Entrep 1 Introduction to Entrepreneurship – Student Workbook

Introduction to Entrepreneurship: What it takes to start your own business?

Introduction:

This basic course will provide the student with an introduction to entrepreneurship, the basic planning needed before starting your own business and the steps necessary to create a business plan.

At the end of this module, you should be able to: Differentiate between four different business models Describe considerations for what it takes to start your own business Explain what to include in a business plan

DefinitionsEntrepreneur (Oxford Dictionary) – Person who undertakes an enterprise with chances of profit or loss. (Entrepreneur is a person who undertakes a business activity of which he has no background and faces considerable risks in the process. If either of the two elements, i.e., “no background” or “considerable risk” is missing in the venture, it is no entrepreneurship).

Enterprise (Oxford Dictionary) – Bold Undertaking

Entrepreneur – (New Encyclopaedia Britannica) – An individual who bears the risk of operating business in the face of uncertainty about the future conditions.

Common Meaning – one who starts his own, new and small business.

Entrepreneurship – It is a philosophy or process through which an entrepreneur seeks innovation and employment.

Entrepreneurship can also be described as a creative and innovative response to the environment.

Some other related facts about Entrepreneurship• Entrepreneurs are made; they aren’t born. (This statement is more of public posturing than fact. Essential characteristics of an entrepreneur, i.e., ambitiousness, capacity to take moderate risks, organizing ability, persistence, vision, etc., cannot be taught in any school. These are inborn characteristics of a person.).

• Incubator organization is an organization that supports entrepreneurs

• Venture Capitalists – VCs are like bankers, but since they aren’t subject to strict regulations as bankers, they take greater risks in making investments – organized as formal businesses, they expect to reap 25– 30% annually and get more actively involved in the ventures than bankers do.

• Angels are private individuals who invest directly in firms and receive equity stake in return – they act as advisers to founders.

• Don’t confuse entrepreneurship with running a business. Every person launching a business is not an entrepreneur. A businessman’s son taking over his established family business or starting another factory in neighboring town is no entrepreneur because he is well trained in matters of that business by virtue of constant exposure since childhood. He has support of family and friends in terms of finance and advice should going gets tough. With his training, professional and personal contacts and financial backing, risk element and uncertainty are almost missing in such business. Whereas, a farmer’s son, venturing to open a grocery or even ‘pan shop’ is an entrepreneur because he is stepping into an uncharted territory of which he has little/no training and therefore bears considerable risk.

How do you define an entrepreneur in the 21s t Century?An entrepreneur of 21st century is a customer focused innovator. He uses e–knowledge. Advantage is speed. He is a global thinker even though he may not necessarily be a global player.

Standard (New) DefinitionEntrepreneurship is the process of creating something different with value by devoting the necessary time and effort, assuming the accompanying financial, psychic, social risks and receiving the resulting rewards of monetary and personal satisfaction and independence.

Word “Entrepreneur” stems from French Verb Entreprendre – means between; taker or go between.

New Definition involves four aspects –(a) The creation process(b) Devotion of time and efforts(c) Assumption of risks(d) Rewards of independence, satisfaction, money.

Advantages of Entrepreneurship

To an Individual(a) Provides Self Employment for the entrepreneur(b) Entrepreneur can provide employment for near & dear one as well(c) Entrepreneurship often provides an employment and livelihood for next generations as well.(d) Freedom to use own ideas – Innovation and creativity(e) Unlimited income / higher retained income – Bill Gates has risen to become richest in the world in a single life time through entrepreneurship(f) Independence(g) Satisfaction

To the nation(a) Provides larger employment – Entrepreneurs provide employment for self as well as other people and is source of employment creation.

