INTRODUCTION TO AGRIBUSINESS

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DAH 0214: INTRODUCTION TO AGRIBUSINESS AND ENTREPRENUERSHIP
Part I
The agribusiness concept
In Tanzania like in most developing countries that have a good agricultural
resource base, the agribusiness sector is of strategic importance to the
development process. Agribusiness offers great opportunities for creating viable
small and medium enterprises, particularly in rural areas, which can contribute to
employment creation and improve foreign exchange earnings.
Business opportunities exist in the input sub-sector to supply inputs to the
farmers; the production of a variety of commodities; and adding value to the raw
farms produce through processing and marketing. Therefore there is a need for
stronger links between production, processing and marketing, and in particular
greater promotion of post-harvest operations that add value to farmer’s crops.
To take advantage of these opportunities, there is need to equip the emerging
and prospective small and medium agribusiness operators with the basic
management skills that will enable them launch and sustain their enterprises in a
competitive and dynamic market environment.
1 What is agribusiness?
Agribusiness can be defined as business and management activities performed
by firms in the farm system i.e. provision of inputs to the farm sector, production
of farm products, and/or process, transport, finance, distribute, or market farm
products.
From systems perspective, Agribusiness can be broken down into three
economically interdependent sectors. These sectors are the:-
 Input supply
 Farm production and
 Output (or product-market) sectors.
Figure 1: Sectors that makeup Agribusiness
Input-supply sector Production sector Product-market sector
 The input of farm supply sector provides farmers with supplies for the
production of crops and livestock. These inputs include seed, stock feed,
fertiliser, chemicals, machinery, and fuel, among others.
 The farm production sector uses these inputs to produce commodities such
as crops and livestock that are needed by consumers.
 The product market sector processes, stores and distributes the final output
to the ultimate consumers.
In short agribusiness includes the entire input, farm, and output sectors. Some of
the activities included here would be chemical, fertiliser, and farm machinery
dealers; feed and seed establishments; and agricultural credit and other financial
institutions serving the production sector. It also include the products distribution

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channels-(the middlemen, the providers of storage and transportation
facilities,the ultimate sellers), the processors who adds more value to the
products and finally the ultimate consumers.
This broader definition of agribusiness illustrated by the types of employment
encompassedby agribusiness includes the following:-
 Agricultural production and propagation of animal, animal products,
plants, plant products, forests, and forest products, fish and fish products.
 The provision of services associated with agricultural production and the
manufacture and distribution of supplies used in agricultural production.
 The design, installation, repair, operation, and servicing of machinery,
equipment, and power sources, and the construction of structures used in
agricultural production.
 Any activities related to the inspection, processing, and marketing of
agricultural products and primary by-products.
 Any aspects of nursery, landscaping, parks and other ornamental
horticultural operations.
 The conservation, propagation, improvement, and utilisation of renewable
natural resources.
 The multiple uses of forestlands and resources.
Agribusiness System
AGRIBUSINESS
INPUT
SECTOR
FARM
SECTOR
(Production)
PRODUCT
MARKET
(Output)
Inputs
 Seeds
 Fertilizer
 Farm
implements/machi
nery
 chemicals
Raw materialsor
commodities
 Cereals/oils seeds
 Livestock
 Fishing
 Fibre –
cotton/sisal/jute
 Horticultural
products
Processing
 Crops and its
products e.g. Paddy,
Cotton, etc.
 Livestock and its
products e.g. Beef,
Milk, pigs, etc.
Value adding

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2 Why study agribusiness?
Recall class discussions
2.1 Increased opportunity for economic growth
Tanzania’s short to medium term economic growth prospects lie in agribusiness
through the production of a variety of agricultural commodities and through value
adding to serve the local, regional and international markets. Realising the
country’s potential by developing a dynamic agribusiness sector that is capable
of generating employment opportunities, raising incomes and improving people’s
livelihoods poses a big challenge to the country. This calls for concerted efforts
by the private sector, small holder producers and government.
2.2 Creates new areas of employment
Extension staff and/or market development facilitators working in government
and NGOs have got a major responsibility to
 Bring within the reach of farmers and start-up or existing
entrepreneurs, basic agribusiness skills to help them run viable
businesses that should survive and grow.
 Create employment for people that have lost employment as a result
of economic restructuring and for the unemployed youth.
 Employment opportunities for the service providers in the whole farm
system.
2.3 Opens chances for learning new skills
As an agribusiness promoter, you may be called upon to advise the emerging
agribusiness entrepreneurs on how to deal with many externalities – factors that
one must accept and over which one has very little control. As a development
facilitator you must be ready to explain to farmers and agribusiness persons what
this will entail and how they should deal with potential problems.
A practical foundational agribusiness is therefore necessary. This course will give
you some guidelines to go by, which will be useful in assessing business
opportunities and advice farmers and the emerging agribusiness entrepreneurs
to make good business decisions in the uncertain economic climate.
3 Agribusiness sub-sectors
3.1 The input-supply sub-sector
This is the sector that supplies the farmers with improved supplies and appropriate
technologies. These include improved varieties of seed, livestock breeds, fertilizers,
pesticides, stock feeds, farm irrigation equipments and post harvest techniques,
machinery and equipment and technical support services. The inputs and services
provided to the farmers are intended to help them raise their productivity and production
levels.
In modern agriculture, most farmers are dependent on purchased inputs for production.
At the onset of rains, farmers have always complained about late or non delivery of farm
inputs. This shows that, an efficiently operated input supply sector that is capable of

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supplying the farm with sufficient quantities of the right inputs at the right time is crucial
to agricultural production. Some of the major input-supply industries and key companies
operating in Tanzania are discussed below:-
Feed
 A few large former parastatalcompanies as well as newly established private
companies and a small number of medium sized companies who are also
involved in maize meal and wheat flour production dominate the industry.
 Most run vertically integrated operations that handle maize buying and
storage, processing, and distribution.
 The majority of feed inputs, including grain and supplements, are sold
through appointed dealers. The beef, dairy, poultry and the pig industries are
the major consumers of stock feeds in Tanzania.
Seed, Fertiliser and Chemicals
 The seed and fertiliser market in Tanzania is dominated by a few.
 The dominance of the market by a few firms has raised concerns among the
farming community and government alike of the possibility of anti-competitive
marketing practises, in particular price collusion.
 The chemical market include a number of multinationals as well as Tanzanian
and South African companies that are serviced by a network of local agents,
independent farm supply stockists as well as specialised agricultural
commodity dealers.
Electricity and Petroleum
 A few highly mechanised commercial farmers countrywide are quite
dependent on petroleum and electricity to run their farm operations
particularly in the production and processing of crops, livestock and
horticultural products. Concerns have been raised over tariff hikes.
Farm machinery and equipment
 Farmers need efficient farm implement suppliers who can meet their
requirements, which vary according to scale of farming and level of
mechanisation. Another key requirement is the availability of maintenance
services, which are very unreliable in Tanzania.
 A large majority of Tanzanian farmers can only afford animal drawn farm
implements but even these are not so readily available aside from the high
cash outlays involved in acquiring them.
 Currently the government is trying to encourage the importation of farm
machinery and equipment by setting no import duty on them.
This sector has performed badly in recent years due to financial problems of the
production sector. However, with the removal of import duty and the value added
tax (VAT) on farm machinery and equipment there might be some recovery.
Livestock (breeder and feeder stock)
 Livestock production is the second most important sub-sector in terms of
contribution to farm income especially in the predominant cattle keeping
areas of Tanzania like central part of Tanzania.

