Entrepreneurship & SMB Mgmt Syllabus

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ENTREPRENEURSHIP AND SMALL BUSINESS MANAGEMENT
SYLLABUS
Entrepreneurship and Small Business Management
Objectives:
1. To enable students understand entrepreneurship, its relevance and importance.
2. To enable students understand how to become an entrepreneurs.
3. To enable students understand the role of entrepreneurial in the economy and
leadership played in the nurturing and growth of a start-up.
4. To enable students understand the importance of small business management.
Topics
1.Entrepreneursh
ip:
Concepts and
Overview of
Entrepreneurs
hip
Definition,
meaning and
importance of
entrepreneurs
hip
Entrepreneu
rs
Characteristi
cs
competences
and
functions
classifications
and role of
entrepreneurs
hip in the
economy
2.Entrepreneursh
ip vs
Entrepreneur
entrepreneuria
l
models/Theori
es
Approaches
for studying
entrepreneurs
hip
Legal issues
for
Entrepreneu
r: Intellectual
property
rights:
Copyrights
Trademarks,
Trade secrets
and Patents.
3. Women vs Men
Entrepreneurs
Entrepreneuria
l Culture,
Entrepreneuria
l Society and
working
environment
challenges in
the path of
women
entrepreneurs
empowerme
nt
Grassroots
entrepreneurs
through self-
help groups
(SHG).
4. Building the
business plan-:
Feasibility
study
Setting up of
Small business
enterprises
5. Financial
Considerations:
Basic financial
statements
Managing Cash
Flows
Preparation
of projected
financial
statements
Sources of
finance: Debt
and Equity
6. Marketing: Marketing
considerations-
selecting the
target market
. Market
strategy.
Pricing
strategies and
marketing of
Export
marketing

services
7. Production
management in
Small business:
Production and
material
management
Break even
analysis
8. HRM in Small
business:
Importance of
HRM
Industrial
relations
labour laws Pollution
control laws.
10. Sickness in
small business
enterprises:
Definition and
status of
Sickness of
SSI’s
. causes of
sickness
Symptoms
and cure of
sickness
OVERVIEW
This course aims to describe the characteristics of entrepreneurship & small business,
and the importance of diversity in the marketplace and the workplace. It also aims to
articulate the differences between the small business manager and the entrepreneur
and between the main forms of ownership and franchising. Moreover, it aims to identify
the components of a business plan. Furthermore, it aims to evaluate potential start-ups
and suggest sources of business ideas, uses of financial records to a small business,
sources of funding, laws and regulations that affect small business, and explain the
process of developing a small business marketing strategy
Definition and nature of Entrepreneurship
An entrepreneur is an individual who starts and runs a business with limited resources
and planning, and is responsible for all the risks and rewards of his or her business
venture. The business idea usually encompasses a new product or service rather than
an existing business model.
Entrepreneurship is the practice of starting new organizations or revitalizing mature
organizations, particularly new businesses generally in response to identified
opportunities. Entrepreneurship is often a difficult undertaking, as a vast majority of
new businesses fail. Entrepreneurial activities are substantially different depending on
the type of organization that is being started. Entrepreneurship ranges in scale from
solo projects (even involving the entrepreneur only part-time) to major undertakings
creating many job opportunities.
The understanding of entrepreneurship owes much to the work of economist Joseph
Schumpeter and the Austrian economists such as Ludwig von Mises and von Hayek. In
Schumpeter (1950), an entrepreneur is a person who is willing and able to convert a
new idea or invention into a successful innovation. Entrepreneurship forces "creative
destruction" across markets and industries, simultaneously creating new products and
business models. In this way, creative destruction is largely responsible for the
dynamism of industries and long-run economic growth.

Entrepreneurship is about taking risk. The behaviour of the entrepreneur reflects a kind
of person willing to put his or her career and financial security on the line and take risks
in the name of an idea, spending much time as well as capital on an uncertain venture.
The act of entrepreneurship is often associated with true uncertainty, particularly when
it involves bringing something really novel to the world, whose market never exists.
Before Internet, nobody knew the market for Internet related businesses such as
Amazon, Google, YouTube, Yahoo etc. Only after the Internet emerged did people begin
to see opportunities and market in that technology.
Risk-Bearing
Starting a new enterprise always involves risk and trying for doing something new
and different is also risky. The enterprise may earn profits or incur losses because of
various factors like increasing competition, changes in customer preferences, and
shortage of raw material and so on. Infarct, he needs to be a risk-taker, not risk avoider.
His risk-bearing ability enables him even if he fails in one time or one venture to persist
on and on which ultimately helps him succeed. In order to help you in this regard given
below are ten of the most common risks that every entrepreneur faces with some
simple ways to fight them off.
1. Competitive Risk
Competitive risk is the risk of a business facing competition from its rivals. Every
business besides monopolies faces competition because there are substitutes easily
available in the market. New businesses have to face this risk to a higher degree because
they face stiff competition from already established businesses. However, reputable
businesses are not immune from this risk either.
In order to minimize this risk one must run a proper SWOT analysis and come with
strategies to counter attacks from competition. The SWOT is an acronym for the four
parameters the technique examines:
 Strengths: characteristics of the business that give it an advantage over others.
 Weaknesses: characteristics of the business that place the business at a
disadvantage relative to others.
 Opportunities: elements in the environment that the business could exploit to its
advantage.
 Threats: elements in the environment that could cause trouble for the business.
2. Technological Risk
Thanks to the changing times every business has to face technological risk. This
includes change in technology that are taking place at a rapid pace. What’s in today goes
obsolete tomorrow. It is difficult for entrepreneurs to be able to gauge the future
properly.

The solution in this regard is not to plan for today but tomorrow so that you are ready
with the new technology by the time it goes huge.
3. Political and Legal Risk
This risk is everywhere especially in the case of businesses that run in uncertain
environments. This includes the changing political scenario including the changes in
laws and regulations. Multinationals have to face this risk to a great degree because they
do not only have to worry about the political and legal situation of their country but of
every country they have a business in.
The right solution in this regard is to have flexible policies so that changes can be
incorporated just in case the government changes any of its policies.
4. Economical Risk
A good example of this type of risk is the recent economic slump that was seen globally.
This risk includes the changes in the cycle that includes periods of high prosperity
(boom) and recession. These cannot be predicted correctly and must be taken into
account at the planning stage.
5. Financial Risk
Financial risk is the risk of a business running out of finances. Entrepreneurs need to
have a good financial sense in order to run a business successfully. They need to manage
cash flow, predict demand and supply so that financial decisions can be taken properly.
Every decision, big or small, has a significant impact on profit and a company’s financial
position which is why it is very important to be careful.
6. Employee Risk
The human capital is one of the most important things for a business to be successful. It
is the duty of the entrepreneurs to build an impressive team of managers who can lead
the employees in the right direction. No company can attain its goals without the
support of its employees that act as the backbone.
There is always the risk of a key employee deciding to switch or not reporting to work
on an important day. Some of the risk factors related to the employees can be
controlled, such as many employees may be convinced from jumping ship by motivating
them in several ways including a pay raise. However, certain problems such as a low
output employee cannot be solved easily.
7. Strategic Risk
Strategic risk is the risk of a strategy failing due to one reason or another. Since
companies plan keeping the future in mind there is always a chance of things going
wrong as the future is uncertain and cannot be predicted correctly. The strategy they
apply cannot be taken back which it why it needs to be sound.

