INTRODUCTION TO ENTERPRENEURSHIP

Entrepreneurs are defined a as people who have ability to see and evaluate business opportunities, gather necessary resources to take advantage of opportunities and initiate appropriate action to ensure success.

Entrepreneurs are action oriented they are highly motivated individuals who take calculated risks to achieve their goals.

Entrepreneurs try doing the same things in different ways that are more profitable.

Entrepreneurs are people who realize that life is changing at all time and that new ideas new method and new fresh opportunities are important to cope to current change.

Entrepreneurs are different from ordinary people because they have more self confidence, they can get things done without too much help. They try hard to keep on trying. They set for themselves standards and they are always trying to put themselves a little better than others.

Entrepreneurs are good at estimating how risky something is before taking up the opportunity to avoid high risks. They get bored with routine activities and they believe in getting alternatives. They are good at making decisions and they are able to evaluate the pros and cons of the situation before making up the decisions. Thus they take calculated risks in all their moves.

What is entrepreneurship?The word entrepreneurship is defined from French word ''entreprendre'' meaning “to undertake”.It is important to realize that human needs are endless and they have to be satisfied by use of limited resources and entrepreneurial person has to incorporate the scarce resources to satisfy the endless human needs at a profit. This activity is said to be entrepreneurship once it is accompanied with the identification of business opportunities, evaluation of the business opportunities, the gathering of necessary resources to take advantage of them and initiation of appropriate action to ensure success.

IMPORTANT ENTREPRENEURIAL TRAITS

i. Hardworking Running a business requires a lot of energy and drive. This involves ability to work for long hours when necessary, to work intensively and cope with less than the normal amount of sleep in pursuit of new ideas new opportunities and new methods of doing things.

ii. Self confidenceTo succeed in business people have to believe in themselves and the ability to achieve goals they set for themselves. This is shown by a belief “if you want something badly enough and are prepared to work for it, you will always get it.”

iii. Builds of the futureThe goal for most successful entrepreneurial people is to build a secure job and income for themselves which rests upon their own abilities. This means understand that it may take several years to build up business income generating activities to a reasonable start but for entrepreneurs they believe in themselves and they are able to build businesses that can stand future challenges.

iv. Profit orientedEntrepreneurs have interests in generating money which is a clear indicator of sustainability for the enterprise. This means entrepreneurs recognize that business comes first money must be generated and this can only be accompanied by evaluation of decisions.

v. Goal orientedSuccess in business depends upon being able to get realistic goals or targets and work with determination to achieve them. This ability to get targets and to work to achieve them is fundamental.

vi. Copes with futureAll business ventures contain disappointments and failures as well as success. Coping with failures involves recognizing failures, learning from them and seeing new opportunities. Without this characteristic, earlier failures may spell the heart of a persons attempt at self employment.

vii. Response to feedback The concern to know how well one is doing to keep track of performance is important. To get useful feedback and advice from others is another important characteristic of entrepreneur.

viii. Demonstrate initiatives Research shows that successful business people seek to take initiative and put themselves in positions where they are personally responsible for success or failure.

ix. Willingness to listenSuccessful business group is not an inward looking group that never listens to or uses outside resources. Self reliance does not exclude the ability to ask for help when needed from such people like accountants, business advisers, marketers, administrators etc. Entrepreneurs are known to listen when given advice.

x. Sets own standards Setting standards for performance and then working to achieve them is an indicator of a successful entrepreneur. This state can include income to be realized, Quality of products to be produced, sales turnover etc. Most businesses want to do better each year, to set and achieve higher standard than those of the current year.

xi. Copes with uncertainty Business undertaking is much more uncertain than formal employment. This uncertainty is about sales and turnover. But it is also exists in other areas such as material delivery, price fluctuations, change of workers and also bank support.

xii. Commitment Starting and running an enterprise demands total commitment in terms of time, money and lifestyle. Thus commitment has to be prime priority for an entrepreneurial person.

xiii. Builds on strengths Successful entrepreneurial person bases his/her ability / work upon his/her strengths. Thus they take time to evaluate their manual skills, interpersonal skills, selling skills, original skills, writing skills, knowledge of a particular product or service, knowledge of people in the same business and ability make and use contacts.

xiv. Reliable and has integrity Entrepreneurs posse quality of honesty, fare dealing and reliability in terms of doing what one has promised, the customers and other associates.

xv. Risk TakersAll business involves some risks, entrepreneurs have the ability to take-up measured or calculated risks. This involves working at the likely cost and gains the chance of success and the belief in oneself to make the risk pay off.ROLES OF ENTREPRENEURS

i. Entrepreneurs are prime movers in any business venture, without the entrepreneurs there will be no business in the first place. Since he/she is the one who identifies gaps in the markets and then turns these gaps into business opportunities thus initiating businesses.

ii. It is the entrepreneur who finances the business: After identifying a business opportunities the entrepreneur takes and mobilizes the necessary resources to exploit the opportunity. By so doing he becomes the financier of the enterprise. He does not of course have to finance the business from personal savings alone but is able to organize finance and other resources from different sources.

iii. Entrepreneurs manage the business: This is a function that can be delegated to other people but the entrepreneur has to remain with ultimate responsibility of managing the business.

iv. Ability to create jobs: By starting a business, it leads to creating employment.

v. Maintaining of free enterprises: By different people starting their own business.

vi. Promotion of health competition

vii. Creating wealth: By mobilizing funds, working hard, creating employment, generating income providing goods and services.

viii. Spreading of prosperity: By creating employment opportunities, by being innovative, to fulfilling/satisfying needs.

ix. They enhance wealth stability: Because the idea of today is not of tomorrow.

x. Ensures innovation and creativity

xi. Encourages grass root development

xii. Champions in social congress i.e. progress in society

xiii. Enhancing growth i.e. in ideas, minds, body, expanding infrastructures

N/B Enterprises are able to achieve the above by:

i. Having the ability to identify gaps in the market/Society

ii. Implementing and managing the business

iii. Preparedness of bearing discomforts of uncertainties

TYPES OF ENTERPRENEURS

Entrepreneurs are classified according to why they start businesses into following categories:

i) Self-employed - These entrepreneurs/people who perform all the work and keep all the profits. They start the business with intentions of employing themselves e.g. Doctors, Lawyers.

ii) Opportunistic entrepreneurs - These are entrepreneurs who identify opportunities within their environment and they start businesses to exploit the opportunity. These type of entrepreneurs start a business, expand it in order to employ others. They enjoy utilizing skills or expertise of their own employees.

iii) Inventors - These are entrepreneurs with particular inventive ability. They invest new products, new services and then they create businesses i.e. companies to produce and design new products.

iv) Economy of scale exploiters - These are entrepreneurs who benefit from large volumes of sales by offering discounts and operating within very low overhead costs.

v) Acquintres - These are entrepreneurs who take over business that have been started by someone else and use their own ideas to make the business more successful.

vi) Speculators - These are entrepreneurs who purchase a commodity and resale at a profit e.g. broker.

vii) Internal Entrepreneurs - These are entrepreneurs who create new ideas within organization and they make them move successful and they run them as businesses.

N/B Intra-preneurs: - Intra-preneurs is entrepreneurship within an existing organization. Business organizations have the financial resources, business skills, marketing skills and advantage of distribution systems, thus when management becomes entrepreneurial, it makes the best use of the above resources.

The cooperation that recognizes entrepreneurship encourages development of new ideas creativity and innovation thus establishing entrepreneurial spirits in their organization.