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 The traditional beef keepers rely on their own in-bred lines and from other
producers.
 Several establishments in the country supply broiler as well as layer chicks.
Inputs can only be brought into the country if one can be granted a veterinary
permit, which is difficult because of fears of diseases.
 This sector is expected to assume even greater importance with this
increased private sector investment that has gone into both the poultry and
dairy processing industry over the past 5 years.
Co-operatives
 Entrepreneurs can benefit more by networking. Farmer co-operatives are
considered to be an important element in modern day agribusiness because
they are considered to be power balancers within the industry. Co-operatives
can also potentially provide many innovative services to farmers and increase
competition within the farm supply sector.
 Co-operatives can venture into many of the input supply sub-sector activities.
India gives a typical example where IFFICO which is perhaps the forth world
largest fertiliser manufacturing company is owned by farmer’s co-operatives.
3.2 The farm production sector
At the hub of agribusiness is the farm production sector. This is one sector
whose distinct feature is that it is dominated by many producers at different
scales of production and varying levels of commercialisation. Whereas market
participants in the input-supply and output sectors can, by and large, set prices
for their products, farmers on the other hand get prices that are determine in the
marketplace – where they have little bargaining power.
As this sector grows in size, level of output and efficiency in the other sectors of
agribusiness are directly affected. The financial status of this sector has a vital
and direct impact on the well being of the input-supply and output sectors of
agribusiness.
3.3 The output sector
The final sector system is the output or product-market sector. This sector is
responsible for the transformation of the raw farm produce into final consumer
products and conveying them to the retail level. It is potentially the one that the
best prospects of creating jobs and raising incomes within the country through
value adding.
Like the farm sub-sector it also attracts all sizes of investors from small scale
operators such as vegetable vendors who are found in almost all urban
residential areas as well large scale corporations that tend to dominate the
market of certain products such as Tanzania Sugar Company.
Structure
Large corporate organisations are common in the output sector. Many of these
firms are integrated. They combine a number of marketing functions at different
levels in the farm-food marketing chain, especially in integrating or merging

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processing and marketing activities. A few firms have even integrated back to
the farm level to guarantee a supply of raw materials with uniform quality.
Wholesaling
Wholesale operations involve sales to retailers, other wholesalers, industrial
users, and, to a lesser extent, the ultimate consumer. A wholesaler may buy
directly from the farmer and sell to another wholesaler of food processor, or the
wholesaler may buy from processors and sell to retailers. The makeup of the
whole trade involves a large group of varied organisations. Wholesalers take title
to the products they handle and are responsible for geographic distribution of the
particular product.
In the horticultural market we have seen the entry of freshmarket that is buying
an assortment of vegetables and fruits from up country to supply urban markets,
supermarkets, restaurants and hotels
Retailing
The retail food stores represent one of the largest industrial segments in
agribusiness. It includes informal sector food vendors, cattle dealers, butchery
owners, retail shops, super market chains etc.
4 Importance of agribusiness to the Tanzanian economy
4.1 Source of employment
Agriculture is the single largest employer in Tanzania and accounts for more
business activities than any other sector of the economy. Farming and
agribusiness combined employs more than 50% percent of the total work force.
The poor performance of most sectors of the Tanzanian economy over the past
decade has also meant that most Tanzanians can only earn a livelihood within
the agribusiness by directly earning their living from performing agribusiness
activities of various types.
4.2 Contribution to national income
The importance of the agribusiness sector to the Tanzanian economy can also
be seen through the examination of the linkages between the agribusiness sector
and the other sectors of the economy such as tourism (e.g. cultural tourism) and
transport sectors. Manufacturing in Tanzania is predominated by food
processing and textiles.
4.3 Expansion of non-traditional exports
Similarly Tanzania’s non-tradition export sector, which has shown impressive
growth figures, is anchored largely by horticultural, sugar and cotton lint and yarn
exports. With the problems that the country has been experiencing with its
tradition export, non-traditional agricultural exports have over the last ten years
been making a growing and significant contribution to the country’s export
earnings. (Spices, fresh fruits and flowers, medicinal plants, animal skins etc)

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5 The scope of agribusiness
The agribusiness sector exists to supply us with a basic human need – food
including fibre products. Its complexity and scope is best appreciated by considering
the number of people and organisations that are involved in performing the
numerous and diverse tasks which go into the producing of food and delivering it to
the final consumers (see box 1)
Box 1– An example of agribusiness linkages
A simplified case of the production of maize-meal would help us appreciate What
constitute the agribusiness sector. This process starts with the maize Breeder, followed
by a hybrid maize-seed producer, a farm-supply company that supplies farmers with
commercial hybrid maize, fertilisers as well empty Grain bags, the maize farmer, a maize
marketing agent, a transporter, a Miller, whole seller and a retailer who sells the final
product to the consumer. Note that, everyone touched in the whole chain is directly
involved in Agribusiness sector.
Box 1 is in essence the input supply-production-marketing chain or agribusiness.
If we think of the wide variety of products needed by consumers, it is not so
difficult to visualise how many farmers, the different type of firms and people that
are engaged in agribusiness.
Agribusiness becomes increasingly complex and specialised in response to
consumer needs. As their incomes rises, consumers demand more variety in
products. This creates a demand for new and improved services in output
marketing, which in turn motivates the producers of agricultural products to adopt
improved technologies that have to be supplied by the farm-supply sub-sector in
collaboration with institutions and companies that develop and transfer
technology.
The farm-supply sector takes on important new dimensions. As these trends
continue, the agribusiness sector becomes increasingly important to the national
economy. It not only provides the right type and amount of purchased inputs to
the farm sector but also the correct mix of services in the food marketing system.
And it has to be well co-ordinated and efficiently run if food and other agricultural
products are to be provided at a reasonable cost.

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6 Agribusiness linkages
6.1 Beneficial intra-agribusiness linkages
As discussed above agribusiness is made up of three inter-linked and inter-
depended sectors, namely the input sector, the farm production sector, and
output (product-market sector).
The benefits that accrue to the economy from agribusiness emanate from the fact
that consumer demand for a variety of products is transmitted in the production-
marketing chain to supply the inputs and services required to meet these
consumer needs.
 Technology development in the input sector is largely driven by a demand for
innovations by the farm-production sector in order to increase farm
productivity and lower production costs, and this generally results in
increased farm output which translates into relatively higher farm incomes.
 Productivity improvements have been observed even among the small scale
producers who if given access to financial services to purchase the basic
farm implements and production inputs are capable of more than doubling
their output if they follow the recommended crop husbandry practices.
 Under a free market system and with the opening up of the economy to
international trade, the small-scale farmers can only be enabled to take full
advantage of opportunities to serve the internal or external markets –(if well-
managed agribusiness firms with direct access to these markets adequately
provide them with market support services).
 Agribusiness firms dealing in internationally traded agricultural commodities
could open export markets for the smallholders, which the latter cannot
ordinarily access as individuals. This has become quite evident not only in
the tobacco and cotton sub-sectors but also in the herbs and essential oils
sub-sectors, under which out-growers are producing crops such as paprika,
castor beans and herbs.
 Export trade in agricultural commodities also create demand for specialised
services such as export financial services, market research, freight
forwarding etc. which give rise to the creation of employment opportunities.
 Development of a good road and communication infrastructure is also vital for
improving small-scale producers’ access to markets. And this is one area
that agribusiness firms often play a crucial role especially if they are
supported with some form of tax incentives. They do not only help open up
new production areas on their own initiative but can also lobby governments
to improve feeder road networks. Improvement in road infrastructure result in
a reduction in transport costs, due to reduction of maintenance costs and an
increase in the number of transporters attracted to service these markets.
6.2 Beneficial linkages between agribusiness and other sectors

