Entrepreneurship and Business Ideas N4

Entrepreneurship and Business
Management N4

www.futuremanagers.com
THE ROLE OF ENTREPRENEURS AND INTRAPRENEURS
An entrepreneur is a person who is able to recognise an unfulfilled need in
the community, and use this opportunity to start a profitable business.
Intrapreneurship is the practice of entrepreneurship by employees within an
organisation or a business. The main difference between an entrepreneur
and an intrapreneur, is an intrapreneur is employed by a company whereas
an entrepreneur works for themself.
Module 1: The contemporary challenges of
entrepreneurship

Module 1: The contemporary challenges of entrepreneurship (continued)
PERSONAL QUALITIES (CHARACTERISTICS) OF AN ENTREPRENEUR
• Confidence in your ability to
succeed,
• Preference for moderate risk,
• Desire for responsibility,
• Energetic,
• Identifying opportunities,
• Organising skills,
• Need to achieve,
• Desire for immediate feedback.

PERSONAL RESOURCES OF THE SUCCESSFUL ENTREPRENEUR
An entrepreneur has the following three personal resources at his disposal:
• Knowledge and skills,
• Contacts and friends,
• Finance (Personal assets and liabilities).

ECONOMIC IMPORTANCE OF THE ENTREPRENEUR
Entrepreneurs, in particular small businesses, are vital in order for South
Africa’s economy to grow. Entrepreneurship affects the following aspects of
the economy:
• Developing of natural resources,
• Creates employment opportunities,
• Innovative production methods,
• Private sector (free market system) is dependent on entrepreneurs.

THE MERITS (ADVANTAGES) OF ENTREPRENEURSHIP
Entrepreneurship offers so many meaningful advantages, not only to the
entrepreneur himself but to society as a whole:
• You reach your full potential,
• Hard work can bring big rewards,
• You gain control over your own destiny,
• You contribute to society and are recognised for your efforts.

WHY ENTREPRENEURS FAIL AND HOW TO AVOID PITFALLS
If an entrepreneur fails, it is often due to the following pitfalls:
• Management incompetence,
• Lack of experience,
• Poor financial control,
• Changes in the business environment.

HOW TO AVOID PITFALLS (REASONS WHY BUSINESSES SUCCEED)
It is up to the entrepreneur to minimise the risks of falling into pitfalls by:
• Preparing a business plan,
• Knowing your business,
• Understanding financial statements,
• Learning to manage people effectively,
• Making a successful entrepreneurial transition.

IDEAS AND NEEDS
As an entrepreneur you need to have a strong idea of what you will sell or
what service you want to render and whether there is a market that would be
interested in your product/service. Not all business ideas are good business
opportunities. If your product satisfies a basic human need and a lot of
people have the same need, you are possibly sitting on a real business
opportunity.
Module 2: Creativity and idea generation

Module 2: Creativity and idea generation (continued)
EXPLAIN THE CONCEPT CREATIVITY
Creativity is that ability that helps us to do something new, original and
different. Creativity also refers to the ability to do the same old thing in a new
way. An entrepreneur knows the art of being aware of new trends, listening to
what people say and then doing something about it.

GENERATING IDEAS (HOBBIES, SPORT AND ENTERTAINMENT)
Ask yourself, “Why should it be this way?” Maybe you can do it slightly
differently:
• What form of entertainment is offered in your area?
• What do people do after work? Do they go watch the locals play soccer
matches, go to church or like to go to the movies?
• Who looks after the children when the parents go out?

GENERATING IDEAS (SHOPPING)
We probably spend most of our money shopping. Maybe you can start a
business with this in mind. Next time you go shopping, think of the following:
• How can you improve this product or service?
• Are there any problems with the product?
• Is it possible to add a few products to an existing range?
• Isn’t there a different product that can perform the same task?
• Is it possible to combine two seemingly different products?

GENERATING IDEAS (TRAVEL)
Ask yourself the following:
• How do people get to work in your area?
• What do they do while waiting for transport?
• What is being sold at taxi ranks, stations and bus stops?
• What about the elderly waiting in the queue?

GENERATING IDEAS (TELEVISION)
Television can be a great source of ideas if you really listen and watch
attentively. There are many programmes about other countries and how they
do things. New concepts, technological methods and products are regularly
shown on television. Just keep your eyes and ears open.

GENERATING IDEAS (NEWSPAPERS AND MAGAZINES)
Newspapers are all about news, things that are different, what people are
doing and their problems. It is important to remember that other businesses,
organisations and even the government could become your most valued
customers. Keep an eye on the “letters to the editor” section. People tend to
write and complain about things that bother them. That may point to a good
business idea.