ENTREPRENEURSHIP EVOLUTIONS

The word entrepreneurship is derived from French word ''entreprendre'' meaning “to undertake”. The entrepreneur is the one who: -

i) Undertake to organize

ii) Undertake to manage

iii) Undertakes to assume risks of the business

Today an entrepreneur is an:

i) Innovator/developer who recognizes and identifies opportunities

ii) Converts those opportunities into workable, marketable ideas

iii) Adds value through time, effort, money and skill

iv) Assumes the risks of the competitive market place to implement these ideas

v) Realizes the rewards from these efforts

Thus an entrepreneur is the aggressive catalyst for change in the world of business. He/she is an independent thinker who dares to be different in a background of common events. The recognition of entrepreneurship dates back to 18thC in France when economists Ricaldo associated the risk bearing activity in the economy with entrepreneur. In England during the same period, the industrial revolution was evolving with entrepreneur playing a visible role in risk taking and transformation of resources. America currently is enjoying the new wave of business and economic development of entrepreneurship as its catalyst. In the 20th century the word entrepreneur became synonymous and closely linked to free enterprise. This has led to recognition that entrepreneurs serve as: -

i) Change agents

ii) Provide creative, innovative ideas for business enterprises

iii) Help businesses to grow and become profitable

Whatever activity they play, entrepreneurs in the 21st century are considered the heroes of free enterprise. Many entrepreneurs have used innovation and creativity to build multi-million dollar enterprises. These individuals have created new products and services and have assumed the risks associated with the ventures. Many people today regard entrepreneurship as ''pioneership'' and they relate entrepreneurs with leaders.

Thus:-

i) Entrepreneurship is a dynamic process of vision, change and creation

ii) It requires an application of energy and passion towards the creation and implementation of new ideas and creative solutions.

Essential components to entrepreneurship

i) The willingness to take calculated risks in terms of time, energy and career

ii) Ability to formulate an effective venture term

iii) The creation of skills and ability to gather the needed resources

iv) The fundamental skill of building a solid business plan

v) The vision to recognize opportunity where others see chaos, contradiction and confusion.

The Myths of Entrepreneurship

Many myths have come about in entrepreneurship due to lack of research thus the following myths have been criticized.

i) Entrepreneurs are ''doers'' not ''thinkers''

It is clear that entrepreneur do what they think and not what others think for them. Thus today we see thinking entrepreneur think as well as doing entrepreneurs. Thinking and doing both are important activities of an entrepreneur.

ii) Entrepreneurs are “born” and not “made”

The idea that characteristics an entrepreneur that he can not be taught and learn, and one is born with entrepreneurial skills, today being is challenged. Entrepreneurs have special traits of course i.e. aggressiveness, initiative, drive, willingness to take calculated risks, analytical ability and skills in human reactions. Today like any discipline, entrepreneurship has models, processes and causes of studies that allow the unit to be studied and knowledge to be acquired.

(iii) Entrepreneurs are “always inventors”

Although many inventors are entrepreneurs one can also be an entrepreneur minus being inventive since entrepreneurship covers more than just invention, it requires complete understanding of innovative behavior in all forms

(iv) Entrepreneurs are “academic and social misfits”

This is as a result of some business owners who are academic and socials misfits having successfully run business after dropping out of school or quitting employment. Historically, educational and social organizations did not recognize the entrepreneur they abandoned him/her as a misfit. Today the entrepreneur is considered as a hero, socially, economically and academically and no longer a misfit.

(v) All what entrepreneur need is “luck”?

Being at the right place at the right time is always an advantage, prepared entrepreneurs who identify opportunities when they arise and take advantage of the opportunity and make gains out of the opportunity are not lucky “but they are simply better prepared to deal with situation and turn them into success. Whatever that appears to be luck is preparation, determination, desire, knowledge and innovativeness.

(vi) The E-Myth

Michael Garber has written a book the E-myth which analyses why most businesses do not work and what to do about it by differentiating the roles of entrepreneurs, managers and technicians in business

(a) Role of entrepreneur

The entrepreneur invents the business that works without him or her. This person is visionary who makes a business unique by creating special characteristics derived from the purpose or direction of the business.

The entrepreneurs’ far reaching perspective enables him or her to anticipate changes and needs in the market place to initiate activities and capitalize on them.

(b) Role of managers

A manager produces results through employees by developing and implementing effective systems and by interacting with employees

He enhances their self esteem and ability to produce good results. The manager can actualize the entrepreneurs’ vision through planning, implementation and analysis.

Entrepreneurs use managers to achieve their vision.

(c) Role of technicians

He performs specific tasks according to systems and standards set by management.

He does not only gets work done but also provides inputs to supervisors for improvements of the systems and standards

N/B Most small business do not become successful, because their owners work too work hard in opportunities they have created. Hence, small businesses fall because the owners technicians and owner entrepreneurs. Therefore today’s business owners need to stop being technicians and thinking as entrepreneurs and accept that business can work without them after setting clear policies and strategies for business.

ENTREPRENEURSHIP APPROACHES /THEORIES

To understand the nature of entrepreneurship is important to consider some of the theories developed so as to better recognize the emerging importance of entrepreneurship. In the theory of contemporary entrepreneurship one concept desire that entrepreneurship is interdisciplinary. It contains various approaches that can increase one understanding of the field. Thus need to recognize diversity of theories as an emergency of entrepreneurship understanding

The following are some of the theories used to explain entrepreneurship

I. The schools of entrepreneurship thought Under this theory there are two views

a) Micro-viewb) Macro-viewa) Macro-view

This view of entrepreneurship represents a broad number of factors that relate to success or failure of entrepreneurial venture. They include:

External factors that are above the control of the entrepreneur thus the following:

i. Environmental school of thoughtii. Financial/ capital school of thought

iii. Displacement school of thought

i. Environment school of thoughtIt deals with external factors that affect a potential entrepreneur’s lifestyle. They can either be positive/ negative the focus is on institution such as families, organizations etc. The values practiced by the institutions contribute a lot to growing an entrepreneurial person. Thus need ask ourselves what values are of good to entrepreneurship and which ones are not? What institutions are encouraging and what can be borrowed from them? The atmosphere of friends and relatives can influence the desire for one to become entrepreneur thus the environmental school of thought sees environment to contribute a lot to entrepreneurship.

ii. Financial or capital school of thoughtThis school of thought is based on capital seeking process. It emphasis that capital is a requirement to start a venture and not only the activity to acquire the capital but to manage the capital. The theory analysis different stages of business growth and identifies that need for capital and need to manage capital thus the following stages of business growth.

a) Start-up stageUnder this stage business ventures require capital to start the venture or capital to acquire the venture. Then there is need to manage the capitals acquired to be able to startup the business

b) Business up stage The entrepreneur requires top have skills or ability to manage cash flows, investments, financial analysis and evaluation. This enables the entrepreneur to make decisions on whether to:

Maintain the business

Increase the size of business

Reduce the size of business

c) Decline stage

The decline stage indicates decrease in profit and thus taxation question. Entrepreneur requires ability to monitor and evaluate business performance and make decision such sale the business, retire or dissolve e some of operations.

iii. Displacement school of thought

It focuses on group phenomena. Its hold that when groups or individuals are threaten and displaced they tend to become more creative, innovative and are likely to start business ventures. Displacement can be caused by political issues, cultural issues, economic issues etc

b) Micro –view

This examines the factors that are specific to entrepreneurship and are part of the internal focus of control. The potential entrepreneur has ability to control the factors. The theory focuses on internal factors such as:

i. The entrepreneurial traits e.g. hardworkingii. The venture opportunity i.e. the ability to identify a worthwhile venture.

iii. The strategic formulation-This focuses on the ability to plan the business

N/B The macro-theory emphasizes that there is need to continue entrepreneurial traits with opportunity identification and business planning which can be controlled by entrepreneur.