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Agribusiness sector is also linked to other sectors of the economy such as:-
 Tourism, which provides it with a market
 The energy sector that supplies it with electricity and fuels to run farming and
processing operations. These are what are commonly referred to as the
forward and backward linkages, which integrate sectors and create
dynamism within the economy.
 Agribusiness can, for instance, contribute to the development of the rest of
the economy by generating a surplus that could be invested and used to
develop the infrastructure.
 The improvement in road infrastructure and extension of national electricity
grid can have positive development effect on the tourism, mining and
agriculture sector. Such infrastructure development could lead to the opening
up of rural areas for mineral exploitation and tourism.
 Rural farmers could benefit from improved tourist inflows by supplying tourist
lodges with foodstuffs. Tourist establishments could in turn benefit from the
availability of cheap food supplies.
However, agribusiness (if not well managed) can also have undesirable effects
on the other sectors of the economy. For example:
 Pollution from the use of agro-chemicals has a negative effect on the
environment and on human beings as well.
 The opening up of new agricultural land can result in destruction of natural
environment and consequently loss of animal habitat
 The opening up of new agricultural and deforestation can also result in green
house effect and consequently global warming
 Deforestation arising from the demand for fuel wood for tobacco curing could
also result in a loss of rainfall catchment areas and biodiversity.
Such effects could in the long run harm the tourism, the agricultural sectoritself
and the many agribusiness inter-linkages resulting into disastrous effects.
7 Negative practices in agribusiness
An individual farmer acting alone cannot dictate prices at which his or her
produce should be sold. On the other hand, large input manufacturers and
marketing firms possess sufficient market power to influence the prices at which
they sell inputs and buy commodities.
Compared also to farmers, firms that are involved in input-supply and product
marketing are usually fewer in number and have the resources to spend on
market research, product development, advertising and sales promotion which
enables them to influence the level of demand and supply, and thus prices.
It is common to find producers being offered more or less the same prices by
different agricultural commodity traders. Although the law prohibits collusion
among firms in the setting of prices, in practice this is difficult to enforce.
This imbalance in market power between the large and better resourced
corporate firms that predominate the farm supply and product-market sectors and

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the numerous and unorganised farmers, result in market conflicts that sometimes
forces the governments to intervene through legislation.
The exploitative tendencies among agribusiness firms that provide farmers with
farm inputs, extension, marketing services and those dealing in export products
varying their contractual terms under the excuse that farmers do not meet world
market quality standards or falling prices in international markets is a negative
practice.
The most important option available to farmers to increase their bargaining power
is to form associations or co-operatives. However,problems that face co-
operatives in their attempt to negotiate favourable prices for their members
arethat:-
 Some farmers want to enjoy the benefits of collective action without
fully supporting the cooperatives and also
 Mismanagement of the cooperative resources.
Agribusiness firms also experience some problems. One major problem they
face is that of traders, the so-called crop raiders, who connive with farmers to sell
part or whole of their produce that was financed by others. This practice is
against the agricultural credit act, which prohibits a farmer to sell his/her crop to a
trader other than the one from whom he/she received an input loan.
8 Roles of an Agribusiness Development Facilitator
The AgribusinessDevelopment facilitator or change agent can play a number of roles to
initiate or improve agribusiness activities. This could be done in a number of ways:
 Creating awareness among farmers and rural entrepreneurs on how the free
market system operates; and advise them on the appropriate course of action
to deal with the marketing problems in a liberalised market environment.
 Educating farmers to see themselves as businesspersons who should be
active market participants.
 Providing farmers and other agribusiness operators with market and technical
information to enable them identify and exploit the emerging market
opportunities in agribusiness.
 Helping the farmers acquire the basic agribusiness management skills that
they need in order to be successful in their business ventures.
 Enlightening farmers and the small-scale agribusiness operators about the
support institutions from where they can get technical and financial support
and advice.
 Acting as a business broker between the agribusiness firms and farmers and
intermediate in the resolution of market conflicts to ensure that each party is
satisfied.

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Optionalbut importantdiscussions (to make the students aware
of what is happening in the sector)
KEY PLAYERS IN TANZANIA AGRIBUSINESS SECTOR
 Farmers/Producers - small, medium, large
 Agricultural commodity markets, supermarkets etc.
 Ministry of Agriculture
 Other ministries – Land and Settlements
 Water and Irrigation
 Finance and Planning
 Industries and Trade

 Government and non-governmental agencies and entities
 TIC
 BRELA
 TCCIA
 TFDA
 EPZ
 BET
 BEST

 Research Institutions
 Higher learning Institutions
 Donors
 Marketing Agencies/marketing boards
 Cooperative Unions/other farmer Associations
 Financing Institutions
Other important assignments/ Discussions
 West rethink subsidy
 AGOA
 Comparative and competitive advantage (discussion)
 The role of Commodity exchange markets
 Cooperatives/farmers association
 New concepts
 Organic farming
 Fair trade
 Ecolabbeling (Food miles)

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PART II
ENTREPRENEURSHIP DEVELOPMENT
An Entrepreneur is a person who exploits opportunities and utilizes resources to create
more value taking reasonable risks in the process.
Entrepreneurship is the process of creating something different with value by devoting
the necessary efforts, assuming the accompanying risks and receiving rewards of
monetary and personal satisfaction.
It is important to note that entrepreneurship does not always manifest itself in new or
unique products and services; but also in the generation of ideas that help people to
improve the jobs they do, as well as the products and services they offer.
Innovation: The process of doing new things or the transformation of creative ideas into
useful applications.
2 Who is an Entrepreneur?
That word ‘entrepreneur’ is french in origin. It is derived from the 17th
century
French “Entreprendre”, meaning “one who ‘undertakes’ the risk of new
enterprise” Adam Smith, famous 16th
Century economist, in his 1776 wealth of
nations, described the entrepreneur as a person who undertakes the formation of
an organization for commercial purposes. He suggested that this somewhat
special type of individual is very reactive to economic change and this effectively
makes him/her an agent who transforms demand into supply.
Economists view entrepreneurs as those who bring resources together to
generate profit. Psychologists view them in behavioural terms as being
achievement oriented individuals, driven to seek challenges and new
accomplishments.
Marxist philosophers viewed them as exploitative adventures, representative of
all that is negative in capitalism. Those who strongly favour a market economy,
view them as pillars of industrial strength ‘the movers and shakers’ who
constructively disrupt the status quo”.
It is also generally agreed that the entrepreneur is an action oriented, highly
motivated person who is willing to take risks to achieve goals. Despite these
many definitions of the entrepreneur, it is generally accepted that the
entrepreneur is someone who sees opportunities which might not be apparent to
others, and takes action to turn these into creative and productive activities.
3 Characteristics of Entrepreneur
Entrepreneurs display a number of characteristics that make them stand out from
the crowd, and enable them to function the way they do. As you will discover,
each characteristic is displayed by certain traits. It is important to note that

