EBM N4 MODULE 1: THE CHALLENGES OF ENTREPRENEURSHIP

OBJECTIVES

After you have studied this module, you should be able to:
 define the term "entrepreneur"
 discuss the role of entrepreneurs in the economy
 describe the characteristics of a successful
entrepreneur describe the resources of an
entrepreneur
 identify the merits and failures of entrepreneurs

1. ENTREPRENEUR creates new business

• in the face of risk and uncertainty

• for the purpose of achieving growth and profit

• by identifying business opportunities and

• assembling the necessary resources to capitalise on these opportunities

Therefore, the entrepreneur starts his own business/develops

something new

(NEW BUSINESS)

2. INTRAPRENEUR finds business opportunities for someone else; he works for a boss and does not
own the business; he prefers the security of working for an existing business and a salary
(EXISTING BUSINESS)

WHY DO PEOPLE START THEIR OWN BUSINESS?

 to be their own boss

 to do the work they like
 to increase their income
 to break away from a boring job when they
 become retrenched/unemployed
 because they identify a new business opportunity

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3. PERSONAL QUALITIES/CHARACTERISTICS OF ENTREPRENEURS

They have CONFIDENCE in their ability to succeed

 they are optimistic about their chances of success

 they approach things positively
 they analyse the situation to determine what problems there are
 they take action to correct the situation

They take (2) MODERATE RISKS

 they do not take foolish risks

 they think situation through
 decide to do it if goal is reasonable and attainable
 do market research and planning

They are (3) RESPONSIBLE

 they prefer to be in control of their own resources

 use resources to achieve planned goal

They have (4) ENERGY

 they have more energy than the average person

know hard work and long hours are necessary

They (5) IDENTIFY BUSINESS OPPORTUNITIES

 they are good at finding business opportunities

 concentrate on what can be done in future

They are skilled at (6) ORGANISING

 they know how to put the right people together to do a task

 they combine people and tasks to achieve business goals

They have an URGE TO ACHIEVE for them

 achievement is more important than just making money

3.8 They want IMMEDIATE FEEDBACK

 they want to know if they are succeeding or failing

 constantly looking for reinforcement

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4. PERSONAL RESOURCES OF SUCCESSFUL ENTREPRENEURS

4.1 KNOWLEDGE AND SKILLS

They possess the necessary technical skills, they have to develop management skills to be successful
They must acquire financial, marketing, personnel and general management knowledge

4.2 CONTACTS

They ensure they meet people who can help their business grow. Good places to meet such people are
professional clubs, local business organisations and sport, cultural or social clubs

4.3 FUNDS

They can get money as a loan from various financial institutions. You need a business plan and part of
the funds to get a loan

5. ECONOMIC IMPORTANCE OF THE ENTREPRENEUR

 they create job opportunities

(small businesses in the informal sector create more jobs than larger companies)
 they initiate the production process and are responsible for producing goods and services
 they generate wealth and
 create a higher standard of living

6. THE MERITS (REASONS FOR/REWARDS) OF ENTREPRENEURSHIP

 Entrepreneurs GAIN CONTROL OVER THEIR OWN DESTINY - they like to take control of their future;
want to achieve personal and business goals
 Entrepreneurs want to REACH THEIR FULL POTENTIAL - entrepreneurship is a way to practice one's
skills and abilities
 Entrepreneurs want to REAP UNLIMITED PROFITS - earning good profits are a reward for hard-
working entrepreneurs
 Entrepreneurs CONTRIBUTE TOWARDS SOCIETY AND ARE RECOGNISED FOR THEIR EFFORTS they
are part of the business system. They contribute directly towards a successful economy - deals
based on trust and respect are the hallmark of successful businesses

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7. REASONS WHY ENTREPRENEURS FAIL

 LACK OF MANAGEMENT SKILLS - main reasons for failure are management inexperience or poor
decision-making ability
 LACK OF EXPERIENCE they need to have experience in their field
 POOR FINANCIAL CONTROL for success, entrepreneur must have good financial control
 LACK OF CAPITAL - many entrepreneurs start businesses with too little money often make mistakes
about the funds needed
 BAD CONTROL OF CUSTOMER DEBT - credit sales must be carefully controlled credit collecting is a
very difficult task
 OVER INVESTING IN FIXED ASSETS if you spend too much money on fixed assets (equipment,
property, vehicles, machinery) there will be nothing left for expanding
 POOR PLANNING - failure to plan leads to disaster must have a strategic plan about where business
is going. Growth must be planned carefully. Must develop new skills according to changing needs of
business
 STOCK SHORTAGES - this will lead to customer dissatisfaction and customer loss
 ATTITUDES - entrepreneurs must have the right attitude towards business; be prepared to work long
hours and make sacrifices
 ETHICS - must practice ethical behavior. This means you must be honest in business; dishonesty
makes you lose out in the long run

8. TO AVOID THE PITFALLS OF FAILURE

 PREPARE A BUSINESS PLAN - without a business plant there is no direction in the business you must
have a policy about credit, customers, product lines, image, prices, advertising, etc.
 KNOW YOUR BUSINESS IN DEPTH - must have personal contact with customers gain knowledge
about your business all the time
 UNDERSTAND FINANCIAL STATEMENTS - you must have a basic knowledge of accounting and
finance. Financial statements show if its economically viable. Financial statements also indicate
potential problems
 LEARN TO MANAGE PEOPLE EFFECTIŒLY - must learn how to manage the staff; businesses depend
on well-trained staff.

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