INTRODUCTION
TO
ENTREPRENEURSHIP
Key
Learning Points
vOverview
vDefinition
of Entrepreneurship
vVenture,
venture capitalist, and adventure
vGoal
setting/planning
vRisk
taking/resource management
vThe
role demands of business
vReasons
for business failure (internal and externals factors)
v
v
v
Overview
oEntrepreneurship
as a practice and as an academic field of study has gained worldwide acceptance
during the past few years.
oIt
is a dynamic activity w/c helps the entrepreneur to bring changes in the
process of production, innovation, usage of materials, creator of market etc.
Concept of Entrepreneur
The word “Entrepreneur” is derived 4m de
French verb ‘entrepredre’. Which means ‘to
undertake’.
According
to J.B. Say, “ An Entrepreneur is
the economic agent who unites all means of production, land, labour,
information and capital to produce a product. By selling the pdt in the market
he pays rent of land, wages to labour, interest on capital and what remains is
his profit”.
...
…regarded
as a person who has the initiative skill and motivation to set up a business of
his own and who always looks for high achievements.
According
to Cantillon “An entrepreneur is
the agent who buys factors of production at certain prices in order to combine
them into a product with a view to selling it at uncertain prices in future”.
Types
of Entrepreneurs
i.Innovative: assembles
and synthesis info and introduces new combinations of FoP.
ii.Imitative/Adoptive: simply adopts successful innovation introduced
by other innovators.
iii.Fabian:
he is timid and cautious, imitates other
innovations only if he is certain that failure to do so may damage his
business.
iv.
Drone: never like to get rid of their
traditional systems of d biz & always feel comfortable.
●
...
v. Empirical; hardly introduces anything revolutionary
and follows the principle of rule of thumb.
vi. Rational: well informed about the general economic
conditions and introduces changes w/c look more revolutionary(innovative).
vii. Cognitive: well informed, draws upon the advice and
services of experts and introduces changes that reflect complete break 4m d
existing scheme of biz.
Entrepreneur Vs. Entrepreneurship
The term ‘entrepreneurship’ is often used
synonymously with the term ’Entrepreneur’ though, they are two sides of the
same coin, conceptually they are different.
Entrepreneurship is
the process of identifying opportunities in the market place, arranging the
resources required to pursue these opportunities and investing the resources to
exploit the opportunities for long term gains.
...
According
to Cole “Entrepreneurship is
the purposeful activity of an individual or a group of associated individuals
undertaken to initiate, maintain and aggrandize/boost profit by production or
distribution of economic goods and services”.
Venture,
venture capitalist, and adventure
What
is a Venture?
In
common parlance, the term venture refers to a business undertaking.
An
undertaking that is dangerous, daring, or of uncertain outcome.
A
business enterprise involving some risk in expectation of gain.
...
oThe
term venture is the shortened form of “aventure”, which itself is the abridged
version of “adventure”.
oIn
short, the origin of the word is associated with adventure, risk and
uncertainty of outcome.
...
What
Then is Venture Capital?
Venture
capital is money invested in businesses that are small; or exist only on paper
as a concept, but have the potential to grow and become immense.
§The people who invest this money
are called venture capitalists or, simply, VCs.
§As the VC investment is made in a
company’s equity, it is also referred to as risk capital,..
...
..denoting that unlike loans that are
secured by lenders thro’ charges (interest).
§This
investment is at risk of being completely wiped out if the biz goes into
bankruptcy.
§VC
money is also sometimes referred to as “patient risk capital” as the investment
is usually made for a medium to long-term period ranging from any where btn 2
to 3 years to about 5 to 7 years, and in some rare cases as long as 10 yrs.
...
§Clearly,
the objective of the VC is not to earn a regular income from his investment but
to make a substantial gain.
§VCs
who provide their own money to entrepreneurs for “seed capital” to research an
idea, draw up a biz plan and other initial biz activities are referred to as
“angels” and the money they invest is called “angel capital”, w/c is one of the
ways “informal VC” works.
§
...
What
Venture Capital is Not
VC is not money available at a rate of
interest payable at regular intervals although VCs usually do take some regular
payment as fees to provide support to the cos in w/c they invest.
VC should also not be confused with other
financial services which are performed for a fee, such as investment banking.
Goal setting/planning
A
goal is a specific target to be achieved
…an
observable and measurable end result to be achieved within a fixed timeframe.
…the
end towards which effort is directed
◊Setting goals is essentially the
process of creating a plan, or roadmap for
your enterprise in the next one
year. E.g.