II Process approachesIntegrative approach:

The integrative approach emphasizes on a process with both input and output to the entrepreneurial person needs to be prepared well to start at venture and to be able to implement (input).The preparedness enables the entrepreneur to be innovative, creative, and associative and take risks. Giving a roll of outcomes e.g. value addition, new product/service creation etc

HOW TO BECOME AN ENTREPRENEUR

Competencies for Successful Entrepreneur

For one to start a business or become an entrepreneur following major competencies play a major role. These competencies are: knowledge, skills, traits required to start a business. Thus for one to be successful in business, requires.

(i) Knowledge

It is a set or body of information stored, which may be recalled at appropriate time. For example knowledge /inform on the following:

a. Business opportunity b. Production processes c. The market opportunitiesd. Technical matters e. Customers f. business management g. Competitors h. Source of assistance

(ii) Skills

Skills are the ability to apply knowledge. The skill may be technical or managerial in nature. Skills relate to abilities to perform tasks such as:

a. Technical e.g. engineering, computing, carpentry, mechanics, catering etc b. Managerial e.g. marketing, financial, Organizational, planning leadership etc

(iii) Traits

Traits are personal characteristics of an entrepreneur. Examples:

a. To take initiative b. Being persistent

Successful Entrepreneur

Traits

KnowledgeSkills

c. Concern to high quality d. Oriented to efficiency e. Alternative ways of solving problems f. Taking calculated risks g. Being persuasive h. Sees and acts on opportunities i. Seeks informationj. committed to fulfilling contracts k. A systematic planner l. Ability to demonstrate self confidence m. Ability to influence strategies etc

BUSINESS IDEAS

A business idea is the response of a person(s) or organization to solving an identified problem in the market community. It involves perceiving or identifying missing gaps in the market communities and the want to satisfy them. Business ideas are seen as solutions to individual community problems. Identifying a good business idea is the first step in transforming the entrepreneur’s desire and creativity into business opportunity.

The following are what one will require to generate a business idea i.e. requirements for a good business idea

i. Environment ii. Identification of needs in the environment

iii. Willingness to respond to market/community needsiv. Understanding change and ability to manage change v. Ability to understand and manage competition and stay ahead of competitions

vi. Appreciation of technology in doing things better than yesterday (technology remains one of the key drives of competition these days)

vii. Appreciation that products or services have a life cycle viii. Appreciation of risk taking, spreading of risks and allowing for failure GENERATION OF BUSINESS IDEAS

A good business idea is essentials and a requirement for successful business venture. Good business ideas however, do not usually just appears rather they result from handwork and effort on the part of entrepreneur in generating, identifying and evaluating opportunities.

Sources of business ideas

i. Personal interests/hobbies ii. Personal skills of experience

iii. The mass media iv. Exhibitionv. Seminars/educational seminars and presentations

vi. Surveys /research vii. Complains

Identification of business opportunities

Seeing or seeking of businesses opportunities is one of the characteristics of successful entrepreneurs everywhere. It is also the basis of starting and maintaining successful ventures. It involves not only generating ideas and recognizing opportunities but also screening and evaluating them to determine the most viable & attractive that can be pursued.

Characteristics of a Good Business Opportunity

A good business opportunity must fulfill or be capable of meeting the following criteria

i. Real demand - Respond to unsatisfied needs or requirements of customers who have the ability to pur-chase and who are willing to exercise that choice.

ii. Return on investment - Provide durable, timely and acceptable returns or rewards for the risk on the ef-fort done

iii. Competitive - Be equal to or better from the point of view of the customers than the other available prod-ucts/services in the market (in the same industry).

iv. Meet objectives - Meet the goals and aspirations of the person or organization taking the risk

v. Use available resources and skills - The opportunity must be within the reach of the entrepreneur in terms of resources, competence, legal requirements among others.

Identifying and Assessing Business Opportunities

Ideas and opportunities need to be screened and assessed for viability once they have been identified or generated. This is not an easy task but it is very vital because it can make a difference between successes and failure, thus it helps to minimize the risk and reduce failure. Identifying and assessing opportunities includes determining risks and rewards and the following points need to be put into consideration;

i. Industry and market to serve - The following questions are required to be answered by the entrepreneur to determine and screen the idea in relation to industry and market

a. Is there a market for the idea?b. Are there any customers? i.e. people with money who are able and willing to buy the product or service.c. Are you able to provide what they need or want?d. How many are they? Or how much is required?

ii. Personal goals and competencies of the entrepreneur - The entrepreneur needs to assess himself in rela-tion to the opportunity and the following questions can help.

a. Do you really want to venture into the business?b. Do you have what it takes/requires?c. What goals would you be satisfying?d. Do you have the competence to achieve the goals?e. Are you motivated enough?

iii. Management team - It is not easy for an entrepreneur to succeed in business minus the team to work with. The following questions will help the entrepreneur to evaluate his management team in relation to the opportunity

a. Who will be involved in the business? b. Who else can be involved in the business if, the person expected to be involved is not there?c. Do they have the experience how to conduct transaction or do they have the desired attributes? d. What structure will you but in place? (Business structure?)

iv. Competition - The entrepreneur requires answering the following questions in assessing the opportunities.a. Who are the competitors? b. Do they have something desired by customers that I do not have?c. Will I be able to produce and market at lower costs than my competitors? d. How will I differentiate my products from my competitor products?

v. Capital technology and others resource requirements - There is need to answers the following questions a. How much capital is required to start business?b. What technology is applicable? c. What others resources are required?d. Do you have them, and if not where will you source them?

vi. Environment - In starting a business it is important to see to environment thus the following questions will assist the entrepreneur.

a. What is the political environment? Is it conducive, and if not what strategies shall I have in place?

b. What is the economic state and what strategies should I have in place in relation to the economy? c. What are the geographical legal requirements and what strategies should I have in place?

d. Would the business do any damage to the physical environment? If so then what strategies should I have in place?

BUSINESS PLAN

It is a document which spells out the goals and objectives of business and clearly outlines how and when they will be achieved.

Entrepreneurs use business plans as road maps to get to their destination. Entrepreneurial business plans are unique; they have a lot of creativity, innovativeness as they use them as strategies in differentiating themselves with others in the market through coming out in a more ‘smarter’ way in the market. This helps them to achieve their objectives in a short time than the other business people in the market.

Importance of a business plan

i. A business plan provides information which is required in starting and running the business as well as ac-tivities that are used to enhance the information

ii. It provides guidelines for starting a business iii. Businesses plan assists in communicating the affairs of the business iv. Business plan assists in communicating the affairs of the business to interested parties as supplier, cus-

tomers, banking institution when sourcing for funds etcComponents of business plan

The following are components of business plan

i. Description plan - Covers in detail the background of the business owner, the type of business, location of business, the product or service to be offered and the entry and growth strategy. It is the first item to be writ-ten in preparing a business plan.

ii. Marketing plan - It describes how business intends to sell its products or services. It identifies the cus-tomers and the competition. It also outlines the pricing, the selling, promotional and distribution strategies.

iii. Organization plan - It explains how the business will be coordinated to accomplish its objectives. It shows the organization structure, identifies key management staff, their duties responsibilities and rewards.

iv. Operational plan - It describes how the product/services of the business will be manufactured. It shows the equipments to be used, materials, other costs which will be incurred during the production process etc

v. Financial plan - It describes financial requirements of the business venture. It produces proposals for the sources or uses of funds, further financial information in relation to proforma income statements, balance sheet, projected cash flow statements etc

vi. Executive summary - It is the summary of the entire business plan. It is written last after the preparation of the entire business plan but it is supposed to be in the first page of the business plan.