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entrepreneurs may not possess all these traits, but the more they have the
greater will be their chances of achieving success in their endeavours.
For some people, these traits are latent, and will only be displayed when they are
faced with situations that force them to do so.
Some of the generally agreed characteristics and accompanying traits of the
entrepreneur are:
Characteristics of successful entrepreneurs.
Successful entrepreneurs are usually described as follows;
 Self-confident
 Self-reliant
 Creativity
 Achievement-oriented/goal directed
 Leadership
 Risk taker
 Committed
 Innovative,
 Flexible, versalite
 Energetic
 Initiators
 Positive thinkers
 focused
 curious
 outgoing
 pro-active
Self Confidence
Entrepreneurs have confidence in their ability to succeed at what to do. This
confidence is backed by positive action necessary for ensuring success.
Entrepreneurs will therefore work hard and will persevere to achieve their goals
despite problems encountered.
Independence
The entrepreneur has a strong desire to be independent. It is this desire which
causes people to start a business of their own rather than seek wage
employment. Some persons will even leave a highly paid job to start their own
business.
Creativity
Creativity is that quality that enables the entrepreneur to identify new and better
ways of doing things. However, entrepreneurs do not always bring new
innovative ideas into reality. Entrepreneurs get ideas from things and people
around them. Therefore see an idea or an opportunity in a problem, get ideas
from the news, from people as they travel on a bus, and a number of other
sources.

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Goal Directed
Entrepreneurs have a vision of where they want to go, and will develop practical
plans in order to get there. This means they set clear goals and do everything
within their power to achieve them. They are therefore described as being goal-
directed, in that they are self motivated and possess a deep desire to achieve the
goals they set.
Leadership
It is said that successful entrepreneurs are effective leaders regardless of their
number of persons in their charge. The attitudes and actions of the entrepreneur
very heavily determine the total performance of a business. His/her effectiveness
as a leader will determine the results achieved. Effective leader is highly
motivated and is also able to influence others so that they too can become
motivated.
Risk Taking
The entrepreneur is someone who is willing to accept risks.
Risk situation is one in which the individual is confronted with at least two
alternative choices, where the potential outcomes cannot be fully objectively
evaluated. The risk involves the possibility for success or loss, depending on the
choice made. The greater the possible loss, the greater the risk.
4 Entrepreneur versus small business persons and Intrapreneurs
If you were to compare the characteristics of the entrepreneur, the small
businessperson and the intrapreneur (corporate entrepreneur), you would see
many similarities.
They all have to be creative, be willing to take calculated risks, etc. The
entrepreneur has vision of growth, is committed to constructive changes,
persistent in gathering necessary resources and has energy to achieve results.
Where do corporate entrepreneurs fit in? They have the same characteristics –
will commit their time and energy, or may even risk their career, but the
distinguishing feature is that unlike entrepreneurs, they do not risk their money.
So for practical purpose, they are referred to as “Intrapreneurs”. The
Intrapreneur also plays a vital role in bringing new and improved products and
services into existence, and it is the entrepreneurial like tendencies that enable
these individuals to do this.
Small “business person” risks their personal finances. Does this make them
entrepreneurs? Not always, in some instances, these persons do not possess
or have not developed the traits that would enable them to succeed. This
sometimes resulted in business failure.
In the case of the “business person” profit is usually the sole motivating factor.
The entrepreneur, on the other hand, while seeing profit as a primary factor, is
driven by other forces such as strong needs for independence, achievements,
self satisfaction. These forces cause the entrepreneur to see and act on
opportunities.

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Shortly, the entrepreneur is a business person, but the business person is not
always an entrepreneur.
Apart from the entrepreneurial characteristics, to become a successful one, some
business skills are required
The following skills are important for the self-employed business person to possess:
 Identifying opportunities
 Formulating ideas
 Clarify concept
 Goal setting
 Developing a business plan
 Obtaining technical assistance
 Selecting the type of ownership
 Planning the marketing strategy
 Locating the business
 Financing the business
 Dealing with legal issues
 Managing human resources
 Promoting the business
 Managing sales efforts
 Problem solving

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CREATIVITY AND PROBLEM SOLVING
Creativity is accepted as being important to the production of quality work which
is sensible and appealing, however it is only now being given recognition in other
disciplines.
Creativity is increasingly being regarded as the essential ingredient in change
and progress.
1 Creativity Thinking
Creative thinking is concerned with the development of new ideas. These new
ideas are at the core of change and progress, in every field. It means thinking
differently from the usual.
Many of the products and services we enjoy today and sometimes take for
granted, evolved as a consequence of creative thinking. The computers,
telephones, tractors, machines, are only a few of the many things we enjoy in life
which were born out of creativity.
There is a notion that new ideas have to do with technical invention. This is only
one aspect of creativity. Creativity can also manifest itself in the way we find
solutions to both the simple and complex problems that affect our daily lives.
Creativity plays an important part in the development of small businesses.
Through creativity, entrepreneurs are able to find new and better ways of
producing goods and services as well as packaging and delivering these goods
and services. Creativity flourishes best in a dynamic, tolerant atmosphere.
Entrepreneurs must understand the creative process, know how to select people
with creative ability, be able to stimulate creative behaviour, and provide a
climate that nurture creativity.
1.2 Creativity and Entrepreneurship
For a creative person, every
problem is an opportunity
Creativity is a major tool for survival in the small business setting. It increases
your problem-solving ability. In periods of high inflation, high interest rates and
declining disposable income, it is creativity that will lead to survival and success.
The business that encounters a problem and finds a novel way around it, or
quickly turns the problem into an opportunity, will be a survivor in a field where
others, less flexible will be left behind.
The following rules will apply in your effort to find creative solutions to problems;
 Every problem holds an opportunity
 Problems should not be excuses for giving up
 Every problem has more than one solution

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1.3 Expanding your Creativity
Creativity is not something that is possessed only by geniuses in our society. We
all have latent creative traits that can be developed. By daring to think differently
and, breaking away from the old way of thinking, we can create new and
improved ways of doing things.
This new way of thinking and acting is what makes the entrepreneur different
from others.
The entrepreneurs do not necessarily bring something new into existence,
instead the result could be an improvement to something already in existence.
1.4 Creativity Traits
Creative people tend to display some or all of the following characteristics. They
are usually:
1. OPEN TO NEW EXPERIENCES - The will to seek out and thoroughly enjoy
new frontiers.
2. OBSERVANT - They see things in unusual way.
3. CURIOUS -They have an almost insatiable need to know why things occur
the way they do, as well as the implications of these occurrences.
4. TOLERANCE OF AMBIGUITY - Able to accept and reconcile apparent
contradictions and can, by extension, tolerate ambiguity.
5. INDEPENDENT - Independent in thought, judgment and action.
6. PERSISTENT - Does not easily give up. Is relentless in his/her pursuits.
7. RISK TAKERS - Willing to take calculated risks.
8. FLUENT – Able to generate large number of ideas.
9. FREE FROM FEAR OF FAILURE - is not daunted by the possibility of failure.
10. FOCUSSED - Able to focus and concentrate for extended periods.
In order to expand your ability to think creativity, you can try the techniques that
follow:
 Keep an open mind.
 Be willing to explore possibilities other than the usual.
 Brainstorm (alone or with others).
 Experiment with new ideas.
 Develop an inquiring mind.
 Do not accept every thing you are told without questioning
 Dare to be different
1.5 Fostering Creativity in Small Business
Creativity becomes the lifeblood for the survival of the small business. The
involves the ability to find creative solutions to problems which occur in daily
business operations; being able to find new and improved ways of accomplishing
tasks, as well as expanding one’s market.
To survive and grow in a competitive environment, entrepreneurs must therefore
strive to be creative and must also foster a creative environment within which
their employees can function.
TIPS

