Entrepreneurship
Introduction
- Peter F. Drucker defined an entrepreneur as one who always searches for an opportunity. The basic test of a successful entrepreneur is the identification of business opportunities in the environment and initiating steps to produce and sell goods and services to make the best use of that opportunity.
Entrepreneurial Opportunity
1. What Is A Business Opportunity?
There are a lot of opportunities in the world of business, which everyone might not be able to spot. An entrepreneur should be able to spot it. A business opportunity can be described as an economic idea that can be implemented to create a business enterprise and earn profits.
Before selecting an opportunity, the entrepreneur has to ensure two things:
There is a good market for the product he is going to produce.
The rate of return on the investment is attractive to be accepted by him.
Only when the entrepreneur is able to fulfill these two criteria, he/she can be successful.
2. Elements Of A Business Opportunity
A business opportunity may be described as an attractive economic idea that could be implemented to create a business, earn profits, and ensure further growth.
A business opportunity has five elements which are as follows:
- Assured market scope
- An attractive and acceptable rate of return on investment
- The practicability of the idea
- Competence of the entrepreneur to encash it
- Potential of future growth
3. Market Assessment
The selection of a product or service will depend upon many factors. While assessing the market, an entrepreneur has to prepare details on the following lines:
Demand- The demand assessment will be based on the size of the market being targeted i.e. local markets, the market at the state level, or national/international market. It will also involve a study of the target groups of consumers, their preferences, tastes, and other related variables.
Supply And Nature Of Competition- While assessing the market, supply position is also studied by entrepreneurs. By supply position what is meant is the complete picture of quantities of the product made available in the market by all the existing players. It should take into account future supplies from possible entrants in the field.
Cost And Price Of Product- It is important to determine the cost of the product and its comparison with available products in the market. Cost variables of competitors in terms of transportation delays, wastage, storage, etc. have to be studied to spot cost advantage. This will influence the delivery mechanism of the identified product or service.
Project Innovation And Change- Market assessment will require a study of prevailing innovations and changes being carried out by existing entrepreneurs. Technological advancements in the fields have to be analyzed because they may change the quality and influence the cost and price ultimately.
4. Ways In Which An Entrepreneur Spots Tends
1. Read Trends
- They regularly read the leading publications and websites affecting their business. This could include industry publications, trade association sites, major newspapers, key business magazines, thought leaders, and influential bloggers. So many trends start overseas, so they make sure that they read about what is going on in those cities. At first, they scan information from a wide variety of sources-from international news down to niche bloggers focused on specific aspects of their industry. Obviously, there’s a tsunami of information available. They use tech tools such as RSS feeds, e-mail newsletters or websites, and forums to keep on top out of so and get the information they want. They understand quickly which sources are valuable and which should be avoided.
2. Talk Trends
Talking to people is an equally important trend-spotting tactic. They get involved in specific industry trade associations and attend events both online and offline. They also take advantage of social networking tools like social network websites and forums. They even start or join groups on the networks and see what people are buzzing about and about the latest trends.
It’s also important to talk to customers and prospective customers, both online and offline. They use social media or online surveys to get input on what customers are thinking, buying, craving and doing. They also use social network websites and forums to identify key influencers and trendsetters in their target markets. In addition, they pay attention to ratings and review sites-not just what customers are saying about the business, but what they’re saying about the competitor’s business.
3. Watch Trends
- There’s no substitute for getting out in the marketplace. They make it a point to regularly go where their target customers hang out. If the customers are teenagers, that might be the local mall. If they are business people, it might be the region’s “power lunch” restaurant or office park restaurant center. The entrepreneur spends some time simply watching and observing. What are people eating, doing, wearing, using? What stores or restaurants draw crowds and which sit empty? Trade shows are a great place to get trend ideas, too even if they are not looking to buy products, they attend many shows simply to see what’s.
4. Think Trends
- As an entrepreneur begins gathering all this information regularly, they will start to develop a “trend-spotter mind”. As they absorb and mull about what they’ve read, hears, and observed, they’ll start to make connections and observations that will lead to business-boosting insights. The news about rising shrimp prices, the lines out the door at the Asian-fusion restaurant downtown, and something one of the customers said last week will all come together and they’ll have a great idea for a new menu item, a new product will line or even a whole new business.
Forms Of Enterprises
- From the point of view of ownership and management, business enterprises may be broadly classified under three categories:
1. Private sector enterprises
The enterprises which are owned, controlled, and managed by private individuals, with the main objective of earning profit come under this category.
Private individuals thus could start a venture as:
- Sole-proprietorship
- Partnership
- Joint Hindu family business
- Cooperative
- Company
2. Public sector enterprises
When business enterprises are owned, controlled, and operated by public authorities, with welfare as primary and profit as secondary goals, they are called public sector enterprises.
Either the whole or most of the investment in these undertakings is done by the government. These enterprises have the following form of organization:
- Departmental undertaking
- Public corporations
- Government companies
3. Joint sector enterprises
A joint sector is a form of partnership between the private sector and the government where management is generally in the hands of private sector, with enough representation on the Board of Directions by the government too. Resources are mostly borne equally.