The business description

The following are the main features of business description

a. Background of the owner or supervisor b. Nature of the business c. Product/services to be produced and sold d. Entry strategy e. Growth strategy

a. Background of the owner - The following guidelines will help the entrepreneur to describe the owner of the business

a. Full name and age b. Marital status c. Residenced. Present occupation e. Educational and professional qualifications f. Relevant business experience

g. Plans to acquire necessary experience h. Amount to be invested in the business i. Amount to be borrowed from specified sources and why?

NB: The entrepreneur require to identify strengths and weakness in relation to the above points and then come up with strategies on how to meet the weaknesses and turn them to advantage and how to make the best use of the strengths in order to capture the opportunities outside.

b. Nature of the business (i) Describe the name of the business - It is always important to carefully select a business name and it should be

a) A name with few words b) A name that is easy to remember c) Easy to pronounce d) Attractive e) Relate to the business activity

(ii) Exact location of the business Discuss the location of the business the advantages in relation to the location, challenges to the location and strategies to take advantage of both the advantages and challenges of the location

(iii) Legal form of the business a) State whether sole-proprietorship, partnership or companyb) Give reasons why the form and how to take advantage of the form c) Identify challenges to be faced in that form and how to take advantage of the challenges.

(iv) Major activity of the business a) Identify the core business activity and other activities that the business can take advantage of which are

related to the business.b) Clearly state strategies on how to run the core activity and other activities

(v) Principle customers and their location in relation to the businessa) Clearly identify customers of the product /services within the location b) Identify strategies of converting their needs to demands.

c. Product /services to be produced - The following points will help the entrepreneur on describing the product /service

i. Name the product/service ii. Explain the main features of the product /services

iii. Discus benefits obtainable from the product /service iv. Discuss the unique features of the product/service d. Entry strategy

It describes how the entrepreneur intends to penetrate into the market. It is always important to prepare well, notify the target customers on your plans to open the business so that they wait for your product/service as you open the business. It is very disappointing to find the entrepreneur waiting for the customers instate of the customer waiting for the entrepreneur. This happens when the entrepreneur fails to demonstrate his/her entry strategies clearly. In formulating entry strategies it’s important for the entrepreneur to put the following into consideration;

i. Competitive advantage of the business ii. Weaknesses in the competition

iii. Your pricing strategyiv. Plans to attract and retain customers e. Growth strategy

A good entry strategy brings about immediate business growth. It is important for the entrepreneur to prepare him/herself well with clear entry and growth strategies. It is therefore important to put the following points into consideration

i. Be aware of the trend which signal business growth e.g. increasing demand, increasing customer’s aware-ness, increasing sales etc

ii. Opportunities arising from the trend iii. Plans to take advantage of the opportunities arising .MARKETING PLAN

Marketing is one of the key components of a business plan. It describes the following.

i. Potential customers ii. Competitors/competition

iii. Pricing strategy iv. Sales tactics v. Advertising and promotion strategy

vi. Distribution strategy(1) Potential customers

It is important for the entrepreneur to understand the potential customers he/she has to serve. It is important too for the entrepreneur to classify customers into: individuals, institutions, government agencies etc

(a) Understand:a. What they buy b. Why they buy it c. How they buy d. Why they buy how they buy e. When they buy and why f. Where they buy and why

(b) Understand your customer’s age to be more aware of their needs and how to motivate them (c) Be awake of their income levels as this will assist in pricing(d) Educational attainment contributes a lot to the understanding and serving of the customers (e) Appreciate believes held and values cherished by the customers(f) Understand the purchasing pattern of the customers(g) Always be aware of the need of customers to be served(h) Understand the occupation of the employees (2) Competition/competitors

When preparing a business plan, it’s important for the entrepreneur to understand the industry he/she is to serve and nature of competition in that industry. After describing the industry, it is important to narrow down to potential competitors and take care of the following:

a. Names of key competitors b. Location in relation to your business c. Size of competitors d. Comparison between your product /service and that of your competitors e. Strengths and weaknesses of your competitors

(3) Pricing strategy

Pricing plays a major role in the process of selling goods and services. It is important for the entrepreneur to consider the following points when preparing a pricing strategy

a. Evaluate methods of calculating the selling price of your product /service b. Understand factors which will influence your price setting e.g. competitors price, overheads costs, cost of

the product, nature of the product etc c. Understand the actual selling price of your product /service d. Evaluate credit terms to be offered and discounts to be allowed e. Evaluate what after sales-services to be offered and analyze the cost involvement

(4) Sales tactics

Sales tactics is a component that plays a major role in the selling process. This process begins by identifying who to employ as a sales person i.e. clearly having the description and qualifications of the person to employ. When practicing sales tactics it is important to lay strategies on how to conduct the following:

a. Direct selling or personal selling i.e. how to organize the sales team, how to motivate them etc b. Indirect selling: identify those who need your product and buy it indirectly, then state strategies on how

to meet their requirements.c. Describe how to restrict and retain the sales force d. Have strategies on how to monitor and evaluate the sales team.e. Come up with ways of selecting and motivating distributors or agents f. Come up with strategies on how to utilize distributors and agents within your region.g. Identify the geographical area that you intend to serve

(5) Advertising and promotion strategy

In making your product /services known to your potential customers, it is essential to develop an advertising and promotional strategy. The entrepreneur when formulating the strategy will take the following into account;

a. The role of the business in advertising itself i.e. a business can use itself to attract many customers through satisfied customers.

b. Media to use; Evaluate cost of media and effectiveness of the media before settling on a mediac. Decide on the image you wish to portray about your product or service d. Image you expect to project regarding your firme. Frequency of advertisement f. Cost per advertisement placed g. Methods of measuring, effectiveness of the advertisementh. Plan on how to be carrying out promotional campaigns and especially the first campaign i. Have a clear plan for regular promotional methods j. Be aware of the costs of each promotional eventk. Have methods of measuring effectiveness of each campaign

(6) Distribution strategy

The entrepreneur needs to describe how his products /services will be moving from one point to another. The following will help the entrepreneur to come up with clear distribution strategy.

i. Identify the channels to use ii. Analyze the channel

iii. Have strategies on how to utilize the channel iv. Discuss the means of transport to use and justify whyv. Analyze cost of transport per month

vi. Anticipate/identify distribution problems and how you intend to overcome them N/B It is very important to understand the nature of a channel to use before making a choice on the channel as it will minimize cost in distribution.

LEADERSHIP

Definition and meaning of leadership

Leadership is a process of influence on a group. Leadership is the ability of a manager to induce subordinates to work with confidence and zeal. Peter F. Drucker, considers “leadership” as a human characteristic which lifts a man’s vision to higher sights, raises a man’s performance to higher standards and builds man’s personality beyond its normal limitations.

According to Alford and Beatty “is the ability to secure desirable actions from a group of followers voluntarily, without the use of coercion”

According to Terry “a leader shows the way by his own example. He is not a pusher, he pulls rather than pushing”.

In the words of R. T. Livingston, leadership is “the ability to awaken in others to desire to follow a common objective”.

According to Peter F. Drucker, leadership “is not making friends and influencing people i.e. salesmanship, Leadership is the lifting of man’s vision to higher sights, the raising of man’s performance to higher standards, the building of man’s performance to higher standards, the building of man’s personality beyond its normal limitations”.

A leader is a person who gets a task completed by developing good relationship with his/her colleagues and harnessing their combined resources. The resources are harnessed by ensuring that:

1. They fully understand their goals and objectives and as far as possible are involved in determining them. 2. They know how and what they are doing to achieve these objectives and are party to deciding and agree-

ing the course of action to be taken.3. They are empowered to make decisions.4. They know and agree the control to be exercised over them.5. They are aware of the rewards and penalties of not achieving their objectives.6. They trust and respect the leader’s judgment.