...
To increase sales from 15m to 17m
To increase profits by 5%
To increase market share
To Lower production costs
To develop new product line(s)
Why Set Goals?
®Provide
direction to your business
®Allow
you to plan ahead and be prepared
®Provide
a basis for recognizing firm’s successes and accomplishments
®Motivate
employees
®Help
delegate responsibility within your biz
®Goal-setting
helps make evaluation easier and more fair
®
...
Goals
should be S.M.A.R.T
Specific
– Goals s/d pinpoint specific things.
Measurable
– You s/d be able to know when you reach
a goal.
Action-oriented
– You s/d be able to break a goal down
into tasks.
Realistic
– You s/d be able to achieve goals.
Timely
– You s/d set timelines and deadlines for
goals to be met and stick to them!
Steps
to Effective Goal Setting
.
...
±Brainstorm
•What does your biz want
to achieve?
±Prioritize
•What is most important for your biz to achieve?
±Develop
an Action Plan
How can
your biz accomplish?
±Evaluate
What did
your enterprise accomplish?
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Risk taking/resource managt
oEntrepreneurs
bear substantial risk; entrepreneurs are associated with risk and risk –
taking.
oWhen
something is highly risky, it means its return is uncertain.
oOne
of the most important factors in the entrepreneurs success is their risk –
taking
oEntrepreneurs
must be risk – takers to realize their ideas.
Entrepreneurship
and risk – taking
Risk-taking
refers to the tendency to engage in behaviors that have the potential to be
harmful or dangerous, yet at the same time provide the opportunity for some
kind of outcome that can be perceived as positive.
Entrep’ship is a process in w/c the
entrepreneur identifies new opportunities, mobilizes resources resulting into a
new pdt/svs to society with uncertain returns (risk)
Risks
Undertaken By Entrepreneurs
i.Financial risk: Most
entrepreneurs finance by savings and personal effects and if they fail, they
will loss it. They take risks of failure.
●
ii.Job risk:
There is always this question "can an entrepreneur find a new job or
return to his /her previous job if he /she fails in his / her economic
activity?"
...
iii. Social and family risk:
The beginning of entrepreneurial job
needs a high energy and is time – consuming.
Because of these undertakings, he may
confront some social and family damages like deficiencies and the problems
resulted of her or his absence in the home and its effects on his / her family.
...
iv. Mental risk
Perhaps the biggest risk that a
entrepreneur takes is the risk of mental health.
The risk of money, family and friends
could be adjusted but mental tensions, stress, anxiety and the other mental
factors have many destructive influences.
...
V.
Trusting a key employee.
When you first start a business, you
won’t have a full team of employees working for you. Instead, you’ll probably
have a small, tight-knit group of people working tirelessly.
You’ll have to put an overwhelming amount
of trust in them, especially those with special skills and willing to start
work at a lower salary than the industry standard.
The role demands of business
®Take
on challenges
®Think
through possibilities and practicalities
®Promote
the business
®Focus
on business outcomes
®Be a
perpetual student of the biz-constantly seeking knowledge to grow the venture
®Be
self-reliant
®Be a
self-starter
®Build
relationships.
®
Reasons for Business failure (internal
and externals factors)
A
business failure is the termination of an entrepreneurial initiative that has
fallen short of its goals.
…it
can also be referred to as a firm’s inability to exist due to loss of capital
or insufficient return on investments.
...
oSmall
businesses help create new jobs, introduce new products and provide specialized
expertise to large corporations.
oSmall
firms represent about 99% of employers.
oUnfortunately,
according to the U.S. Small Business Administration, over 50% of small
businesses fail in the first year and 95% fail within the first five years
Internal
factors for business failure
xBankruptcy/inadequate
financing
xProblematic
decisionmaking
xLack
of market research and information
xLack
of innovativeness-Copying others
xPutting
all your eggs in one basket
xAdopting
new things you can not keep up with.
xLack
of control-unaccountability
...
xBullfrogs-show-offs
xPoor
business planning
xMgt
incompetence (lack of skills)
xUnworkable
goals
xInapproapriate
loaction
External
Factors for business failure
xBorrowing
money from banks (Bank loan) for unviable projects
xNegative
business recession
xIntense
competition
xCivil
unrest and conflict-Lack of peace
xNatural
calamities- Earthquake, flood, storm etc.
xChange
in demand-tastes and preference
xAdverse
Gov’t policies-Such as heavy tax, ban etc.
x
x
x
Task
Read
about the theories of entrepreneurship
…
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