Entrepreneurs need to have foresight so that they can plan properly. Plus, an
entrepreneur may not have knowledge about every aspect of a business; hence he or
she should seek help from relevant departments.
8. Health and Safety Risk
This risk involves how a business functions. It is the duty of the businessperson to
provide the right environment to its employees so that they do not have to face any kind
of health hazard. There are employee and labor laws that clearly highlight the rules
regarding everything from having a canteen to a bathroom etc.
If a company fails to practice this then it may lead to injured workforce that may trigger
a lawsuit for the company.
9. Environmental Risk
Risks that are associated with the environment are called environmental risks. Most of
the risks that fall under this category cannot be controlled. These include natural
disasters like flood and drought. Plus, a lack of natural resources also falls under this
category.
The best option to overcome this risk factor is to do proper research before opening a
business.
10. Operational Risk
The risk associated with administrative procedures is called operational risk. This
includes outdated IT systems, poor supply chain and disorganized record keeping.
These problems result in big issues for the company as having wrong records would not
give a true picture of the company’s growth and may lead to poor decisions.
It is important for businesses to run continuous checks and keep an eye on everything
to ensure that this risk factor is minimized.
It must be understood that risk is a part of a business. It cannot be completely removed.
However, every entrepreneur should take measures to minimize the damage. The key
lies in being careful and making decisions with care.
Entrepreneurial Characteristics:
The following are some of the characteristics of an entrepreneur
a) Risk Taking
b) Self-Confidence
c) Optimist
d) High need of achievement
e) Need for independent
f) Need for power
g) Creativity
h) Foresight

i) Effectiveness
j) Imaginative
k) Respect for feedback
l) Learning from experience
M) Future oriented
Benefits / Opportunities of Entrepreneurship
a) Opportunity of gain control over their own destiny
b) Opportunity to reach their full potential
c) Opportunity to reap unlimited profits
d) Opportunity to contribute to society & be recognized for their effort
e) Opportunity to do what they enjoy
Limitations of entrepreneurship
a) Uncertainty of income
b) Risk (Financial Risk & Career Risk)
c) Long hours & hard work
d) Lower quality of life until the business gets established
e) High level of stress
f) Complete responsibility
Theories of Entrepreneurship
An entrepreneur puts together a business and accepts the associated risk to make a
profit. While this definition serves as a simple but accurate description of
entrepreneurs, it fails to explain the phenomena of entrepreneurship itself. A number of
theories exist, but all of them fall into one of five main categories
(a)Innovation theory
This theory was introduced by ‘J.A. Schumpeter’. According to him, entrepreneur is
basically an innovator and innovator is one who introduces new combinations. New
combinations theory covers four cases which are:
 The introduction of a new product in the market.
 The instituting of a new production technology which is not tested by experience
in the branch of manufacture concerned.
 The opening of a new market into which the specific product has not previously
entered.
 The discovery of new source of supply of raw material. The carrying out of the
new form of organization of any industry by creating of a monopoly position or
the breaking up of it.
(b) Psychological Theories or Need for achievement theory
This theory was developed by ‘David C. McClelland’. He tries to find the internal factors
that are human values and motives that lead man to exploit opportunities, to take
advantage of favourable trade conditions. The entrepreneur is concerned with need for
achievement (n-achievement).The n-achievement is called as a desire to do well, not so

much for the sake of social recognition or prestige, but for the sake of an inner feeling
of personal accomplishment. People with high n- achievement behave in an
entrepreneurial way. So it is better to develop n-achievement among individuals to
ensure high scale of economic development.
(c)Theory of social behaviour
‘Kunkel’ presents a behavioural model of entrepreneurship. Behavioural model
concerned with the clearly expressed activities of individuals and their relations to the
previous and present surroundings, social structure and physical conditions... According
to him, individuals perform various activities of which some are accepted by the society
while others are not. The accepted are awarded. The rewarded act is as supporting
stimulus increasing the probability of repeating that behaviour pattern. This pattern of
social behaviour is entrepreneurial behaviour.
d) Theory of Leadership
This theory was developed by ‘Hoselitz’. According to him, entrepreneurship is a
function of managerial skills and leadership.
(e ) Economic Theories
Economic entrepreneurship theories date back to the first half of the 1700s with the
work of Richard Cantillon, who introduced the idea of entrepreneurs as risk takers. The
classic, neoclassical and Austrian Market process schools of thought all pose
explanations for entrepreneurship that focus, for the most part, on economic conditions
and the opportunities they create. Economic theories of entrepreneurship tend to
receive significant criticism for failing to recognize the dynamic, open nature of market
systems, ignoring the unique nature of entrepreneurial activity and downplaying the
diverse contexts in which entrepreneurship occurs.
(f ) Resource-Based Theories
Resource-based theories focus on the way individuals leverage different types of
resources to get entrepreneurial efforts off the ground. Access to capital improves the
chances of getting a new venture off the ground, but entrepreneurs often start ventures
with little ready capital. Other types of resources entrepreneurs might leverage include
social networks and the information they provide, as well as human resources, such as
education. In some cases, the intangible elements of leadership the entrepreneur adds
to the mix operate as resource that a business cannot replace.
(g) Sociological/Anthropological Theories
The sociological theory centres its explanation for entrepreneurship on the various
social contexts that enable the opportunities entrepreneurs leverage. Paul D. Reynolds,
a George Washington University research professor, singles out four such contexts:
social networks, a desire for a meaningful life, ethnic identification and social-political
environment factors. The anthropological model approaches the question of
entrepreneurship by placing it within the context of culture and examining how cultural

forces, such as social attitudes, shape both the perception of entrepreneurship and the
behaviours of entrepreneurs.
(H) Opportunity-Based Theory
Prolific business management author, professor and corporate consultant, Peter
Drucker put forward an opportunity-based theory. Drucker contends that
entrepreneurs excel at seeing and taking advantage of possibilities created by social,
technological and cultural changes. For example, where a business that caters to senior
citizens might view a sudden influx of younger residents to a neighbourhood as a
potential death stroke, an entrepreneur might see it as a chance to open a new club.
Manager vs Entrepreneur OR Small Businesses vs. Entrepreneurial Ventures
There is a fine line between being a small business (SB) owner and an entrepreneur—
the roles actually have a lot in common—but there are distinct differences that set them
apart. Small businesses usually deal with known and established products and services,
while entrepreneurial ventures focus on new, innovative offerings. Because of this,
small business owners tend to deal with known risks and entrepreneurs face unknown
risks.
Limited growth with continued profitability is what is hoped for in most small
businesses, while entrepreneurial ventures target rapid growth and high returns. As a
result, entrepreneurial ventures generally impact economies and communities in a
significant manner, which also results in a cascading effect on other sectors, like job
creation. Small businesses are more limited in this perspective and remain confined to
their own domain and group.
IMPORTANCE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT
The following are the importance of the willingness to venture into entrepreneurship.
1. Provision of a variety of job opportunities.
Establishment of new businesses creates jobs in the business formed. The more
enterprising people are the more the chances of investing in new ventures and creating
new jobs.
2. Economic growth
Creation of new businesses creates wealth which is eventually distributed to all
members in various forms. Business owners, suppliers, financiers, distributors and
other parties are all beneficiaries to the wealth created.
3. Standard of living.
Entrepreneurship enables a country to produce quality products and services which are
sold at reasonable prices. Consumption of high quality goods at low prices improves the
consumer’s living standard.
4. Investment opportunities
The success of one new business produces many additional entrepreneurial and
investment opportunities. Initial entrepreneurial activity may serve as a role model to

inspire new generation of entrepreneurs and become a breeding ground for new
business ventures.
5. Profits.
The key shareholders in entrepreneurship are the entrepreneurs and venture
capitalists. These reap huge rewards for themselves when a business is successful.
6. Tax base
New businesses become tax payers, thus returning revenue to the government. More
revenue is also accruing to the government from business employees when they pay
income tax.
7. Technological Development
Entrepreneurs develop new products from new ideas. Every business strives for
profitability. Competition dictates that great stride be made in technology.
ROLE OF AN ENTREPRENEUR
 Mobilization and allocation of resources e.g raw material, equipment and
facilities, funds.
 Managing employees and operating the business.
 Ensure business objectives are achieved.
 Ensure the needs of the customers are satisfied.
 Ensure laws and regulations of the Country are followed.
 To ensure high rate of return, goodwill and reputation of the organization.
 Redress of grievances concerning the business and environment generally.
 Providing marketing efficiency.
 Accepting risks (uncertainties).
 Processing marketing information that is make it available and utilized take
advantage of business opportunities.

