Entrepreneurship for health care givers.pptx

Topic 1
ENTREPRENEURS AND THEIR ROLES

Introduction
Besides individual benefits accruing to an
entrepreneur, they contribute to their
businesses and national development in
different ways. Due to the entrepreneur’s
contribution to national development, the
government of Kenya has decided to support
the initiation and development of the small
businesses.

Definition of Entrepreneur:
A person who has the ability to scan the
environment and identify a viable business
opportunity (ies) and the gather the necessary
resources to exploit the identified opportunity
(ies), and by so doing assumes risks involved in
starting and operating the

Qualities of Successful Entrepreneur:
• To become successful as an entrepreneur in business life, a businessman should
possess a number if not all of following qualities. Those are noted below:
– Moderate risk taking: an entrepreneur always takes calculated risk to operate the organization
– Hard work: an entrepreneur is very much hard worker, he or she always busy with various
types work.
– Accountability: a successful entrepreneur is accountable well as his associates always
accountable to him.
– Educated in real sense: successful entrepreneur is educated. In real sense .he tries to
implement his organizational objectives through his education.
– Analytical mind: a successful entrepreneur is analytical minded. he scrutinizes every activity
on the organization.
– Dynamic leadership: a successful entrepreneur is always dynamic to operate the organization
– Presence of mind: a successful entrepreneur is always at present of mind he is always aware
of activities that to happening in the organization and around him
– Accommodative: a good entrepreneur has the capacity to make his own place at every sector
– Courageous and tactful: Corsages and techniques is very much essential for a successful
entrepreneur
– Maker of right decision: A successful entrepreneur makes right decision in right time in right
place
– Foresighted: a successful entrepreneur foresights the future and take decision accordingly

Qualities of Successful Entrepreneur:
– Right perception of things: A successful entrepreneur things in a right way
– Enjoy simple life: A successful entrepreneur always deals a simple life a general people of the society
– Strong desired to success: A successful entrepreneur has a strong desire to success. He is driven by the
desire to success
– Innovation: innovation is the process of making new something. A successful entrepreneur is innovative
– Self confidence: A successful entrepreneur is self confidence. does not really on other for decision or fate
– Goal setting: a successful entrepreneur set the goal
– Keen observation: A successful entrepreneur always observes the origination
– Sociable: A successful entrepreneur is sociable person
– Loves to work; A successful entrepreneur is very much addicted to work
– Loves new ideas: A successful entrepreneur loves new ides of the organization
– Team builder: A successful entrepreneur builds a suitable team
– Clean understanding: A successful entrepreneur clearly understands every things
– Ability to conceptualize: A successful entrepreneur is able to conceptualize the reality.
Additionally entrepreneurs have self drive, hence they are goal setters. They also like working on
their own, thus they are self starters. Entrepreneurs make decisions in a hurry and under pressure,
hence they are energetic while at the same time they like to take charge of their activities/affairs
and they always like to finish what they start. Entrepreneurs think clearly and have good common
sense, hence they think before they act. They also have good business ideas and think up new ways
to solve problems. Entrepreneurs also plan before they start a job and are not afraid to ask for
advice. They are well organized. Entrepreneurs like to lead and get others to follow, they like
people and get along well with them. Entrepreneurs do what they say and hence people trust
them.

Characteristics of an Entrepreneur
As stated above, an entrepreneur is a person who initiates a business venture, and as such he has
certain features that are unique to him/her as follows:
– Risk taking capacity: every business has risk of time, money etc. So an entrepreneur must have the capacity
to take such risks.
– Creativity and innovation: an entrepreneur has an initiator , creativity and innovative power
– Need for achievement: the entrepreneur has strong desire to achieve the goal of business. he is always
driven by the needs for achievement.
– Need for autonomy: an entrepreneur does not like to be under anybody. It is the need for autonomy which
drives a person to be an entrepreneur.
– Internal locus of control: an entrepreneur believes in him his work.
– External locus of control: he also believes in fate for ultimate result.
– Self confident: an entrepreneur has confidence in him.
– Leadership capability: an entrepreneur must have leadership capability to lead works under him
– Industriousness: a successful entrepreneur must have leadership capability to lead workers working under
him.
– Decision making capability: the entrepreneur has capability to take quick decision
– Adaptability: he has the capacity to adapt with any kind of situation that arise in the enterprise
– Foresightedness: The entrepreneurs have a good foresight to know about future business environment.
– Others include; the other feature are dynamism, ambition, education and training, long term involvement,
future orientation.

Types of Entrepreneurs:
There are different types of entrepreneurs; among them are
opportunistic entrepreneurs, inventor entrepreneurs, and pattern
multiplier entrepreneurs, economy of scale exploiter, an enquirer
entrepreneurs, speculator entrepreneurs and so forth.
Role of Entrepreneurs in their Businesses
An entrepreneur does basically everything in her/his business.
Some of the jobs an entrepreneur performs in the business include
planning the business, managing employees, buying and keeping
track of business supplies and pricing a product properly for profit.
Other roles include selling and advertising, keeping financial
records, paying taxes and handling public relations. Entrepreneurs
also play the roles of an initiator, mobilizer, shareholder, director,
organizer of systems and designer.

Contribution to National
Development:
• An entrepreneur contributes to national development in the following ways:
• Employment Creation: For himself and others. The government also benefits
through the payment of taxes.
• Improving Standards of Living: It increases people’s ability to buy goods and
services.
• Promotion of National Productivity: Any products sold locally increases GDP while
goods produced locally are sold abroad; its sales improved the GNP.
• Innovator/ Technology: Entrepreneur is capable of coming with new ideas
regarding improving existing methods of producing certain products.
• Conservation of Foreign Currency: Production of goods and services using locally
available resources saves a country’s foreign currency.
• Promotion of Export: Goods produced locally can be sold in foreign countries;
improving export market.
• Conservation: Using some of the locally available and waste materials helps in
conserving the environment. Waste re-cycling reduces the cutting of more trees.

Entrepreneur as a Leader
An entrepreneur is very good motivators of his employees by sheer
example of his hard work, but this may not be the best leadership style.
An entrepreneur who is person-oriented tends to be the most successful
motivators. Below are some of the techniques that high person-oriented
leaders use to motivate staff:-
– Build worker’s’ self-esteem by praising their work and showing them that their
best efforts are always expected.
– Inform employees what is to be accomplished.
– Delegate authority and responsibility to employees.
– Maintain personal contact with all employees.
– Apply reinforcement principle by rewarding behaviour that is considered
desirable.
– Are active listeners and explicitly give feedback to the person speaking.
– Set specific goals which are clearly understood, measurable and which must
be continually reviewed.
– Take corrective action without criticizing publicly.

Leadership Traits
Below are important leadership traits which are portrayed by successful entrepreneurs:-
• Treating others more like people than numbers.
• Tactful with reflections with others
• Fair and honest in dealing with others
• Sets good example for others
• Cooperate with others
• Dependable and hard worker
• Cheerful and optimistic
• Helpful in assisting others to do a better job
• Receptive and accept new ideas
• Emotionally stable in dealing with people
• Loyal to employees
• Consistent in relations with others
• Accepts responsibilities
• Admits mistakes
• Obtains good work results and habits
• Promotes well being and belongingness among employees.

Topic 2
ENTREPRENEURIAL MOTIVATION

Introduction
Several research studies have been conducted to identify the factors that
inspire entrepreneurs to venture into business. Among these factors are:-
– Educational background
– Occupational experience
– Family background
– Desire to work independently
– Assistance from government
– Assistance from financial institutions
– Availability of technology/raw materials
– Demand of a particular product
– Favourable business environment
– Staple political situation
–
Factors which motivate people to venture into business can be grouped into
two main categories namely: Internal factors and External factors

Internal Factors Motivating
Entrepreneurs into Business
These include:
– Strong desire to do something independently in
life
– Technical knowledge and manufacturing
experience
– Business experience in the same or related line

Factors External to the Entrepreneur
– Profit margin
– Unstable units available at a cheap place
– Heavy demand
– Encouragement from big business
– Financial assistance from non-government sources
– Attitude of the government to help new units
– Machinery on hire purchase
– Accommodation in industrial estates
– Financial assistance from institutional sources
Other studies have classified factors behind entrepreneurial growth
into three categories namely
– Entrepreneurial ambitions
– Compelling reasons
– Facilitating factors

Entrepreneurial Ambitions
Entrepreneurial Ambitions
• To make money
• To fulfill desire to self/parents
• To continue family business
• To secure self-employment/independent living
• To gain social prestige
• To make decent living
• Desire to do something creative
• To create employment
Compelling Reasons
• Unemployment
• Dissatisfaction with the job
• Making use of the funds
• Making use of technical/professional skills.
• Maintenance of a large family
• Emergency

Facilitating Factors
– Previous association
– Previous employment in same or other lines
– Success story of other entrepreneurs
– Property inheritance
– Advice or influence from others
Other factors that contribute to entrepreneurial
motivation are embedded in the theory of
achievement motivation such as desire to excel,
strive for success etc.