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1. Develop an acceptance for change
One pitfall to avoid, is the unwillingness to accept change. Refusing to try new
techniques or ideas could stagnate the growth of the business, render it
inefficient and ultimately, uncompetitive.
While it is a fact that change which is not gradual or which is unplanned, can
create stress for those involved, it is also true, that failure to embrace. Change
could impact negatively on the success of the business. Small business persons
must therefore recognize the need and be willing to implement change.
Planning, changes
can minimize stress
2. Encourage New Ideas
To encourage creativity, entrepreneurs must listen to the suggestions of their
employer, customers, friends, and be willing to implement those which have the
potential to enhance their business.
Encourage New Ideas
3. Permit More Interaction
A permissive, creative climate is fostered if individuals within the organization
have the opportunity to interact with each other. Such interaction encourages the
exchange of useful information, the free flow of ideas, and new perspective on
problems.
4. Tolerate Failure
Many new ideas prove impractical or useless. Effective small business owner
accept and allow for the fact that time and resources will be invested in
experiments with new ideas that may not work out.
The risk can be minimized however, when new ideas are assessed before
implementation.
5. Offer recognition
Creative individuals are motivated to work hard on tasks that they find interesting.
However, like all individuals, they enjoy being rewarded for a task well done.
Entrepreneurs should therefore demonstrate that creative behaviour is valued, by
providing tangible incentives to employees who provide creative ideas.
1.6 The Creative Thinking Process
Creative thinking process, consists of five steps namely:
1. Problem finding or recognition
2. Immersion or preparation
3. Incubation
4. Insight
5. Verification and application

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The process utilized in creative thinking, is not readily observed by the onlooker.
It ranges from the collection of data, to day-dreaming and the evaluation of ideas.
Problem Finding or Recognition
The individual selects a problem to work on or, more likely, become aware that a
problem or disturbance exists. Isn’t there a better way to do this?
Immersion or Preparation
The individual concentrates on the problem and becomes immersed in it,
recalling and collecting information that seems relevant and dreaming up
hypotheses without evaluating them. At this stage, the individual therefore
begins to search for solutions.
Incubation
After assembling the available information, the individual relaxes and
subconsciously mulls over the material. In this little understood but crucial step,
the individual often appears to be idle or to be daydreaming, but his or her
subconscious is in fact trying to arrange the facts into a new pattern.
Insight
Often, when least expected – while eating, or walking – the new integrative idea
will flash into the individual mind. Such inspirations must be recorded quickly
because the conscious mind may forget them when it becomes engaged in other
activities.
Verification and application
The individual set out to prove by logic or experiment that the idea can solve the
problem and that it can be implemented. A plan of action is therefore developed.

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2 PROBLEM SOLVING
We all face problems daily, and it is how we deal with these problems that will
determine whether the problem is eliminated, minimized or whether it gets worse.
One way in which people deal with the problems sometimes is to avoid them.
Problems should be faced and dealt with within a timely and systematic way.
2.1 The Rational Problem Solving Approach
The problem – solving process begins when the problem has been identified for
action. The first task is to search for all the factors that may have created the
problem or that may be incorporated into the eventual solution.
Monitor and evaluate the outcome
Prepare a plan of action
Decide on the best possible alternative
solution
Develop possible solutions and
alternatives
List the cause of the problem
State the desired results
Identify/define the problem

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1. Identify/Define Problem
Confusion in problem definition is sometimes caused by the fact that the events
or issues with which the individual is concerned, may be mere symptoms of the
problem itself. Defining the problem in terms of how individual or organisational
objectives are affected, helps to avoid confusion the symptoms with problems.
Example:
If the farm sales target is Tshs. 2 million and actual sales are Tshs. 1.2
million, the problem expressed in terms of the farm’s objective would be a
“short fall in sales revenue”. Investigation might then indicate that this
was brought about by low productivity (cause) a symptom of which was
late arrivals and high absenteeism from work.
Separate the Problem from
Its symptoms and causes
2. State the Desired Results
Once the problem has been defined, the next task is to decide what would
constitute an effective solution. What changes would you like to see when the
problem has been solved?
3. List the Causes of the problem
Causes unlike symptoms, are not usually obvious. Furthermore, different
persons, because of their individual perspective, may identify different causes for
the same problem. This requires that managers/entrepreneurs put all the pieces
together and come up with a clear picture. To do this, the need to identify all the
possible sources of the problem.
Questions they need to ask, include:
 What factors within or outside the organization has contributed to the
problem?
 Who are the person most involved?
 Do this persons contribute to the problem?
 Do they have the information that may help to clarify the problem?
4. Develop possible Solutions
There is a distinct advantage in developing more than one solution, in that,
comparisons can be made to determine which is most effective. Evaluation of
each alternative as they are developed, could also prevent the generation of an
adequate number of alternatives.
Develop a number of alternatives,
then evaluate each

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5. Decide on the best possible alternative/solution
The entrepreneur needs to evaluate each alternative or solution, to determine the
extent to which each is effective.
Each alternative should be assessed against certain criteria. These included the
objectives to be achieved, as well as the resources available within the
organization. For example, cost may be a serious constraint, in that, the
organization may not be able to afford the implementation of a particular
alternative.
6. Prepare a Plan of Action
The entrepreneur will need to initiate a plan of action, and ensure its
implementation. This might require the preparation of budgets and schedules for
the implementation of the alternative. Responsibility must also be assigned for
each task to be undertaken.
7. Monitor and Evaluate the Outcome
Actions taken to implement the decision must be monitored. Are things going
according to plan? The outcomes or results must also be evaluated to determine
whether the proposed alternative has worked. Have the objectives been met?
What is happening in the environment as a result of actions taken? How is
competition responding?
Problem – solving is a continuous process for individuals as well as for
entrepreneurs.
3 APPLYING THE CREATIVE THINKING PROCESS TO PROBLEM - SOLVING
1. The first step involves the development of a working definition of the
problem.
This includes:
a) Familiarizing one self with that needs to be done to solve the problem
b) Breaking the problem down into sub-problems
c) Diagnosing causes
Research suggests that in creative activity, the more time spent on problem
formulation the more aesthetic and original the outcome is likely to be.
2. Search for solutions, starting with the most familiar, and expanding through
associative thinking to more and more far-out alternatives.
3. Restate the original problem by redefining or reinterpreting the constraints in
order to break out of the mental blocks. This activity paves the way for the
emergence of new and different perspectives.
4. Evaluate ideas generated without getting discouraged by the results.
Instead, use the evaluation as a spring board for further exploration and not
for negative self assessment.
5. Allow the imagination free reign. Free it of mind set and traditional
assumptions to roam freely over the topic.

