Entrepreneurship Theory and Concept Entrepreneurship Meaning It was Robert L Schwarz who gave the following statement as a meaning

of what he saw as entrepreneurship: The entrepreneur is essentially a visualizer and an actualizer. He can visualize something, and when he visualizes it he sees exactly how to make it happen. And no doubt you can visualize being wealthier than you are now and enjoying a more satisfying lifestyle. If you have what Schwarz cites as entrepreneurial qualities then youll also want to actualize your visions. You can take the first step towards doing making the dream a reality by contacting We Simplify the Internet and enquiring about their franchise opportunities. The Dictionary.com definition of 'entrepreneur' reads "a person who organizes and manages any enterprise, especially a business, usually with considerable initiative and risk." The concept of entrepreneurship has a wide range of meanings. On the one extreme an entrepreneur is a person of very high aptitude who pioneers change, possessing characteristics found in only a very small fraction of the population. On the other extreme of definitions, anyone who wants to work for himself or herself is considered to be an entrepreneur. The word entrepreneur originates from the French word, entreprendre, which means "to undertake." In a business context, it means to start a business. The Merriam-Webster Dictionary presents the definition of an entrepreneur as one who organizes, manages, and assumes the risks of a business or enterprise. Schumpeter's View of Entrepreneurship Austrian economist Joseph Schumpeter 's definition of entrepreneurship placed an emphasis on innovation, such as: new new new new products production methods markets forms of organization

Wealth is created when such innovation results in new demand. From this viewpoint, one can define the function of the entrepreneur as one of combining various input factors in an innovative manner to generate value to the customer with the hope that this value will exceed the cost of the input factors, thus generating superior returns that result in the creation of wealth. Entrepreneurship vs. Small Business Many people use the terms "entrepreneur" and "small business owner" synonymously. While they may have much in common, there are significant differences between the entrepreneurial venture and the small business. Entrepreneurial ventures differ from small businesses in these ways:

1. Amount of wealth creation - rather than simply generating an income stream that
replaces traditional employment, a successful entrepreneurial venture creates substantial wealth, typically in excess of several million dollars of profit. 2. Speed of wealth creation - while a successful small business can generate several million dollars of profit over a lifetime, entrepreneurial wealth creation often is rapid; for example, within 5 years.

3. Risk - the risk of an entrepreneurial venture must be high; otherwise, with the
incentive of sure profits many entrepreneurs would be pursuing the idea and the opportunity no longer would exist. 4. Innovation - entrepreneurship often involves substantial innovation beyond what a small business might exhibit. This innovation gives the venture the competitive advantage that results in wealth creation. The innovation may be in the product or service itself, or in the business processes used to deliver it. What are the components/ Qualities of entrepreneurship? A drive to do "it" better than it's ever been done Being fiercely independent Being assertive and confident Having a marked intolerance of the status quo Being a

risk taker

Willingness to study one's self

Willingness to take criticism and use input to improve self or processes Willingness to be taught and teach You know you're an entrepreneur when you're over your head and have complete confidence that you, your mentor and support system can devise the "way". You're almost an entrepreneur when you go looking for a mentor. (you should start looking now) When starting your own venture, whether it be a traditional brick-and-mortar storefront, franchise, or home-based network marketing opportunity, risk is always involved. There is no certainty to what the future holds. That's why it's called a 'risk' and not a 'guarantee.' Entering the world of free enterprise can be as scary as it is exciting. With any risk, there's a certain element of fear that comes into play. Even the most business-savvy of individuals questions what the future holds and wonders whether they should listen to the people telling them they're crazy and making a huge mistake. But always remember this: the ones who speak negatively of your ventures are not putting money in your bank account. If they throw negativity at you, it's best to pay them no mind. Components of a Successful Entrepreneur. The key to unlocking the door to success is adopting and adhering to the Five Components of a Successful Entrepreneur. 1) Develop the Proper Mindset -It all begins here. Henry Ford once said, "Whether you think you can or think you can't, you're right." As an entrepreneur, your mindset will dictate where you're headed and how you'll get there. In order to stay the course, it's imperative you block out the outside forces that attempt to pour cold water on your efforts. The sooner you establish a goal-oriented, results-driven mindset that blocks out negativity and allows you to learn from every scenario you encounter, the sooner you'll see the best results from your enterprise.

2) Define Your Goals and Mission -Going into business for yourself without a clear-cut mission and goals to accomplish is as foolish as heading on a cross-country trip with no map or GPS. Without goals to work towards, you'll get lost...and may never find your way back. You have to have a reason why you're putting in the effort. There has to be something at the end that rewards your labor. And it doesn't always have to be money. It could be the ability to fire your boss, travel, golf, spend more time with your kids, whatever drives you. As long as you believe in your goals and mission strongly enough, nothing will stand in the way of helping you reach them. 3) Apply Drive, Passion, and Work Ethic -Nothing in life comes easy, and anyone who's ever told you there's a quick-and-easy route to success is drunk on their own kool-aid. It takes blood, sweat, tears, passion, and commitment to become successful, as well as a work ethic that keeps you motivated through the toughest of times. You can't expect the world to fall to its knees in front of you simply because you opened a business. You have to make it happen through your own effort. 4) Implement a Proven Marketing System to Carry Out Your Mission and Achieve Your Goals -Without a system in place to market your products and opportunity, you'll make no sales and be dead in the water. You have to find a way to make sure what you're promoting is getting in front of the right people. This starts with educating yourself on how to do it, which inevitably requires a trip out of your comfort zone. Remember, Michael Jordan didn't pick up a basketball for the first time and become the greatest player of all time. He had to work, learn, and dedicate himself to learning how to accomplish great things. Successful entrepreneurs face these same obstacles. But as any successful person will tell you, the learning experience is what makes it fun! 5) Take Action and Stop at nothing to Achieve Ultimate Success -Everything you learn and absorb is worth NOTHING if you don't take action and do what's necessary to succeed. Many people salute the flag of "getting overwhelmed by overwhelm" or "paralysis by analysis" and never accomplish what they set out to do in the first place because they get locked inside an unnecessary need for perfection. Without question, you're going to face obstacles and make mistakes. But learning from your mistakes will lead to overcoming the obstacles, inevitably leading to the level of success you desire. The world of free enterprise is filled with stories of both success and failure. And the stories of success were born from dedication, sacrifice, and commitment. Those who failed either gave up before they could learn what it took to be successful or were in search of the next big 'get-rich-quick' scheme. They wanted the 'magic' solution to all their aches and pains without putting forth the effort required for true entrepreneurial success. The truth is, there is no magic involved in the success stories you hear. The successful entrepreneurs you hear about overcame the odds by dedicating themselves to their own entrepreneurial development. This development then bled into their business and instead of waiting for success to fall in their lap, they went out and earned it themselves!