They arouse and unite colleagues by:-

1. Listening to them and gaining their respect and trust.2. Being friendly and approachable but remaining sufficiently distant to exert authority.3. Treating them as equals without losing the capacity to exert authority.4. Paying attention to their individual as well as their collective needs5. Involving them in agreeing objectives, reviewing results, solving problems etc.6. Representing their interests.

Nature and characteristic features of leadership

1. Leadership implies the existence of followers 2. Leadership involves a community of interest between the leader and his followers3. Leadership involves an unequal distribution of authority among leaders and group members4. Leadership is a process of influence 5. Leadership is the function of stimulation 6. A leader must be exemplary (show good example) 7. A leader ensures absolute justice

Leadership Styles1. The manager makes decision and announces it - autocratic leadership2. The manager sells his decisions - manager takes the additional step of persuading the subordinates to

accept his decision 3. The manager presents his ideas and invites questions - great involvement of the employees in this

pattern4. The manager presents a tentative decision subject to change - decision is tentatively taken by the

manager but he is amenable to change and influence from the employees5. The manager may present the problem, get the suggestions and then take his own decision - sufficient

opportunity is given to the employees to make suggestions that are coolly considered by the manager

6. The manager may define the limits and request the group to make a decision - lets the group have the right to make the decision, but to the limits defined by the manager

7. The manager may permit full involvement of the subordinates in the decision-making process -democratic leadership

Leadership SkillsThe leader is expected to play many roles and therefore must be qualified to guide others to organizational achievement. Although no set of absolute traits or skills may be identified, the individual who possess abilities to lead others must have certain attributes to help them in performing their leadership rolls. In broad way the skills which are necessary for an industrial leader may be summarized under four heads:-

1. Human skill:- Co-operation of his followers e.g. empathy, objectivity, communication skill, teaching skill, social skill etc

2. Conceptual skill:- Sensing of the organisation as a whole and the total situation relevant to it e.g. organisation behaviour, competitors of the firm, and financial status of the firm

3. Technical skill:- thorough knowledge and competence in, the principles, procedures and operations of a job.

4. Personal skill:- getting the best from others. e.g. intelligence, emotional maturity, personal motivation, integrity and flexibility of mind

Types of leadersThe different types of leadership styles are:

1. Autocratic or task management leadership2. Participative or democratic leadership3. Laissez faire or free-rein leadership4. Paternalistic leadership

1. Autocratic or task management leadershipGives order which he insists shall be obeyed. He determines policies for the group without consulting them, and does not give detailed information about the future plans.Types of autocratic leadership

a) Strict autocratic leaders:- Relies on negative influence and give orders which the subordinates must accept. He uses his powers to disperse rewards to his group.

b) Benevolent autocrat:- Is effected in getting high productivity in many situations and he can develop effective human relationship. His motivation style is usually positive

c) Manipulative autocrat:- Is one who makes the subordinates feel that they are participating in decision making process even though he has already taken the decision.

2. Participative or democratic leadershipIs one who consults and invites his subordinates to participate in the decision making process.3. Laissez faire or free-rein leadershipA Laissez faire or free-rein leader does not lead, but leaves the group entirely to itself. The leader avoids using power and interest in decision making and gives authority to his subordinates. He does not direct his subordinates and there is complete freedom for the subordinates.4. Paternalistic leadershipThe leader assumes that his function is fatherly. His attitude is that of treating the relationship between the leader and his groups like a family with the leader as the head of the family. The leader works to help in work, to help in guiding, protection, and keep his followers happily working together as members of a family, by providing them with good working condition, fringe benefits and employee services. Importance of leadershipA good leader motivates his subordinates, creates confidence and increases the morale of the workers. Following are points highlighting the importance of leadership:

1. It is a process of influencing the activities of an individual or a group towards the achievement of a goal2. Motivates the subordinates for higher level of performance 3. Promotes team-spirit and team-work which is quite essential for the success of any organisation4. Helps in the effective use of formal authority5. Creates confidence in the subordinates by giving them proper guidance and advice

Functions of a leader1. To take the initiative 2. He identifies group goals3. He represents the organisation4. He acts as a arbitrator-often resolve the differences5. To assign reasons for his action6. To interpret 7. To guide and direct 8. To encourage team work9. He manages the organisation

Leadership theories1. Mc Gregor’s Theory X and Y

Theory X - Holds that people have an inherent dislikes to work and do not want either to work hard or assume responsibility.

Theory Y - Contests that people want to do a good job and assume no responsibility. They are always ready to take responsibilities.

2. Theories of leadership traits

Assumes that leaders have certain personal characteristics of effective leadership, pointing out that the personal traits or personal characteristics of a person make him an effective or successful leader. According to this theory the person who possesses the following traits or personal characteristics could become successful leader:

1. Good personality 2. Intellectual ability 3. Initiative4. Imagination5. Maturity 6. Desire to accept responsibility7. Self-confidence8. Flexibility9. Fairness and objectivity10. Considerate

3. Behavioural theory of leadership

According to this a particular behaviour of a leader provides great satisfaction to the followers and so they recognize him as a good leader. The behavioural approach is based on the premise that effective leadership is the result of effective role behaviour.

4. Theory of leadership style

It’s focused on the emphasis that the leader places on the task and the people undertaking it. Under this leaders can be classified as:-

a) Autocratic- The leader dictates what he wants.b) Persuasive- The leader sells his ideas.c) Consultative/Participative- Leader discusses with the team members before reaching decisiond) Democratic- Leader involves team members in both the discussion and the decision.

5. Situational theories

Is strongly affected by the situation from which a leader emerges and in which he works. It emphasizes that the entire action between the group and the leader is the main factor which makes a leader successful. It relates to the group environment, its physical settings, the size of the group, its technical abilities etc.

6. Integrative theories

They are the most comprehensive and realistic, but least precise or conclusive. They embrace a wide variety of variables.

7. Greatman theory of leadership

The theory asserts that leaders are born and not made. This is especially so with great leaders who are natural leaders. Leadership calls for certain qualities like commanding personality, charm courage, intelligence, persuasiveness and aggressiveness. Hence the great leaders are assumed to be “the gift of God” to man kind.

Leadership development

Essentially there are three forms of leadership development

1. Formal training.2. Developmental activities.3. Self help activities.

MOTIVATION

Motivation is a latin word, meaning “to move”. Human motives are internalized goals within individuals. Motivation may be defined as those forces that cause people to behave in a certain ways. Although it should be kept in mind that what motivates one person may not motivate another.

Motivation is a process of channeling a person’s inner drives so that he wants to accomplish the goals of the organization.

As defined by Michael J. Juicus “the act of stimulating someone or oneself to get a desired course of action”

In the words of Lewis Allen “motivation is the work a manager performs to inspire, encourage and impel people to take required action”.

Nature and characteristics of motivation

Motivation is the work a manager performs to inspire, encourage and impel people to take required action. The process of motivation is characterized by the following:

a) Motivation is an internal feeling

b) Motivation is related to needs

c) Motivation produces goal-directed behaviour

d) Motivation can be either positive or negative

Importance and benefits of motivation

Manager’s primary task is to motivate others to perform the tasks of the organization. The various benefits of motivation are:

a) Managers direct or guide the workers in the desired direction for accomplishing the goals and the organization

b) Creates the willingness to work

c) Increase organizational effectiveness

d) Contributes to good industrial relations in the organization

e) Motivation is the best remedy for resistance to change

f) Facilitates the optimum utilization of all factors of production (resources)

g) Promotes a sense of belonging among the workers

h) Helps organizations to develop their employees as future resources

Types of motivation

There are two types of motivation: -

1) Positive or incentive motivation: Is generally based on rewards. It is a “pull” mechanism. It involves the possibility of increased motive satisfaction. The positive motivation includes; praise and credit for work done, wages and salaries, appreciation, a sincere interest in subordinates as individuals, delegation of authority and responsibilities etc.