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6. Brainstorm, i.e. generate as many ideas in a given time frame, suspending
all evaluations and accepting even those ideas that seem bizarre and
unconventional.
7. Question every idea in every way you can. This may help you to see other
ideas and solutions.
8. Choose the idea that will best solve the problems.
9. Plan how you will solve the problem.
10. Implement your plan.

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PLANNING AND GOAL SETTING
1 Planning
Some of the questions that we will seek to answer are;
What is planning?
Why plan?
Who should plan?
How do we plan?
Planning may be defined as the way we decide what our goals are and how we
intend to achieve them.
Planning is therefore, determining, before hand, a course of action relevant to the
achievement of a goal. Planning enhances our chances of success. It helps
individuals to:
 Focus on goals. This makes it easier to use the limited resources more
efficiently.
 Make better decisions. Remember, decision making is simple choosing
between alternative courses of action.
 Reduce the chance of risk and uncertainty. During the planning process,
possible obstacles to goal achievement are highlighted and taken into
consideration.
 Measure its accomplishments. If you have a map of where you are going,
you will know, not only when you get there, but also how far off you are from
your destination.
No business or individual can predict the future with absolute certainty.
Planning is simply a way of thinking about our goals and how we are going to
achieve them. It allows us to decide on:
What is to be done?
When it is to be done
How it is to be done
Who is to do it, and
Where it is to be done
1.2 The Importance of Planning
We actually plan everyday without being conscious of it.
Planning is a way of
Making our lives more
Orderly and manageable
A plan is extremely critical to all business endeavours, regardless of how small
the business. It ensures that limited resources (particularly human and financial)
are used properly, and are combined in such a way as to achieve the goals of the

25. 25
business. In business, and in major life situations, it is important that we plan on
paper.
Planning is also necessary for all aspects of the business, so that entrepreneurs
have a fair idea of what they need to do in order to ensure that things go
smoothly and that goals are achieved. Similarly, planning is important in our
lives. We need to set goals and decide what we need to do in order to achieve
these goals.
1.3 Types of Plans
Depending on your special needs, you can develop different types of plans.
Also, there is no golden rule as to how far ahead you should plan. A business
should have plans that will be useful. Remember, planning involves forecasting
or predicting the future. Since the future is subject to change, plans must be
flexible enough to “change with the times”
OPERATIONAL PLANS
A company’s operational plan should be specific and much focused. Single-use
plans and standing plans are two main types of operational plans.
Single use plans are operational plans for carrying out activities not likely to be
repeated in the future, such as a programme.
Standing plans are operational plans for carrying out activities that are a regular
part of a business’s operations.
Others are Financial and marketing plans
2 Goal Setting: Its Nature and Relevance
Goal setting is basically how we go about determining our goals. Goals are
usually broad, but can be broken down into specific objectives.
Example: One goal of a farm business is to make profits, but it needs to achieve
a number of specific objectives in order to achieve this goal.
Some of these specific objectives could be:
 to reduce cost
 to successfully market the product or service to more persons
 to increase production.
In business undertake, goals will elucidate on:
 direction and guidance
 allocation of resources
 define the corporate culture and
 assess performance.
Long term, intermediate, and short-term goals refer to plans for various periods of
time, from five years or more in the furture to less than a year.

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3 The Planning Process
The ability to formulate a plan is what will separate the achievers from the
dreamers. The business idea needs to be analyzed closely, in order to decide on
its strengths and weaknesses.
Next, one needs to look at the environment and analyze any threats and
opportunities that the business may face. Answers will therefore be sought for
the following questions:
 What do I want?
 What am I able to do?
 What am I now doing to get what I want?
 What opportunities exists?
 What are obstacles?
 How will I deal with these obstacles?
 How will I get to where I want to be?
The starting point in the planning process is where you are at, and the finishing
point is where you would like to be. Planning must be a continuous process,
because conditions both outside and within the business may change.
To ensure the development of effective plans, entrepreneurs should:
 Set clear objectives
 Constantly monitor the business to ensure that a plan is not being followed
long after it has lost its usefulness.
 Understand that the most important part of planning process is deciding
which goals to pursue and which assumptions about the future and the
environment are pertinent at the moment in time.
3.1 Basics Steps in Planning
Planning process, involve various activities which can be summarized in the
following steps.
Step 1 DEFINE THE GOAL
What is desired?
Why is this important?
Why should I get involved?
Why do I need to do this?
Why should this be a top priority?
A goal is basically a condition or situation that you desire; an end that you strive
for. Defining the goal can motivate and inspire, as well as generate commitment
and interest. Planning is hard work and without a strong commitment,
discouragement and frustration can set in.
Step 2 SET GOALS AND DEVELOP GOOD OBJECTIVES
Develop a vision of the completed plan. Visualize the desired future state-get a
mental picture. We achieve a goal by performing a series of activities that will

27. 27
gradually lead to the accomplishment of that goal. These activities should be
based on specific objectives.
Knowing your goals allows you to define your objectives. Objectives are:
Specific
Measurable
Attainable and geared towards specific actions
Realistic, that is, it is possible to achieve them
Time-oriented, that is, they have a specific time in which they are to
be achieved.
Stating your objectives
Objectives should be expressed in terms of outcome expected. Each objective
should answer the question: what is to be accomplished? Who is expected to
perform each task, by when, and where?
Who: Target groups or individuals expected to carry out the change.
What: The action or change expected
How much: The extent of the expected change
When: When desired conditions will be accomplished
Where:Area in which the change will be observed.
Step 3 GET AND ORGANIZE THE NECESSARY FACTS
Look more closely at yourself and the business and decide what the strengths
and weakness are. Next, look at the environment, and analyze any threats
(obstacles) or opportunities that may be faced. In other words you do SWOT
analysis at this stage. The following are some of the questions you should be
seeking to answer:
 Where am I now and how I get there?
 What lesson(s) can I learn for the future?
 What are present obstacles to my accomplishing my goal?
 What present opportunities can help me to achieve my goals
 What resources do I have?
 What do I need?
- People, - Supplies, - Equipment, - Space, - Time, - Money
 Who has accomplished this goal before and how did they do it?
In other words, we need know where we want to go where we can realistically go,
and how we will get there.
If our goal is to start a business of our own, we must develop a plan to achieve it.
Some important things to consider are:
PRODUCT OR SERVICE
 What product or service will I provide?
 What will be the quality of these products or services?
 Will my emphasis be on low price or quality?
 How should the product/service be packaged?
FINANCES
 How much financing do I have?
 How much financing do I need?

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 Where will I get the financing needed?
 What level of profit will I be able to make?
PERSONNEL
 Will I need to employ persons to assist me?
 What skills must my employees have?
 What managerial skills do I have?
 Are there gaps in the skills of the persons I plan to employ?
 What do they do best?
 How will I foster high worker morale?
 Is my proposed compensation comparable to the industry?
CUSTOMERS
 Who will be customers?
 What do they want from the product or service?
 Where do they now buy the product or service?
 Can I estimate the size of the market?
ECONOMY
 Can I sell overseas?
 Will my business be affected by any changes in legislation or government
policies?
COMPETITION
 Who are my competitors?
 What is the size of each competitor’s business, and where are they located?
 How profitable are they?
THE ENVIRONMENT
 Will my product or service be harmful to the environment?
 How can I make it more environmentally friendly
These questions by no means represent all the questions to be asked. They
simply indicate some of the things you would need to consider inorder to plan
effectively for the achievement of your goals to establish a business.
Step 4 MAKE THE PLAN
Once you have completed the assessment and come to terms with your personal
objectives you can now follow the basic steps in planning. The steps are
summarized below:
 Establish a goal or a set of goal
 Determine where you are relative to the goal
 Develop a plan for achieving the goal
 Determine the opportunities and obstacles to goal attainment
 Develop alternate course of action
Remember that the plan can usually be changed. By trying to anticipate these
changes (problems/obstacles), you will be better equipped to deal with them
when they occur.