There are many reasons why entrepreneur would think of starting his own business .He may also need additional incentives to stay in his line of business. There are various theories that have been put forward by various scholars regarding entrepreneurship development. Discussing these theories will help us understand better the nature of in entrepreneurship. The emergence of entrepreneurship has brought with it immense insights that we need to appreciate. This has led to a diversity of theories that we need to examine, by looking at there schools of thought that divide entrepreneurships into specific activities. These activities may be looked at from micro or macro view. The Macro View Entrepreneurial Thought: This point of view presents a number of schools of thought which suggest that external factors are those forces behind the entrepreneurial process. Often these factors are beyond the control of the individual entrepreneur;

1. Environmental school of thought

2. Financial/capital school of thought 3. Displacement school of thought 1. Environmental school of thought

The proponents of this school of thought argue that entrepreneurial desires are molded by external factors (which may be positive or negative) that affect a potential entrepreneur lifestyle. They further argue that institutions and society values grouped together from an environmental framework that strongly influences the development of entrepreneurs. Freedom and support in the work environment can also foster a managers desire to pursue an entrepreneurial career. In addition, the social group a person may belong to may finally affect the potential development of an entrepreneur.

2.

Financial/capital school of thought- capital

This school presents the view that the desire to become an entrepreneur is based on the capital seeking process; that the entrepreneurial process is about decisions that involve finances at every major point in the venture i.e. a. Startup or acquisition venture stage: In the beginning the entrepreneurs main concern is deciding on the major sources of funds to give him a head start in the venture. He may either take up a loan or decide to save up his. The success or failure of this decision making process will lead him further to make a decision as to whether to proceed or abandon the project. b. Ongoing venture stage The financial consideration here is how to manage cash, make investments undertake financial analysis, and evaluate the financial position of the venture. The decision to be made here is whether to increase or reduce the size of the business. c. Decline or succession stage The entrepreneur will be forced at some point to investigate the future profitability of the venture. Following these analysis they may then consider options such as corporate buyout, the solution of succession. This decision of course is as financial consideration.

3. Displacemnt school o thought

This view suggests individuals will not pursue a venture unless they are prevented from doing other activities. Factors that may cause one from pursuing other ends in life include

I. II.
III.

Political factors-This may include riots, wars etc. and may cause one to move from station to another Cultural factors- e.g. family backgrounds Economic factors- this could be, for instance a result of loss of current employment

THE MICRO VIEW ENTERPRENUERAL THOUGHT This view prevents factors that specific to an entrepreneur who has the ability to direct or adjust the outcome of each major influence. The following school of thought comprises this view point: I. II. III. The entrepreneurial trait school of thought The venture opportunity school of thought The strategic formulation school of thought

The entrepreneurial trait school of thought The following study of successful people, it was found that they exhibited similar characteristics. Those behind this school of thought therefore, suggest if certain traits associate with successful entrepreneurs are established and supported early in life, this will lead eventually to entrepreneurial success. The four traits usually exhibited by successful entrepreneurs include: I. II. III. IV. Creativity Determination Achievement Technical knowledge

Family development and education are also important traits which contribute to success of entrepreneur. 2. The venture opportunity school of thought This school of thought suggests the ability to become an entrepreneur lies in being able to search for idea sources, development concept and implement opportunity. The proponent argues that creativity, market awareness, developing right idea, at the right time, for the right market niche are the essential ingredients to entrepreneurial success. Opportunity identification is the key force behind becoming an entrepreneur 3. The strategic formulation school of rethought-strategy This approach to entrepreneurial theory emphasizes that the planning process is vital for successful venture development. The argument is that through strategic planning and formulation an individual is able to develop an effective venture. This is because he will be able to identify and make use of markets, unique people, unique products and unique resources. Alternative View/ Categorization of Theories There are theories which explain what motivates people into business.

People start business for various factors within themselves and from outside that tend to drive them to entrepreneurship or starting business. Some of the theories leading to entrepreneurship brought forward include: 1. Psychological theory 2. Sociological theories 3. Economical theories 1. Psychological theory

This is based on personal characteristics or traits theory which focuses on the personal attributes. The individual characteristics which are of course internal like, needs attitudes, value, form and drive that lead to business formation and entrepreneurship. This was suggested by Mc Clelland as need theories (need theories). McClelland said people with high level of needs have a strong desire to solve problems on their own enjoy setting goals (higher) and achieving them through theory own effort. He came up with: a) Three need theories by Alderfers Needs for power

Need to achievement
Need for affiliation b) Need for independence locus of control People would want to be their own bosses. There are two types of locus of control. External locus Internal locus

External locus of control has a belief that what happens in life is a matter of luck or forces beyond their control. Internal locus of control has a belief that the future lies on their own hands and therefore its only through their effort and therefore they usually work hard, innovative in order to change their destiny.

c) Risk Taking Propensity

Ready to take risk, the most effective entrepreneurs are risk takers. 2. Sociological theory This is about social conditions. Its about social condition. Its about unique personal background i.e. own biography, its about external environmental factors, its about ones belief, culture, social structures, far backgrounds that determines entrepreneur actions and behaviour. a. Positive pull These are positive influences that can come from either; the family, brothers, sisters, parents, it also comes from the customers, can also come from a mentor. b. Positive push

That which can push one i.e. own career i.e. a teacher who starts a school. You start above deep knowledge of the industry can push one into entrepreneurship. c. Negative displacement Internally displaced out of comfort zone i.e. loosing. Displaced by political skirmishes. Also loosing spouse who was a breadwinner hence one has to look for new ways of surviving. Also when one is insulted ridiculed, feeling dissatisfaction a challenge.

d. In- between
Those who have finished college and are bored and they tend to look for something to occupy their lives also do business as a hobby. In between is also called life bath changes. 3. Economic/resource based theory This is based on one has in terms of economic resource which can be turned into the business. Our possessions are either tangible or intangible. Tangible may be assets, financed amine, a forest, land , vehicle. The intangible e.g. skills, experience, knowledge or reputation.

4.

Management theory Those who have some particular managerial ability in terms of ability to organize various factors of production into anew venture. Also ability of leadership; planning In order to turn this, there should be situational characteristic. The way people perceive the situation (perception desirability). The way we perceive, the way certain things are desirable.

Incentive of Aspiring Entrepreneurs Entrepreneurs would really de with habit of encouraging them to succeed in their business. This comes in the forms of incentives from the local central authorities. The incentives could come in form that enables them to carry out the businesses with little indifference globally, there are some form of inventiveness that can help the entrepreneur also keep up with other businesses I other countries. The incentives can come in any of the following ways.

Few barriers to entry

This will encourage the upcoming to penetrate a specific industry, with ease. Competition may be there but with few barriers that could have been set up with the already existing businesses, it becomes possible for small firms to compete in a fair environment Tax incentive

Businesses that operate in certain areas and certain industry could do within some exemption in the tax on inputs. This will mean that they will not collect output tax on their product and the incentive, but the incentive in itself will mean less administrative work Better regulation

To control the growth of small firms, the government can regulate e issuing of licenses or require stringent forgone to get a licence. This will act as an incentive for the new entrants and will create a conducive environment for healthy competition

Linkages

The government through the ministry of finance can set up forums where the investors can meet with upcoming entrepreneur and discuss prospects where both parties can benefit from each other. Thos can be organized in form of seminars and trainings or workshops organized by the ministry concerned low interest rates on loans

The government could set up loan schemes through microfinance institutions where entrepreneur with good business finance can get business prospects can get boost for the growing venture in the form of lo interest loans. The interest subsides will be the government invest for the upcoming business that ill eventually contribute to national growth.