GENERATING IDEAS (INTERNET AND SOCIAL MEDIA)
The Internet and social media are valuable tools to find new business ideas.
Not only will you find the latest trends and products on these sites, you can
also see what competitors are doing, search for certain hashtags and
keywords, read the comments of users and see what people like and find
interesting. The constant flow of images from these sites will definitely get
you thinking creatively.

GENERATING IDEAS (TRADE SHOWS AND EXHIBITIONS)
Trade shows and expos are often held in major centres. The themes of these
shows vary significantly, making regular visits a must. Information about new
products and new ways of doing something is readily available. Keep your
eyes open for advertisements in local newspapers or even on posters on
lamp posts.

CREATIVE METHODS
Various creativity methods can be used to identify a good business idea. It
can be something new, different or simply something very practical or
convenient such as:
• Redefining the problem situation,
• Taking a product or a problem and breaking it up into smaller parts,
• Associating words and making a forced connection,
• Making a mind map.

PROTECTING YOUR IDEAS
Secrecy: When you come up with a good idea, be careful about disclosing
the details of your planned business to other people.
Patents: A patent is a legal right of ownership you acquire when inventing
something new.
Trademarks: A trademark is relatively cheap to register and lasts indefinitely.
Copyright: It is prohibited to copy any material covered by copyright.

TURNING IDEAS INTO OPPORTUNITIES
• Identify good ideas:
Step 1: Match your ideas to your personal resources.
Step 2: Identify your critical success factors.
• Identify opportunities:
Ask if it will make a profit.
Get feedback from friends and strangers.
See if it is easy to market or promote.

IMPORTANCE OF A FEASIBILITY STUDY
A market feasibility study implies a flow of information from the customer to
the business, i.e. the customer provides the business with information
regarding preferences, tastes, willingness to pay a specific price for a
product, etc.
Module 3: Market feasibility study

Module 3: Market feasibility study (continued)
IDENTIFY THE MARKET POSITION
To find your market position (where your product/service will fit in within a
particular market), you need to first identify your target market, describe your
target market, segment your target market and work out what share of the
market you will own.

MARKET INFORMATION (MARKET RESEARCH)
To determine the market feasibility of your product, you must collect all
relevant market-related information. Examples include:
• The price that customers are prepared to pay.
• The profile (market segment) of your customers.
• Where potential customers stay.
• Why they would rather buy from you.
• Their views about your product or service.

SWOT ANALYSIS
By doing a SWOT analysis for your business, your business plan will be
more realistic. A SWOT analysis explains the current situation of your
business and takes the outside forces into consideration. Strengths and
Weaknesses deal with your own current situation, the “here and now” while
Opportunities and Threats will happen sometime in the future.

ANALYSE COMPETITIVE ADVANTAGE
The following checklist can be used to analyse your competitors. Try and
answer each question as thoroughly as possible:
• What is their unique selling proposition?
• Where do they advertise and how frequently are they running promotions?
• How did they price their products?
• What are their return policies?
• Do they have a website?

EXPLAIN THE FINANCIAL CONCEPTS OF A BUSINESS
A financial feasibility study is conducted in order to help you plan for costs
needed for a business. It forms part of the business plan of a business.
Module 4: Financial feasibility study

Module 4: Financial feasibility study (continued)
START-UP COSTS
Starting a business can be a costly exercise. Everything from applying for the
installation of a switchboard, renting office space to buying stock for your
business requires money. Your start-up costs can be divided into two
categories:
• Fixed assets, and
• Pre-operating costs.

TOTAL COSTS (CONCEPTS AND EXAMPLES)
Total costs refer to all the costs in your business. There are two main
categories of costs namely fixed costs and variable costs.
Fixed costs are those costs in your business that stay the same every
month regardless of the changes in your sales volume. Salaries, rent and
electricity are all examples of fixed costs.
Variable costs are those costs that change or ‘vary’ with your sales
volumes.

SALES FORECASTING
A sales forecast is a prediction of how many products (or services) a
business will sell over a particular period of time expressed in “units” or
“Rands”.

THE BUSINESS PLAN
A business plan is a detailed action plan or roadmap explaining every aspect
of your proposed business venture. A business plan helps you determine
what you want and assesses whether goals are achievable.
Module 5: Introduction to the business plan

Module 5: Introduction to the business plan (continued)
ELEMENTS (COMPONENTS) OF A BUSINESS PLAN
The following are the different elements (components) of a business plan:
• Cover page,
• Executive summary,
• Description of your business idea,
• Marketing plan,
• Management plan,
• Financial plan,
• Appendix of supporting material.

WHERE TO FIND ASSISTANCE
Small start-ups can obtain general assistance with their new venture from:
• SEDA (Small Enterprise Development Agency),
• Commercial banks,
• SEFA (Small Enterprise Finance Agency),
• National Empowerment Fund (NEF),
• FinFind,
• Department of Trade, Industry and Competition (DTIC).