29. 29
Step 5 CRITIQUE THE PLAN
After you have finished the plan, you should try to list all the things that could go
wrong. This will help you see potential weaknesses or serious problems which
are not apparent.
Step 6 IMPLEMENT YOUR PLAN
Before you decide to neatly shelve those plans in some remote corner, ask
yourself a simple question: “will things change?” If your answer is “yes”, it’s a
good idea to review your original plan periodically.
Remember, your business is a system that is affected by changes in the internal
and external environment in which it operates, these changes often throw your
original plans off-balance, requiring you to take corrective action.
Part III
1 THE LEGAL ECONOMIC AND SOCIAL DIMENSIONS OF AN ENTERPRISE
There are four significant legal forms of business:
i. Sole proprietorship
ii. Partnership
iii. Corporate
iv. Co-operate
Many micro and small enterprises operating in our society today have not
formalized their operations under any of these legal forms.
1.2 Which Business Form?
Whatever the reasons one might have for selecting a particular legal model in
which to operate, such considerations will generally be based on at least one of the
following criteria:
i. Personal preferences of the entrepreneur(s)
ii. Profile/size of the relevant enterprise
iii. Advantages/disadvantages associated with the particular legal business
form
iv. Funds required vis-à-vis funds available.
The Sole Proprietorship
One person and does not involve legal partners. The person bears full
accountability for the business in terms of financing, compliance with tax
regulations, etc. This business carries unlimited liability in that the entrepreneur
is liable to the extent of her personal assets. Technically, a sole proprietorship
does not exist without its owner.
Some of the more significant advantages of the sole proprietorship form of
business:
1. Relatively easy and low cost of starting up.
2. All accrue to the owner
3. The owner has direct control

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4. Possible tax savings
5. Freedom and simplicity of ending the business
6. Simplicity of administration
Drawbacks relating to the sole proprietorship:
1. Unlimited liability of owners
2. Limitations applicable to the raising of capital/financing
3. Lack of business continuity
4. Limited opportunities for employees
Partnership
A partnership exists where two or more persons are co-owners in a enterprise.
In operating as partners the owners do not only combine financial resources, but
also their talents, which are usually complementary. They are also able to
expand social and professional contracts.
As a legal form of business, partnerships are less widely practiced among small
business persons than sole proprietorships. There are two basics type of
partnerships:
i. The general or simple partnership
ii. The limited partnership
A general partnership is one in which the co-owners share unlimited liability for
the business regardless of the percentage each has invested. Each is also
legally liable for the conduct of the business, and cannot avoid any liabilities that
is created by any of the partners.
A limited partnership, one or more of the partners have limited liabilities, and also
need not be involved in the actual running of the business.
Advantages
1. Ease for formation
2. Access to additional capital
3. Broader management base
4. Tax advantages
5. Employee incentives
Disadvantages
1. Unlimited liability
2. Shared authority
3. Lack of continuity
4. Capital limitation
The Corporation or Registered Company
The corporation is a business having a legal identify of its own but whose
ownership to a maximum of twenty in the case of a private corporation, and an
unlimited number in the case of the public corporation.
The owners of a corporation are its shareholders – meaning that they are the
final owners of the company’s assets, less debts and liabilities. A corporation

31. 31
has its own legal identify separate and apart from its shareholders. It can acquire
property, accumulate wealth, sell its assets, enter into contracts with other
entities or individuals, make investments or engage in legal actions.
Advantages
1. Limited liabilities
2. Wide and full access to equity capital
3. Specialized management and broad networking
4. Continuous existence
5. Transferability of ownership
6. Less risk for creditors
7. Autonomy in the establishment of legal entities
8. Tax advantages
Disadvantage
1. Dispersed ownership
2. Operational flexibility
3. Taxation
4. Implication for secrecy
The Co-operative Form of Business
An enterprise or organization that is owned or managed jointly by those who use
its facilities or services.
An association or corporation established for the purpose of providing services
on a nonprofit basis to its shareholders or members who own and control it.
The nature and functions of cooperatives differ considerably—such as
purchasing cooperatives, consumer cooperatives, and marketing cooperatives
It takes at least ten-(10) person to form a registered co-op, and it is primarily a
group – controlled kind of business.
Advantages
i. Tax and stamp duty concessions
ii. Wide social and professional networking
iii. Shared decision – making
iv. Safety mechanism against individual or special interest group control
v. Attractiveness to grant aid funding institutions
Disadvantage
i. They are difficult to organize and register
ii. Suppression of independence
iii. Restriction of level of share ownership
iv. Restrictions of savings rate and dividends payout
v. Limited credit prospects

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2 The Economic and Social Considerations for Starting and Operating an
Enterprise
The chances of success for a new or existing enterprise can only be enhanced if
proper attention is given to some critical economic requirements. Some of those
economic and social requirements include:
i. Marketing
ii. Funding
iii. Personnel
iv. Inputs/Resources
v. Production/Processing
vi. Location
vii. The environment
2.1 Marketing consideration
Whether a business is involved in the production of goods or services, such a
business would definitely not survive without an adequate market for such goods
and services.
Whenever you consider the market, you should think of;
 Market size
 Final product design and presentation
 Product pricing
 Competition
 Potential sales levels
2.2 Financial Consideration
Business is all about money in one form or the other. Some sources of financing
 Personal: Owners equity
 Credit and development agencies
2.3 Personnel considerations
The availability of suitable personnel can make or break a business even before
it gets started. Businesses requiring specialized or highly skilled personnel are
particularly vulnerable.
The following can be used as a guide to determine levels of
qualification/experienced should they have?
 How many personnel are needed
 Level of qualification and experience
 What spread of technical skills are required
 What are wages and salaries being paid?
 What incentive can you provide to staff to motivate them
 What are the implications of the labour laws relevant to your business
activities?
2.4 Inputs/Resources Consideration
These represent the mix of inputs/resources that will be used to produce the final
goods/services to be marketed. If the desired input or resources are for some
reason not available when needed, the net result will be a stifling of production or

33. 33
the production of poor quality goods/services. It is important to give adequate
and timely consideration to the types and quality of inputs required, costs of
these inputs, and the consistency of the source of supply.
2.5 Production/processing and Equipment Considerations
This has a lot to do with the choice of a production system. Choice is usually
made in terms of size, technology, efficiency and so on. This will be determined
by a number of other factors ranging from funds available the nature of the
market to be supplied.
2.6 Location Consideration
Should the location of the business be based on the market, or should it be
based on the convenience of obtaining raw materials and other inputs/resources?
Whatever the choice ultimately made, there will be some economic implications
for the business, as there will necessarily have to be some level of cost/benefit
trade off.
2.7 Environmental Consideration
Every effort should be made to give the environment a priority position in the
planning process. Usually, at the planning stage an assessment is made of the
financial and economic costs and benefits. Some questions you can use to
determine environmental impact are:
i. Is the product made from natural resources, which cannot be renewed?
ii. Does the manufacturing of the product/service create permanent or
temporary damage to the environment?
iii. If the damage is temporary, can any thing be done to repair it?
iv. Does the use of the product damage the environment?
v. Does the disposal of the product after use, pose a problem to the
environment?