(b) Results in wider distribution of wealth – This is a logical sequel of above issue. Higher the employment, greater the distribution of wealth(c) Mobilizes local resources, skills and savings(d) Accelerates the pace of economic development – Entrepreneurship is the govt’s one of the most trusted vehicles for economic development(e) Stimulates innovation & efficiency

What makes a Successful Entrepreneur?1. The urge for achievement (most often monetary ambitions) – Most Important2. Willingness to take moderate risks – (High risk takers are not entrepreneurs but gamblers).3. Determination to win4. Win– Win Personality5. Ability to identify & explore opportunities6. Analytical ability to take strategic decisions7. Perseverance8. Flexibility9. Capacity to plan and organize10. Preparedness to undergo physical and emotional stress11. Positive self-concept/Self Belief12. Future orientation – Vision13. Ethics and Values – Mission

Who can be an Entrepreneur?1. Who feels the need for achievement2. Who can take moderate risks3. Who possess skills in organizing4. Who can capitalize on opportunities5. Who has some financial strength – On his own or borrowed6. Who has ability to work hard7. Who has desire for responsibility8. Who has a clear perception of probability of success9. Who gets stimulation by feedback10. Anyone – He can be male, female or even a Eunuch11. Who does not have previous experience

Characteristics of an Entrepreneur1. Mental ability2. Clear objectives3. Business secrecy4. H.R. ability5. Communication ability6. Technical knowledge7. Achievement– oriented8. Perseverance9. Ethical10. Motivator11. Self– confident12. Long term involvement13. High energy level

14. Problem solver15. Initiator16. Goal setter17. Risk taker(Please note that all the three headings are necessarily the same)

ENTREPRENEUR’S BACKGROUND & CHARACTERISTICS1. Family Environment – In most cases, people follow the footstep of father. A businessman’s son takes up business and a salaried person’s son tries to find a job. So, if a family has had a tradition of entrepreneurship, later generations also follow the step of their ancestors. Conversely, if a family has had a bad experience with entrepreneurship, it is unlikely that next generation will be very entrepreneurial.

2. Education – Education has no correlation with entrepreneurial spirit. If at all there is one, it seems to be inverse. Most of the entrepreneurs come from low education background. Educated people who get decent job rarely prefer comfort of salaried job. It is only those who are unable to find a living for themselves eventually try their hands at new business. For long long years, due to problems of license, quota and inspector raj, most educated people preferred gov’t job, for it symbolized power, comfort, social status and for the people with low scruples, money too. However, trend is slowly changing. With business environment becoming easier and gov’t officials’ powers being on the wane, many educated people are also beginning to venture into entrepreneurship

3. Age – There are people who start as early as probably 10 and some others after their retirement. Harland David Sanders, better known as Colonel Sanders (not an Army Colonel but an honorary one) started his famous Kentucky Fried Chicken business quite late in his varied career. But commonly, men are often in the age group of 25 – 35 and women in the age group of 30– 45.

4. Physical Attributes – Have absolutely no correlation with entrepreneurial spirit.

5. Marital Status – No direct correlation but going by the age group, most entrepreneurs are married.

6. Working History – Entrepreneurs quite often have some working experience as a salaried employee in the field of their venture. It always helps to learn a little about business before putting your money in. Sindhi community follows this practice assiduously.

7. Family Contacts – Family contacts in business world reduce the risks and help the entrepreneur.

8. Professional Contacts – Professional contacts again help. College graduates venturing into entrepreneurship often get help from their peer and seniors.

9. Personal values

10. Lifestyle – Most entrepreneurs are fond of good things in life but are willing to wait till they strike rich. In the interim they are willing to rough it out.

Section 1: Business Models

There are all kinds of small businesses that mature workers can start if they have the qualifications, skills, and resources to do it. It can be a sole proprietorship, home- based business, a partnership or an online business. These are the most popular business models that fit mature small business owners:

Business Model Definition1. Sole proprietorship A type of business that is owned and

operated by one individual who is the one investing all the money and getting all the profits. The proprietor of the business can have other people working for them.

2. Home-based business A small business that operates from the owner’s home and usually can have a small number of employees, who are most of the time family members.

3. Partnership When two or more individuals share ownership

4. Online Business Also known as an e-business is a new venture that delivers services or products entirely online. It may also include a business that uses the internet as an extension of the regular market. It can be to provide services, to manage information, or to sell products.