PERSONAL COMPETENCIES OF AN ENTREPRENEUR
1. Tenacity despite failure. Successful entrepreneurs don’t give up even though
faced with hurdles and an obstacle that must be overcomes. Most entrepreneurs
succeed only after they had failed several times.
2. Confidence. Confident in their abilities and the business concept. In addition
they have an in – depth knowledge of the market and the industry and they have
conducted months of investigation.
3. Self-determination. Entrepreneur behave that their success or failure depends
on their own actions this quality is known as an internal locus of control.
4. Management of risk. Risk is at the very heart of running your own business and
the ability to manage risk is one of the qualities of any successful entrepreneur.
5. Seeing changes as opportunities. Entrepreneurs see changes as normal and
necessary. They search for changes, respond to it, and exploit it as an
opportunity which is the basis for innovation.
6. Tolerance of ambiguity. Uncontrollable factors such as the economy, the
weather, and changes in consumer tastes often have dramatic effect on a
business. An Entrepreneur’s life is described as a professional life riddle by
ambiguity a consistent lack of clarity.
7. Initiative and a need for achievement. Successful entrepreneur take the
intuitive in situations where other may not.

8. Detail orientation and perfection. An entrepreneur is often a perfectionist and
striving for excellence or perfection helps to make the business successful.
9. Perception of passing time. Entrepreneur are aware that time is passing
quickly and may therefore often appear to be impatient.
10. Creativity. They have imagination and can envision alternative scenarios. They
are able for recognize opportunity that others do not see.
11. Ability to see the big picture. They see things in holistic sense, they can see
the “big picture” when others see only the parts “scanning the environment”.
12. Motivating factors. Entrepreneur often decide to start their own business in
order to avoid having a boss.
13. Self-efficacy. Self-efficacy is a parson’s belief in his or her capability to perform.
Functions of Entrepreneurs.
Entrepreneurs functions are broadly classified into categories as mentioned below:
1. Entrepreneurial Functions
2. Managerial Functions
3. Promotional Functions
4. Commercial Functions
These are now discussed in seriatim:
1. Entrepreneurial Functions:
The major entrepreneurial functions include risk bearing and innovation.
Entrepreneurship takes the risk for the new venture. For innovative actions in the field
of production technology for new products in a volatile market and for new raw
materials used in production. Moreover, it also takes the risk for theft, robbery,

snatching market fall and hooliganism that may be involved with new
entrepreneurship. This is a major function of entrepreneurship.
(a) Innovation can be defined simply as a "new idea, device or method". However,
innovation is often also viewed as the application of better solutions that meet new
requirements, unarticulated needs, or existing market needs. Such innovation takes
place through the provision of more-effective products, processes, services,
technologies, or business models that are made available to markets, governments and
society. The term "innovation" can be defined as something original and more effective
and, as a consequence, new, that "breaks into" the market or society. Innovations tend
to be produced by outsiders and founders in start-up’s, rather than existing
organizations. Innovation is related to, but not the same as, invention, as innovation is
more apt to involve the practical implementation of an invention (i.e. new/improved
ability) to make a meaningful impact in the market or society, and not all innovations
require an invention. Innovation often manifests itself via the engineering process,
when the problem being solved is of a technical or scientific.
(b) Creativity
 Creativity is defined as the tendency to generate or recognize ideas, alternatives,
or possibilities that may be useful in solving problems, communicating with
others, and entertaining ourselves and others.
 Three reasons why people are motivated to be creative:
1. need for novel, varied, and complex stimulation
2. need to communicate ideas and values
3. need to solve problems
 In order to be creative, you need to be able to view things in new ways or from a
different perspective. Among other things, you need to be able to generate new
possibilities or new alternatives. Tests of creativity measure not only the number
of alternatives that people can generate but the uniqueness of those alternatives.
the ability to generate alternatives or to see things uniquely does not occur by
change; it is linked to other, more fundamental qualities of thinking, such as
flexibility, tolerance of ambiguity or unpredictability, and the enjoyment of
things heretofore unknown.
 Creative" refers to novel products of value, Creative" also refers to the person
who produces the work, Creativity also refers both to the capacity to produce
such and to the activity of generating such products, Creativity requires hard
work
 All who study creativity agree that for something to be creative, it is not enough
for it to be novel: it must have value, or be appropriate to the cognitive demands
of the situation.
 Ways that "creativity" is commonly used:
1. Persons who express unusual thoughts, who are interesting and
stimulating - in short, people who appear to unusually bright.
2. People who experience the world in novel and original ways. These are
(personally creative) individuals whose perceptions are fresh, whose

judgements are insightful, who may make important discoveries that only
they know about.
 Creativity is any act, idea, or product that changes an existing domain, or that
transforms an existing domain into a new one...What counts is whether the
novelty he or she produces is accepted for inclusion in the domain.
 Characteristics of the creative personality:
1. Creative individuals have a great deal of energy, but they are also often
quiet and at rest.
2. Creative individuals tend to be smart, yet also naive at the same time.
3. Creative individuals have a combination of playfulness and discipline, or
responsibility and irresponsibility.
4. Creative individuals alternate between imagination and fantasy ant one
end, and rooted sense of reality at the other.
5. Creative people seem to harbour opposite tendencies on the continuum
between extroversion and introversion.
6. Creative individuals are also remarkable humble and proud at the same
time.
7. Creative individuals to a certain extent escape rigid gender role
stereotyping and have a tendency toward androgyny.
8. Generally, creative people are thought to be rebellious and independent.
9. Most creative persons are very passionate about their work, yet they can
be extremely objective about it as well.
10. The openness and sensitivity of creative individuals often exposes them
to suffering pain yet also a great deal of enjoyment.
2. Managerial Functions:
In simple words, management is getting things working with and through others. The
significance of management function lies in the fact that enterprises with excellent
facilities and quality resources have floundered and fizzled out due to either no
management or poor management and enterprises with good management but with
poor facilities and resources have flourished and performed exceedingly well. In small-
scale enterprises, the entrepreneur who is the owner of the enterprise also, has to
perform the management functions as well. The management functions performed by
entrepreneur are classified into the following five types:
a. Planning:
Planning is pre-determined course of action to accomplish the set objectives. In other
words, planning is today’s projection for tomorrow’s activity. Planning pervades in all
aspects of business. An entrepreneur has to make decisions as to what is to be done,
how it is to be done, when it is to be done, where it is to be done, by whom it is to be
done and so on.

The importance of planning lies in the fact that it ensures the smooth and effective
completion and running of a business enterprise. Absence of planning causes confusion
which, in turn, affects the smooth performance of job whatsoever it may be.
b. Organising:
The organizing function of an entrepreneur refers to bringing together the men,
material, machine, money, etc. to execute the plans. The entrepreneur assembles and
organizes the above mentioned different organs of an enterprise in such a way that
these combined start functioning as one, i.e., enterprise. Thus, organizing function of an
entrepreneur ultimately provides a mechanism for purposive, integrated and co-
operative action by many people in a joint and organized effort to implement a business
plan.
c. Staffing:
Staffing involves human resource planning and human resource management. Thus,
staffing function of an entrepreneur includes preparing inventory of personnel
available, requirement of personnel, sources of manpower recruitment, their selection,
remuneration, training and development and periodic appraisal of personnel working
in the enterprise.
d. Directing:
The functions like planning, organizing, and staffing are merely preparations for setting
up a business enterprise. The directing function of entrepreneur actually starts the
setting up of enterprise. Under the directing function, the entrepreneur guides,
counsels, teaches, stimulates and activates his/ her employees to work efficiently to
accomplish the set objectives.
Thus, directing function of entrepreneur concerns the total manner in which an
entrepreneur influences the actions of his / her employees/ workers. It is the final
actions of an entrepreneur in making his / her employees actually act after all
preparations have been completed.
f. Controlling:
Controlling is the last management function performed by the entrepreneur. In simple
words, controlling means to see whether the activities have been performed in
conformity with the plans or not. Thus, controlling is comparison of actual performance
with the target or standard performance and identification of variation between the
two, if any, and taking corrective measures so that the target is accomplished.
3. Promotional Functions:
(a). Identification and Selection of Business Idea:
Every intending entrepreneur wants to start the most profitable and rewarding project.
The selection of the most suitable business project involves a process. The intending