The Role of Small Business In Economic Development of A Country Creates employment Poverty reduction by providing individuals with income Generating revenue to the government through taxes Reduce monopolistic tendencies among large organization Provision of social welfare They provide goods and services which are affordable Contribution through national wealth Make use of local resources, create market for local resources Help in distribution of wealth Act as a training ground for many people through apprentice

Why would people engage in small businesses? To supplement their income Government incentives Lack of employment Problems of small scale business Lack of premises Lack of management skills Security Lack of market High competition Unable to access funding from the mainstream banks because they dont keep records

Lack of good infrastructure Lack of proper information regarding their market Lack of appropriate technology Unfavorable regulatory systems e.g. harassment by councils Poor credit management Seasonability of the business

Small businesses Strengths Very good in flexibility in terms of identifying a business opportunity and can quickly and speedily take advantage of the opportunity Can change when there is need. Innovative constantly looking for new ways to survive. Ability to be in close contact with customers Simple management structure which lead to quick decision making Highly motivated workers depending on the leadership Capital required to start business is low.

Weaknesses Short life span Poor decision making Poor access to a funding They have a low bargaining power as are not fragmentation. Unskilled workforce

Government incentives: What government is doing to encourage small business Funding Policy change to encourage micro finances - To advance small business i.e. Faulu Kenya Operating premises: Jua kali sheds, also Kenya Industrial Estates Licencing before one could start business with so many licences. But no there is single business permit. Infrastructural developments e.g. water, roads, electrify etc. Training in business business incubation systems put in place to increase the chance survival

They involve provision of necessary support services like operating space, helping business to be connected to financiers, supporting networking technologies connection. They are helped through market supports and trade fairs which help them. Also procurement in government.

Entrepreneurial opportunities Entrepreneurs are good in identifying business opportunities for their own environment. Identify the difference between business idea and business opportunity. Business idea meaning is basically a suggestion of the plan. It can be a dream or a thought. Sources of business ideas Friends Magazines/journals/publications/internet From experts, research and development From workshops/seminars Customers or distributors they complain if their needs are not satisfied or not met. From competitors From business tours, shows, exhibitions

Ideas go through a creative process of ideas whereby imaginative people generate ideas they nurture them and they develop them successfully. The first step in this process is: 1. Idea generation Idea generation can be traced from the curiosity about a specific problem or about finding a solution to problem. 2. Preparation Preparation is a conscious search for answers you are seeking information about the problem and how others have solved that problem before. This stage involves setting up market research or carrying out market experience; The aim is to carry out viability sustainability of business.

3. Incubation Is allowing the ideas to go without intentional efforts i.e. dreaming bout ideas,

4. Idea experience The Eureka factor

5. Evaluation & development 6. Implementation Verification/Screening business ideas Not all ideas generated from whichever source can be turned into business opportunity. Some are good and others are not. Before carrying them further, you need to screen/verify them.

1. How viable is the idea?

Viability of the business is opportunity is determined by the market potential or demand of the products service that you want to offer to your customers. i. ii. iii. Will the business generate enough sales Is the business sustainable for a long time Is there a real need for the product/service how useful is the product

2. Do you have the skills and talents to develop the business idea into a business? Do you have the capacity? 3. what other resource do you require to take the idea and sell it to the customers Basically there are 3 broad resources that are required to get started. a) Financial resources success of financing b) Operating resources premises, production machinery and equipments, raw materials, licensing ad permits. c) Man resource people are critical to the success of any business. In terms technical expertise, knowledge and skills do you understand the needs of your customers. Methods of generating ideas/problem solving technique a) Focus groups given information in a structured format b) Reverse brain storming c) Reverse brainstorming focusing on reverse. d) Gordon method individual unaware of problem e) Free association f) Forced relationship

g) Attribute method You need to know about the industry and market idea. How to understand the industry in the market you scan the environment both socially and politically in order to understand the industry empowerment. Your research on the industry. Also research on the legal implication involved you need to avoid while screening business ideas. a) Avoid identifying the problem b) Avoid judging ideas too quickly avoid excitement. Seek professional advice, think and sleep over the idea c) Obey rules and avoid getting blocked by the imaginary obstacles that are not genuine.

Successful Entrepreneurs According to Webster's dictionary, an entrepreneur is one who organizes, manages, and assumes the risks of a business or enterprise. Entrepreneurs live in the future. They have creative personalities, are innovative, and thrive on change. Traits in a Successful Entrepreneur 1. Good health. Successful entrepreneurs must work long hours for extended periods of time. When they get sick, they recover quickly. 2. A Need to Control and Direct. They prefer environments where they have maximum authority and responsibility and do not work well in traditionally structured organizations. This is not about power, though. Entrepreneurs have a need to create and achieve by having control over events.

3. Self-confidence. Findings showed that as long as entrepreneurs were in control, they were relentless in pursuit of their goals. If they lost control, they quickly lost interest in the undertaking. 4. Sense of Urgency. They have a never-ending sense of urgency to do something. This corresponds with a high energy level. Many enjoy individual sports rather than team sports. Inactivity makes them impatient. 5. Comprehensive Awareness. They have a comprehensive awareness of a total situation and are aware of all the ramifications involved in a decision. 6. Realistic Outlook. There is a constant need to know the status of things. They may or may not be idealistic, but they are honest and straightforward and expect others to be the same. 7. Conceptual Ability. They have superior conceptual abilities. This helps entrepreneurs identify relationships in complex situations. Chaos does not bother them because they can conceptualize order. Problems are quickly identified and solutions offered. The drawback is that this may not translate well to interpersonal problems. 8. Low Need for Status. Their need for status is met through achievement not through material possessions. 9. Objective Approach. They take an objective approach to personal relationships and are more concerned with the performance and accomplishment of others than with feelings. They keep their distance psychologically and concentrate on the effectiveness of operations. 10. Emotional Stability. They have the stability to handle stress from business and from personal areas in their lives. Setbacks are seen as challenges and do not discourage them. 11. Attraction to Challenges They are attracted to challenges but not to risks. It may look like they are taking high risks, but in actuality they have assessed the risks thoroughly. 12. Describing with Numbers. They can describe situations with numbers. They understand their financial position and can tell at any time how much they have in receivables and how much they owe.

Social Entrepreneurship Components Assumptions about social entrepreneurship fall into four broad components: Entrepreneurs Ideas Opportunities Organizations.