NAMING YOUR BUSINESS
The following guidelines will assist you:
• The name should be informative
• The name should appeal to the type of customer you want to attract.
• Choose a short and memorable name.
• It should be easy to pronounce.
• You want the name of your business to become a household name or a
brand.

MARKETING MIX
The marketing mix refers to this mixture of marketing activities that a
business has to perform to convince customers to buy their particular
products or services. This mixture consists of four different functions also
called the “Four P’s”. They are Product, Price, Place and Promotion.
Module 6: Marketing plan

Module 6: Marketing plan (continued)
PRICING FOR PROFIT
Determining the price of your product will have a direct effect on your sales
as buying patterns of customers are affected by price. The following factors
must be taken into consideration when determining the selling price of your
products:
• Your target market,
• Competitors and the extent of competitors,
• Convenience.

PROMOTION
Promotion is a type of marketing communication, used to inform a target
market about a product/business or brand with the aim of increasing sales.
Promotion consists of a set of activities, namely advertising, sales promotion,
personal selling and publicity.

PLACE
Place is also referred to as distribution. It generally includes the following:
• Locality – where a business is situated.
• Distribution – how a product is made available to the customer.

TYPE OF BUSINESS
Different types of businesses include:
• Sole proprietor – one person owns the business.
• Partnership – when two or more, but not more than twenty, bind
themselves contractually to form a business.
• Private company (Pty) Ltd - when one or more persons bind themselves
legally according to the prescriptions of the company’s act to become a
separate legal entity.
Module 7: Management plan

Module 7: Management plan (continued)
WHICH FORM OF OWNERSHIP?

LEGAL FORMALITIES IN ESTABLISHING A BUSINESS
Approach your local authority to enquire about the necessity and requirement
for a trading licence. Generally, a small business need apply only if you are
in the food or liquor business. Pre-schools and tour operators (taxis) are also
examples of businesses that must apply, since public safety is at stake.

OWN INVOLVEMENT
The management responsibilities of you as the business owner are:
• Planning,
• Organising,
• Leading,
• Controlling.

HUMAN RESOURCES PERSONNEL
Human resources are the most important resources in a small business.
They are the workers who determine how well everything in your business is
being done. Managing the people in your business well is very important
while recruiting the right type of people is just as important.

HR RESOURCES RESPONSIBILITIES
Responsibilities towards workers include:
• Creating a pleasant working environment,
• Adhering to labour legislation,
• Motivating your employees,
• Investing in their potential by training them,
• Paying them a fair salary,
• Being fair when it comes to disciplinary measures.

OPERATING PLAN (PRODUCING THE PRODUCT)
The operating end of a business is where resources are transformed into
goods and services. All businesses have operations whether they take place
on a production floor, in a garage, office, kitchen or on the side of the street.
In other words, this is how the business “makes” its money. This is achieved
by the buying of raw materials or products and transforming them by means
of machinery and equipment into the product that you are selling.

OFFICE EQUIPMENT MACHINERY ANALYSIS
Before starting your own business, you must determine your office
equipment requirements. This is an important part of planning that you will
need to run your business successfully. The type of office equipment
depends on the type of business that you are going to start.

SUPPLIER ANALYSIS
Factors to consider when selecting a supplier:
• Reliability,
• Proximity,
• Service,
• Number of suppliers,
• Sustainable practices.

OFFICE ADMINISTRATION
Businesses must keep records of all business transactions to be able to
compile the following Three Key Financial Statements that explain the
financial position of the company:
• The Income Statement,
• The Balance Sheet,
• The Cash Flow Statement.

SOURCES OF FINANCE
Every entrepreneur is faced with the problem of financing when starting or
expanding a business. Capital is normally required for three possible
reasons:
• Fixed capital,
• Working capital,
• Growth capital.
Module 8: Sources of finance

Module 8: Sources of finance (continued)
FINANCIAL MANAGEMENT
The “Financial Management Plan” is often compared with a map. It tells you
how to get to your destination, provides alternatives, and warns you about
certain obstacles like mountain passes and indicates the types of roads. Your
financial management system will also assist you in arriving at your
destination.

FINANCIAL STATEMENTS
A budget is a financial plan showing future income and expenses on a
monthly, quarterly or yearly basis.
A sales forecast is a detailed schedule of expected sales for future periods.
The operating expense budget refers to all the operating expenses that
you can expect.

DETERMINE LOAN REQUIREMENTS
In order to determine your loan requirements you need to calculate the
following:
• Total start-up requirements,
• Your own contribution to the business,
• Securities that you can offer as collateral for a possible loan.

Entrepreneurship and Business Ideas N4

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