Topic 3
ENTREPRENEURSHIP AND SELF-
EMPLOYMENT

ENTREPRENEURSHIP AND SELF-
EMPLOYMENT
• People who decide to go into self-employment do so for the
following reasons:-
• Personal satisfaction as one is involved in doing what he enjoys
each day
• Freedom/independence as one is not under anybody’s control
• Control over working conditions as one cannot be retired, demoted,
transferred.
• One can also decide to relocate the business or change the nature
of the business; hence flexibility.
• Prestige as successful entrepreneur is highly regarded. He is seen as
contributing a lot to the society.
• Improved personal income as all the income earned is not shared
and it is used to better ones standards of living.
• Challenges one to achieve his goals.

Demerits of Self Employment
• Among the disadvantages of self-employment include the following:-
– Risks: An entrepreneur faces several risks such as:-
– Financial loss: In case the business fails
– Career risk: It may be impossible to get the formal job one left again
– Family and social risks: As one spends too much time in the business at the expense of the
family and friends. This may create a permanent emotional scar.
– Psychic risk: Business failure may cause psychological impact on the entrepreneur.
– Stress – This may be caused by loneliness, need to achieve and immersion in business. The
problem of stress can be solved in various ways such as:
• Networking for the purpose of sharing experiences with other business persons
• Getting away from the business by going for holidays or taking breaks etc.
• Delegating some responsibilities to others.
– Sacrifice of Guaranteed Income: Initially, a business may operate at a loss to an extent of the
owner not making ends meet.
– Increased Responsibility: An entrepreneur does everything in the business. He performs all
sorts of jobs.

Personal Barriers to self-Employment:
Many people refuse to venture into business due many
personal reasons such as:-
– Fear of Failure: If one thinks he will fail the chances are he will.
Hence, need to be confident and have understanding of how to
build, promote, manage and sell your services.
– Lack of Drive: Lazy people fail and fear to go into business
Lack of sustained motivation
Difficulty with ambiguity
Inability to dream or lack of vision
Impatience in solving problems
Lack of clear perception
Inadequate preparation including lack of knowledge, skills or
experience.

External Barriers to self Employment
Among the external factors that make people fail to venture into business
are:-
– Lack of capital in the society or nation
– Poor quality of labour
– Lack of access to raw materials
– Cultural block caused by fear to go beyond the cultural norms
– Practical values e.g. some societies discourage certain people from engaging in
certain activities as such activities may be considered childish.
Incentives for Self-Employment
– The Kenya Government and its development partners have designed and
– implemented a number of support programmes to entice people into self-
employment. Such assistance programmes
– include the Jua Kali Sheds, the Youth and the Women Funds, the Nguvu Kazi
exhibitions, the requirements of setting
– aside certain percentage of government contracts to small business and so
forth. Likewise many NGOs have specific
– programmes to assist the small businesses

KEY POINTS:
The process of initiating a business venture
follows a certain natural order as follows:
– Generating/identifying business opportunity
– Evaluating identified business opportunity
– Selecting viable business opportunity
– Developing a business plan
– Identifying/sourcing necessary resources
– Implementing selected business opportunity

Topic 4
ENTREPRENEURIAL AND BUSINESS
OPPORTUNITIES

Introduction
Many people would like to start their businesses
yet they lack know- how. A person may have
most of the right-entrepreneurial qualities and
attitudes towards self-employment, but unless
they are able to identify and evaluate a variable
business/project opportunity, they may never
succeed in venturing into self-employment. For
one to make a sound investment, he/she must be
clear about the activity to invest in. This calls for
one to have certain knowledge and skills
regarding the process of initiating and managing
a business venture

Generating/Identifying Business
Opportunity
• Good business opportunities can be identified
through the following ways; observation of
existing business sector, interviewing local
people, brainstorming, attending shows etc.
Other ways include; utilization of own skills or
talent, utilizing waste, utilizing ones assets and
so forth.

Evaluating/Screening Business
Opportunity
• Factors to consider when evaluating the viability
of an identified opportunity are; availability of
market and existence of competition, adequate
supply of inputs, capital requirements, the
business location and availability of the required
labour. Ease of exit, compatibility with the
promoter etc. Other considerations include;
consistence with government policies,
reasonableness of costs, business location,
cultural value, political conditions, status and
profitability

Selection of Viable Business
Opportunity
A good business opportunity must fulfill the following criteria; there
must be real demand for the product, it must provide durable,
timely and acceptable returns, it must be equal to or better from
the customer’s view point, it must meet the goals and aspirations of
the promoters and it must generate income which exceeds the cost.
Developing a Business Plan
This is a written document which explains business goals and the
strategies that will be used to achieve the set goals. It spells out the
future direction of the business and it helps a firm exploit the
identified opportunity. Hence; a blue print.

Identifying and Sourcing Start-Up
Business Resources
Before a business plan designed is implemented, one must
always consider the resources that are needed to
accomplish the goals of an organization. Necessary
resources may include the following:
– Labour; in terms of skills needed to perform given tasks. Skills
could be technical, managerial or entrepreneurship.
– Capital: Money needed to start and to run business. Capital can
be sourced from different institutions and individuals.
– Equipment: Tools of trade required to accomplish the goals of
an organization.
– Premises: Space required for operating or conducting a
business.
– Others include: Licenses, taxation laws, zoning law etc.

Implementing Selected Business
Opportunities
After resources have been identified and
acquired, the entrepreneur must employ them
through the implementation of the business
plans. At this juncture the entrepreneur must
examine carefully the problems of growing
enterprises. This involves implementing a
management style, and structure as well as a
determining the key variables for success.

Topic 5
MODES AND FORMS OF BUSINESS
VENTURES

Introduction
The term” business” has several meanings which
includes all human activities undertaken for the sake of
earning profit through the process of production of
goods or buying or selling of goods. Profit is earned by
satisfying human needs and desires with different
products. Thus, earning profit is the special mark of a
business. An activity which involves production to fulfill
personal needs only is not a business.
A business organization is one unit of control which
may be owned by one person or a group of persons
and the operations can be controlled by owners or by
the managers on behalf of owners.

Legal Forms Business Ownership
Business organizations can be formed by one person, a group of people or
even the government. The main legal forms of business ownership are as
follows:-
• Sole Proprietorship
• Partnership
• Limited Companies
• Co-operatives
• Franchises
• Joint Venture
• Parastatals etc
These forms of business organizations are distinguished from each other
by the following features:-
• The laws that govern their operations
• The size and composition of ownership
• The rights and the obligations of the owners
• The liability and responsibilities of the owner
• The advantages and disadvantages of operating each

Sole Proprietorship
This is a business organization which is owned and
operated by one person. The person who operates it is
called a Sole Trader or Sole Proprietor. Sole
proprietorship is the simplest and easiest business
organization. It is also the most widespread and
common form of business all over the world. There on
law that requires Sole Proprietorship to be registered.
However, in case one decided to operate it under a
different name from his/her own name, that name
must be registered according to the Business Names
Act (CAP 499). Sole Proprietors are common in retail
trade,

Features of Sole Proprietorship
Major characteristics of this form of business
organization are as follows:-
– The owner contributes all capital and other resources.
– The law does not distinguish the owner and the business.
– The gets all the business benefits
– The owner manages the business alone.
– No law requires the registration of the business unless
partners decide to use different name for the business
other than the partners.
– It is the simplest business to start and to manage.
– The owner shares all the debts and obligations alone.

Advantages of Sole Proprietorship
In view of the features described above, the operating a Sole
Proprietorship business will get the following advantages:-
– Few formal legal requirements in starting and as such it is easy to
start.
– Formation costs are lower compared to others.
– Decision-making and implementation is fast as there is no
consultation.
– The owner exercises direct personal control on the business all the
time.
– The owner has direct and personal contacts with the customers.
– The affairs of the business remain secret.
– The business is not taxed but the owner.
– The owner enjoys all the profits alone
– The trader is accountable to himself

Disadvantages of Sole Proprietorship
Despite the advantages one may enjoy, operating Sole Proprietorship business has
certain demerits as enumerated below:-
– It has unlimited liability and as such the owner is personally liable for all the business debts.
– The expansion of the business may be limited due to scarce capital of the owner.
– The owner works long hours.
– Sickness or absence of the owner the business will affect the business.
– The business may not enjoy the benefits of economic of scale.
– Death or bankruptcy of the owner may result to the collapse or poor performance of the
business
– The business may perform poorly due to lack of specialization; hence managerial or technical
problems.
– The owner shares all the losses alone.
– A Sole Proprietorship business may be dissolved in any of the following circumstances:-
– Decision by the owner to do so.
– Death or insanity or bankruptcy of the owner.
– Completion of intended purpose.
– Court order

Partnership
Partnership is a relationship that exists between two or more persons jointly carrying out business
with the Part objective of making a profit. Each of the persons in the partnership is called a Partner
while the business is referred to a Firm. There are two types of partnerships one can operate
namely General Partnership and Limited Partnership.
A General Partnership is one in which all the members of the firm have unlimited liability. On the
other hand, Limited Partnership is one in which the liabilities of some members is restricted to the
amount of capital the originally put in the business. In limited partnership, the partners with limited
liability do not participate in the management of the firm.
Partnerships could also be temporary or permanent. Temporary partnership is one which is formed
to carry on specific task for a specific time after which the business automatically dissolves. On the
other hand, a permanent Partnership in one which are formed to operate indefinitely.
Partners in a partnership may be classified according to the role they play in the firm or their
liabilities for the business debts or the age of the partners or the capital contribution.
– Classification According to Role Played: According to this, partners will either be Active or
Dormant/sleeping/passive/silent.
– Classification According to Liabilities: In view of this, partners are either general or limited partners.
– Classification According to Age: Partners may be either major or minor.
– Classification According to Capita Contribution: Partner may be either real or nominal/quasi.