These four components not only help organization the rapidly growing literatures on business entrepreneurship, they clarify the search for strategies that might help entrepreneurs develop and launch better ideas, discover opportunities, and create more

creative organizations. There is plenty of evidence that social entrepreneurship involves more than an entrepreneur and a pattern-breaking idea. The only problem, if it is a problem at all is that the field as a whole has yet to decide which components matter most, or how individual dispositions vary with organizational context. Entrepreneurs Entrepreneurs are the first component of social entrepreneurship, and can be found in every definition I have read. However, some definitions give entrepreneurs greater prominence than others. Although Drayton argues that there is no entrepreneur without a powerful, system-changing idea that seeks widespread impact, there is no chance of success without the talent, creativity, and entrepreneurial intent of the individual. As he wrote in 2005, these people are compelled to change the whole society. From childhood, an entrepreneur intuitively seeks out an area of interest, for example, health, and then begins the long search for an idea that will be his or her vehicle for leaving a scratch on history. This focus on entrepreneurs inevitably leads the search for traits and characteristics that might these gifted individuals from the rest of society. According to Drayton, entrepreneurs are easy to spot long before they have made their mark. They are married to their visionand will stick with it for decades if needed. They are equally focused on the how to questions. They ask themselves: How do I get from here to my goal fifteen years from now? How do the pieces fit together? How do I solve this and the next problem? Thus does the democratic revolution occur. Draytons entrepreneurs also show deeper qualities: What qualities define an effective social entrepreneur? First, the person must be creative in both goal setting and problem solving. Secondand this is the toughest screenis entrepreneurial quality. This is not leadership, or the ability to administer, or the ability to get things done. The driving force here is the fact that such a person is emotionally, deeply committed to making change throughout the whole of society. Once one understands that this commitment itself is the driving force, then everything else follows. The final quality essential to success as a social entrepreneur is ethical fiber. People will not make significant changes in their lives if they do not trust the person asking them to do so. What Are the Characteristics of a Successful Entrepreneur? The Components of a Successful Business 1. A competent entrepreneur 2. A viable business concept 3. Access to adequate capital When these three components come together, then you are in the right place at the right time. If not, you will probably fail. Following is the summary of an article written by Judith L. Glick-Smith that ran in the July/August 1999 Society for Technical Communicators' journal, Intercom. This is a wellresearched article and includes an impressive bibliography. Anyone thinking of becoming self-employed would do well to compare his/her own personality to the traits described in the article. Entrepreneurial behavior. Entrepreneur in English is a term applied to a person who is willing to launch a new venture or enterprise and accept full responsibility for the outcome. Entrepreneurship

is a multidimensional process. A review of the literature provides some support to look at a multidimensional perspective when analyzing entrepreneurs. There are two distinct schools of researchers in the field of entrepreneurial psychology. The more traditional group of researchers have focused on the personality characteristics of the individual such as: locus of control, risk taking, achievement motivation, problem solving style and innovativeness, perception, and work values. The second group of researchers has taken a social cognitive approach, looking at the relationship between an individual and his or her environment. The external factors include culture, role models, work experience, education, and environment. It is important to look at all of these factors and their influence on entrepreneurial behavior. The relationship between the entrepreneur, personality characteristics, values, and other dimensions helps explain why some become entrepreneurs and others do not. This model has implications for entrepreneurial educators and policy makers.

1.

Introduction Jean-Baptiste Say, a French economist, is believed to have coined the word "entrepreneur" in the 19th century - he defined an entrepreneur as "one who undertakes an enterprise, especially a contractor, acting as intermediatory between capital and labour".[note 2] An entrepreneur is a person who has possession of a new enterprise, venture or idea and is accountable for the inherent risks and the outcome.[ Entrepreneurial behavior involves the activities of individuals who are associated with creating new organizations rather than the activities of individuals who are involved with maintaining or changing the operations of ongoing established organizations [21], [22]. In the process of identifying and designing the entrepreneurial behaviors instrument, [23] has taken into account various factors and theories. Among the factors referred were theories of entrepreneurship, theories of human development and the characteristics of successful entrepreneurs. 2. Entrepreneurs defined Entrepreneurs is someone who recognizes an opportunity, and marshals the resources to take advantage of, or act on that opportunity Bygrave and Hofer (1991) define the entrepreneurial event as the creation of a new organization to pursue an opportunity. The authors define the entrepreneurial process as involving all the functions, activities and actions associated with the perceiving of opportunities and the creation of organizations to pursue them. Finally, they define an entrepreneur as someone who perceives an opportunity and creates an organization to pursue it. The authors identify five innovative strategic postures of entrepreneurs: (1) Introduction of new goods (2) Introduction of new methods of production (3) Opening of new markets (4) Opening of new sources of supply and (5) Industrial reorganization (Gartner 1988; Sexton and Smilor, 1986).

A look at the vast array of research on entrepreneurs indicates that there is still no standard universally accepted definition of an entrepreneur. The definition used in a particular study is dependent on what one's intent is, or what one hopes to accomplish. For the purpose of this paper, entrepreneurs are defined as individuals who pursue opportunities with a long-term

focus in mind (Miner, 1997; Begley, 1995). This definition recognizes that tendencies such as internal locus of control, achievement orientation, risk taking propensity and work values, are important in analyzing the psychology of entrepreneurs. 3. Personality characteristics 3.1 Need For Achievement The work of McClelland in the early to mid-1960s suggested that the key to entrepreneurial behavior lie in achievement motivation (McClelland, 1961). The need to achieve is a drive to excel, to achieve a goal in relation to a set of standards (Chell, Haworth, and Brearley, 1991, Johnson, 1990). A person endowed with such a need is expected to spend time considering how to do a job better, or how to accomplish something important to them. McClelland distinguished such persons from the rest of the population, suggesting that the former group were high achievers (McClelland, 1961). 3.2 Locus of Control Closely related to the concept of a high need for achievement is the belief in an internal locus of control. Individuals who are reluctant in believing in their ability to control the environment though their actions, would also be expected to be reluctant to assume the risks that starting a business entails (Chen, Greene, and Crick, 1998; Mueller and Thomas, 2000, Sexton and Smilor, 1986;). 3.3 Risk Taking Risk taking, whether financial, social or psychic , is a distinguishing characteristic of entrepreneurship. Early writers such as McClelland posited that entrepreneurs are high in the need for achievement and therefore prefer moderate levels of risks (Bowen and Hisrich, 1988). The usual interpretation of a risk taker

is someone who in the context of a business venture pursues a business idea when the probability of succeeding is low. 3.4 Values Any consideration of personality characteristics of the entrepreneur must entail an examination of their value systems. Value orientation can be defined as a generalized and organized conception of nature (Sexton and Smilor, 1986). Such a definition includes an understanding of one's place in the society. Specifically, in studying entrepreneurs, it refers to an individual's idea about persons and things. 3.5 Problem Solving Style And Innovativeness GARTNER (1989) refers to innovation as the central value of the entrepreneurial behavior, since it is successfully taking an idea or invention to market. Innovation and problem solving capabilities are expected to be the core of the entrepreneurial capability of an entrepreneur. Studies by Hoy and Hellriegel (as cited in Sexton and Smilor, 1986) indicate that the vast majority of entrepreneurs studied were characterized by sensationthinking problem solving styles. Such individuals were shown to be shortterm oriented, dealing with immediate problems. Entrepreneurs are faced with a number of challenges as they try to implement new ideas and solve problems; their innovativeness is thus a major issue. Schumpter (as cited in Sexton and Smilor, 1986) felt that innovation was one of the central characteristics of entrepreneurial endeavor. Looking at history, entrepreneurial activity is most active during periods of upheaval: economic, social, or political (Morrison, 2000). This is usually when traditional systems and ways of doing business are no longer affective. Those who survive the changes will be the businesses that act entrepreneurially; in other words, doing things differently and innovatively (Morrison). 4 External Factors In social psychology, the focus is on the interaction between the environment and the individual. An individual's behavior is affected by the interaction between the internal factors (personality, motivation, selfconcept) and external factors (work situation, culture, support and role models, education, and environment) (Chen, Greene, and Crick, 1998; Luthans, Stajkovic, and Ibrayeva, 2000). It is this interaction that will distinguish an entrepreneur from a manager. Ways of inculcating entrepreneurial behavior Why do people start businesses? To make money. So to create entrepreneurial behavior, you have to look at the "to make money" aspect. All means must end in helping people make money. There are various ways to do this. Cut taxes or offer rebates for new businesses