entrepreneur, based on his /her knowledge, experience, and information gathered from
friends and relatives, generates some possible business ideas which can be examined
and pursued as a business enterprise.
This process is also described as ‘opportunity scanning and identification’. Then, the
generated ideas are analysed in terms of costs and benefits associated with them.
Having made cost-benefit analysis of all the ideas, the most beneficial idea is finally
selected to be pursued as business enterprise.
(b). Preparation of Business Plan or Project Report:
The entrepreneur prepares a statement called ‘business plan’ or ‘project report’ of
what he / she proposes to take up. In other words, business plan is a well evolved
course of action devised by entrepreneur to achieve the specified objectives within a
specified period of time.
In this sense, business plan is just like an operating document. The preparation of
business plan is not must, but it is very much useful for the entrepreneur to establish his
/ her enterprise in an effective and smooth manner. But, it is must for those
entrepreneurs who intend to apply for financial assistance from the financial
institutions and banks for their enterprises.
It contains information about the intending entrepreneur, location of enterprise,
requirement for land and building, plant and machinery, raw material, utilities,
transport and communication, manpower, requirement for funds including working
capital along with its sources of supply, break-even point and implementation schedule
of the project.
(c). Requirement for Finance:
The entrepreneur prepares requirement for funds with its detailed structure. The
financial requirement is also classified into short-term and long-term separately. Then,
the sources of supply to acquire the required fund are also mentioned. How much will
be the share capital in terms of equity and preference shares and how much will be
borrowed capital from different financial institutions and banks are clearly determined.
4. Commercial Functions:
(a). Production / Manufacturing:
Once the enterprise is finally established, it starts producing goods or offering services,
whichever is the case. Production function includes decisions relating to the selection of
factory site, design and layout, types of products to be produced, research and
development, and design of the product.

The ancillary activities include production planning and control, maintenance and
repair, purchasing, store-keeping, and material handling. The effective performance of
production function, to a large extent, depends on the proper production planning and
control.
( b). Marketing:
All production is basically meant for marketing. Marketing is the performance of those
business activities that direct the flow of goods and services from producer to consumer
or user. Thus, marketing essentially begins and ends with the customers. It is important
to note that marketing is not just selling. In fact, marketing includes much more than
selling. Selling is the last function in marketing activities.
The examples of marketing activities are market or consumer research, product
planning and development, standardization, packaging, pricing, storage, promotional
activities, distribution channel, etc. The success of marketing function is linked with an
appropriate ‘marketing mix’. Traditionally, marketing mix referred to 7 Ps, namely,
product, price, promotion, and physical distribution, packaging, people, and process.
(c). Accounting:
The main objective of any business enterprise is to earn profits and create wealth.
Whether the business is fulfilling its objective or not is ascertained through accounting.
What is accounting? According to the National Board of Accountants and Auditors,
“Accounting is the art of recording, classifying and summarizing in a significant manner
and, in terms of money, transactions and events which are, in part at least, of a financial
character and interpreting the results thereof.”
Thus, accounting involves a process consisting of the following four stages:
1. Recording the Transactions
2. Classifying the Transactions
3. Summarising the Transactions
4. Preparing the Final Accounts
5. Analysing and Interpreting the Results.
The Profit & Loss Account is prepared for ascertaining whether the business earned
profit or incurred loss during a particular period of time also called ‘accounting year’.
The Balance Sheet is prepared to know the financial position of business during the
accounting period. Hence, the Balance Sheet is also called ‘Position Statement.’
MACRO VS MICRO VIEW OF ENTREPRENEURSHIP
The macro view of entrepreneurship

This is a view which presents a broad selection of factors relating to success or failure
in existing entrepreneurial businesses in the external locus of control. It also includes
external processes that are beyond the control of the individual entrepreneur and can
be broken down into three subcategories:
1. The Environmental School of Thought
This school deals with external factors that affect the lifestyle of a potential
entrepreneur. These could be positive or negative forces in the modelling of
entrepreneurial desires. The school focuses on institutions, values and influence of the
society that put together, form a socio-political environmental framework that affects
the development of an entrepreneur. For example strong support from family and
friends may influence the desire to become an entrepreneur
2. The Financial/ Capital School of Thought
The foundations of this school are based on the capital-seeking process. The search for
start-up and growth capital is the complete focus because securing venture capital is
vital to an entrepreneur’s development. In this case, the entire entrepreneurial venture
is viewed from a financial management viewpoint and decisions involving finance occur
at every major point.
3. The Displacement School of Thought
This thought process concentrates on the negative side of the existence of group, where
someone can feel out of place or be displaced from the group. It argues that a group can
slow a person’s development, either bringing it to a halt or removing specific factors
vital to the individual for them to advance. As a result the frustrated individual is
motivated to succeed which can be projected into an entrepreneurial pursuit. There are
three major types of displacement that demonstrate this school of thought:
-Political displacement- Government regulations and policies that can limit/redirect
certain industries or reject free enterprise.
-Cultural displacement -Social groups excluded from professional fields e.g. Ethnic
background, sex, race, religion.
-Economic Displacement - Job loss, capital shrinkage and anything affected by
economic variations of recession and depression.
The micro view of entrepreneurship
This examines the factors that are specific to entrepreneurship and are part of internal
locus of control. The potential entrepreneur has the ability to direct or adjust the
outcome of each major influence
Approaches to Study Entrepreneurship
Some of the major approaches to study entrepreneurship are as follows: 1. Sociological
Approach 2. Psychological Approach 3. Political Approach 4. Composite Approach.

The concept of entrepreneurship as we have studied so far is not a very old one. It
became a popular subject of study only after the Second World War, the time when the
students of economic development concentrated on economic problems of the less
developed countries and realized that the real problem of development in the less
developed countries today is not as much economic as it is non-economic.
The element of entrepreneurship in the process of industrialization and economic
development could be realized as early as by the beginning of the 19th century. Weber
and Schumpeter may be considered the first scholars to have systematically explained
the role of entrepreneurs in productive enterprises.
Since then, scholars of different disciplines have been concentrating on the issues like
social, economic and political bases of entrepreneurial supply, psychological
characteristics of entrepreneurs and entrepreneurial functions in the business
enterprise.
There are broadly four approaches to the study of entrepreneurship:
1. Sociological Approach
2. Psychological Approach
3. Political Approach
4. Composite Approach
1. Sociological Approach:
The sociological approach to the study of entrepreneurship deals with social and
cultural factors responsible for the nature and growth of entrepreneurship
development in a society. It attempts to understand as to why a social structure and
culture facilitates or inhibits entrepreneurial development. It believes that laws of
development lie in the social structure and culture of a region.
It tries to seek answer to the question, why one segment of social structure produces
larger number of entrepreneurs than the other. For example, it is mainly the Samurai
community that could rise to entrepreneurship during the Meiji regime in Japan. Indian
entrepreneurship, from the very beginning, has been dominated by three communities:
the Parsis, the Gujratis and the Marwaris. They, however, continue to dominate the
business sector even today.
Max Weber, Cocharan, Young, Hoselitz and Hagen are prominent among the scholars
known for sociological interpretation of entrepreneurial development. Max Weber’s
thesis is that Protestantism, and not Catholicism, could help generate entrepreneurship
and modern capitalism. Weber believed that the Hindu religion of India did not have the
potential to promote entrepreneurship.
The traditional social structures; the caste and the joint family which were essential
attributes of the Hindu society, according to Weber, have been detrimental to the