Partnership Deed....
Terms of partnership-temporary or otherwise etc or it is
ambiguous, the provisions of the Partnership acts (CAP 29 –
General Partnership or CAP 30 for Limited Partnership) will
apply. The provisions of Partnership Act (CAP 29) are:-
– Equal contribution of capital.
– No salary for any partner and no interest on capital.
– No interest on drawings.
– Equal share of profits and losses
– Every partner has right to inspect books of account and
participate in decision making
– Interest on all loans given to partners
– On dissolution, outsiders are paid first
– No conflict of interest etc.

Features of Partnership
It is an association of at least two and a maximum of 20 for general
partnership or a maximum of 20 for professional partnership.
– It has no legal entity of its own separate from its owners
– Partners contribute capital required.
– Partners share profits.
– Partners share losses
– Generally they have unlimited liabilities
– May be formed orally or in writing or by implication
Features of Partnership
Few legal requirements in the formation; hence they are easy to start.
Ability to raise more capital, hence expansion is possible.
– Distribution of work among the partners.
– Contribution of different talents and expertise.
– Partners share losses and liabilities among themselves.
– Tax benefits since partners pay taxes individually.

Disadvantages of Partnership
– Liability of members is unlimited.
– Possibility of continued disagreement among
partners.
– Decision-making is slow due to consultation.
– Action of one partner binds all the others.
– Partnerships may have limited access to capital.
– Partnership may also have limited access to a variety
of management or technical skills.
– Hardworking partners may not be rewarded fairly.
– A mistake by one partner may result in losses which
are shared by all.

Dissolution of Partnership
– A partnership may be dissolved under any of the
following circumstances:-
– Through mutual agreement by all partners.
– Death, insanity or bankruptcy of a partner
– After completion of the task for which it was initiated.
– A court order.
– Involvement in unlawful business.
– Change of law.
– Retirement or admission of a new
– Continued disagreement among the partnership

Limited Companies
A Limited Company is an association of two or
more persons who come together to
undertake business activities in common with
a view to earning profit. Unlike the
partnerships the association of limited
companies is created through registration
according to the Companies Act (CAP 486

Formation:
• To form a limited company, the company promoters must
comply with the requirements of the Companies Act. The
Act requires that any company wishing to be registered
must prepare and present certain documents to the
Registrar’s of Companies. These documents are:-
• The Memorandum of Association
• The Articles of Association
• A statement of nominal capital
• List of Directors with their written statement and signed
consent to be Directors.
• A statutory declaration by Directors showing that they have
fully complied with the Companies Act.

Memorandum of Association
• This is a document that defines the
relationship between the company and
outsiders. It contains the following details:-
– Name clause
– Objects clause
– Situation clause
– Liability clause capital clause
– Declaration clause

Articles of Association
• A document that governs the internal operations of the company. It also contains rules and
regulations affecting the shareholders in relation to the company and in relation to the
shareholders themselves. Among the details contained in the document are:-
• Rights of each type of shareholders-voting rights.
• Methods of calling meetings
• Rules governing election
• Rules regarding preparing and auditing of accounts
• Powers, duties and rights of directors.
• Registration of Limited Company
• Once the Registrar is satisfied, he/she will issue the company with a certificate of incorporation.
Incorporation gives a company its own legal personality different from the entity of its
shareholders. According to law, the company is treated as an artificial person with all the rights and
responsibilities. Thus, incorporation gives the company:-
• Limited liabilities
• Perpetual succession/continuity
• Power to own and sell property
• Power to sue or to be sued
• Power to enter into or withdraw from a contract

Types of Limited Companies:
Limited companies can be classified into two namely:
Private limited company and Public limited company.
Private Limited Company: It has the following characteristics:
– Formed by between 2 to 50 shareholders.
– Does not advertise its shares to public, but sells them privately
– Shareholder are restricted to sell shares unless with consent
from other shareholders.
– Requires only two people to sign the statutory declaration
– Can start operating immediately it receives certificate of
incorporation

Advantages and Disadvantages of
Private Limited Company:
Advantages of Private Limited Company: advantages of a private limited
company include:-
– Has separate legal entity from its owners.
– Has limited liability
– Has a wide source of capital
– Has access to professional management
– Ease of starting trading as soon as it is incorporated
– Has a perpetual succession
– Directors can access loans
Disadvantages of Private Limited Company
– Must submit annual returns to the Registrar of Companies
– Cannot sell shares in public
– Director do not have direct control over the management
– Slow decision-making due to bureaucracy
– Expensive process of registration
– Double taxation

Public Limited Company
Has the following features:
– Formed by a minimum of 7 shareholder but no maximum
– Shares are free transferable from one person to another
– It can invite the public to buy shares but must issue a prospectus
– Must receive a trading certificate to start operating
– Must publish its financial reports
Advantages of Public Limited Company:
– A wide range of sources of capital
– Liability of shareholders is limited to capita contributed
– A wide choice of business opportunities
– Ease of share transferability
– It has a continuous life
– Management by professionals

Public Limited Company
Disadvantages of Public Limited Company
– Expensive process of registration
– Must comply strictly with numerous legal requirements
– Owners do not directly participate in the day to management; director do it
– Business affairs are not secret-they must be published
– Delays in decision making due to bureaucracy
– Double taxation
Dissolution of Public Limited Company- A limited public company can be
dissolved, liquidated or wound up due to the following reasons:-
– Due to insolvency
– Due to ultra-vires
– Amalgamation
– Court order
– Decision by shareholders

Differences Between Limited Public
and Limited Private Company
Public Limited Company Private Limited Company
1. Minimum shareholders are 7
2. Maximum number of shareholders is
any
3. Statutory Requirements:
 Meetings
 Reports
 Directors declaration
 List of directors
4. Shares-Freely transferable
5. Prospectus-Must issue it to float shares
6. Financial reports-Must be published
7. Operations-Must receive trading
certificate
8. Directors-a more than one to operate
9. Loans-Directors cannot get loans
1. Minimum shareholders are 2
2. Maximum number of shareholders is 50
3. Statutory requirements:
 Meetings-Not required
 Reports-Not required
 Directors declaration- Not required
 List of directors- Not required
4. Shares-Not freely transferable
5. Prospectus-Not done
6. Financial reports-Not published
7. Operations-Can start operating after
incorporation
8. Directors-operate with one and co.
secretary
9. Loans-Directors can get loan

Franchise:
A Franchise is a form of business which is created as a result of an agreement in which the owner of
a trademark, trade name, or copyright allows another to trade under the name and sell the
products or services of another. Thus, a franchise is a form of doing business in which one
person/business licenses another to carry out business using his/its name and products. The
business allowing/granting the right (franchise) is called franchiser or franchisor while the firm
taking the right is called franchisee; an example being Mt. Kenya Bottlers and Coca Cola. Franchising
arrangement may cover any of the following:-
– Product franchising which gives the right to distribute goods only.
– Manufacturing franchising which gives the right to produce and distribute the goods
produced.
– Business/format franchising in which the franchisor offers a wide range of services to the
franchisee including marketing, advertising, strategic planning, training etc.
The relationship between the franchisee and the franchisor is guided by the following tenets:
– Both must avoid acts and misunderstandings likely to cause conflict between them.
– Both must avoid actions against each other’s interest.
– There must be mutual understanding beneficial to their growth.
– Their agreement should not create ambiguity and their respective responsibilities must be
properly defined.
– Both must share costs as agreed.
– Each must treat the other as business partner.

Franchise:
Advantages of franchising
– Training and guidance
– Brand name appeal and recognition
– Proven track record
– Financial and marketing assistance
– Ease of networking
– Existence of a market.
– Economies of buying
– Standardized appearance and operation
Disadvantages of Franchising
– Franchising fee
– Strict control by the franchisor
– Unfulfilled promises by the franchisor
– Kills creativity and innovation
– Success or failure depends on franchisor

Costs of Franchising
– The basic franchise fee
– Insurance costs
– Opening inventory costs
– Renovation and lease improvement costs
– Pre-operation costs
– Payroll costs
– Utility costs
– Debt servicing costs
– Accounting/auditing costs
– Legal and any other professional charges etc.
Joint Venture: A Joint Venture is a business organization owned by more than one firm. Thus,
a joint venture occurs when two or more firms analyze the benefits of creating a relationship,
pool resources and create a new entity to undertake productive economic activity. The
businesses forming a joint venture share assets, profits, risks and venture’s ownership. A joint
venture can take various forms such as a state owned firm may form a joint venture with a
privately owned firm. A joint venture has several advantages as follows:
– Firms gain intimate knowledge of local conditions.
– Firms use resources owned by others
– Firms lower their overall risks
– Firms reduce initial capital outlay needed.
– Despite the above advantages, a joint venture has fragmented control.

