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Entrepreneur Management Explain the concept of entrepreneur. Discuss the main function of entrepreneur. What are the characteristics possessed by successful entrepreneurs? Explain the concept of women entrepreneurs. Discuss the problems faced by women entrepreneurs.
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Explain:
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Why do businesses fail?
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Rural entrepreneurship
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Types of entrepreneur
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Explain the source of finance to an entrepreneur including venture capital.
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Discuss the quick start routes to business.
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What is business plan? Discuss the features of business plan.
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12 Characteristics of Successful Business Management Teams 1. Definiteness Definiteness of Purpose Definiteness of purpose is one of the success secrets of the world’s most successful business management teams. Successful business management teams know the company’s goals, objectives and vision at their finger tips; and they are focused in the pursuit of the company’s objectives. objectives. They know their specific role in the company and they concentrate on this role to make sure that the business objectives are met.
2. Knowledge of the Business Successful business teams have adequate knowledge of the business of the company. The general rules of business are the same throughout the world but market intricacies are different from industry to industry; so also are the environmental factors. factors. That’s why I said that successful business management teams have adequate knowledge of the business. A competent corporate manager in the food industry may not perform excellently when assigned to a business operating in the oil and gas sector. Why? The reason is because the
industrial intricacies and the market are entirely different. Take a look at what happened to Apple when John Sculley took over leadership; Apple lost market share and profits declined rapidly. •
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What really happen? I can’t really tell; after all, John Sculley was successful during his time at Pepsi. But all the same, I can attribute his failure to sustain Apple’s market share to lack of unders understand tanding ing of the busines businesss and market market intricac intricacies ies associa associated ted with with the technology sector. sector. John Sculley was experienced in the food and beverage industry; however, he wasn’t able to transfer that experience to the technology industry because the rules of the game are different. So if you are going to build a successful business management team; be sure to business” a top priority for the members of your team. make “knowledge “knowledge of the business”
3. Commitment Take a closer look at the characteristics that make up successful teams and you will see commitment at the core. Successful business management teams are committed to the succe suc cess ss of the the compa company ny in wh which ich they they serve serve.. You You may may not not really really unde underst rstan and d how how commitment affects the performance of a team until you study the management structure of companies such as Berkshire Hathaway and Google.
4. They are Goal Goal and Result Oriented Oriented They know that their their compet competenc ence e and Successfu Successfull business business teams are result oriented. They credibility will be adjudged based on their accomplishment; so they press forward for positive results because results keep them in the game. game . If they fail to produce results; they will get kicked kick ed out of the company by the business owner or investors.
5. The They are are Indi Indiv vidua iduall Thin Thinke kerrs and Critic itical al Problem Solvers Members of a successful business management team are individual thinkers and critical problem solvers. Though they are a team, the members still think individually and solve intricate problems associated with their own area of expertise. For instance, the Chief Operational Officer individually tackles problems associated with the firm’s daily operations while the Chief Financial Officer strives to keep to keep the company’s finance in good position; yet they are all working w orking towards a common goal, “ Sustained Business Growth.” Growth.”
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They are Team Players
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Successful business teams are team players. Though members of the team are individual thinkers; they all act with same definiteness of purpose towards actualizing a common goal.
7. They are bonded by the Business Mission Statement At the core of every successful business management team is something very important. T his single factor is the reason why successful business teams are successful and this factor is the “business mission.” Successful business management teams know that the entrepreneur’s spirit is in the business mission and that’s why they strive to stay focused on the business mission. It’s this same mission that keeps them together as a team; take the mission away and the centre will not hold any longer for the entire business.
8. They are Strategic in their Approach Successful business management teams are strategic in their approach. All members of the team are individual master strategists with respect to their own field or calling. Successful teams strategize, plan and make in-depth calculation or analysis before arriving at a decision. And once a decision is reached; they execute it without delay and monitor the feedback.
9. They are Competitive Just as soldiers are tested on the battle field; so also is the competence of a business management team tested in the marketplace. Competitiveness is the reason why successful business management teams emerge successful; they are always on the watch to swiftly counter the moves of competitors. Price wars and media attacks are product of business teams testing their wits against each other.
10. They are Responsible and Accountable Successful business management teams are responsible and accountable for their actions. They know that the company’s success or failure is dependent on the decisions they make; so they take charge and execute their plans without fear of the consequences. If their move backfires; they take responsibility, learn from the mistake and move on.
11. They are Opportunistic
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Successful business management teams are opportunistic in their approach and strategy. They are always on the lookout for trends, problems and opportunities they can exploit. They are always quick to take advantage of a miscalculation or false move from the competitor.
12. They are Excellent Communicators And lastly, successful business teams are excellent communicators. They know how to motivate their workforce, raise capital from investors, promote the company’s products and increase brand loyaltythrough their spoken words. As a final note, these are the 12 characteristics and success secrets of the world’s most successful business management teams. So if building a business management team that will serve in high capacity and keep your business metrics strong is your topmost priority; then make the characteristics listed above a priority while forging the values on which your team will be built and your business will end up having a strong management team.