Considerations before Starting your Own Business

Section 2: Be clear about what you want

Starting a new business may require a lot of hours of work and even 6-7 workdays a week. It will require monetary investments, and support from family and friends.

(Answer here)

Section 3: Choosing your business idea

Choosing a business idea should be something that you like to do and are really good at. It could be a hobby or a very particular set of skills you possess. Ask yourself if there is something that you really like or enjoy doing. Take into consideration if this kind of business is going to fit well with your lifestyle, family and finances.

To succeed as a new small business owner, you do not necessarily need to invent something new or create something unique. You can find an unfilled service or commodity in your community and look for a business that fills this vacancy.

You need to ask yourself: What am I interested in? What skills do I have that I can use in this business? Do I see an opportunity in the market in my community or communities that I

can fill with the business I have in mind?

Activity #1: In this activity, you will answer the following questions regarding your business idea.

1. What is the business idea you want to start?

2. List other businesses in your community who provide similar services or products.

3. Write down where you will have the business. Will it be in a separate location or will it be in your home?

(Answer here)

Section 4: Potential to Generate Good Income

Does your business have the potential to generate good income? You want to make sure that your business is going to generate income that not only will help you recuperate what you invested in it including your salary, but also give you a margin of profit.

You may need to consider different ways to keep your start-up costs low. Look for advice from another small business owner, a Small Business Administration expert, or a local financial expert in your area. You need to have some financial guidance to help you define a good business path.

Section 5: Developing a Business Plan

You must develop a business plan. A business plan is like a road map for your business and its projections for the next 3-5 years. This plan doesn’t need to be a scientific research. It can be simple and flexible. You will probably see that your business plan can turn into a group of mini-plans. One plan will be needed per each aspect of your business such as: marketing, finance, sales, and staffing.

(a)Executive Summary: This will include a general overview of what you want your company to be and along with your business goals.

(b)Company Description: Include information about what your business will do and who will be the clientele that your business will serve. Include what makes your business different or better than the existing ones (if there are other businesses like yours in that area).

Activity #2: In this activity, you will write down in detail what your business will do. Make sure you include who the clientele will be in addition to any services you will provide. Also, list any business goals you have for your company.

Company DescriptionWhat your business will do?

Who will be your clientele?

What kind of services you will provide?

List your business goals.

(c) Market Analysis: Research your business market, competitors, and trends for the local business industry. Decide what will be the size of your company, who will be your target clientele to serve, and the demographics or characteristics along with the characteristics of your competitors in the market.

Activity #3: In this activity, describe who will be your customers and what your business is going to do for them. Be very specific with regards to any services you will be providing or products you will be selling. If you are creating an online business, list information on how your site will communicate your products or services to your clientele.

1. Describe who will be your customers?

2. Describe which services you will be providing or products you will be selling or creating:

(d) Organization and Management: You must find out what will be the best organizational and management model for you and your business. Who does what in your business? What will be the composition of your business team and what will be their functions and responsibilities.

(e) Service or Product Line: Are you going to sell a product or a service? What will be the benefit for your customers?

(f) Marketing and Sales: How are you going to drive the sales in your business and keep your customer loyal? What will be your sales strategy? How are you going to advertise your business?

(g) Funding Request: Do you have enough funding to start your business or are you going to seek other funding venues such as loans, private investment money, or partnerships? You may need to calculate the cost of starting your own business. This may include the expenses for starting up until you start to generate your own capital and also your assets such as property, equipment, furniture, and inventory.

Activity #4: In this activity, identify your funding sources. How are you going to obtain the capital to start your own business?

Funds Needed Sources

Activity #5: In this activity, you will list the types of certifications, preparation, experience or skills you have that will qualify you to start your ideal business.

Qualifications

Section 6: Seek Legal Guidance

You should seek legal assistance and guidance to register your business. Get an orientation about all the steps you may need to follow in order to register your business and obtain the local licenses to operate. Make sure that you will comply and complete all the necessary permits before starting your own business.

Wrap Up

During this course you learned: Four different business models Five considerations for what it takes to start your own business What to include in a business plan