Business Acquisition:
Many people venture into business by buying existing
business or through the transfer of ownership. This can
also happen when growing ventures are reorganized
under new focus of ownership with new investors.
Before acquiring a business, the following must be
taken into consideration:-
– The entrepreneur’s experience in the business
– The nature of the business
– The location
– Personal and business risks
– The cost of the enterprise vs. starting a new one

Mergers and takeovers:
1. Merger: This is a form of business organization which is formed in a situation in which two or
more businesses join together by mutual agreement; sometimes establishing a new distinct
business or sometimes retaining separate entities. Mergers can also be referred to as
amalgamation. Four types of mergers/integration can be formed as follows:-
2. Horizontal Merger: A situation where two businesses are engaged in the same stage of
production of the same goods eg a merger of two car manufacturers. Such a merger aims at
achieving greater market share, gaining economies of scale or synergy, or gaining an opportunity
to enter different segment of the market
3. Vertical Merger: This occurs between two or more businesses engaged in different stages of
production of the same product e.g. a firm producing milk and cheese may take over a dairy farm
to safeguard its supply of raw materials. The aim of vertical merger include: gaining control of
sources of supplies, or getting a guaranteed access to the market.
4. Lateral Merger: This occurs between two businesses producing related goods that do not
compete directly with each other e.g. a merger between a supermarket and a hardware shop.
The aim of this merger is to cut costs.
5. Conglomerate/Diversified Merger: This occurs between two or more businesses with different
products e.g.; acquisition of a cosmetic manufacturer by a tobacco manufacturer. Such a merger
occurs to diversify products, or as a defence mechanisms in anticipation of a decline of a market.
Thus the new business is acquired to spread the risks.

Legal Issues Related to Emerging
Ventures
Though entrepreneurs cannot be expected to have legal expertise or background,
they however, should sufficiently be knowledgeable about certain legal concepts
that have implications for their business ventures. Among these concepts are
patents, copyrights, trademarks and bankruptcy.
Patent:
A patent is an intellectual property right granted to an investor giving him/her the
exclusive right to make, use or sell an invention for a limited time period e.g. 20
years. A patent provides the owner with exclusive rights to hold, transfer and
license the production and sale of products or process. The objective of a patent is
to provide the holder with a temporary monopoly on his/her innovation. This is
done to encourage the creation and disclosure of new ideas and innovation in the
market place. A patent is the result of a unique discovery and patent holders are
provided protection against infringement by others. A number of items can qualify
for patent protection such as processes, machines, products, plants, compositions
of elements and improvements on already existing items. The process of obtaining
a patent is long and tedious (familiarize with Kenya law on patents).

Ventures
• Copyright: A copyright is a legal protection that provides exclusive
rights to creative individuals for protection of their literary or
artistic productions. It is not possible to copyright an idea but the
particular mode for expressing the idea often can be copyrighted.
The expression can take different forms such as books, periodicals,
dramatic or musical composition, art, motion picture, lectures,
sound recording and computer programmes.
• Copyrights are enjoyed for a specific life span. For one to obtain a
copyright, the materials must be in a tangible form so that it can be
communicated or reproduced. It must also be the author’s own
work and hence, the product of his/her skills or judgment. Thus the
principles, concepts, processes, systems or discoveries are not valid
for copyright protection until they are put in tangible form-written
or recorded (familiarize with Kenyan copyright laws).

Ventures
Trademarks:
A trademark is a distinctive name, mark, symbol, or motto identified with a company’s product and
registered at the Patent and Trademark Office. Trademarks help in distinguishing one firm from the
others. Trademarks specifically distinguish goods of one firm from the other while services are
distinguished by Service marks. On the other hand, Certification Marks (ISO or KEBS) denote the
quality, materials or other aspects of goods and services. Trademarks may be lost under any of the
following circumstances:-
– Cancellation due to proceedings filed by a third party.
– Cleaning-out-procedure-in case a similar trade mark is in use/exists
– Abandonment of a trade mark for two consecutive years
– Generic meaning-when a trademark has a very general meaning
Bankruptcy:
Bankruptcy is a situation in which a business fails to meet its financial obligations. The failure may
be caused by many reasons such as:-
– Stiff competition from new entrants into the market.
– Failure of a firm to provide goods with demand
– Spending more money in research and development
– Overstocking
– Laxity on financial management
– Large discounts to customers etc

Introduction
The business opportunity implementation stage
comprises of all spade work required to set up
the business. This covers procurement of the
necessary resources required to initiate and
operate the business successfully.

resources required to start a business.
The business opportunity implementation stage comprises of all spade
work required to set up the business. This covers procurement of
the necessary resources required to initiate and operate the
business successfully. Among the resources a business requires are
skills, capital, machinery, premises and availability of market.
1. Skills: Is the abilities to perform a certain task or job. Skills could be
categorized into entrepreneurial skills, technical skills and
managerial skills. Entrepreneurial skills are the-know how or the
ability to tactfully respond positively to a given situation and enable
one to start and operate a business. It includes being able to scan
the environment and perceive opportunities, identifying the
necessary resources to take advantage of those opportunities and
taking action to utilize the opportunity.

resources required to start a business.
On the other hand, technical skills are the skills that give expertise in a technical trade
such as electrical engineering or accounting or printing. Managerial skills are the
skills that enable one to run the business an example being financial management,
human resource management, directing business operations and marketing
operations. One can obtain skills by interacting with entrepreneurs, or from
relatives, through training, working as volunteer and so forth.
2. Capital: This refers to the finances an entrepreneur requires to start a business. It
includes Pre-operational expenses, long-term capital and working capital. Capital
can be acquired from your savings, borrowing from relative, friends or banks etc.
New and growing businesses require financing for a variety of need which may be a
function of the type of business, the rate of the business growth or the state of the
business development. In view of this, low growth firms require smaller amounts
of funding compared to higher growth firms. Likewise service firms require less
funding than manufacturing businesses. Firms in their rapid growth stage require
more funds than the newly launched firms. Thus, businesses at different stages of
development require financing for different reasons as follows:-

resources required to start a business
a) Pre-Start Up Capital: Capital required long before the business is
launched to meet the following expenses:-
• Development of proto-types, designs etc
• Market research and development
• Development of strategic plan/business plan
• Purchase of initial site etc
b) Start-up Expenses: These are incurred shortly before, during and
immediately after the actual launching of the business. Such funds
are used for meeting the following costs:-
• Purchase of facilities like equipment
• Purchase of inventory
• Use during launching event
• Meeting marketing expenses
• Payment of pre-paid expenses like deposits for water, insurance etc

c) Post Start-up Capital: This may be needed once the business is launched and is
growing. The finances are required to cater for operating expenses such as
advertising, additional stock, and salaries. At this stage the business also requires
finances to develop capable teams in all areas, address delegation; leadership and
control mechanisms, institute advanced production management techniques.
d) Stabilization Stage: This stage comes as a result of marketing and efforts of the
entrepreneur. At this stage, a number of developments occur including increased
competition, consumer indifference to the firm’s goods or because of market
saturation with a number of similar or look-alike goods. As sales begin to stabilize
the entrepreneur must start thinking about the direction the business should take
over the next few years.
The stage proceeds the period during which the business is either swinging towards
decline and failure. At this stage there is need for the entrepreneur’s
innovativeness for the future success. Only those firms that become innovative will
survive while the others will die. Note that all the stages of a business cycle are
important and each requires a different set of strategies. However, much attention
must be focused on growth stage since it is the stage that is often ignored. This is
because the stage causes some hypnotic effects to the entrepreneur making
him/her forget to think of future.

3. Machinery, Equipment and Tools: These are the implements that an entrepreneur
requires for the implementation of the business opportunities selected.
4. Premises: Refers to any type of space for operating or conducting a business
including open air space. These can be acquired by building or buying, renting or
using family premises. However, the location and the size of the premises, design
and layout are critical to the success of the business.
5. Market: A market refers to a group of potential buyers of a firm’s products. A
market can be people or institutions/organizations. The potential buyers may be in
the business locality (local market), spread throughout the country (national
market) or outside the country (international market).
Sources of business finance.
Business requires financing for short, medium and long term use. Thus, business
financing may be for meeting pre-operational costs or for launching the business
or to meet working expenses or to meet development costs such as buying fixed
assets. Business financing may be obtained from two main sources namely:-
• Equity financing
• Debt financing

Equity Financing: This is a source of financing business using the owners’ finances.
Thus, equity financing represents the business owners’ interest in the business and
it gives him/her some residual claim on the cash flows. It has infinite life in the
business. However, equity financing does not have any priority in liquidity. No
interest is paid nor is security required when investing the money into the
business. Equity financing has the following characteristics:-
• It is a permanent source of finance which provides flexibility in the use of the
funds
• The business has no obligation to pay dividend to the shareholder unless there is a
sufficient profit.
• There is no charges on any asset required while raising equity capital
• There is no obligation to repay equity capital to the shareholders unless at
business liquidation
• Equity acts as a margin and provides the business an opportunity to repay debts
• Equity contributors get business ownership and control over the business.