process of entrepreneurial growth. Kapp (1963) also holds the Hindu culture and Hindu
social organization responsible for slow pace of development and suggests that “a
lasting solution of the problem can be found only by a gradual but systematic
transformation of India’s social system, world view and the level of personal
aspirations”.
The Parson an model of development, best known as ideal-typical approach to
entrepreneurship and development, relates to his popular schema of pattern variables.
B.F. Hoselitz used the Parson an model of pattern variables to explain how
entrepreneurship development is a function of socio-cultural changes known as
modernization.
Hoselitz uses three of the five pattern alternatives given by Parsons which according to
him are applicable to the problem of development: the choice between modalities of the
social object (achievement vs. ascription), the choice between types of value orientation
standards (universalism vs. particularise) and the definition of scope of interest in the
object (specificity vs. diffuseness).
The backward economies, according to Hoselitz, exhibit usually a lack of reliance on
achievement as a norm for acquiring economic goods. Achievement-oriented behaviour
is however not fully absent but exists only in limited cases.
Distribution of economic goods in primitive societies and also in medieval societies has
been typical example of a scripture way of distribution pattern. The advanced societies,
on the other hand, exhibit the norms of achievement-oriented behaviour. In such
societies, there is system of formal education and vocational and professional training.
Second characteristic of underdeveloped economies is the prevalence of particularism
in the distribution of economically relevant tasks among performers. Particularistic
pattern of distribution has been prevalent, for example, in the traditional Indian caste
system. The advanced societies have universalistic i.e., rational approach to the
allocation of resources.
Again, it is to be emphasized that both these variables do not exist in the respective
societies in their pure forms. The movement of society is seen from particularistic to
universalistic system as it moves from backward to advanced economy. Sir Henry Maine
has also postulated this movement with different terminology and that is from ‘status to
contract’.
Thirdly, in the backward societies, economic activities are quite diffuse. It is so because
of the fact that there is a low level of development of division of labour. Partly it is the
result and, at the same time, cause of the low level of productivity. Thus, the
specialization of tasks and the finer division of labour require the development of
principle of specificity and rational allocation of roles.
Specificity is the outcome of rational planning, the result of the combined application of
the principles of universalism and achievement as the norm to economically relevant
social situations. Hoselitz concludes that the analysis of social structural aspects of the
differentiation between “advanced” and “underdeveloped” economies leads us to

conclude that we expect the former to exhibit predominantly universalistic norms in
determining the selection process for the attainment of economically relevant roles;
that the roles themselves are functionally highly specific; that the predominant norms
by which the selection process for those roles is regulated are based on the principle of
achievement, or “performance”.
In an underdeveloped society, on the contrary, particularism, functional diffusion and
the principle of ascription predominate as regulators of social structural relations
especially in its economic aspects and the orientation of actors in economically or
politically influential roles is determined predominantly by considerations of their ego.
Cocharan is of the view that entrepreneurial development depends to a substantial
degree on cultural factors. According to him, patterns of child rearing and family life
determine the personality patterns. Frank W. Young, in his ‘Mediation Model’ of
entrepreneurial activity, points out that the entrepreneurial attributes show up in
individuals as a result of particular family background and as a reflection of general
cultural values.
Entrepreneurial characteristics, such as the ability to make new combinations of factors
of production, managerial skill perception of opportunity, risk-taking, inventiveness and
achievement motivation are not merely a pale reflection of these antecedent conditions;
they constitute an independent causal factor mediating between structural factors and
consequent economic development.
E.E. Hagen opined that the traditional authoritarian social structure inhibits the growth
of personality with entrepreneurial talent. His thesis is that an entrepreneur is a
creative problem-solver with innovative temperament interested in things in the
practical and technological realm and driven by a sense of duty to achieve.
Modern democratic system is more conducive to the development of innovative
behaviour. According to him, they are more prone to taking up entrepreneurship as a
career whose existing social status has been denigrated in the course of historical
change.
2. Psychological Approach:
We have understood by now that the entrepreneur is not a common person. He has a
typical personality with creative, managerial and imaginative skill who can innovate
and contribute positively to an industrial project. This kind of personality develops in a
person who has strong motivation for achievement.
David McClelland, the greatest exponent of the psychological approach to
entrepreneurship, is of the view that the genesis and performance of entrepreneurs
requires strong motivation for achievement. The achievement motivation, according to
McClelland, is a function of child rearing practices in a society.
Unlike the sociological approach which asserts that the existing social structure
determines entrepreneurship and economic development, the psychological approach
seeks to find out how the social structure affects the attitude of the people of a society.

Areas like entrepreneurial commitments, tendency of saving and investment and
business management have been usually covered by the studies carried out by
psychologists.
Collins, Moore and others have examined a sub-category of business leaders. Their
study of innovating entrepreneurs revealed that many of their subjects had experienced
childhood poverty and disrupted family lives which stimulated strong motivations for
personal achievements.
John H. Kunkel questioned the validity of many psycho-dynamic concepts and principles
and the unresolved controversy surrounding the role of social structure and personality
in the process of economic development. He propounds the behavioural approachas an
alternative.
Joseph Schumpeter, the first to offer a systematic interpretation of entrepreneurship,
had psychological perspective in his mind when he said that the entrepreneur possesses
energy of will and mind to overcome fixed habits of thought and the capacity to
withstand social opposition.
3. Political Approach:
The political approach to entrepreneurship deals with the issues involved in
relationships between entrepreneurship development and the state particularly in the
context of the role of the latter in the development of entrepreneurs. The role of the
government is crucial in deciding the nature and rate of development.
Rapid growth of industries and good pace of economic development largely depend on
the merit of economic policies of the government. Democratic and relatively stable
governments are supposed to be conducive to economic development.
Entrepreneurial supply would be greater in a state which believes in the ideology of
capitalistic liberalism and provides requisite credit facility, appropriate training
opportunity, technological and scientific knowledge and adequate incentive.
The Government of India pursued the policy of mixed economy till the end of 80s of the
20th century which could not contribute to growth rate of 3 to 4 per cent for over 40
years of the economic regime of the country. Corruption, laziness, traditional power
structure and weak governance, responsible for sluggish development, could not be
removed by the state.
Economic reforms initiated worldwide from 1991 with an objective to liberalize
economic policies, promote individual investors and bring about structural adjustment
have undoubtedly yielded significant results.

Political studies on entrepreneurship have revealed that the late growth of
entrepreneurship in Russia and France had been due to the existing political conditions
in the countries. Japan’s fast entrepreneurial growth can be attributed to the country’s
political system which peculiarly integrated the industrial and agricultural economy.
4. Composite Approach:
The entrepreneurship is a complex phenomenon. None of the approaches discussed
above has been able to explain the entrepreneurial dynamics fully. Due to their non-
holistic nature, they have failed to offer the precise laws of supply and success of
entrepreneurship.
It has been observed that entrepreneurial behaviour is an outcome of the interplay of
multiple social, cultural, economic, political and psychological factors. No single factor is
entirely responsible for the supply of successful entrepreneurs. We, in our study of
carpet manufacturers in the Bhadohi-Mirjapur belt, found no manufacturer entering
into business on account of any single factor.
Dwijendra Tripathi also, in his comparative study of historical roots of industrial
entrepreneurship, has observed that the emergence, performance and perception of
entrepreneurs can be understood by an integrated approach which would take into
account all the possible sociological, psychological, economic and political factors
contributing to the increase in entrepreneurial behaviour.
Business idea:
A business idea is a concept that can be used for financial gain that is usually centered
on a product or service that can be offered for money. An idea is the base of the pyramid
when it comes to the business as a whole.
The characteristics of a promising business idea are:
 Innovative
 Unique
 Problem solving
 Profitable
A business idea is often linked to its creator who needs to identify the business' value
proposition in order to launch to market and establish competitive advantage.