2) Negative or fear motivation: It is based on force and fear. Negative motivation involves the possibility of decreased motive satisfaction. It is a “push” mechanism. The imposition of punishment frequently results in frustration among those punished, leading to the development of maladaptive behaviour. It also creates a hostile state of mind and an unfavorable attitude to the job.

Theories of motivation

1. MC Gregor’s theory X and Ya) Theory X is negative, traditional and autocratic style. People under this naturally dislike work

b) Theory Y is positive, participatory and democratic. People under this are always ready to take responsibilities

2. Maslow’s need-Hierarchy theory of motivation.Abraham Maslow, a U.S psychologist states that man is a wanting animal. He has variety of wants or needs and all motivated behavior of man is directed towards the satisfaction of his needs, which could be arranged in a hierarchy.

Maslow Deficit and Progression Principles

1. Deficit Principle: - Once a need is fairly well satisfied, it is no longer a stronger motivator of behavior.

2. Progression Principle:- Five categories of needs exist in a hierarchy. A need at a given level is not activated until the need directly below it is fairly well gratified. The person is expected to progress step-by-step up the need hierarchy.

3. Herzbergs theory of motivation

Herzberg developed this theory with premise that human nature has two separate elements associated with positive feeling of employees about job. (Job satisfaction)

The 1) Motivation: - Motivation items that determine job content e.g. achievement,

Recognition e.t.c

2) Hygiene or maintenance factors: - Influence the job context e.g. company policy, salary, working conditions, inter-personal relations e.t.c .They create a zero level of motivation and if maintained prevent negative motivation

4 Victor vroom’s expectancy theoryDeveloped by victor H vroom is based on the notion that human behaviour depends on people’s expectation concerning their ability to perform tasks and to receive desired rewards. It includes three variables which vroom refers to as:

a) Valance: - means strength of an individual’s performance for a performance and reward and reward.b) Instrumentality: - Refers to relationship between performance and reward.c) Expectancy: - Expectancies about like hood that an action or effort on their part will lead to the intended

performance5 McClelland’s need for achievement theoryDavid C. McClelland’s, Harvard psychologist, proposed that there are three major relevant motives most needed in work-place situations

1. The need for achievement i.e. strive to succeed2. The need for affiliation i.e. warm relationships with others3. The need for power i.e. controls other people.

Requirement of a sound motivation system

Sound motivation systems should have following essential features

1. Satisfy the needs and objectives of both the organization and employees.2. Should change with the change in the situation3. Subordinates should be made to realize that they are stake holders in the organization.4. Satisfy the different needs of employees.5. Should be simple so that it is easily understood by the workers

Method of motivating people

Physiological (Hunger, thirst,

relaxation, sex etc)

Security (Protection against danger, threat,

deprivation etc)

Social Association with others (Belonging, giving &

receiving affection etc)

Esteem Self-respect (Status etc)

Self-actualization (Creativity, self-expression etc)

People respond to physiological needs, social needs and egoistic needs. Human needs and desires are the door ways through which the manager channels his motivation efforts. There are three types of motivational programmes to improve a person’s behaviour towards job.

1. Pay incentive plans –payment by result2. Job enrichment3. Management by objectives

DECISION MAKING

Decision making is the process of choosing between alternatives. It is a process of narrowing choice.

Phases in decision making process as conceptualized by

(1) Herbert A Simon

1. Intelligence activity: - Consists of searching the environmental conditions calling for decision making2. Design Activity: - Inventing, developing and analyzing possible courses of action take place3. Choice activity: - Actual choice selecting a particular course of action from among those available(2) Mints berg and colleagues (Empirically based)

1. The identification phase: - Recognition of a problem or opportunity arise and diagnosis is made

2. The development phase: - Search for existing standard procedures or solutions already in place or design of a new, tailor made solution

3. The selection phase: - The choice of a solution is made

Types of decision making

1. Programmed or structured decisions2. Non-programmed or unstructured decision

1. Programmed decisions:- Decision maker is aware of the extent of the decision and there exists a clear set of options from which a choice can be made

2. Non-programmed Decisions: - When decisions are unique and not routine.Decision cycle

1. Monitor: - Decision maker monitor the environment to detect deviations from plans2. Define: - Problem or situation has to be defined precisely 3. Specify: - Decision objectives have to be specified and the likely risks and constraints be considered.4. Diagnose: - problem is analyzed more thoroughly and the causes scrutinized.5. Develop: - Alternative courses of action are developed.6. Establishment: - methods to be used in the appraisal of the option are established.7. Appraise: - Alternative solutions should be appraised8. Choose: - Best alternative solution is chosen9. Implementation: - Best alternative solution is implemented and detailed operational plan is discussed

RISK TAKING

IdentificationRecognition Diagnosis

DevelopmentSearch Design

SelectionJudgment AnalysisBargaining authorization

This is the process of personal willingness and readily preparedness to take the challenges with the hope to overcome those challenges. Risk taking whether financial, social or psychological is part of the entrepreneurial process.

Risk:- The condition of not knowing the outcome of an activity or decision. Nevertheless, risk is capable of being evaluated for relative probabilities. An effective risk management involves key issues such as:-

i. Identifying risksii. Evaluating potential effects

iii. Identifying and analyzing possible solutionsiv. Adopting the most appropriate solution v. Monitoring the results

Risk classification schemeFollowing are different way of classifying risks.1. Financial riska) Markets/hedging:- Buyer or seller network for exchange of capital and credit such as the stock, commodities and foreign exchange marketb) Liquidity/credit:- Liquidity is the marketability of an asset (ability of an asset to be converted to cash) while credit is contractual agreement to receive money, goods or service without paying for them in the near term.c) Reporting:- Process of capturing data in a meaningful format to provide information t stakeholders for decision making purposes i.e. tax and accounting issues.2. Operational a) Process:- Combination of resources and the work environment which result in a desired outputb) Innovation:- The modernization or transformation of some aspects of the business into a novel approach that improves operating performance3. Strategica) Business environment:- Business environment wherein buyers and sellers interact to buy or sell goods and services. i.e. change in supply and demand, competitive structure and introduction of new product or technology b) Transaction:- Execution of specific activities to initiate significant change in strategic direction. i.e. asset reallocation via mergers and acquisition c) Investor relations:- Strategy for communicating with individuals/institutions who have invested in the business. i.e. communication and turnaround

Importance of risk taking process1. Gain or profit - After overcoming risk one stand gaining or making profit2. Open the scope of thinking – With the challenges one will open up mind and learn how to go by different

situations3. Creating space for creativity – makes one more creative4. Encourage hard working – makes one hardworking 5. Create self confidence and encourages self reliance

HIRING

There are three main activities involved with hiring of employees

1. Recruitment2. Selection3. Placement

1. Recruitment: - it is the discovering of potential application for actual or anticipated organizational vacan-cies. In other words it is a “linking activity” bringing together those with jobs and those seeking jobs

Sources of recruitment

o Internal sources-present working forceo External sources- out the organizationo Indirect methods- Advertisemento Third party methods- agencies

2. Selection: - concerned with securing relevant information about an applicant. This is done to determine whether an applicant meets the qualifications for a specific job and to choose the applicant who is most likely to perform well in that job

3. Placement: - This is determining of the job to which an accepted candidate is to be assigned and his assign-ment to the job.