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Part IV
IDENTIFYING BUSINESS OPPORTUNITY
A business opportunity exists in every face of life. The entrepreneur usually
recognizes these opportunities more quickly than other individuals. The big
question, however, is, when does an idea become an opportunity?
1 Ideas and Opportunities
In essence, an idea becomes an opportunity only when it has the potential to be
viable. Viability can be determined against several criteria, but some general
areas include:
Marketing: Is there a substantial market for the product/service? I.e. will people
buy it?
Production: Will you have the capacity and technology to produce goods that
will meet the requirements of the market and enable you to make a profit?
Financial: What returns will you get on your investment?
2 Sources of Business Ideas
1. Awareness of trends and practices in your society
 Greater health and fitness
 Information Technology
 Increase in travelling and the exposure to other cultures
 Globalization
2. Recognition of needs
3. Problems
4. Other cultures
Other sources
 Friends, business associates, consultants etc
 Yellow pages and business publication
 Statistical, and other information bureau
 Etc.
3 Evaluating Your Business Idea: Opportunity Identification
Whatever the source or method used to generate your business ideas, before
seeking to implement any of them, it is critical that you determine whether it has
the potential to be a success i.e. does the idea constitute a business opportunity?
The ensuing information will provide details on a structured approach, which
could be used to further evaluate your ideas. This approach is referred to as a

35. 35
SWOT analysis i.e. an assessment of the idea in terms of its strengths,
weakness, opportunities and related threats.
Personal Constraints
It is sometimes felt that factor of a personal nature do not impact significantly on
the success of the business. However, failure to determine personal constraints
could lead to inappropriate decisions and ultimate failure. These constraints
could include the time you will need to devote to the business, as well as skills
that you will require.
Some specific questions which could be used as a guide are:
 Is this an area in which I has an interest?
 What skills, knowledge, experience do I have/will require in order to make this
business work?
- technical?
- management?
- communication?
 Will I be able to devote sufficient time to the business or will I need to employ
a manager?
 Will I be satisfied with the level of earning I can generate from this business?
 Will it enhance my status?
 Will I be comfortable with the lifestyle demanded? For example, working late,
constant travelling etc.
 Is the idea on my list of priorities?

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Part V
THE BUSINESS PLAN
1 Your Personal Guide
A Business Plan is a document or blue print that summarizes what the
entrepreneur hopes to achieve from being in business, and how various
resources will be organized to meet these goals.
It is also a tool that serves for implementing the business idea, monitoring the
progress of the business and outlining strategies that will ensure that the
business is able to cope with difficulties, particularly those of the first few years.
Generally it will include, details of the nature of the business, its structure, goals,
objectives, strategies, markets, star-up and operation costs, financing required as
well as returns on investment.
2 The Importance of Preparing a Business Plan
Having a plan means having a focus and a clear direction of where you want the
business to go and how it will get there. Preparing a Business Plan also helps to
ensure that needs are anticipated and planned for before they actually arise.
Internally, the plan also benefits you in terms of being a tool that allows you to
monitor the progress of your business.
The business plan becomes a reference point for implementing strategies that
will counteract the problem while steering the business towards its goals.
Externally, it can be used as a proposal for accessing capital for start up, or
expansion. It is on the basis of this plan that lending agencies or investors
decide if your business idea is bankable or worth backing.
The systematic approach to preparing a business plan forces the entrepreneur to
think things through more clearly i.e. to weigh the pros and cons, to determine
market potential more accurately and therefore make more informed choice
regarding whether or not to start or expand the business.
3 The Business Planning Process
To facilitate the preparation of a useful and effective plan, there are a number of
preliminary steps, which need to be taken. These include:
 Generating business idea(s)
 Assessing the business idea in terms of market potential and financial returns
 Determine the long-term and short term goals of the business
Business Plan outline
1. COVER SHEET: with appropriate descriptions.
a. Business name
b. Business address
c. Business phone, fax, E-mail address
d. Principals (owners of the business)
e. Date

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2. EXECUTIVE SUMMARY:
This is what convinces someone that they should read the remainder of the plan.
It should be one or two double spaced type pages and contain the essence of the
plan. Remember: consider for whom it is written, what is being requested of
them, and why they should be interested in participating in the venture or
financing it.
3. TABLE OF CONTENTS: Be specific and complete in this area. Some readers
may judge the completeness on the basis of the plan.
4. BUSINESS DESCRIPTION
a. HISTORY SECTION: If this is a start-up venture, a brief explanation of
how the idea (company) came about, is in order at this point. If this is an
operating plan the history section may have the major highlights
supplemented with additional details, in a appendix.
b. DEFINITION OF THE BUSINESS: It is important that you be able to
state succinctly what the business is. This is distinct from what the
business does (a listing of functions, products, or services) and is oriented
to answering the question: WHAT NEED ARE WE MEETING.
c. DESCRIPTION OF PRODUCTS OR SERVICE: The identified need and
the identified market will be accommodated by specific products or
services. The description(s) of the product or services should fully explain
to the reader why, given the previously stated information, such products
or services will be demanded. You may append catalog sheets, pictures,
etc.
d. LOCATION
5. MARKETING PLAN: Having stated WHAT need you are fulfilling you can now
define WHO has that need. Your definition will indicate the target of your
marketing effort and will give both demographic and psychographic
characteristics. Your market penetration projection should be included along with
an analysis of the competition.
a. Customers
b. Competition
c. Pricing
d. Sales, advertising and Promotion
e. Distribution
6. MANAGEMENT PLAN: Having described the business, the market, and the
product, it is time to indicate who will make things happen. A start-up or
financing plan will require more detail than will an operating plan. Resumes and
other details of the personal backgrounds of the principals should be left to an
appendix. This section should sell two things: That you have the right people

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and that they are properly qualified or experienced to effectively manage the
business.
7. OBJECTIVES, GOALS AND STRATEGIES(STRATEGIES AND
IMPLEMENTATION)
What you intend to accomplish and how? This will include varying amounts of
details based upon the purpose of the plan, but it is important to focus this
section on the “crunch factors”. The detail should be placed in individual
appendices. Items to be covered in this section include:
a. Sales strategies
b. Promotion strategies
c. Financial strategies
d. Management strategies
e. Pricing strategies
8. FINANCIAL DATA: A business plan is future oriented. Therefore, this section
should focus on projections and pro-formas. Historical financial information
necessary to understand the plan should be referenced in an appendix. The
items to be included are:
A. Cost-volume-profit analysis
B. Income projections – Pro-forma
 Monthly for the planning year
 Quarterly for the second year
 Annually for the third year
C. Cash flow analysis – Pro-forma
 Monthly for the planning year
 Quarterly for the second year
 Annually for the third year
APPENDICES: These give supporting detail to the content section as well as adding
material of interest not otherwise included. If there is proprietary information (patent,
research and development, formulas, market research, etc) that you may wish to
control it would be well to place that information into detachable appendices.