What is innovation?
For businesses this could mean; creating new ideas, new product development through
research and development or improving existing services. Innovation can be the central
focus of a business and this can help them to grow and become a market leader if they
execute their ideas properly. Businesses that are focused on innovation are usually
more efficient, cost effective and productive. Successful innovation should be built into
the business strategy, where you can create a culture of innovation and drive forward
creative problem solving
Unique selling point
A unique selling point (USP) is the factor that makes a company or a product stand out
from its competitors, whether it is through; pricing, quality, customer service or
innovation.
Each successful company has a USP and this is what potentially makes their customers
loyal to them, as this is the original reason as to why they chose to buy from them. A USP
can be created through the element of being first to a market.
Problem solving
Business ideas that solve problems are fundamental to developing our world and
companies.
Profitability
Profitability is a business's ability to generate earnings compared to its costs over a
certain period of time. This is possibly the most important aspect of any business idea in
the long term, as this is what makes a business survive in order to keep having the
impact that it has. Profitable ideas need a strong revenue stream against its costs and
this tends to create the success of the business, however some companies defy this and
make losses to begin with, yet are still exceptional business ideas that are worth
billions.
Major sources of business ideas
Business ideas are thoughts that when implemented can lead to income
generation. Entrepreneurs must first come up with ideas from different sources
that should lead them to starting a well-planned business. Here are some of the
sources of business ideas.
a) Surveys.
Business ideas can be generated from market surveys indicating or showing
which sector is viable or possibly void of products. People can check the market
to come out with appropriate conclusions on which sectors are not flooded or
occupied.

b) Training.
Business ideas can be acquired through training individuals where they are
equipped with necessary skills and knowledge from schools and such other
institutions of training.
c) Experience.
An idea can also be generated from experience. Experience in itself comes from
constant touch on a particular aspect. For instance, an individual might have an
experience in accounting through his or her occasional involvement with
accounting issues.
d) Hobbies.
Hobbies are what one is fond of doing most of his or her time. At least each and
every one finds something interesting and comfortable doing every time. Well,
that might be a source of a business idea.
e) Talents.
A business idea can also come from individual talents. You are best in what you
are talented in and this might form a good base for starting a business if you spot
an idea in that area. For instance, if you are talented to play football, you might
spot an idea in supplying football kits to customers in the market.
f) Strengths of an individual.
An individual's strength can also serve as a source of idea which is tuned to an
idea for carrying out business. For instance, if you have a particular strength in
helping out clients through consultations, that could form a base to start a
business.
g) Market gaps (niche)
Spotting a gap in the market can also form an idea. A market gap in this case is
used to mean some important area that is not occupied. Sometimes, a particular
area in the market may be empty with nobody really providing some goods or
services needed by customers. This is what can be formed to an idea.
h) Events.
A business can also be generated through attending events in which new ideas
are exchanged. For instance, an event that is scheduled in some other place can
be very good opportunity to find out what is missing in that particular place and
by providing such products, you satisfy customers’ needs which is one of the
reasons of doing business.
i) Media.
An idea can also come from the media. Reading magazines, newspapers and such
published materials that contain business related issues can help one generate
an idea. An idea can still come from the other media sources like television
stations and radios. Discussions related to business topics can be very useful in
generation of an idea.
j) Shows and exhibition.

An idea can also be extracted from shows and exhibitions. By seeing what other
people presents in the shows and exhibitions, an individual can come up with an
idea of providing something like what he or she has seen others do.
k) Recognizing needs.
An idea can also be generated from recognition of what customers need in the
market. If for instance customers are frequently demanding maize flour instead
of maize itself, one can come in to provide the maize flour demanded by
customers.
l) Merging existing businesses.
Business people can also come up together to merge their business as a new
development towards achieving or getting more customers or for provision of
better services to customers.
m) Listening to what people say.
A business idea can also be generated through listening from other people's
thoughts. This is more so important when you socialize with great minds or such
people who have tried out businesses or those who actually are in businesses.
An Introduction to Business Plans
Business Plan
Definition: A business plan is a written document describing the nature of the business,
the sales and marketing strategy, and the financial background, and containing a
projected profit and loss statement
A business plan is also a road map that provides directions so a business can plan its
future and helps it avoid bumps in the road. The time you spend making your business
plan thorough and accurate, and keeping it up-to-date, is an investment that pays big
dividends in the long term.
Your business plan should conform to generally accepted guidelines regarding form and
content. Each section should include specific elements and address relevant questions
that the people who read your plan will most likely ask.
Components of a Business Plan:
I. Title Page and Contents
A business plan should be presented in a binder with a cover listing the name of the
business, the name(s) of the principal(s), address, phone number, e-mail and website

addresses, and the date. You don't have to spend a lot of money on a fancy binder or
cover. Your readers want a plan that looks professional, is easy to read and is well-put-
together.
Include the same information on the title page. If you have a logo, you can use it, too. A
table of contents follows the executive summary or statement of purpose, so that
readers can quickly find the information or financial data they need.
2. Executive Summary
The executive summary, or statement of purpose, normally explains your reason for
writing the business plan. It tells the reader what you want and why, right up front. Are
you looking for a Tz 100,000 loan to remodel and refurbish your factory? The questions
that pertain to your situation should be addressed here clearly and succinctly.
The summary or statement should be no more than half a page in length and should
touch on the following key elements:
 Business concept describes the business, its product, the market it serves and the
business' competitive advantage.
 Financial features include financial highlights, such as sales and profits.
 Financial requirements state how much capital is needed for start-up or
expansion, how it will be used and what collateral is available.
 Current business position furnishes relevant information about the company, its
legal form of operation, when it was founded, the principal owners and key
personnel.
 Major achievements points out anything noteworthy, such as patents,
prototypes, important contracts regarding product development, or results from
test marketing that have been conducted.
3. Description of the Business:
The business description usually begins with a short explanation of the industry. When
describing the industry, discuss what's going on now as well as the outlook for the
future. Do the necessary research so you can provide information on all the various
markets within the industry, including references to new products or developments
that could benefit or hinder your business. Base your observations on reliable data and
be sure to footnote and cite your sources of information when necessary. Remember
that bankers and investors want to know hard facts--they won't risk money on
assumptions or conjecture.
When describing your business, say which sector it falls into (wholesale, retail, food
service, manufacturing, hospitality and so on), and whether the business is new or
established. Then say whether the business is a sole proprietorship, partnership. Next,
list the business' principals and state what they bring to the business. Continue with
information on who the business' customers are, how big the market is, and how the
product or service is distributed and marketed.

4. Description of the Product or Service:
The business description can be a few paragraphs to a few pages in length, depending
on the complexity of your plan. If your plan isn't too complicated, keep your business
descriptions short, describing the industry in one paragraph, the product in another,
and the business and its success factors in two or three more paragraphs.
When you describe your product or service, make sure your reader has a clear idea of
what you're talking about. Explain how people use your product or service and talk
about what makes your product or service different from others available in the market.
Be specific about what sets your business apart from those of your competitors.
Then explain how your business will gain a competitive edge and why your business
will be profitable. Describe the factors you think will make it successful. If your business
plan will be used as a financing proposal, explain why the additional equity or debt will
make your business more profitable. Give hard facts, such as "new equipment will
create an income stream of Tzs100, 000 per year" and briefly describe how.
Other information to address here is a description of the experience of the other key
people in the business. Whoever reads your business plan will want to know what
suppliers or experts you've spoken to about your business and their response to your
idea. They may even ask you to clarify your choice of location or reasons for selling this
particular product.
5. Market Analysis
A thorough market analysis will help you define your prospects as well as help you
establish pricing, distribution, and promotional strategies that will allow your company
to be successful vis-à-vis your competition, both in the short and long term.
Begin your market analysis by defining the market in terms of size, demographics,
structure, growth prospects, trends, and sales potential. Next, determine how often your
product or service will be purchased by your target market. Then figure out the
potential annual purchase. Then figure out what percentage of this annual sum you
either have or can attain. Keep in mind that no one gets 100 percent market share, and
that a something as small as 25 percent is considered a dominant share. Your market
share will be a benchmark that tells you how well you're doing in light of your market-
planning projections.
You'll also have to describe your positioning strategy. How you differentiate your
product or service from that of your competitors and then determine which market
niche to fill is called "positioning." Positioning helps establish your product or service's
identity within the eyes of the purchaser. A positioning statement for a business plan
doesn't have to be long or elaborate, but it does need to point out who your target
market is, how you'll reach them, what they're really buying from you, who your
competitors are, and what your USP (unique selling proposition) is.
How you price your product or service is perhaps your most important marketing
decision. It's also one of the most difficult to make for most small business owners,