FIRING STAFF

Firing staff means cessation of service with the organization for one or other reason. This can be done as a result of:

Resignation Discharge and dismissed Suspension and retrenchment Lay-off

1. Resignation: -Resignation may be put in voluntarily by the employees or compulsory when the employee is asked to put in resignation if he wants to avoid termination of his services on the ground of gross negligence of duty on his part.

2. Discharge: - Involves permanent separation of an employee from the pay-roll for violation of company rules3. Dismissal: - Termination of the services of an employee by way of punishment for some misconduct or pro-

longed absence from dutySuspension: - is a serious punishment, generally awarded only after a proper enquiry has been conducted.

4. Retrenchment: – permanent termination of services of the employee for economic reasons in a going con-cern.

5. Lay-off: - refer to indefinite separation of the employee from the pay-roll due to factors beyond the control of the employer. The employee is expected to be called back in the foreseeable future.

FINANCIAL MANAGEMENT

Finance management is defined as the management of flow of funds in a firm. It encompasses the procurement of the funds in the most economic and prudent manner and employment of those funds in the most optimum way to maximize the return for the owner. It is concerned with overall managerial decision making in general and with the management of economic resources in particular.

In order to make right decision at right time, the finance manager has to be equipped with sufficient past and present information about the firm and how it is operating and changing overtime available from financial statements:- which are the end products of the financial accounting process.

Financial statements include:

1. Balance sheet: - Balances the assts to the firm against its financing, Presents the assets of the firm i.e. re-sources and the liabilities of the firm i.e. obligations. (Total assets = total liabilities)

2. Income statement: - Also known as statement of earnings summarizes the revenues and expenses of the firm for an accounting period. Gives detail of sources of income and expenses and thus it provides the sum-mary of the operating results of the firm for a specific period.

Revenue-Expenses=Net profit

SOURCES OF FINANCE FOR SMALL ENTREPRENUERS

Finance is the life-blood of a business. Bus cannot run efficiently if it does not have adequate finance to meet its requirements. Sources from which an entrepreneur can meet his financial requirement can be classified as follows:

According to period

a) Long-term sources: - shares, debentures, long -term loans e.t.c

b) Short-term sources: - Advance from banks, public deposits, advances from customers and trade credi-tors’ e.t.c.

According to ownership

a) Own capital: - share capital, retained earnings and surpluses etcb) Borrowed capital: - debentures, public deposits and loans etc

According to source of generation

a) Internal sources:- retained earnings and depreciation funds etc.b) External sources: - Securities as shares and debentures, loans etc.

Note: For the sake of convenience, entrepreneur sources of funds can be classified into three categories

a) Security financing: - include issue of equity and preference shares and debentures.b) Internal financing: - include retained earnings c) Loan financing: - include both snort and long-tern loans.

Other sources of finance are: -

a) Salary or personal income b) Soft loan from commercial banksc) Borrowing from friendsd) Selling of property e) Mortgaging of property or leasingf) Inheriting from parentsg) Promoted by private venture capital funding organizations

Self-employment and entrepreneurship

Self-employment is regarded by many as something purely and genuinely good. More entrepreneurs mean more innovation and new ways of organizing production. People do not only provide themselves with employment, they also employ others. This creates economic growth. And the larger number of self-employed will increase competition and efficiency. Taken together, this will increase the real incomes in society. Many governments apparently believe that entrepreneurs create jobs and that higher levels of enterprise promote economic growth.

Skills for Success

There is no template for a successful business person, but he or she is likely to have most of the following attributes:

• Some commercial (business) awareness: reading the Financial Times every day isn’t necessary, but you will need a basic understanding of how to make a profit, attract customers and market whatever you are offering.

• The ability to multitask: setting up your own business may entail having to do everything yourself, from accounts to marketing to web design. Freelancers can find themselves juggling several jobs at once. Self-employment requires the ability to learn fast and respond quickly to unexpected situations.

• Good organizational skills: you will need to keep careful track of paperwork, schedules, company expenditure and deadlines. You are also responsible for invoicing your clients and making sure you get paid!

• The ability to network: successful self-employment requires contact with as wide a variety of people as possible, so that you can tell others about your business and find new clients or partners. Some useful networking organizations are included below in the Further Information section.

• Energy and resilience: it takes a lot of effort to build up even a moderately successful business and there are often setbacks along the way. You will need considerable emotional stamina to stay optimistic during difficult periods.

Different Routes to Self-Employment

Business owner

As a self-employed business owner you set up and run your own company, either as a sole trader (alone) or in partnership with others. You and any colleagues must generate sufficient income on which to live, while building up demand for your services.

Franchising

As a franchisee, you buy into an established business such as a restaurant chain. The company provides raw materials, training, support and a recognized brand name, all of which you pay for. Beyond this you are largely autonomous and responsible for generating your own profits at a local level.

Freelancing (or contracting)

As a freelancer, you work for another company on a temporary contract basis covering a particular project or commission. Once that has finished you have to look for another assignment. Typically, freelancers need a specific skill (such as IT or writing) which they can offer to companies.

Policy tools affecting self-employment

The most important policy tools affecting self-employment fall into three different categories:

1. Taxes2. Policies on credit markets3. Training, advice, and support

Self-employment as motive for public intervention

Creates a resource allocation - Positive externalities of ideas, products, and employment might create higher social returns to self-employment.

Income distribution - Self-employment might be a road out of poverty, unemployment, and dependence.

Practicalities

In the rush to get your business up and running, pay attention to:

• Tax: this should be declared and settled on an annual basis. Many freelancers and small businesses run into difficulties because they forgot to factor this into their financial equations, fail to pay up on time and suffer heavy fines as a result. Consult an accountant to check what you can legally set against tax and seek their help with your first tax return.

• Legal and financial advice: a small investment of time and money at the outset can pay large dividends in the long run. A partnership document is the business equivalent of a prenuptial agreement and minimizes the hassle if you go your separate ways. Your status (sole trader, partnership, and so on) needs to be defined from the start. Copyright and patent issues may need to be sorted out, as will landlord and tenant matters.

• Insurance: guard against damage to equipment and premises, plus some form of health insurance in case you cannot work.

• Health and safety: take care of yourself, any employees, clients or visitors and the general environment in which you are operating.

• Overheads: such as rent, repairs and business rates.

• Private pension plans: unless you want an old age spent in penury.

• Membership of professional bodies: it’s often well worth the annual fee in terms of networking, advice, marketing and access to opportunities.

• National Insurance contributions: these are paid separately if you are self-employed or freelance. Contact the local tax office to register.

Advantages

You’re in charge! Generally speaking you have the freedom to make your own business decisions and to grow your organisation in your own way and at your own pace. You can work the hours you choose without having to justify yourself to a manager, and there are numerous tax benefits for people who are self-employed. Also, any profits and kudos are yours alone.

Disadvantages

The responsibility for the business starts and ends with you, and one badly-judged decision can have a major knock-on effect financially. You may also end up labouring at all hours of the day and night, particularly if you’re a sole trader; furthermore, keeping yourself motivated can be a daunting task. Also if you don’t work, you don’t get paid: taking a holiday may result in a sharp drop in earnings.

2. The Government and Entrepreneurship

The government is the most beneficial factor for an entrepreneur. The government has numerous ways to help out the entrepreneur. The most appealing factors are grants, as well as provide free services for initial business start-up. The government knows that entrepreneurs are what make society flourish, and it is their actions and ideas that truly make.