Thus, one of the first decisions that an entrepreneur will have to make for his new venture is how the business should be structured. We all know that business must adopt some legal configuration that defines the:
- Control
- Personal liability
- Rights and liabilities of participants in the business’s ownership
- Life span
- Financial structure
Partnership
A partnership is an association of two or more persons to carry on, as co-owners, a business and to share its profits and losses.
Thus, two or more persons may form a partnership by making a written or oral agreement to carry out a business jointly and share its proceeds.
Partnership form of organization has developed due to the inherent limitations of sole proprietorship i.e.
- Limited capital
- Limited managerial ability
- Limited continuity
- In this era of specialization, expansion, and diversification, expecting one man to combat them all if not possible. Business acumen and wealth seldom meet in one person. This desirable combination probably led to the emergence of partnership forms of business.
Company
In common prevalence, a company means a voluntary association of a person formed for some objects with capital divisible into units of equal value called ‘shares’ and with limited liability. Company is a creation of a law that is the birth of this artificial human being is by law and it can be put to death by law only.
According to Section 3 of the Indian Companies Act, 1956,” a company means a company formed and registered under this act or any previous act.”
Thus, a company is an association of persons who contribute money in the shape of shares and the company becomes a legal entity and enjoys a permanent existence.
Business Plan
The business plan is a comprehensive written down document prepared by the entrepreneur describing formally all the relevant external and internal elements involved in starting a new venture.
It’s a formal statement of a set of business goals, the reasons they are believed attainable, and the plan for reaching those goals along with the background information about the organization or team attempting to reach those goals.
Thus, a business plan is a comprehensive project report which not only encompasses the entire range of activities that are being planned in the business but also:
- Helps to understand the feasibility and viability of the proposed venture
- Facilitates in assessing and making provisions for the bottlenecks in the progress and implementation of the idea
- Discusses the potential for success of the project along with the risk factors involved.
- Business plans are decision-making tools:
- Describing all necessary inputs for the enterprise
- Explaining the mode of utilization of the resources
- Detailing the strategies for the execution of the project
- Outlining the desired goals
- Assessing market sensitivity and profitability of the venture
- Thus, the content and the format of the business plan are such that it is able to represent all these aspects of the business planning process.
=> Components Of Financial Plan
Major financial items that should be included in the financial plan are:
1. Proforma Investment Decisions
- This part of the financial plan relates to how the enterprise’s funds are invested in different assets so that the enterprise is able to earn the highest possible returns on investments. An estimate of various components of capital nature i.e. fixed assets and working capital should be clearly mentioned in this part of the business plan.
2. Proforma Financing Decisions
This section summarizes all the projected sources of funds available to the venture to raise finance from, which you have already studied in the previous class.
Typically sources of funds are:-
- 1. Owners i.e. owner’s funds
- 2. Outsiders i.e. borrowed funds
3. Proforma Income Statement
The Proforma income statement is the projected net profit calculated from projected revenue minus projected costs and expenses. Basically, it summarizes all the profit data during the first year of operations of the new enterprises.
In preparing the Proforma income statement,’ sales by month’ must be calculated first, making use of forecasting techniques as the basis.
4. Proforma Cash Flow
- Profit and cash flow are not the same, when from sales we subtract expenses, the result is profit and then from cash payments, the resulting figure is the cash flow. Proforma cash flow reflects the projected cash available with the enterprise as a result of subtracting projected cash disbursements from projected cash accumulations.
5. Proforma Balance Sheet
- This document helps the enterprise to reflect the position of the business at the end of its first year. A summary of the projected assets, liabilities, and net worth of the entrepreneurship is depicted through a proforma balance sheet.
6. Break-Even Point
- Every firm wants to maximize its profits. The Breakeven point is that level of volume of production at which form neither makes a profit nor a loss. Here, the total revenue is equal to the total code of a firm, at the given level of capacity.
7. Economic And Social Variables
- In view of the social responsibility of business, the abatement costs, i.e. the cost of controlling the environmental damage should also be stated in the plan. It’s always advisable to mention in the business plan, the socio-economic benefits expected to acquire from the proposed investment.
Enterprise Marketing
1. Branding
Branding is a process, a tool, a strategy, an orientation whereby a name, a sign, a symbol, etc. is given to a product by the entrepreneur so as to differentiate his/her product from the rival products. Once a brand name is established in the market, then it becomes difficult to complete with it.
We know anything that can be offered to a market for attention, acquisition, or consumption. It includes physical objects, services, personalities, places,
organizations and ideas.
The character of the product may be seen differently by the buyer and the seller.
- As a product of any tangible or intangible offering that is required to satisfy the needs or aspirations of a consumer, thus it is important to understand:
- the “underlying motives” behind “buying” of the product
- to ascertain whether the buyer is really satisfied by having the same product
2. Packaging
Packaging is often the key element in assisting, mainly consumer goods companies to achieve a comparative advantage.
The critical decisions that must be made on the package are concerned with the functions, the product packaging will perform as well as with the mix of packaging components best able to perform in different degrees, the particular functions of the packaging.
