Chapter 20 Entrepreneurial Motives and Characteristics
7 Characteristics of Entrepreneurs
Self-confidence
- People who believe that they are going to succeed
- Able to persuade other people
Self-determination
- People who think that can take control of events
- Influence those events and turn them into something beneficial
Being a self-starter
- Able to work independently and can take decisions. Develop their ideas.
Judgement
- Gathers information and listen to advice
- Able to see where the business might go in the future and what they want out of
the business.
Commitment
- Successful entrepreneurs are ones who are committed to what they do
Perseverance (resentment)
- Able to get through bad times and the setbacks
Initiative
- Able to change and be proactive
Skills Required by Entrepreneurs
Entrepreneurs benefit from being capable to some extent in their chosen line of
business. But, it’s possible to set up a business in unfamiliar fields.
Organising
- Project manage the setting up and running of their business ventures. Involves
organising and coordinating a wide range of resources in order to run the
business.
- - Entrepreneurs will be planning,scheduling, giving instructions, meeting
deadlines, etc. (pg.151)
Financial management
- Main aim of this role is to make sure that the business has enough money
whenever it is needed.
- Involves budgeting, cash flow forecasting, chasing debts, analysing financial
information, and more. (pg.151)
Communication
- Need to interact with a wide range of stakeholders. Eg.
customers,employees,suppliers,local community and authorities
- Develop effective face-to-face communication skills, formal writing skills (for
letters,emails,reports, forms), presentational skills.
Managing people
- Need to recruit suitable people in the first place and then show clear leadership
and direction.
- Individuals may require different approaches to motivation. Easier to manage if
their needs are met alongside treated with respect and valued
Decision-making
- Decision making and problem solving require entrepreneurs to process,
analyse and evaluate information
Negotiating
- Oftens mean agreeing the terms of a contract
- Get their points across in a calm and confident manner, develop arguments with
reasoning, know when to compromise, and try to arrive at a settlement that is
agreeable for both parties.
- Negotiating could occur when dealing with customers for orders placed, suppliers
for credit purchase, and employees for wage payment for example.
IT Skills
- Able to run their business more efficiently if they have good IT skills
- Examples include:
Communicate with stakeholders using email or conference calling
Use spreadsheets to prepare budget and cash flow forecast
Set up a business websites
Use computer software to give presentations
Detail listing on pg151.
Reasons Why People Set Up Businesses
Financial Motives
- Profit is the driving force among many entrepreneurs
Profit Maximisation
Definition- Try to make as much profit as possible in a given time period
- They are motivated by money and their key focus is the financial return on their
efforts.
- Might be argued that entrepreneurs who try to maximise profits are likely to take
a bigger risks. Because there is usually a direct relationship between risk and
reward. And that they are more likely to ignore the needs of other stakeholders.
Eg. enforce zero-hours contracts and only pay the legal minimum wage.
Profit satisficing
Definition- aim to make just enough profit to maintain their interest in the business.
- They do not want to take on the extra responsibility of expanding their business-
which is often required to make more profit.
- This type of business generates enough profit to provide the flexibility needed to
pay for a particular lifestyle. Allows owners to spend more time pursuing other
interests or with family.
Non- Financial Motives
- Entrepreneurs will obviously need to make enough profit in order for the business
to continue in operation, But the main driving force is non-financial.
Ethical stance
- Setting up a business in support of a moral belief they possess.
- Example: vegetarian who believes it is wrong to kill animals for meat may open
up a vegetarian restaurant
Social enterprise (not-for-profit organisations)
- Organisations that trade with the aim of improving human and environmental
well-being.
- Generate most of their income through trade or donations.
- Fair Trade is an example of a social enterprise. It ensures that these people get
a better price for what they produce.
Independence
- People want to be their own boss. Driven by the desire to be independent.
- Freedom to make all decisions when running a business is very appealing.
Home-working
- Set up their business from home.
- Incluse tradespeople such as plumbers, painters or electricians that use their
home as abase for their business,
- Some work from a room or an office at home. Eg. writers,accountants, software
designers, tutors and financial analysis.