Equity financing must be used with care because of the following reasons:
• Excess equity may lead to over capitalization
• High level of equity in capital structure is likely to create inefficiency in
enterprise as there may be sufficient pressure to service or repay the
equity funds.
Equity financing may be sourced from various sources such as own money,
family, friends, relatives, venture capital or going public by issuing Initial
Public offerings (IPOs).
Debt Financing: This is a source of business financing using money which is
borrowed and which has an element of risk associated with it. Debt
financing has a contractual claim on the cash flows of an enterprise. Thus,
debt financing carries with it commitment to repay the principal sum and
the interest according to the agreed schedule. Failure to pay the debt may
lead to the business insolvency.

Debt financing has the following features:-
• It is cheaper source of financing than using retained
earnings or new equity as it creates tax-deductable
expense
• It has a fixed life span
• It has priority in operating profits as well as liquidity
• It has no claim on the business ownership or control
Common sources of debt financing include family,
relatives, friends, commercial banks, other financial
institutions, SACCOs, Government and its agencies,
NGOs, etc.

Other Sources of Business Financing
• Trade Credit: A source of financing in which inventory is obtained by the buyer on
credit. It is unsecured loan which is interest free.
• Customer Credit: A source of business capital provided by customers who pay a
certain percentage of the total cost of an item to the seller as a down payment at
the time the order is made.
• Networking with other Entrepreneurs: A source of business financing in which
entrepreneurs cooperate with other and enter into agreement to share certain
costs through part production.
• Internal Cash Management: A source of obtaining business financing by
entrepreneurs practizing sound internal business management decision to
conserve cash. This may involve any of the following techniques:-
• Leasing an equipment rather than buying
• Encouraging credit customers to pay on time
• Developing good credit policy such as encouraging customers to buy on cash basis
• Establishing sound credit terms
• Venture Capital: This is a valuable source of financing in which professional people
with

capital provide a full range of financial services for new or growing
ventures. The services they provide include:-
• Capital for start-ups and expansion
• Market research
• Management services etc.
• Venture capital is a form of equity financing. Other sources of
business financing include Account receivable (sales) or Account
receivable-factoring.
Procedures for Applying for a Business Loan: Different financial
institutions have established procedures which have to be complied
with and adhered to by loan applicants. It is therefore important for
borrowers to understand the factors that are considered when
appraising a loan applicant. When appraising loan applications,
banks consider the following criteria:

a) The Kind of the Loan: Whether short-term or long-term
b) The Purpose of the Loan: To ensure applicant will not invest the money in an illegal
business
c) Credit Worthiness and Integrity of the Borrower: Based on the borrower’s track
record with the Bank
d) Capability: The loan applicant’s ability to run the business with professional
expertise and effectiveness
e) Repayment Period: To test whether the time requested to repay the loan is realistic
f) Security: This refers to the collateral/guarantee the loan applicant provides to the
bank just in case of loan defaulting
g) Guarantors: This refers to the extra security provided on top of the immovable
property and tangible assets
h) Capital: aimed at determining the percentage of the total investment is contributed
by the business owner compared to the amount of loan
i) Feasibility of the Business: Done to test the viability of the business for which
money is borrowed. The lender appraises borrowers on the basis of the cost
involved and the cash flow, financial and statistical projections.

Criteria for Evaluating Sources of
Finance
When an entrepreneur decides to borrow money from banks or other lending institutions certain
conditions and terms may be put to him/her to protect the financiers against unnecessary risk and
poor management practices by borrowers.
Cost: Which source exposes your business to the lowest degree of risks? The cost of your capital source
is measured by its impact on your earnings and not the increased expenses incurred by the
business. Consider a company that is deciding between a Shs 20,000 loans at 10% interest or selling
25% of the shares in the business in order to raise Shs 20,000. The business expects a pay interest
on the loan of Shs 200 per year which would reduce its net profit by Shs 2,000 before taxes.
If the business expects to earn Shs 30,000, interest expense would reduce the profit to Shs 28,000. In
the equity alternative, the net income would be applicable to the present owner’s since Shs 7,500
(30,000 x 25%) would represent the participation of the new shareholders. Therefore the income of
the business under the equity alternative would be higher, but the participation of the present
owners would be less. You should be able to know that each capital source has its own cost.
Internal sources such as the sale or liquidation of assets could lead to loss of revenue following
inventory disposal or added operation costs if machinery were sold to generate costs. If you use
trade credit, discount is forfeited. In reaching a decision, it is important that you consider all
relevant costs for each source

Criteria for Evaluating Sources of
Finance
Risk: One should take general risks when raising capital. Use of trade credit could lead to supplier
dissatisfaction and possible damage to your credit worthiness. Because borrowed money must be
repaid with interest, debt capital imposes obligations upon the cash flow of your business which
must be paid to avoid default. A default could cause you a number of actions such as forfeiture of
collateral or forced bankruptcy. The only money source that frees your business from risk is equity
capital because the equity investor is the risk taker but not the business.
Flexibility: If you rely upon asset management to meet your capital needs then you deny your business
credit extensions or inventory purchases which leads to lost sales. Use of trade credit as a major
capital source makes your business to depend on a few suppliers which denies you the chance to
buy from other suppliers who charge low prices. Loans carry conditions that prevent your business
from securing additional debts because the assets are tied as security.
Control: The use of internal financing and trade credit is unlikely to have any impact upon the control of
the business exercised by you. If you are an equity investor you are entitled to some degree of
control in the company operations. Shares issued to your partners usually carry voting rights in
proportion to the number of shares purchased. Lenders do not ordinarily participate in the affairs
of the business but are legally entitled to a vote in corporate matters as are common shareholders.
However, major loans from banks insurance companies or others may require that the lender’s
interest in keeping abreast of corporate affairs could affect your control of the business.
Availability: Your business may be restricted in its abilities to raise capital due to non availability of
preferred resources. Regardless of the source considered most feasible, your business only has
access to whatever is available.

Introduction
Modes of Venturing into Business
After selecting a viable business opportunity to implement, the next step is to decide on the mode
through one will venture into business. A person or group of persons may venture into business through
any of the following three ways:-
• Taking over family business
• Buying out an existing firm
• Starting a new firm
a) Taking Over Family Business: A mode of venturing into by inheriting a business belonging to his/her
family. The mode saves one from the hassles of starting a new business from scratch. Among the
advantages of this mode of starting business include:-
• Existence of stock
• Existence of customers
• Existence of good reputation
• Existence of track record
• Availability of premises
• Licenses and business permits exist
• Suppliers are known

Introduction
On the other hand, the mode has the following demerits:-
• Inheritance of a business one may not be interested in
• Existence of obsolete stock
• Possibility of huge debts
• Problem of poor image and reputation
• Business may be poorly located
b) Buying Existing Business: This is a mode of venturing into business in which an
entrepreneur decides to buy an existing firm from somebody else. Buying an existing
business has a number of merits such as:-
• A measurable track record of performance
• Established business accounts and customers
• Established relationships with suppliers and financiers
• Established location and facilities
• Established operating and management procedures
• Seller can assist in running the business
• Opportunity to generate income immediately

Introduction
Despite the above merits, an existing business may pose certain challenges, among them:-
• Possibility of huge debts/financial crisis
• Poor location
• Unnecessary assets
• Obsolete stock
• Poor reputation etc
c) Starting a New Business: a mode of venturing into business in which the entrepreneur starts a
business from scratch. The merits of starting a new business include:-
• Starts with new customers
• Starts with new and fashionable stock
• Starts with the right amount of assets
• One chooses the best location
• One starts with fresh image
• One starts with zero debts
Demerits of starting a new business from scratch include:-
• Must undergo a tedious process
• It costs a lot of money to start a new business
• One starts with no customers
• One has to look for a premises etc.