Benefits of Entrepreneurship to the Government

Growth Firm survival Innovation Employment creation Technological change Productivity increases Exports Vehicle for personal development Harness social cohesion - The state of cohering or sticking together

Role of Government

Setting effective Government policies and programmes favouring entrepreneurship and encouraging them

Entrepreneurship and Society From an entrepreneurship point of view economic knowledge and awareness will raise during running the mini-company, while its main aim is creating a culture of entrepreneurship, developing a greater number of entrepreneurs. However, economic education is not supposed to be a means of economic policy to increase the number of entrepreneurs in order to create welfare, innovation and jobs, aiming to create an attitude to improve entrepreneurial conditions to increase returns and decrease costs! Economic Education exists in order to enlighten individuals about the economic situation they live in, to increase their chances to help them arrange their lives in a self-determined and responsible way. To this view creating enthusiasm seems to be an irresponsible goal, entrepreneurship education at school has to regard the following aims:

Special issues of Entrepreneurship within society 1. Developing and refining ideas by regarding chances to solve problems:

Entrepreneurship Education is not directed to a good vision, if its main goal is a self-employed person. Self employed persons have to do everything by themselves; they are employed permanently, overburdened and overworked. In one person they have to be innovative and creative, they have to be manger, trader, worker, persuader and advertiser.

Entrepreneurship education focuses on the idea development instead of business management, adapting society’s values and refining ideas regarding synergies, customers, future business partners and market-entry. In this way entrepreneurship education can also create new ideas to solve problems of society as well: It is not only an economic competence, but it is a competence to citizens, to employees and also to consumers as well, and fits within economic education as a whole.

2. Analysis chances and risks of entrepreneurship as an individual career option Enthusiasm may be a rare product of an educational process, but it is surely is not supposed to its goal. Getting used to the role of an entrepreneur in a mini-company or a simulation game, there is the necessity to compare it with the life of an entrepreneur s can be interviewed, so comparison has also take place with data of survival of firms. of examples of the circumstances and obstacles of converting ideas into practice.

3. Understanding role, function and interests of economic actors and their relation to understand so-ciety Entrepreneurship Education may tend to glorify entrepreneurs, whose unselfish action innovation, jobs and wealth are to be owed. It seems if profit is not estimated any more as an incentive to bear risks and as an element necessary for survival, growth, and change of a company. Naturally striving for gains is not the only aim of entrepreneurial action, but a necessary one. Regarding this it is necessary that students understand that intention and result can differ learning only by mini-companies or simulation games. Entrepreneurship education can enhance competences which are of great importance for anybody and it can be completed with ethical perspectives- regarding other economic actors as well- and, in most cases, has to be compared to real life.

Source Appropriate Technology

Appropriate technology is technology that is appropriate to the environmental, cultural and economic situation. It is intended for. It usually describes technologies which are suitable for use in the majority world (or “developing nations”). Appropriate technology makes use of skills and technology that are available in a local community to supply basic needs, such as gas and electricity, water, food and waste disposal. When an entrepreneur is choosing the right type of technology to use following have to be taken into consideration.

Availability and reliability of the technological sources Willingness and ability to buy Importance of the technology to be adopted Availability of local knowledge and expertise Influence ability to operate and maintain Availability of spare parts and materials.

Legal Aspects of Business

Business Legal Issues: Handling the Legal Aspects of Business

Certain legal issues may be specific to the type of business you have. Many issues are common for all types of small businesses. Some of these are being discussed here.

1) Health and safety Every business owner has to ensure the health and safety of their employees at the workplace. This is one of the major concerns of business owners of all businesses, whether big or small. Such responsibilities are both ethical and legal. If your business has a physical location, then you will need to register your business with OSHA (Occupational Safety Health Administration. This goes double if your employees face on the job hazards, such as building things or handling hazardous materials. Not following the law when it comes to health and safety is a sure- fire way to get into legal trouble.

2) Employment and ageIt is necessary for every business owner to ensure compliance of age and employment-related laws along with the health and safety laws applicable to their particular business. In a case where a business is sold to another owner, the new owner needs to follow and maintain the correct policies and procedures together with appropriate practices that accompany the purchase of the business.

It would be advisable to seek information from EEOC (Equal Employment Opportunity Commission) to ensure legal compliance and help you stay within the age limitations imposed by the law.

3) Buildings and property As a small business owner, you need to know the building codes in the district where your business will be operating. This will ensure that there are no building code violations and that there are no structural issues or other problems that may invite fines.

4) Fair Trading Practices Fair trading practices help to avoid deceptive conduct and prevent economic injury to consumers and other businesses. Fair Trade includes unfair competition, false advertising, copyright infringement, etc. As a small business owner, you should make sure to acquaint yourself with Better Business Bureau guidelines and register your business with them. Registering with the BBB shows that your business has an open-door policy and will be fair and equitable when dealing with complaints or other issues. In general, when selling products, either wholesale or retail, all sales should be on equal terms and prices must be non-discriminatory. For example, a box of cards should not be sold to one or more stores for Ksh. 50 and to others for Ksh. 120 unless there is an economic justification. This justification may be that some pay in cash so they get the product cheaper, or they buy in bulk so they get a discount. Other stores may want to retain the right to return unsold goods, so they may pay a higher price.

5) Licensing and insurance It is important that all relevant and necessary licenses pertinent to the business be obtained. The proper way to proceed in applying for any licenses you need is through your state’s business License division. Your business should also be insured (in fact, this is often required), preferably with a reputable insurance company. To get more check with related trade associations, business colleagues and experienced consultants.

It is best to hire an attorney to go through all documentation, plans and papers related to the legal aspects of your business. This will help you to comply with any legal requirements to ensure that your business is protected from lawsuits and other legal complications

Licensing: Licensing is a contract to gain access to the right of a proprietary product, process, or technology for commercial purpose. A business owner can also use licensing to expand, such as licensing a foreign agent to sell his or her product overseas.

BUSINESS FORMATION

There are three general categories of legal business formations

1. Sole proprietorships 2. Partnerships 3. Corporations

SELECTING A LEGAL FORMATION

This involves a decision with at least three important criteria

1) Preferences of the entrepreneur – Entrepreneur tent to want to “go it alone” and this desire influ-ences their decisions about choosing a legal structure.

2) Profile of the enterprise – When a new venture is launched, it is almost always small. Therefore it makes sense to adopt a small structure that is easy to administer. As a venture begins to grow, more resources and people are needed and the basic structure of a “one person” organization is no longer possible.

3) Advantages and disadvantages of a business entity It is important to study in detail the advantages and disadvantages of different business entities. This include the tax regulations, statutory forms of business, owners benefit from preferential tax rules etc which differ from one type of enterprise to the other.

CATEGORIES OF LEGAL BUSINESS FORMATION

1) Sole proprietorship – Is the business of one person, independently owned and without partners. The person is the business with full accountability for taxes, finances and legal liability.

2) Partnerships – Is an association of two or more persons as co-owners to conduct a business jointly. The purpose of any partnership is to combine forces to pursue a specific business. By joining together, partners can create a synergistic team complementing one another’s talents. There are three types of partnerships.a) General partnerships- formal and informal association in which the co-owners share unlim-

ited liability for the business. Each partner is fully responsible for operating the business re-gardless the percentage of shares.

b) Limited partnership- require one or more “ general” partners who are responsible for man-aging the venture with unlimited legal liability. Is limited to the member’s investments.

c) R&D limited partnerships – Entrepreneurs with high-tech innovations or complicated re-search ideals can benefit from research and development limited partnerships.

3) Corporations – Is a legal business entity created by law and managed through a board of direc-tors who are responsible to stake holders for appointing and directing operating officers.