because there are no instant formulas. Many methods of establishing prices are
available to you, but these are among the most common.
 Cost-plus pricing is used mainly by manufacturers to assure that all costs, both
fixed and variable, are covered and the desired profit percentage is attained.
 Demand pricing is used by companies that sell their products through a variety
of sources at differing prices based on demand.
 Competitive pricing is used by companies that are entering a market where
there's already an established price and it's difficult to differentiate one product
from another.
 Markup pricing is used mainly by retailers and is calculated by adding your
desired profit to the cost of the product.
You'll also have to determine distribution, which includes the entire process of moving
the product from the factory to the end user. Make sure to analyze your competitors'
distribution channels before deciding whether to use the same type of channel or an
alternative that may provide you with a strategic advantage.
Finally, your promotion strategy should include all the ways you communicate with
your markets to make them aware of your products or services. To be successful, your
promotion strategy should address advertising, packaging, public relations, sales
promotions and personal sales.
6. Competitive Analysis
The purpose of the competitive analysis is to determine:
 The strengths and weaknesses of the competitors within your market.
 Strategies that will provide you with a distinct advantage.
 Barriers that can be developed to prevent competition from entering your
market.
 Any weaknesses that can be exploited in the product development cycle.
The first step in a competitor analysis is to identify both direct and indirect competition
for your business, both now and in the future. Once you've grouped your competitors,
start analysing their marketing strategies and identifying their vulnerable areas by
examining their strengths and weaknesses. This will help you determine your distinct
competitive advantage.
Whoever reads your business plan should be very clear on who your target market is,
what your market niche is, exactly how you'll stand apart from your competitors, and
why you'll be successful doing so.
7. Operations and Management:
The operations and management component of your plan is designed to describe how
the business functions on a continuing basis. The operations plan highlights the logistics
of the organization, such as the responsibilities of the management team, the tasks
assigned to each division within the company, and capital and expense requirements
related to the operations of the business.

8. Financial Components of Your Business Plan:
After defining the product, market and operations, the next area to turn your attention
to are the three financial statements that form the backbone of your business plan: the
income statement, cash flow statement, and balance sheet.
The income statement is a simple and straightforward report on the business' cash-
generating ability. It is a scorecard on the financial performance of your business that
reflects when sales are made and when expenses are incurred. It draws information
from the various financial models developed earlier such as revenue, expenses, capital
(in the form of depreciation), and cost of goods. By combining these elements, the
income statement illustrates just how much your company makes or loses during the
year by subtracting cost of goods and expenses from revenue to arrive at a net result,
which is either a profit or loss. In addition to the income statements, include a note
analysing the results. The analysis should be very short, emphasizing the key points of
the income statement. Your CPA can help you craft this.
The cash flow statement is one of the most critical information tools for your business,
since it shows how much cash you'll need to meet obligations, when you'll require it and
where it will come from. The result is the profit or loss at the end of each month and
year. The cash flow statement carries both profits and losses over to the next month to
also show the cumulative amount. Running a loss on your cash flow statement is a
major red flag that indicates not having enough cash to meet expenses-something that
demands immediate attention and action.
The cash flow statement should be prepared on a monthly basis during the first year, on
a quarterly basis for the second year, and annually for the third year. The following 17
items are listed in the order they need to appear on your cash flow statement. As with
the income statement, you'll need to analyse the cash flow statement in a short
summary in the business plan. Once again, the analysis doesn't have to be long and
should cover highlights only.
The last financial statement you'll need is a balance sheet. Unlike the previous financial
statements, the balance sheet is generated annually for the business plan and is, more
or less, a summary of all the preceding financial information broken down into three
areas: assets, liabilities and equity.
Balance sheets are used to calculate the net worth of a business or individual by
measuring assets against liabilities. If your business plan is for an existing business, the
balance sheet from your last reporting period should be included. If the business plan is
for a new business, try to project what your assets and liabilities will be over the course
of the business plan to determine what equity you may accumulate in the business. To
obtain financing for a new business, you'll need to include a personal financial
statement or balance sheet.
In the business plan, you'll need to create an analysis for the balance sheet just as you
need to do for the income and cash flow statements. The analysis of the balance sheet
should be kept short and cover key points.

9. Supporting Documents:
In this section, include any other documents that are of interest to your reader, such as
your resume; contracts with suppliers, customers, or clients, letters of reference, letters
of intent, copy of your lease and any other legal documents, tax returns for the previous
three years, and anything else relevant to your business plan.
Some people think you don't need a business plan unless you're trying to borrow
money. Of course, it's true that you do need a good plan if you intend to approach a
lender, whether a banker, a venture capitalist or any number of other sources for start-
up capital. But a business plan is more than a pitch for financing; it's a guide to help you
define and meet your business goals.
Just as you wouldn't start off on a cross-country drive without a road map, you should
not embark on your new business without a business plan to guide you. A business plan
won't automatically make you a success, but it will help you avoid some common causes
of business failure, such as under-capitalization or lack of an adequate market.
As you research and prepare your business plan, you'll find weak spots in your business
idea that you'll be able to repair. You'll also discover areas with potential you may not
have thought about before--and ways to profit from them. Only by putting together a
business plan can you decide whether your great idea is really worth your time and
investment.
Small Business:
A small business is a business whose control and ownership belong to one individual or
few people. Small businesses are privately owned corporations, partnerships, or sole
proprietorships that have fewer employees and/or less annual revenue than a regular-
sized business or corporation. The capital contribution is therefore from these few
individuals who often control the decision-making process. In addition to this, small
businesses have few employees.
Different states have different ways of describing small businesses because of the
differences in the economic conditions. However, there are important factors to
consider to determine whether a business is small or not. They are used worldwide, and
they are enlisted below.
Characteristics of small business
 The number of their employees is low.
 Their sales volume is relatively low.
 They have weak financial strength.
 They are relatively small in size.
 Their initial capital outlay is low.
 They have a small market share.
 They have a small management body

Difference between Small Business and
Entrepreneurship
Behaviorof Small Business and Entrepreneurship
Entrepreneurs and small business owners are both self-employed, but their behaviors
are different. Entrepreneurs often want to change and develop things. They are happy in
creating energy as opposed to being comfortable with their current situation. Small
business owners, on the other hand, are content as long as they are successful. They will
rarely try to do more.
Innovation in Small Business and Entrepreneurship
Entrepreneurs are known to invent and develop things. Their minds are technical as
opposed to small business owners who often do what entrepreneurs are doing already.
Whereas entrepreneurs are proactive, small business owners are reactive.
Motive of Small Business and Entrepreneurship
Most entrepreneurs will start up a business because they are passionate about it. They
will do what they love without thinking about the risks or even profits in the case that
the business is successful. On the other hand, small businesses set up their businesses
with the main motive of earning profits. That is why when the risks become too much,
they will shut down the business to avoid losses.
Market Share of Small Business and Entrepreneurship
Entrepreneurs often have the vision of helping the world. Therefore, their businesses
will have an impact on many people. For instance, Microsoft is serving almost
everybody in the world. They, therefore, have a significant market share. For small
business owners, they have a small market share because they serve people around
them. They put their communities first and their needs. This brings about a gap in the
market shares of entrepreneurs and small businesses.
Mindsets of Small Business and Entrepreneurship
Entrepreneurs and small business owners have different mindsets. While
entrepreneurs will look for the next big venture when their companies are good, small
business owners will retain their business. They are sentimental, and they believe that
their business is for their community,
Entrepreneurship vs. Small Business: Comparison Chart
BASIS OF
COMPARISON
ENTREPRENEURSHIP SMALL BUSINESS

Behaviour Strive to achieve much
more than being
successful
Satisfied with success
Innovation Proactive Reactive
Motive Passionate about the
Business
Start the Business for
profit not as a passion
Market share Large market share Smaller Market share
Mind set Continuously source for
new venture
Retention of the same
Business structure
Summary of Small Business vs Entrepreneurship
Both small business owners and entrepreneurs are self-employed, and they have much
more in common. Most entrepreneurs begin from humble beginnings as small
businesses but they bloom because they are always hungry for more success.
Both small businesses and entrepreneurial projects are imperative because they lead to
the development of the economy. In addition to that, they aid in eradicating the high
levels of unemployment which has become a major issue all over the world. The
projects have also assisted in the utilization of local resources and development of
technology. Therefore, both are useful for the economy to prosper.
Principles of Entrepreneurship