CHALLENGES OF STARTING A
BUSINESS.
For new businesses to succeed, the promoter must develop
managerial decision-making skills such as marketing, organizing,
planning, and financial, and human resources management and so
forth. While implementing a business opportunity, managers will face
a number of challenges namely financial problems, administrative
problems, marketing problems and production problems.
1. Financial Problems: New businesses may face major financial
problems relating to:
• Lack of access to start-up capital
• Lack of or shortage of working capital
• Lack of access to long-term capital
• Recovery of heavy debts
• Heavy taxation regimes

BUSINESS.
2. Administrative Problems: Potential administrative problems new businesses face include:
• Lack of proper planning
• Poor business opportunity implementation
• Shortage of quality workforce
• Under utilization of capital available
• Low level of technical skills
• Lack of good business strategies
• Poor infrastructure –power, water, communication, roads etc
• Poor location
• Lack of research and development
• Bureaucratic red tape and regulations
3. Marketing Problems: New businesses are also likely to face the following market challenges:
• Lack of knowledge about markets
• Stiff competition from other businesses
• Poor or lack of after-sales services
• Poor product distribution
• Inadequate or unsuitable advertising and sales promotion
• Lack or poor bargaining power or skills
• Unfamiliarity with export markets and procedures
• Poor or lack of product branding
• Poorly priced and low quality products

BUSINESS.
4. Product Problems: Potential problems new businesses are
likely to face in production areas are:
• Shortage of necessary raw materials
• Under-utilization of capacity
• Poor quality control methods
• Inadequate utility services
• Use of obsolete technology
• Low scale of production compared to economy of scale
• Lack of standardization
On the other hand, many new and old businesses fail due
several reasons. Some of the reasons that impact on the
success of businesses include the following among others:

BUSINESS.
• Lack of adequate planning
• Lack of adequate start-up, working and expansion capital
• Lack of quality labour or manpower
• Poor capacity utilization
• Inadequate experience in the nature of business
• Low level of technical, managerial and entrepreneurial skills
• Poor or lack of necessary infrastructure
• Bureaucratic red tape and regulations
• Lack of knowledge and insight about available markets
• Lack of and poor strategies to mitigate competition
• Lack of marketing skills-the 4 Ps of marketing
• Poor business location
• Lack of raw and other materials
• Under-utilization of business capacity
• Utilization of out dated technology
• High operations costs
• Provision of quality products etc

PROBLEMS AND SETBACKS OF
STARTING A BUSINESS IN KENYA
• Unfavorable legal and regulatory framework:- The absence of policies
governing the growth of small enterprises could hamper them. This could
mean that small firms are not protected in the harsh markets and the law
does not comprehend their activities thus becomes very hard for an
entrepreneur to set his foot in the economy. The high cost of compliance
to regulations may discourage potential entrepreneurs from formerly
setting up their business.
• Undeveloped infrastructure:- This could be a draw back in the sense that
the entrepreneur may not have access to facilities that will enable him
pursue the objectives of his business on a larger scale. Most institutions
are cautious to lend money to small businesses because of the risks
involved.
• Poor business development services:- Lack of training may be a set-back
in the industry for the small businesses. Most non government
organizations that come up with the plans lack support from the
government and mostly operate on goodwill from potential investors.

PROBLEMS AND SETBACKS OF
STARTING A BUSINESS IN KENYA
• The entrepreneurs lacking in skills need to be in patent with
knowledge that will set with other accomplished businesses giving
them a chance to provide healthy competition.
• Lack of skills and competence:- Most entrepreneurs lack the
relevant skills to engage in meaningful business enterprises. Those
that manage get the support of strategic investors and managers
who mobilize resources on their behalf. On his own, a potential
entrepreneur will find he is limited if he has not undergone some
basic entrepreneurial training.
• Poor entrepreneurial culture:- It has become a trend for most
school leavers to look for employment. While it serves the most
convenient route to earn a living most young people are shied away
from engaging in entrepreneurial initiative because of high risks
involved in setting a business. etc

Introduction
• Starting and organizing a business venture is a
demanding task. Whether one is buying an
existing business or starting a new enterprise,
there are always many tasks to do and issues
to deal with. One way is simply to deal with
each question or problem a as it arises. The
other strategy, long favored by business
advisers and commentators is to carefully plan
the business venture at the start. Hence the
needs for a business plan.

WHAT IS BUSINESS PLANNING
A business plan is a written document that describes the goals of a
business and the steps that will need to be taken to achieve the set
goals and objectives. Thus a business plan:-
• Spells out in details the business owner’s intentions for the future
of the firm;
• It is a forecast or forward protection of a business idea;
• It explains the goals of the firm;
• It explains how the firm will operate;
• It explains the likely outcomes of the business venture.
A business plan is a blueprint a business promoters prepares for a new
(or existing/expanding) business that gives the reader an overview of
what he/she intends the business will look like, how it will operate and
what activities must take place in order to reach the final goal. Hence,
it is an organization’s tool that helps structure, communicate and sell a
business promoter’s idea and convert it into reality.

a) Advantages of Planning: A well prepared business plan has the following
benefits:-
• Provides a clear statement of direction and purpose for a firm.
• It allows the management and employees of the firm to work towards a
set of clearly defined goals, enhancing the likelihood of the goals being
achieved.
• Provides a suitable yardstick for periodically evaluating the performance of
the firm rather than just dealing with day to day problems.
• Helps business promoters adequately research the business idea.
b) Disadvantages of Planning: Among the demerits of a business plan are:-
• It reduces flexibility and room to move.
• It may not have sufficient details in explaining the promoter’s intentions.
• It may lack detailed market survey leading to the use of invalidated data.

Elements of a Business Plan: Most business plans will include a common mix of items
since there are universal issues that all business enterprises must deal with. The main
broad elements or parts of a business plan are:-
• Title page
• Table of contents
• An executive summary
• Background
• Marketing plan
• Organization plan
• Operational/production plan
• Financial plan
Title page: This is the top page of a business plan that shows the following details:
• Name of the document
• Name of the business/Owners or proprietors of the business
• Contact details – address, telephone, fax, email etc
• The date or duration of the plan

Table of contents: Contains the list of the items in business plan. It is always prepared
• after the other main parts have been finalized. Typically, an executive summary
discusses the following issues:
• Executive Summary
• An executive summary summarizes the key issue highlighted in the other main
parts of the business plan. Issues discussed in the executive summary include:-
• The business description: In this section, the following details are presented:-
• Name of the proposed or existing business
• When the business began or intended date to start
• The main business activity and uniqueness of its products
• The number of employees employed or to be employed
• Background of the owners or promoters: The section explains:-
• The names of the owner or promoters
• The experience and skills of the promoters
• The reason for starting the business
• The business management team including their background

The business opportunity: Information presented here includes:
• The business opportunity and the market niche
• Reasons for taking this opportunity at this time
• Plans to exploit the opportunity
• Plans for growth and expansion beyond the product provided at entry (future plans to diversify and
expand)
Reaching the target market: This section presents details to prove that there is likely to be
• sufficient demand for the organization’s goods or services. The section explains:-
• The business’s primary customer or clients
• The plan(s) to reach the primary customers or clients
The firm’s competitive advantages: The section explains reasons/factors that make a firm
• different from its competitors. Information contained in the section must show:-
• The number of competitors offering similar goods or services
• The strength and weaknesses of the firm’s competitors
• The competitive advantages of the firm over its competitors

Financial plan: Information presented in this section tells:-
• The amount of money required
• The sources of the money required
• The ways the money will be used
• The plans to finance the business (debt or equity)
• The proportion of the promoters’ funds compared to money borrowed (if any)
• The plan to repay the loan
• The first year’s trading: firm’s turnover, break-even levels of sales, gross profit margin, return on
equity and return on investment
• Overall assessment of the feasibility of the business
Critical risk and potential problems: The section briefly explains the main risks and
• problems the proposed or existing firm may face at start or during operation. Thus, the information
in the section should show:-
• Any anticipated risks and problems
• Likelihood of the risks and problems happening
• Contingencies plans to minimize their impacts
• Possible impact of the risks and problems
• Contingency plans to minimize their impacts
• Severity of the impact

• Overall schedule or time plan: Information
contained in this section shows the reader
that
• the promoters are organized and that their
plans are time bound. Hence, the section
presents details on:-
• Dates when the business will start operating
• Dates when different aspects of the business
will be undertaken and finalized

THE BUSINESS DESCRIPTION
• This part of a business plan provides the reader with some critical background information that
would enable him/her know the following about the proposed business:-
• The background
• The sponsors
• The business
• The industry
• The products
• The entry and growth strategy
• History: The section gives a brief outline of the firm’s past history (for an existing business)
• before discussing the changes that are planned for the future. The section explains how long the
firm has been in existence, the product it has been offering and its past achievement problems.
• The background: In this section the business promoters set down the issues driving the
business. These include:-
• The mission statement: Which explains the philosophy and overall vision the promoters have for
the business and why they want to start and run such an enterprise. Thus, a mission statement
describes the nature of the business a firm plans to be in.
• The business goals: Describe both the long term and short term objectives of the proposed
business. The objectives must be specific, measurable and achievable targets.