One easy (in most cases) way is to simply cut taxes or offer rebates for new businesses. Many tax-collecting entities (states, municipalities, etc etc) will give huge tax breaks to businesses. One commonly used tactic is to create "Business-friendly zones" or the like. Basically, these are low (or sometimes no) tax regions of cities or states. This creates more of an incentive for businesses to start or move there. Regulation and/or bureaucratic red tape Another relatively easy way is to lessen regulation and/or bureaucratic red tape involved in starting and maintaining a business. This can tie back into taxes. For instance, we all know business people that have had to figure out if it's cheaper to file as an individual or a corporation when doing their taxes. But back to regulation. Some regions make it very hard to start a new business. This could be due to zoning (residential versus commercial zones), the filing process (actually getting licensed to start a business), or environmental regulations. Lessening these regulations can really lower the barriers to starting businesses. One example of this is Alabama, where there are no residential or commercial zones. Keeping interest rates down Another way is to keep interest rates low. Most businesses, when they start, need capital (cash) in order to finance operations. Remember, most businesses report a loss the first year. If it is expensive to get a loan (due to a high interest rate ), many people will not try or not be approved to get those loans to start businesses. Government has few tools to keep interest rates low, but it is something to look into. Local governments can take a very active role in creating businesses by meeting with prospective entrepreneurs or current businesses and creating programs or offering help. For instance, a lot of businesses will work together with local governments for parades, community service, or outreach. One example of this would be a government program that helps low-income people get jobs with local businesses who are looking for cheap, unskilled labor (which many prospective businesspeople would love to have). Infrastructure Development Funding Basically, you need to make it as easy as possible to open a new business, and make sure you never take away the incentive to make money. Self-employment Definition: Self employment means, when you owned your own company and you are your own boss. Anyone who works for themselves as a freelancer or independent contractor is a self employed professional. Whether working from home, running a home-based business, selling material to others it all falls under the heading of self employment. Getting started is as simple (or as hard) as finding work; convincing people to buy materials, products, or services. Learn a few self employment secrets to help get started. Self-employment is working for one's self rather than for another person or company. It is earning one's livelihood directly from one's own trade or business rather than as an employee of another. To be self-employed, an individual is normally highly skilled in a trade or has a niche product or service for his or her local community. With the creation of the Internet, the ability for an individual to become self-employed has increased dramatically.

Self-employed people can also be referred to as a person who works for himself/herself instead of an employer, but drawing income from a trade or business that they operate personally. To be self-employed is not the same as being a business owner: A business owner is not required to be hands-on with the day-to-day operations of his or her company, while a selfemployed person has to utilize a very hands-on approach in order to survive. According the US Bureau of Labor Statistics, only 44% of businesses survive the first 4 years in business. Policymakers increasingly view self-employment in the form of youth entrepreneurship as a possible solution to the youth unemployment crisis. However, many experts believe only 20% of all people are fit to run their own businesses, so it shouldn't be relied on as an "easy fix".[1] Here Are Some of The More Popular Reasons People Start Their Own Businesses: To To To To To To To To To To be in control have more freedom create something special feel successful gain recognition feel a sense of accomplishment improve their financial situations build a better future be their own bosses feel prestigious

Inequity between contribution and reward - People who are by nature high achievers tend not to get along well in large organizations. They want rewards based upon accomplishment, not on seniority, conforming to the culture or political clout. The person who just made a major contribution does not want to be told, "Be patientyour turn will come."

Fame and recognition - It is the opinion of some that this is an important reason why people start companies. I do not agree. Most entrepreneurs I know are fairly conservative individuals who do not seek the limelight.

Participation in all aspects of a business -- Nothing is more exciting than to be broadly involved in the operation of a business. The entrepreneur helps conceive the product or service, helps design it, goes out and gets orders, makes sure the factory runs well, helps the customer put it into operation, and finally sees the effect that all of this has on the profits of the firm. What a thrill!

Personal financial gain - For some people this is very important, for others less so. Gains can come more quickly and can be much greater than when working for someone else; this is not a negligible consideration. For most people becoming an entrepreneur is the only way available to make a lot of money.

Joy of winning -- Entrepreneurs are the ultimate achievers. They like to win. Starting a company is a good way to satisfy the achievement instinct. Starting a new company, working for a new company, being involved in any way with a new company is just plain fun. It is satisfying and exciting. We spend more hours at our job than at anything else we do. Why shouldn't we enjoy it?

Reasons for Starting Your Own Business

1. It takes a lot of work to start a new business.

Although starting a business can present a number of seemingly impossible challenges and frightening risks, there are many very important benefits to being a business owner. Owning your own business provides you with many freedoms that would likely never be possible when working for someone else, but it is not something to be entered into lightly. Unlimited Earning Potential

2. When working for an employer, your earning potential is typically limited to some
sort of a salary structure. However, as a business owner, you theoretically have unlimited earning potential. Your income becomes proportionally linked to the amount of work and creativity you're willing and able to put into promoting and developing your new product, service, or idea. Not every small business will end up being profitable--this is a risk all entrepreneurs must take--but if you're able to make your business work, never again will you be limited to a salary set by an employer. Job Security 3. In times of economic downturn, when unemployment rates tend to rise, having your own business can be a tremendous comfort. Although business owners do have to worry about and deal with economic ups and downs just like anybody else, you don't ever have to worry about getting fired or laid off. Scheduling Freedom 4. As a business owner, you can enjoy a much higher degree of scheduling freedom than is possible if you work for someone else. You can spend time taking care of personal responsibilities and duties during the day, if need be. You can work late into the night from the comfort of your own home, if necessary, and can sleep in a little later in the mornings. Essentially, your schedule becomes your own, and you are able to work--for the most part--on your own time. Career Control 5. As a business owner, you're immune from the stresses of office politics. Because you're at the top of the company, you don't have to worry about trying to outperform your peers or schmooze your superiors. Without these concerns, you're free to devote your attention more solidly toward growing your business and improving your product or service. Starting a business isn't easy, but it can be rewarding. Being an entrepreneur means taking a lot of risks but it also has lots of potential benefits when things work out. So if you are on the fence still thinking about quitting your day job and starting out on your own here are six reasons to persuade you to make that move.

Earning Potential When you own your own business you have the ability to earn much more money than you are likely to ever earn in your day-to-day job. You'll be able to earn money (or lose money!) fast based on your drive, luck, commitment and ideas.