- Time and expenses spent travelling to and from work are eliminated. They also
enjoy more flexibility.
Chapter 21 Business Objectives
Business Objectives
- The objectives of a business are the goals that need to be met in order to
achieve an aim. Eg. Aim to grow and set annual sales targets.
Businesses need to have objectives for the following reasons:
- Employees need something to work towards. Objectives help to motivate
workers.
- Objectives also motivate owners to keep the business going. Or else owners
might lose control and allow their business to become passive and aimless >>
results in business failure.
- Help to decide where to take a business and what steps are necessary to get
there.
SMART objectives
- Specific : stating clearly what is trying to be achieved
- Measureable : can be measured quantitatively
- Agreed : approval of everyone involved
- Realistic : able to achieved given the resources available
- Time specific : have a stated time deadline
Survival
- From time to time survival can become the most important objective.
- Entrepreneurs may lack experience and there may be a shortage of resources. Thus, a
target for a new business may be simply to survive in the first 12 months.
- A business may also struggle to survive if new and more efficient competitors enter the
market.
- A business may struggle when trading conditions become difficult. Eg. high interest rates
on loans.
Profit Maximisation
Definition : owners want to make as much profit as they possibly can.
- This might be more likely if businesses are owned by institutional shareholders, such as
pension funds and investment funds. WHere owners need to maximise the returns on
their investments to meet the needs of their clients.
- To maximise profit, owners will focus on keeping costs as low as possible while raising
prices as high as they can before customer loyalty is damaged.
- SKim pricing is often used by profit maximisers. This strategy is usually used in the
luxury goods market. As wealthy customers are not price sensitive so do not object to
such excessive values.
Other objectives
Sales maximisation
Definition: an attempt to sell as much as possible in a given time period.
- Sales level are an important measure of performance and generally growing sales is a
healthy sign for a business. Raise profits by selling more output.
- Sales maximisation might be used by an entrepreneur to win a larger market share.
- SPecialist sales staff can be recruited to pursue sales maximisation.
Market share
- Trying to increase market share is a common business objective.
- Larger market share > increase revenue > raise the profile of the business in the market.
- Bigger market share than rivals > dominate the market (price setter)
- Larger market share represents that output levels will be higher so a business might be
able to lower its costs by exploiting economies of scale.
Cost efficiency
- From time to time businesses may consider how to reduce their costs.
- It is an objective that might be pursued when trading conditions become difficult due to
more competition or an economic downturn.
- Some businesses look to cut costs all the time since lower costs might also gain a
competitive edge in the market.
Ways to cut costs
- Lay off staff to cut labour costs
- Find new suppliers to get cheaper resources
- Increase the usage of recycled materials
- Develop new working practices that use fewer resources
One of the drawbacks of cutting costs is that product quality or customer service may suffer.
Employee Welfare
- If employee welfare is improved workers will be happier, better motivated, more
productive, more co-operative, more flexible and less likely to leave.
This could be done by:
- Improving the working environment (cleaner, less crowded)
- ENsuring that staff are given proper breaks
- Encourage that staff are equipped with the necessary tools and equipment. Eg.
providing ergonomically designed chairs.
It is often easier to recruit and retain good quality people when employee welfare is improved.
Customer satisfaction\
- Businesses will try to meet the needs of customers. If customers are satisfied they are
more likely to return.
Businesses aim to exceed customer customer expectations by:
- Ensure that all customer-facing staff are trained to a very high level of communication.
- Provide a platform for customer feedback.
- Deal with customer complaints promptly and effectively.
Social objectives
- A business should aim t o promote prosperity and develop a strong relationship with the
local community so it can co-exists.
This might involve:
- Keep noise levels down
- Maintaining sensible opening hours
- Demonstrating responsibility to the environment by minimising pollution
- Maintaining open channels of communication so that issues can be raised and
discussed
- Make contributions to community life such as donations and sponsoring local events.