3. Labeling
- It is the display of information about the product and its container, packaging, or the product itself.
4. Price
Price refers to the value that is put on a product. It depends on the cost of production, segment targeted, the ability of the market to pay, supply-demand, and a host of other direct and indirect factors. There can be several types of pricing strategies, each tied with an overall business plan.
Pricing can also be used as a demarcation, to differentiate it and enhance the image of a product.
Price is the only revenue-generating element among the four Ps, the rest being cost centers.
Factors Which Lead To Effective Employee Relationship
1. Identifying Objectives
- Employee relationship management is a general term that means a lot of different things to a lot of different people. At the outset, it is important to define what is meant by employee relationship management and specifically what areas of the relationship will be managed. For most companies, relationship management centers on items like attracting and retaining employees. Common measures of the effectiveness of these relationships include time to hire, turnover, and employee satisfaction.
2. Determining Employee Needs
- It is not enough to assume that a company or even its HR professionals know what is important to employees. Needs vary greatly depending on employee characteristics-age, gender, etc. as well as the type of job being performed. It is a good idea to find out directly from employees what their needs are. This can be done on one-on-one conversations that take place informally throughout the year, during formal employee evaluation meetings, and through surveys and polls that can provide a quantitative indication of employee needs.
3. Balancing Work And Life Needs
- There is widespread recognition in the 21st-century that effective employee relationship management requires consideration of the whole employee. That means taking steps to ensure that the employees’ work life needs to be well-balanced. This can occur through creative staffing that might involve part-time, flextime or even offsite work assignments.
4. Open And Honest Communication
- Communication is critical to establishing strong employer relationships. Managers must be committed to communicating regularly and honestly with employees about the issues that impact their work. The more open organizations can be, the more likely they are to establish strong relationships ships that lead to increased loyalty and productivity among employees and decrease turnover and dissatisfaction.
5. Measuring And Monitoring Results
- Effective employer relationship management requires ongoing attention. That means that managers and their HR departments should be alert at all times for signs of discontent, which can be subjective, as well as carefully monitoring the results of more formal assessments. These results should also be shared with employees. Too often employees are asked to complete surveys and are not informed of the results-or what will be done with the results.
6. Relationships Are Interpersonal
- Ultimately employee relationship management requires the same skills and processes required to manage any relationship; a clear understanding of employee’s needs and desire to meet those needs is foundational. Then steps must be taken to interact efficiently with employees through a variety of communication channels, both interpersonal and formal. Finally,
Measurement of the effectiveness of these efforts should be frequent and ongoing, with improvements and adjustments made when results are not showing continual improvement or satisfactory levels of performance.
The 12 Broad Causes That Lead To A Business Failure Are
- Lack of industry experience
- Inadequate financing
- Lack of adequate cash flow
- Poor business planning
- Management incompetence
- Ignoring the competition
- Unworkable goals
- Diminished customer base
- Uncontrolled growth
- Inappropriate location
- Poor system of control
- Lack of entrepreneurial skills
Some Of The Famous Entrepreneurs
1. Elon Musk
Elon Musk is the founder and CEO of the 3 most innovative companies, Tesla Inc, SpaceX, and SolarCity. He is one of the world’s wealthiest people, with a fortune of $182.9 Billion US dollars.
2. Bill Gates
Bill Gates was the world’s richest person till 2019 before Jeff Bezos, and now he is the second richest person in the world with a fortune of 110 billion US dollars.
3. Jeff Bezos
Jeff Bezos has occupied the #1 spot in the “world’s richest man,” and he’s the founder of the giant eCommerce platform- Amazon.
4. Mark Zuckerberg
Mark Zuckerberg is co-founder and CEO of a widely popular social-networking website Facebook. He is one of the world’s richest people, with a fortune of 90 billion US dollars.
5. Warren Buffet
Warren Buffet is one of the most successful investors in the world. He is the fourth richest person with a net worth of above 70 billion US dollars. He is often called an investment guru and the most respected businessman in the world.
6. Jack Ma
Jack Ma established Alibaba, one of the largest eCommerce platforms in the world. He is one of the world’s richest people, with a net worth of 49 US dollars.
7. Ritesh Agarwal
Ritesh Agarwal is an Indian billionaire entrepreneur and the founder and CEO of OYO Rooms. He is also a recipient of the Business World Young Entrepreneur Award.
Top 13 Interesting Facts About Entrepreneurship
60% of people who start small businesses are in the age range of 40 to 60.
The average founder salary is estimated to be less than $50,000 per year.
20% of small businesses fail within the first year of their conception.
Less than 1% of entrepreneurs came from extremely rich or poor backgrounds.
73% of small startup owners are men.
The average number of businesses started by an entrepreneur is two.
The internet is the most significant source of advice for entrepreneurs.
Small business proprietors’ incomes have increased by 15%.
28% of small business employees have 1-5 employees.
41% of small business owners are Republicans.
There are 582 million entrepreneurs around the world.
The US is the best place for entrepreneurs.
13.97% of self-employed people don’t plan on returning to traditional work.