Be Your Own Boss Rather than doing what you're told, wouldn't it be better to be your own boss? When you own your own business it is likely that you will have to work even harder. But, you will do so under your own rules. You will choose when to go on holiday, when to go home, and when something is likely to be effective for your business. You should remember, however, that entrepreneurialism is as much about self-discipline as it is about freedom. Hire People You Like You'll be able to choose who you work with, rather than having to work with people that don't work hard, who aren't team players, and who are just plain lazy, you'll be able to choose your team. However this can be much harder than it seems. You will also have to make difficult decisions when it comes to hiring and firing. This will be even harder to do if and when you have to sack a family member but great fun when you are hiring them. Achievement There's very little you can do that's worthy of more kudos than building a company. Business helps the world go round, and many businesses do even more than. Imagine what the world would be like today without certain websites that the internet has helped to create. Some ideas are much more than just a way to make money. Once you have achieved what you aim to do, there's no better feeling. The rush you get when one of your ideas works is unbelievable! Change Someone who has entrepreneurialism within their blood will always think of ways things can be improved. For example, have you ever been in a situation where you have considered how your current employer could be more efficient? Ways that they could drive more sales, decrease costs, and improve customer services? When you own your own business, you will be able to make those changes. And, not only that, you will also be able to profit from them if your decisions were the right ones. Experience When you start your own business, it's possible you'll fail. That's part and parcel of being an entrepreneur. However, if you fail, get up again and succeed the second or third time around, you'll have lots of raw experience that most people will never acquire. You'll know what it feels like when the buck stops with you. This experience will work well for you if you ever decide to start another venture, or even go back into the workplace. Investors like working with entrepreneurs who have started other companies in the past. They do that for one reason: they know that experience counts! Legal Requirements for Self-Employed Persons A self-employed person is not required to have a fictitious business name. You may do business under your own name. A self-employed person is not required to be a corporation. You only need to be a corporation if you want to hire employees.

A self-employed person is not required to have a FEIN. You only need to have a FEIN if you want to hire employees. A self-employed person is not required to have Workers Compensation Insurance. You only need to have Workers Comp if you want to hire employees. A self-employed person is not required to have California State Disability Insurance. Employers need to deduct this insurance from their employees paychecks, but this does not apply to entities contracting with self-employed persons. A self-employed person is not required to carry malpractice (professional liability) insurance.

Paid employment Definition: Paid employment jobs are those jobs where the incumbents hold explicit (written or oral) or implicit employment contracts which give them a basic remuneration which is not directly dependent upon the revenue of the unit for which they work. This unit can be a corporation, a non-profit institution, a government unit or a household. ..... Persons in paid employment jobs are typically remunerated by wages and salaries, but may be paid by commission from sales, from piece- rates, bonuses or in-kind payments such as food. Individual Business Employment Issues The differences between employment and self-employment An employee is employed by a business (incorporated or otherwise) and is paid (monthly or weekly) through the PAYE income tax system. The employer must deduct income tax and class 1 national insurance contributions (which allow the taxpayer to build an entitlement to various social security benefits, including the State Pension) from the employees wages and the employee is paid net of these deductions. The employer also makes NIC contributions on behalf of their employee. Employees will receive a personal annual allowance, which is applied before income tax liability is calculated. An employee will not normally be required to complete an annual tax return, unless they fall into a higher bracket of income or if they have some other form of taxable income (such as interest from investments, property rental income, or a second form of employment). A self-employed individual (sole trader or a small business) is responsible for paying his or her own income tax and national insurance contributions. They must submit an annual selfassessment tax return to HMRC. A self-employed person will be entitled to the personal annual allowance but can also offset overall tax liability by deducting allowable business expenses and costs (eg property rent, business rates, staff wages). A self-employed person in the UK must pay class 2 NICs (which relate to benefits including the basic state pension, maternity leave and Bereavement Benefit, but do not count towards the additional State Pension, Statutory Sick Pay or Jobseeker's Allowance), and also class 4 NICs in some cases (depending on turnover; class 4 NICs are imposed at 8% on annual profits between GBP5,715 and GBP43,875 (2010-11) and 1% on any profit over that threshold). Any individual employed by a self-employed person or sole proprietor should be regarded as an employee, and the legal requirements specified already in this section should be observed with regard to income tax and NIC deductions. Employee or self-employed contractor? The so-called IR35 legislation seeks to eliminate the avoidance of tax and national insurance contributions by companies who use intermediaries or Personal Service Companies rather than employing the individuals directly, with all the

tax, national insurance and obligations that this entails. The legislation seeks to ensure that if the status of a worker and a client would normally have been that of employer and employee, then liability for income tax and NIC would be that applicable to such a relationship. There are a number of different factors that can be used to determine employment status; but roughly speaking, an employee can be defined as someone who: Must do the work set by the client/employer (as the case may be!) themselves, and must do it at a specified time and place, and in a specified way; Can work a set number of hours; Can be moved from task to task; Is paid hourly, weekly or monthly; Can receive overtime payments and bonuses.

Self-employed workers generally: Do not receive holiday or sickness pay or other 'employee-style' benefits; Can hire someone else to undertake the work; Risk their own money; Provide the principal equipment needed to do their job; Fix a per job price, regardless of the length of time taken to complete the work; Are able to decide what work to do, and to decide how and when said work must be undertaken; Regularly work for a number of different clients; Must correct unsatisfactory work in their own time, and at their own expense.

Further information on the various issues relating to the determination of self-employment, and an employment status calculation tool are available on the HMRC website: http://www.hmrc.gov.uk/employment-status/index.htm Directors of a limited liability company are normally treated as employees of the company and income tax and NICs for them must be deducted at source. Sources of Start-Up Capital Banks are a straightforward source of funds. Many offer small-business loans if you've already started your business. You'll need a business plan and perhaps a personal guarantee. The funds are a loan, so you must generate enough cash to cover loan payments. You can find banks via the phone book, the Web and TV as well as Entrepreneur.com's listing Best Banks for Small Businesslisting. Banks seem to be desperate for customers these days. The government can also help. The SBAcan point you toward many different funding sources as well as give you assistance with the legal and administrative aspects of starting your business. Entrepreneurs often raise funds from friends and family. Treat these investors as real business relationships, however. Demonstrate how you will use the money and how you will repay it. Will you pay with interest over time? Will you issue stock and return the investment through an IPO or acquisition? Issuing stock is complicated--you may need a prospectus and SEC registrations, depending on how much you're raising. Note that if you're promising an IPO, the odds are not on your side. Very, very few companies go public. Acquisition or a stock buy-back are more likely strategies. (I recently got a return from my very first start-up investment--20 years later. Original dreams of an IPO gradually gave way to decades of collecting cash to buy back investors' stock!)

Finding friends and family who will invest in your start-up is straightforward: Start calling. You're after high-net-worth investors who take personal referrals seriously. The best way to find them is through personal networking. Suppliers and customers may also back you. If your product complements a supplier's, they might invest--for example, if you distribute its music, a record label might want to invest. Be careful, though: Taking money from a supplier may prevent you from using that supplier's competitors. Strategic investors get their return in many forms: increased sales of their own products, stock sale of your company, advertising through your distribution channels, etc. These arrangements are rarely made just for a cash return, so the payback can take many forms. Private angel investors invest much like professional VC firms. You pitch them with a business plan and financing pitch. They invest for equity and expect a return--IPO, acquisition or stock buy-back--in three to seven years. Angels can be found through professional services like Garage.com, through angel groups like CommonAngels.comor via networking. I usually recommend starting with a lawyer or accountant who works with a lot of small businesses. They often meet professional angels while working with their client companies.