1. Bea SolutionProvider
You must note that entrepreneurship is not just about making money at first
but it’s about providing solutions and adding value. Over the years, successful
entrepreneurs had noted that passion is what brings success in business. This
is because, in starting a business, there are bound to be issues ranging from
sourcing funding to getting good partners, building a good team, location,
marketing etc. If you are involved with inexperienced persons, you are bound
to fail as fast as you had started. Only passion can keep you if you find yourself
in such situation. You just need to impact a life no matter how small; that is
the beginning of your success story.
“Look for a way to make life easy for others”
2. Have a Vision
You are not an entrepreneur merely to make a living. You are an entrepreneur
because you want to enable the world to live more amply, with greater vision,

with a finer spirit of hope and achievement. You are an entrepreneur to enrich
the world, and you impoverish yourself if you forget the errand. Jonathan
Swift said that “Vision is the art of seeing what is invisible to others”. Have a
defined purpose and pursue it.
“Successful entrepreneurs are those that were able to transform
their vision into reality”
3. Choosethe Right Team
When assembling your team, it is imperative to gather a team of individuals
with the same mindset and attitude towards achieving a common goal. You
must not involve family or close friends especially those without any
knowledge or expertise they can add to your startup. Your team must have the
same drive, tenacity, perseverance and an underlying belief in themselves and
the value they can add to the success of the business. Yourteam must be
motivated and dedicated.
“Good team work builds speed”

4. ViableProduct/Service
Let your product/service fulfill a need, be innovative and the approach, a little
different from other regular businesses. Technology is an important tool in
the hand ofmodern entrepreneurs. Your business should easily be accessible
to your target customers. Always give your customers room for feedback or
suggestions on how your product/service can be better.
“Good products most times sell itself”
5. Capital
Good business plan always draw investors. Capital should be your least worry
when you have a solution. Entrepreneurship is all about solution. When your
idea is great, you can easily get investors or government loan. In my country,
Nigeria for example, government has created loan programs for SMEs and this
can be easily accessed with a good business plan alone. One of such programs
is YouWin. Also, the Central Bank of Nigeria is supporting startups with
funding with a little interest rate. Other programs like the Tony Elumelu
Foundation also support startups financially. These funding channels should
be exploited. These are measures most national governments are applying to
promote entrepreneurship knowing that the growth of the world’s economy
depends on it.
“Capital isn’t scarce, vision is”
6. Accountability

As an entrepreneur, you are accountable to the success orfailure of your
business, not your employees, investors or advisors. You must have detailed
account of whatever transaction made by the company. Have a scorecard of all
inventories. Always carry your investors along if there are any. The success of
any business is, in many ways, measured by the management ofits resources.
Even if you hire a full-time accountant, as an entrepreneur, you are expected
to have a fundamental knowledge of accounting, how it works and how to
apply its basic principles with the aim of operating a flourishing business.
“Accountability breeds responsibility”
Recommended Read: 10 Startup Lessons ForYoung Entrepreneurs
7. GrowthandMarketing
Every successful business grew overthe years. Most big companies started
small. It was all a process. Success in business is not a one-time event; it is an
on-going process. You must give room for growth. Do not be content with the
success of yesterday; always strive to beat your own record. That way, your
business will keep on growing, your investors will be happy to remain and
inject more funds. Always remain focused and dedicated to your goal. Have a

clear goal and pursue it. Your business growth also depends on
your marketing strategy. Marketing helps in getting your product known and
good sales come from good marketing.
“Without continual growth and progress, such words as
improvement, achievement, and success have no meaning”
8. Know Your Customer
Your customer base determines the life of your business. If you provide
solution to better the world, your customers will increase. In business, the
higher your customers, the higher the profit. Your business must be
streamlined into a particular niche. This will help you to know who your
prospective customers should be and how to get and keep them. When you
focus on a niche market, it is more efficient, more productive and less
competitive. Always map out strategies that will allow for customer feedback
even if it means giving out discounts/vouchers in exchange.
“Always treat your customers as special guests”
9. Priorities
For success in business, you must categorize things in order of importance. Set
your priorities based on your goals and do not deviate. Your investors should
not make you lose focus on your dream. Daren Smith of theselfemployer.com
wrote “Decide what to do and do it, then decide what not to do and don’t
do it“. Simple! Analyze what to create next based on what has proven to have
the biggest return. If Apple had pushed their Mac Pro, their powerhouse
desktop computercreated specifically for demanding professionals who need
lots of computing power, harder than they pushed the iPod back in the day,
they wouldn’t be the industry giant they are today. I’m sure there were some
people who were way more passionate about the Mac Pro, but they had to
realize that the numbers don’t lie, and the iPod was more important to market
to the world. Your target should always be defined.

“Things which matters most must never be at the mercy of things
which matter least”
10.Never Give Up
The never give up attitude is one quality an entrepreneur must possess.
Successful entrepreneurs are goal-getters. They never give up on turning their
vision into reality. Like I stated in this article 10 MajorCauses of Business
Failure, quitting too soon is the biggest reason why many businesses failed. If
you do not persevere, enquire, research, fail and try again, you might not be
successful in business. If you persist, you will have no choice than to succeed.
In entrepreneurship, persistence and determination is supreme.
“Never, Never, Never Give Up”
I hope you enjoyed this post? Leave a comment below if you do and tell me
one principle that have been working well for you as an entrepreneur or any
one that is hard for you to keep or work on.
7 Characteristics of Successful Entrepreneurs
 Peter Daisyme
 August 24, 2015

Success in entrepreneurship isn’t just about your idea or your money. Plenty of
people have interesting ideas or a lot of cash to throw around — and they never
quite manage to find success in their ventures.
If you want to be an entrepreneur, take a step back and evaluate whether or not you
have the following characteristics.(Andremember:if you don’t have these traits
now, you can developthem down the road to improve your chances of success.)
1. Self-Motivation
One of the most important traits of entrepreneurs is self-motivation.Whenyou
want to succeed, you need to be able to push yourself.You aren’t answerable
to anyone else as an entrepreneur, and that sometimes means that it’s hard to get
moving without anyone to make you. You need to be dedicated to your plan and
keep moving forward — even if you aren’t receiving an immediate paycheck.
2. Understand What You Offer
As an entrepreneur, you need to know what you offer, and how it fits into the
market. Whether it’s a product or a service,you need to know where you fit in. That
means you need to know when it’s time to tweak things a little bit. This also
includes knowing whether you are high end, middle of the road or bargain. Being

able to positionyourself and then adjust as needed is an important part of
entrepreneurship.
3. Take Risks
Successful entrepreneurs know that sometimes it’s important to take risks. Playing
it safe almost never leads to success as a business owner. It’s not about taking just
any risk,though. Understanding calculatedrisks that are more likely to pay off is an
important part of being an entrepreneur. You’ll need to be willing to take a few risks
to succeed.
4. Know How to Network
Knowing how to network is an important part of entrepreneurship. Sometimes who
you know is an important part of success. Being able to connect with others and
recognize partnership opportunities can take you a long way as a business owner.
Figure out where to go for networking opportunities and make it a point to learn
how to be effective.
5. Basic Money Management Skills and Knowledge
We often think of successful entrepreneurs as “big picture” people who don’t worry
so much about managing the day to day. And it’s true that you might have an
accountant or other team members to help you manage the business. However,if
you want to be successful,you should still have basic money management skills and
knowledge. Understand how money works so that you know where you stand, and
so that you run your business on sound principles.
6. Flexibility
To a certaindegree, you need to be flexible as an entrepreneur. Be willing to
change as needed. Stay on top of your industry and be ready to adopt changes in
processes and product as they are needed. Sometimes, you also need flexibility in
your thinking. This is an essential part of problem-solving.You want to be able find
unique and effective solutions to issues.
7. Passion

Finally,successful entrepreneurs are passionate. They feel deeply about their
product or service or mission.Passionis what will helpyou find motivationwhen
you are discouraged and it will drive your forward.Passion is fuel for successful
entrepreneurship. If you findyourself losing your passion, that might be the clue
that it’s time to move on to something else (that stokes your passion). There are
many serial entrepreneurs that create successful businesses, sell them, and then
create something else.
As you consider your characteristics,think about how to better develop them to
help you become a better entrepreneur.

Entrepreneurship & SMB Mgmt Syllabus

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