The sponsors: Contains information that should clarify the following details:
• Names, ages and address of promoters
• Current and past occupation, qualifications (academic, professional and technical)
• Relevant experience in business
• Proposed plans to fill any skill gaps
• Proposed ownership structure – contribution of each person(s) (amount and percentage)
The business: The section presents details that will help readers to understand the nature of business
the promoter(s) plans to venture into or there in. Hence, the following information is presented:
• The name of proposed business
• The proposed location – urban/rural, trading centre, plot number, land registration etc
• The form of business activities – main goods/services
• The principal customer of the business
• Relationship of the chosen location to the market area – infrastructure existing, proximity to
customers, proximity to suppliers etc
• Specific needs the business will satisfy (unsatisfied local demand, export orientation, import
substitutions)
• Contribution of the business to the community (jobs, use of local resources, provision of
goods/services, promotion of local technology)

a) The product (goods or services): The section is used to explain to the readers the products (goods
and services) the proposed business will provide and how this will be done. The section also explains
the key features that distinguish the firm’s products from those of its competitors. This section must
clarify the following:
• The product (goods/services) the business plans to provide
• The unique features of the products (size, color, shape, texture, quality, packaging etc)
• The product trade secrets or any other propriety features required for the products
• The product design, processes or procedure
• The costs to design and develop the products
• The technology required
• The plans to cope with changes in technology
The industry: The information presented in this section aims at giving an insight on the industry in
which the proposed business will operate. This will help the promoters think clearly about the firm’s
potential competitors and the place the proposed business will take within the identified
industry/sector. It will also help the promoters determine the size, characteristics, the trends and the
prospects of the industry. Details presented in this section should help readers to understand the
following:

• The industry (sector of economy) the proposed business belongs (“Matatus” business in the transport industry)
• The size of the industry (total number of firms)
• The size of the firms in the industry (small, medium, large)
• The degree of competition
• The kind of technology used in the industry (labor intensive or capital intensive)
• The level of technology applied in the industry (modern, obsolete, sophisticated or simple)
• The average number of employees per business
• The basic capital needed to enter into the industry
• The general level of sales or profitability in the industry
• The seasonal factors experienced in the industry
• The industrial trends and sales prospects
• The prospects of technology development in the industry
• The competitive trends in the industry (innovation levels)
The entry and growth strategy: The section explains the promoters’ plan for entering the chosen industry or sector of
the economy. The following must be reflected:
• The plan to penetrate and gain an acceptance in the industry (the firm’s competitive advantages, weaknesses
among competitors pricing, distribution, advertising, promotional methods etc)
• The opportunities existing for the growth of the business (population increase, positive political changes etc)
• The plans for growth and expansion beyond the entry products.

MARKETING PLAN
The marketing plan provides the rationale for the existence of the business. It gives the promoter the
opportunity to show what market research has been undertaken, the likely level of demand for the
firm’s products, the exact products that will be sold by the firm and the intended customer base. To
prepare the marketing plan, one needs to:
• Conduct a thorough market strategy
• Conduct an in-depth analysis of the target market
Specifically, the marketing plan section is used to provide details regarding the following issues:
The Customer: In this section, the following information is presented:
• The potential customers (classify customers into homogenous groups)
• The characteristics of each group of customers (age, income, sex education, profession/occupation,
etc)
• The features the customers will be looking for in a product (performance, economy, convenience,
comfort, safety, durability)
• The time the customers will buy the products (time of day, week, month etc)
• The customers buying patterns of characteristics (quantity bought at a given time, frequency of
purchase, mode of payment)
• The size of the market for the products (number of people needing the product)
• The number of units of each product the firm expects to sell each month
• The estimated total sales in units per month

MARKETING PLAN
The Competition: The section objectively analysis the proposed business compared to its competitors to get an idea of
the expected competition. Information presented describes:
• The firm’s potential and or actual competitors
• The number and the size of firm’s competitors (small, medium, large in terms of assets, sales volumes, number of
employees etc)
• The effect of the competitor’s location to the proposed business (advantages and disadvantages of the firm’s
location vs. competitors’)
• The size of the firm compared to the competitors
• The advantages of the firm’s size
The Firm’s Product: The section presents details of the main products to be offered by the proposed business and
comparing them with those of its competitors. The details contained in the section clarify the following:
• The features of the firm’s products compared to those of the competitors in terms of the design features, the
nature of processes or procedures, performance, quality, competitors, after sales services etc.
• The competitive advantages of the firm’s products over those of its competitors.
The overall strength and weakness of the competitors: The section is used to evaluate the overall strength and
weaknesses of the firm’s competitors. This is achieved by presenting information on the following:
• The overall strengths and weaknesses of the competitors (benefits to customers’ credit, technology, location,
management, distribution channels, reputation, credibility)
• The area it will be easy or difficult to compete with the competitors

MARKETING PLAN
The pricing strategy: Describes the strategy and the methods the proposed business will set the price(s)
for its products including the factors it will consider in doing so. In view of this, the following are
discussed:
• Details on how product prices will be calculated
• The selling price for each of the firm’s products
• The factors that will be considered in setting the prices (government price control, competitor’s
prices, firm’s costs etc)
• Whether the selling price will be fixed or variable (justify)
• The credit terms suitable for the firm’s products
• The criteria that will be used to determine the customers to get credit
• The firm’s discounting policy
• The changes for after sales service (if any)
• The firm’s warranty policy on the products (justify)
The sales tactics: The section presents details relating to the methods the sales force will use, the
geographical area that will be covered etc. Information to be presented in this section include:-
• The methods the firm will use to sell its products (direct selling or indirect selling)
• The methods of recruiting, retaining and remuneration of sales force
• The method of selecting and motivating distributors or agents (if used)
• The geographical area the firm’s agents or sales force will cover initially and later

MARKETING PLAN
Advertising and promotion strategy: Explains the various methods and strategies the firm will use to promote and
market its products. The section therefore includes the following:
• The advertising media the firm will use (newspapers, specialist magazines etc)
• The image to be projected about the firm’s products
• The frequency and the cost of each advertisement
• The means of measuring the effectiveness of the advertisements
• The budget allocated for advertising costs
• The promotional campaigns the firm will undertake to introduce its products (free samples etc)
• The promotional methods the firm will employ on regular basis (trade shows, sponsorships, competitions etc)
• The cost of each method of promotion per event
• The means of measuring the effectiveness of the promotional campaigns
The distribution strategy: The section explains the firm’s plan on how it will physically deliver its products so that
customers can access them. The following should be explained:
• The channels of distributing the products to the customers (sales representatives, wholesalers, franchises etc)
• The mode of transport the firm will use
• The cost of transport used per month
• The specific distribution problems anticipated
• The mechanisms to be used to solve the anticipated distribution problems
Evaluation of marketing: The section describes how the effectiveness of the entire marketing program will be
assessed. The performance indicators to measure the success and the frequency of doing it must be fully explained.

THE ORGANIZATIONAL PLAN
The part of the business plan that describes policies for staff development and human resource
management in order to achieve the efficient production of goods and services. Thus, the part presents
in details the job description, employee evaluations, training plans and compensation plans for the
firm’s staff. The section will also indicate the support staff and services the business requires.
The proposed organization: The section describes how the firm will be managed.
• Details presented in the section include:
• The role of the promoter in the firm’s management
• The duties and the responsibilities of the promoter in the firm’s management
• The salary of the promoters per month
• The other promoter(s) who will be involved in the management team (name, age, education, job
title and management role)
• The organizational structure of the firm (organizational chart)
The key management personnel: Describes clearly the duties and the responsibilities of
• the key members of the proposed management team. Hence, the following details will be
required:
• The names, duties and responsibilities of the proposed management team
• The salaries commensurate with the duties and the duties of the management team
• The incentives to be given to the members of the management team

THE ORGANIZATIONAL PLAN
• Other personnel: Identifies the other personnel the firm requires other than the
• management team. Information to be presented in this section include:
• The total number of employees the firm will require
• The job titles and job descriptions of the employees
• The kind of skills each employee should possess
• The source of obtaining qualified employees
• The methods the firm will use to evaluate its employees’ performance
• The firm’s training plans for its different employees
• The remuneration and other benefits for the different category of employees
• The incentives the firm will provide to its employees
• The supporting services: The section indicates the individuals or organizations that may
• be involved in providing support services to the firm. The following information is presented in the
section:
• The names and address of the firm’s banker(s)
• The name of the firm’s accountant or auditors
• The name and address of the firm’s lawyers
• The name and address of the firm’s management or business advisors
• The name and address of postal services provider etc

OPERATIONAL (PRODUCTION) PLAN
• The operational plan section describes the kind of facilities and overheads a firm will require or incur to
manufacture the proposed products or to render its services. For manufacturing firms, the manufacturing process
must be explained while firms providing services, a description of the key features involved in offering the services
must be described. Other issues that need to be explained in this part include any regulations, compliances and
an approval that may affect the firm’s operations. The broad issues explained in this section include:
• Product design and development
• Production strategy
• Production process
• Government regulations
Product design and development: The section describes the proposed product design and development of the firm’s
products. Specifically the following details are provided:
• The design of the proposed products
• The plan to develop the firm’s proposed products
• The costs to be incurred in designing and developing the products
• The technology to be used to manufacture the product(s)
• The level of the technology that the firm will use
• The suitability of the choice of the technology available
• The appropriateness of the technology chosen (simplicity in use, cost effectiveness, flexibility in adoption,
efficiency, availability locally etc)
• The immediate plans to cope with changes in technology likely to affect the proposed business
• The future plans to cope with technological development likely to affect the business

Production facilities and capacity: The section describes the machinery and the equipment that the proposed business
will required for the production of its products. Information that should be included in the section must clarify the
following:
• The number and the cost (purchase and installation) of the machinery/equipment required
• The machinery and the equipment that will be hired or leased and their cost
• The persons or institutions that will maintain and repair the machinery and the equipment
• The locally available spare parts for major items and their suppliers
• The importation arrangements for spare parts not locally available
• The status of the premises ownership (own or leased)
• The terms and the cost of the lease (if applicable)
• The location of the different machinery and equipment within the premises (ground plan)
• The allowance for future expansion of the premise space
• The office equipment the business will need (telephones, computers etc)
Production strategy: The section describes the firm’s material requirements.
Specifically the following information is highlighted:
• The types, source, quantities, unit and total costs of the required materials for production
• The frequency at which the materials will be required
• Availability of the materials throughout the year
• Contingency plans to deal with shortages
• The means and the cost of transporting the materials per month