Whichever sources you choose, decide in advance how much money you want from them and how you intend to repay it. And be realistic! I've seen entrepreneurs make up a story to get the money, only to be surprised four years later when the investors start demanding a return. Professional investors rarely walk away from an investment, so if you write the deal knowing how you'll provide the return, you're much more likely to reach a happy ending. As an entrepreneur, technologist, advisor and coach, Stever Robbins seeks out and identifies high-potential start-ups to help them develop the skills, attitudes and capabilities they need to succeed BUSINESS OPPORTUNITY/ SOURCES OF INNOVATION This different from business idea. An opportunity is something or situation that provide you with a possibility of doing something better or doing something that can add value to customers and create wealth Business opportunity can be looked as a gap in the market. What has created a gap in the market? The changes in environment creates problems It also creates needs What causes changes? a) Demographic changes Changes in demography increase in population, migration of people from rural to urban.

b) Economic environment- during recession people go through difficult time. The entrepreneurs have to look for new ways and cheaper products

c) Social cultural changes- i.e. opportunities for growing wealth people goes for natural foods and even introduction of gym

d) Technological changes new business models i.e. Google, yahoo, car tracking and data recovery, m-pesa are all based on technologies. This can either

create new business and also destroying the business use of internet in marketing of advertisement hence there expansion of business.

e) Perceptral changes slender is beautiful lead to aerobics

f)

Incongrities- difference between expectations and reality

From ideas to opportunity Sometimes you may get good ideas which can be transformed into opportunities through utilities and innovative ways By getting the ideas take an innovative approach of the idea to create and even better more profitable more unique hard to copy opportunity

TYPES OF INNOVATION This can be done through various ways i. Substitute Think what you can substitute for something else to form a new idea eg a feature that allows your customer to order directly from a website rather than visiting your store or ordering by mail is an example by substitution.

What opportunities can you think of that come as result of substituting or replacing something that already exist? ii. Invention coming up with new products/service Combine- think of possible combinations you can make that result in something different What separate products or services or whole business can you put together to create another distinct business iii. Adaption- think about what can be adapted from products or services that already exist. Most successful business was founded on concepts of adaptations. Its a popular innovation strategy tat can be used to have a new venture. Question what could you adapt from other industries field to you r business. Mobility- This is taking an existing product and changing its appearance or adding more features of adding more hours. QUIZ what could make more noticeable in the market or different in some way from my competitors Extension- put other uses think of ways which could generation a high number of opportunities of the product or service beyond whats traditionally used for Eliminate search for opportunities that arise when you gat rid of something or you stop doing something for what will get rid or reduce that would eliminate something my customers more than he/she expected. Re-arrange what can you re-arrange and re-order in the way your product and service appears or way business or industry usually look or located. Through this innovative creative approach business owners can come up with alternative solutions and opportunities. This approach helps you to step outside the usual way to

iv.

v. vi.

vii.

look for opportunities to try to solve problems. (Its like thinking outside the box). Through this approach you can question and challenge the way things appear. viii. ix. Duplication replication of an existing concept Synthesis combine existing concepts and factors into a new use. Legal Forms Of Business There are various forms of legal business ownership Sole proprietorship Partnership Company (incuperated limited, unlimited) Cooperatives

Sole proprietorship Its sometimes called sole trader. Its a situation where the person owns business alone. You provide the capital alone, whatever proceeds come you share alone. If there are any looses yo suffer alone. When it comes to legal entity the law doesnt distinguish between the business and the owner. The implication of this legal status is that if the business sufers loses and cannot be able to pay its debts, the owner will be required to pay for them. That means the owner is responding for the activities of thebusiness. You can manage the business or employ somebody to manage on your behalf. For registration its very simple, apply to the registrars office. Advantages Flexibility Quick decision making Enjoy the profits alone Easy to start and operate Ability to maintain customer relationship with customers, employees and suppliers. Easy to adopt new methods quickly the owner retains some degree of control and autonomy Free from government controls Freedom from corporate business taxes

Disadvantages Suffers loses alone/unlimited liability Life span is short its there as long as you live Relatively limited viewpoint and experience Unlimited liability Unable to raise sufficient capital Longer working hours

Partnership

Partnership is a business relation formed between two or a maximum of twenty people for the purpose of carrying out on a business activity with the objective of making a profit. Each of persons in the relationships in the relationship is called a partner, and the business is called the firm. Each partner becomes an agent of the business and as a partner you can transact business on behalf of the firm or on behalf of the users. Whatever the transaction you carry out is binding partnership terms. It is governed by the Kenyas Partnership Act of 1963. It gives details terms and conditions of the particulars, the names, and purpose type of each of the partners, duties and partners is expected to contribute some skills, knowledge or even connection. Types of partnership a) General partnership general partners have unlimited liability for the firms debts b) Limited partners- have limited liability to the partnership c) Active partners contribute both capital and also participate in the management of the firm. d) Silent partners refers to limited partners who doesnt take active participation in the management of the firms e) Minor partners are those who have not reached the age of maturity (18 years). f) Quasi neither does he participates in management presented to the public as a partner and doesnt contribute capital neither does he participate in management. operating the partnership. For instance it provides of the business, its association, handlers status, or rights of every partners sharing of profits etc. each resources like money, labour, property, equipment,

Advantages of partnership 1) Its easy to form and register 2) Provides sources of capital 3) Bring in broad exposure and expenses as a result of having many cultures 4) Ease of expansion 5) It has a longer lifespan Disadvantages 1) May end up with a lot of disagreements 2) Diverse view/opinion, interest 3) Lack of continuity arising from disagreements 4) Not easy to maintain customer relationship like sole proprietorship. Dissolution of partnership The law provides that; 1) Partnership can be dissolved if it was temporary i.e. if it has achieved its objectives 2) If a partner notifies the others with an intention to dissolve. 3) Partnership can also be dissolved if one of the partners suffers mental illness or is declared bankrupt. 4) If partnership becomes unlawful, due to changes in operation of the law

5) The court can so declare partnership by an implication from a partner or any other interested party. If the court has to do that it does on the following grounds 6) If a partner acts contrary to the provision of partnership 7) Partnership cannot make profit 8) Prevailing circumstances make It fair and just to dissolve Companies There are two types of companies; Registered company Statutory companies Registered company - They are the most common and operate under the Companies Act 1962 under the law of Kenya. They can either be public company with minimum membership of seven and no maximum because shares are freely transferable through stock exchange. Private companys minimum number of two maximum 50. Shares are not freely transferable. Its registered through incorporation from register of companies. Requirements for registration

1) Memorandum of Association This and it also governs relationship

of a company with outsides and any perish dealing with it. 2) Articles of Association This list down rules and regulations for internal origination of the company. It has to do with different types of shares, kinds of meetings and also has to do appointment and qualification of a director. The articles can be changed by the shareholder. 3) List of directors Statutory Companies Statutory are created by an Act of parliament ad therefore there powers and functions are defined by the act that created their. Advantages

They are limited liabilities. If the company owes some debts, its only limited to what is stated, goes up to certain extent. It enjoy legal status There is continues existence They have different sources of raising capital i.e. through the board of directors.

Disadvantages It has completed procedure in the formation There is no direct control by the owners Quite involving in filling returns Slow decision making Problem of impersonality

Cooperatives They are formed under cooperative A ct laws of Kenya Its an organization of members who come together for common purpose . To carry out an economic activity and benefit equitability on the basis of cooperative association. The people must share common interest in the activities that they carry out . NB : Look for merits and demerits of Cooperatives Evaluating sources of finance: Criteria 1) Cost of finance in terms off interest 2) Terms of repayment how to repay back conditions and strings attached. 3) Risk involved 4) Control of the enterprise 5) Consider the availability of the funding 6) Date of repayment, when to repay whether loans or share capital or whichever the source depend on the type of business. Ways of owning a business 1) Acquisition or buying the existing business 2) Inheritance of the business easy to continue, lack of interest. 3) You start yours from scratch 4) Franchising Advantages of buying an existing business, goodwill, cash are already there. You minimize competition. Structures are there and credit facilities are easy and you start off easily. Disadvantages It could be expensive, one could buy business which is in a poor location, also may not know hidden things, also one may buy obsolete materials. Franchise Its another for of owning a business where one party called franchiser. Franchiser allows franchise to use proven business model or the use of a brand number or trade name. Advantages there is a ready market, easy to start, benefit from proven business that known, . Rate is higher. Disadvantages It limits innovation, you loose incase of bad risk . It affects the whole chain, you pay rent whether you are making profits or not to franchise.

Business planning The process of developing a business plan Business plan is a document that spells out the goals and the objectives of a business and clearly outlines how and when they will be achieved. Its an entrepreneurs document that clearly explains how his business will be operated. This document gives details about the operational and financial details, its marketing opportunities and strategy. Its management team skills and abilities. Essentially the busyness plan considers all aspects of the business and or how they fit together enabling the founder or the entrepreneur to see where he/she is going and how to get there. Importance/purpose of business planning

1) Business planning helps you to focus on your goals and objectives. It helps you avoid wastage of resources or getting diverted into areas that you had not planned. 2) The business plan can provide the potentials lender or investors details about the companys past and current operations as well as future projections. 3) It gives details on how the needed investment or loan will contribute to achieving the company goals. 4) The business plan serves as a guide for the operations of the business. 5) Business plan acts as a communication tool for the affairs of the busyness to interest parties. 6) Business plan also tests the viability of an idea and sets out what the business expects to achieve together with the resources and action required. Who prepares the business plan? The owners, founders, entrepreneurs are the one who prepare the business plan. When is it prepared? Its done when you are starting or when you have an idea, even before you start the business. What are the cost challenges, difficulties of a business plan? Despite the importance of a business plan, many businesses operate without one, and this is due to a number of reasons. 1) Lack of appreciation of the importance, purpose or roles of business plan. People tend to associate business plan to those whoa are seeking funding. 2) Lack of knowhow on how to prepare one. 3) Its expensive to prepare and time consuming. Its time consuming because you need to gather information to carry out research, information, regarding Enviromental factors and competitors. 4) The nature of the environment is unpredictable. 5) The perception that you are not able to control the future. The future is unpredictable, its very volatile. Components of Business Plan A business plan has the following components: 1) Business background and descriptions 2) Marketing plan 3) Organization and management plan 4) Production and operation planning 5) Financial pal 6) Executive summary Business background and description Background Is intended to show the business origin or the history of the business. Description is how you describe the business and the founder. Business you start with the business name, its location, justify why you chose that location, i.e. because of convenience, near your residence. Type of business ownership because I didnt want tied up (sole)

Partnership People with experience needed more people who could contribute capital. What products or service are you offering to customers? Talk more of the benefits the product and service are going to offer. What is the real need? Business mission Goals and objectives Business mission what business are you in? What do you do? Vision A dream, your aspirations, identity . Of the market where you want to be a leader Goals are general i.e. my business goal is to create employment or make use of a certain raw materials, talents. Objectives are more specific. It s about thing you can achieve realistically within a given period of time e.g. I want to grow income by 20%within a given period of time. Care values talk about who is the founder of the business in terms of skills, experience, educational background, what previous experience do you have? Marketing plan The importance of this component is to provide a justification of whether or not there is real market for the proposed product or service. Any entrepreneur or founder must therefore describe the company target market and its characteristics. What is a target market? Its specific customer in . In terms of age, income, life style creating a successful business depends on an entrepreneurs ability to attract real customers whoa are willing and able to spend money to buy its products and services. You need to identify who are your promising customers, what are their characteristics, where do they live? What do they buy/ why do they buy? When do they buy? What do they have about the products and services, will the business focus on a niche or will focus on general market i.e. profile of your customers. Talk about the expected shares of the market i.e. what proportions of the market do you intent to capture. E.g. estimated market share of my business is 30%. Talk about competitors Who are your competitors? How many are they What is your strength? What are their strategies? Competitors can attract change in technology, political threat. Particular marketing strategies focusing on the marketing mix. Product Pricing basis of pricing, low prices (penetrating), premium (skim the cream), follow the competitors, pricing discrimination. Promotion purpose of promotion for your business, is to communicate your business to th customers. For creating awareness for your products and service

Also to influence Place of distribution Also consider various promotion methods. Use promotion mix activities. 1) Adverting o o o Posters Word of mouth Planner

2) Personal selling Company representatives talking about the product or service

3) Sales promotion -indoor displays, road show 4) Use of public relations and publicity in order to convince and attract customers.
Distribution The purpose of distribution is to ensure that the product or service gets to the customer in n economic way. Organization this component is concerned about how you manage your business, how you put things together under you objective. Start giving particulars about your organizations structures i.e. the number of people in your business, their responsibility/tasks and their reporting hierarchy. Talk about the top management, who re they? What do they do? Support staff give particulars of their responsibilities, their job description. Talk about their recruitment, training and profession, how are you gong to recruit them and from where? Train them to ensure that the employees know about your products and services. Promotion on what criteria, based on performance, years of experience, academic qualification. Remuneration (compensation) in terms of wages, salaries, and other incentives. A goo pay must be adequate to meet basic requirements. o o o It must be comparable to other organization It should be equitable Stipulated minimum wages

Incentives are important for the purpose of attractions and retention of good workers. Licenses, permits and by-laws his is to ensure your business, is covered to ensure continuity of business without getting trouble with the law enforcers. Other support services e.g. banking services, infrastructural services, security, and keeping legal services. Production and operation plan This will depend on the kind of business you are operating. If you are in processing or manufacturing you talk about product plan. This section is intended to show how you go

about producing your product or offering a service i.e. the process involved in terms of providing service. Machineries or equipment involved and their capacity Where will you source them? Are the spare parts available? What arrangements have you done for servicing? Financial planning A financial plan is a course of financial action which an entrepreneur intends to implement in order to achieve business objectives. Its a tool for assessing the performance of a business on a continuous basis. It represents entrepreneurs in quantitative terms (in figures). Purpose of a financial plan o o o o It indicates the potential of the enterprise It shows progress towards profitability Its a tool for evaluating progress towards attainment of goals Components of financial plan

1) Pre-operational costs Costs incurred before the start of the business e.g. licences,
premises, research writing the business plan

2) An estimation of a working capital projected cash flow statement

3) Projected income statement 4) Pro-forma balance sheet 5) A break even analysis and other profitability ratios Executive summary A summary which highlights the whole document