Monthly labor requirements: Describes the firm’s labor requirements and costs as
• follows:
• The number of direct and indirect worker’s (according to various functions)
• The level of skills employees needed must possess (according to the various functions)
• The total cost of production labor per month (cost of direct plus indirect labor)
• The total preliminary production expenses (rent, electricity, water, telephone etc)
• The volume of production per week, month etc
• The monthly production overheads (transport, warehousing, insurance etc)
• The volume of production per week or month
• The production cost per unit
• The total cost of production in a given period (week or month etc)
Production process: Explains in details the production process the business will use to
• produce its goods. For a service provider, the section will explain the main means by which the
business will offer its proposed service(s). Specifically the section will clarify:
• The steps the firm will take in producing its products
• The external factors likely to affect the firm’s production process
• The plans or arrangements to minimize the impact of the external factors

Government regulations: The section presents information to indicate
the existing government regulations, compliances and approvals that
the business must abide by, such as:
• The permits and licenses the firm must obtain to be able to operate
smoothly
• The source(s) and the costs of permits and licenses
• The local taxes the firm will be expected to pay (estimate)
• The approvals and compliances that are necessary before
operations start (hygiene or environmental compliance, insurance)
• The costs involved in meeting approvals and compliances
• The approvals and compliances that will be regularly needed and
the cost
• The regulations likely to adversely affect the business

FINANCIAL PLAN
In this section, different financial aspects of the proposed business are fully explained with an aim of gauging the firm’s
future financial potential. This is achievable through the preparation of various financial statements (documents) along
with background notes and information that will help the reader make sense of the financial forecasts. For the
proposed business to gauge the future financial potential, the promoter(s) must prepare the following financial
statements/documents:
• Pro-forma balance sheet statement
• Pro-forma profit and loss statement/accounts
• Projected cash flow statement
• Break-even level sales
• Expected profitability ratio
• Financial requirements and proposed capitalization
• Basic assumptions
The broad issues presented in this part of a business plan are as shown below:
Pre-operational costs: The section indicates all the costs the proposed business will incur before it becomes
operational. The different pre-operational costs may include the cost of installation, licenses, deposits for water etc.
Working capital: The section explains in detail the capital the firm will require the first three years. The section also
includes the assumptions made at arriving at calculations. Specifically the selection clarifies the following:
• The amount of capital needed for raw materials
• The amount of capital needed for work in progress (if any)
• The amount of capital needed for the finished goods (if any)
• The amount of capital to be held by debtors

FINANCIAL PLAN
Pro-forma profit and loss account: The document is prepared to forecast the firm’s
level of profit/loss in the first three years to show the overall viability of the proposed
business.
Pro-forma balance sheet: This statement is prepared to report a business’s financial
position at a specific time. It is a “snapshot” of the worth of a business at a given
moment in time. It provides details about the assets (financial resources owned by
the firm) liabilities (the claims against the firm’s assets) and the net worth of the
business. It is also known as a statement of financial position.
Cash flow forecast statement: The statement summarizes the monthly amount of
cash movements (cash inflows and cash outflows) and the resulting cash balance for a
year. Thus, it shows the amount a business actually receives each month and the
amount expenditure and the amount of cash left to meet unforeseen emergencies
such as:
• To fund expansion programmes
• Provide additional personal drawing to promoters

FINANCIAL PLAN
Procedure to prepare a cash flow statement
• Note the actual bank balance the business has at the start of the trading period
• Estimate the sales to be made over the course of the year
• Calculate any other revenue that may be added to the business bank account each month (bank
interest earned, loan to the business, sale of some assets etc)
• Estimate the expenses likely to be incurred each month (business and non-business expenditure
that is drawn from the business account)
• Subtract expenses from revenue to get monthly surplus or deficit
• Add the first month’s surplus/deficit to the figure to arrive at the balance i.e. “End month” figure.
Improving cash flow: A firm’s cash flow can be improved in a number of ways as follows:
• Where possible, collect payment in cash at the time of sale
• Where credit is offered, always issue invoices immediately on completion of the job or sale
• Offer clients incentives or discounts to pay promptly
• All customers to pay with credit card to make payment easier
• Chase up outstanding debtors on a regular basis
• Smooth out expenses by leasing rather than buying capital items
• Pay large bills (insurance premiums) monthly rather than yearly (lump sum)
• Minimize expenditures by reducing promoter(s) personal drawing from the firm

FINANCIAL PLAN
Break-Even Level: This section is used to determine the level of sales (either in Units or Shillings) at
which all expenses have been met but no profit has been made. Thus, the level of sales at which no
profit has been made but all expenses are covered is referred to as the break-even point. Any more
items sold or shillings made will provide a certain amount of profit. However if sales fall below the
point, the business will run at a loss. The two different formula of calculating a break-even point/level
are as follows:
Break-even points in units = Total fixed costs
Contribution Margin Per unit (Selling price per unit-variable costs)
Break-even point in Kshs = Total fixed cost
Contribution rate (contribution margin expressed as a % of its sales price)
Note: Contribution margin Gross profit margin is the difference between sales and total direct
costs (sales-total direct costs or selling price per unit minus variable costs). On the other hand,
contribution margin is the gross profit margin expressed as a percentage of the sales: (Gross profit
margin x 100) Sales
Financial requirements: The section presents the estimates of the total amount of
• money that the firm needs to start its operations. The section must therefore clarify the following:
• Pre-operational costs
• Working capital
• Fixed costs (specify)
• Other requirements (specify)

FINANCIAL PLAN
Proposed capitalization: The section explains the amount of money the firm intends to invest, the
sources and the uses of the money. Issues to be explained in this section include:
• The planned investment (in Ksh) by the business
• The total amount of investment to be financed by the promoter(s)
• The total amount of investment to be financed from other sources (specify)
• The kind/type of security required (fixed assets, mortgage and collateral security)
• The other sources of finance to be considered (due to lack of collateral)
• The preferred loan repayment, terms of loan amount, period of repayment, percentage of loan
interest, grace period and monthly installments.
Basic assumptions and information: The section gives assumptions, notes and information that will
help a reader make sense of the financial forecasts. The section specifically clarifies:
• The assumptions that were made in estimating income and expenses
• Justify any unusual items, significant missions or unusual variations in the figures used
• The estimates that have been made about inflation, increases in costs or wages or interest rates
• The bank accounts the business operates and the financial institutions to be used
• The additional funds the business may need and proposed source(s)
• The internal and external factors that are likely to impact on the business progress to achieve the
projected forecasts etc

A Word on the Business Planning
Process
The business planning process involves a series of logical steps governing the creation, implementation
and revision of business plan document. The steps are reiterat5ive, one may go through some of them
several times before finally developing a plan that all parties feel comfortable with. The critical steps in
the business planning process are:
• Setting preliminary goals
• Conducting initial secondary research
• Confirmation subsequent detailed research
• Developing draft business plan
• Critically assessing the draft plan
• Evaluating the plan
a) Setting preliminary goals: Entails spelling out the firm’s vision of what the proposed organization
wants to achieve, the business it will be in, and the products it wants to offer for sale.
b) Conducting initial secondary research: This involves collecting information from existing data sources
that can provide more details on the state of the current industry as well as prospective viability of
another entry into the idea
c) Confirming the goals: Involves making a decision as to whether there is room for another market
entrant. The outcomes of the initial research will allow the promoters either to pursue the original goal
or abandon the same.

A Word on the Business Planning
Process
d) Conducting subsequent detailed research: This is the step at which more detailed information is
collected from as many different and specific sources as possible. At this stage, all critical elements of
the business plan (business description, marking, operations and finances) must be investigated fully.
e) Developing draft business plan: Once market research results have been obtained and analyzed, the
promoters must prepare a first version of the proposed business plan or project proposal, covering all
the elements suggested in the business plan.
f) Assessing the draft business plan critically: The step at which the promoters set the draft business
plan aside for a brief time before returning to it with a critical and editorial perspective. The aim is to
ensure that:
• The plan read well
• All the plan elements are integrated
• Revise any area with weak arguments
Implementing the business plan: This entails putting the revised business plan into action. The
promoters must adhere to the process and goals outlines in the original plans, unless there are strong
reasons to do otherwise. If a plan is not implemented, then the value of preparing it in the first place is
highly questionable.
g) Evaluating the business plan: As time proceeds, the promoters must review and evaluate the plan
and draw up new set of forecasts for the future. This may also involve reassessment of the venture’s
stated goals to see if they are still realistic or whether they need some modification.

Introduction
• Initiating and managing a business successfully
involves a lot of decision-making. As such
proper decision-making is critical to enhance an
enterprise growth and profit maximization.
Problem solving techniques are required to help
a rational procedure for making decisions. The
general approach to systematically solve
problem large or small businesses is the same.
Decision-making process can be used to solve
majority of the problems facing entrepreneurs.
Section 16.1 below discusses the seven-step
approach to better management.

Entrepreneurship for health care givers.pptx

Entrepreneurship for health care givers.pptx

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