What is Entrepreneurship? A Look at Theory People use the terms "entrepreneur" and "entrepreneurship" interchangeably. The entrepreneur is the person who starts his own business. The exact definition of "entrepreneurship" still remains a vague concept, though various entrepreneurship theories have defined the concept. Early Theories of Entrepreneurship
Richard Cantillon (1680-1734) was the first of the major economic thinkers to define the entrepreneur as an agent who buys means of production at certain prices to combine them into a new product. He classified economic agents into landowners, hirelings, and entrepreneurs, and considered the entrepreneur as the most active among these three agents, connecting the producers with customers.
Jean Baptise Say (1767-1832) improved Cantillion’s definition by adding that the entrepreneur brings people together to build a productive item. Frank Knight's Risk Bearing Theory
Frank Knight (1885-1972) first introduced the dimension of risk-taking as a central characteristic of entrepreneurship. He adopts the theory of early economists such as Richard Cantillon and J B Say, and adds the dimension of risk-taking. This theory considers uncertanity as a factor of production, and holds the main function of the entrepreneur as acting in anticipation of future events. The entrepreneur earns profit as a reward for taking such risks. Small Business Management www.sohoos.com
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Alfred Marshall’s Theory of Entrepreneurship
Alfred Marshall in his Principles of Economics (1890) held land, labor, capital, and organization as the four factors of production, and considered entrepreneurship as the driving factor that brings these four factors together. The characteristics of a successful entrepreneur include: •
thorough understanding of the industry
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good leadership skills
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foresight on demand and supply changes and the willingness to act on such
risky foresights Success of an entrepreneur however depends not on possession of these skills, but on the economic situations in which they attempt their endeavors. Many economists have modified Marshall’s theory to consider the entrepreneur as the fourth factor itself instead of organization, and which coordinates the other three factors.
Max Weber’s Sociological Theory
The sociological theory entrepreneurship holds social cultures as the driving force of entrepreneurship. The entrepreneur becomes a role performer in conformity with the role expectations of the society, and such role expectations base on religious beliefs, taboos, and customs. Max Weber (1864-1920) held religion as the major driver of entrepreneurship, and stressed on the spirit of capitalism, which highlights economic freedom and private enterprise. Capitalism thrives under the protestant work ethic that harps on these values. The right combination of discipline and an adventurous free-spirit define the successful entrepreneur. Mark Casson's Economic Theory
Mark Casson (1945-) holds that entrepreneurship is a result of conducive economic conditions. In his book "Entrepreneurship, an Economic theory" he states the demand for entrepreneurship arising from the demand for change. Economic factors that encourage or discourage entrepreneurship include: •
taxation policy
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industrial policy
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easy availability of raw materials
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easy access to finance on favorable terms
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access to information about market conditions
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availability of technology and infrastructure
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marketing opportunities
Joseph Schumpeter’s Innovation Theory
Joseph Schumpeter’s innovation theory of entrepreneurship (1949) holds an entrepreneur as one having three major characteristics: innovation, foresight, and creativity. Entrepreneurship takes place when the entrepreneur •
creates a new product
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introduces a new way to make a product
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discovers a new market for a product
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finds a new source of raw material
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finds new way of making things or organization
Schumpeter’s innovation theory however ignores the entrepreneur’s risk taking ability and organizational skills, and place undue importance on innovation. This theory applies to large-scale businesses, but economic conditions force small entrepreneurs to imitate rather than innovate. Other economists have added a dimension to imitating and adapting to innovation. This entails successful imitation by adapting a product to a niche in a better way than the original product innovators innovation Israel Kirtzner’s Theory of Entrepreneurship
Israel Kirzner (1935-) hold spontaneous learning and alertness two major characteristics of entrepreneurship, and entrepreneurship is the transformation of spontaneous learning to conscious knowledge, motivated by the prospects of some gain. Kirzner considers the alertness to recognize opportunity more characteristic than innovation in defining entrepreneurship. The entrepreneur either remedies ignorance or corrects errors of the customers. His entrepreneurship model holds: 1.
The entrepreneur subconsciously discovering an opportunity to earn money by
buying resources or producing a good, and selling it 2.
Entrepreneur Financing the venture by borrowing money from a capitalist.
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Entrepreneur using the funds for his entrepreneurial venture
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Entrepreneur paying back the capitalist, including interest, and retaining the
"pure entrepreneurial profit.” Leibenstein’s Theory of Entrepreneurship
Harvey Leibenstein (1922-1994) consider entrepreneur as gap-fillers. The three traits of entrepreneurship include: 1.
recognizing market trends
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develop new goods or processes in demands but not in supply
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determining profitable activities
Entrepreneurs have the special ability to connect different markets and make up for market failures and deficiencies. McClelland’s Theory of Achievement Motivation
McClellands Theory of Achievement Motivation hold that people have three motives for accomplishing things: the need for achievement, need for affiliation, and need for power. Need for achievement and need for power drive entrepreneurship. David McClelland (1917-1988) considers entrepreneurs as people who do things in a better way and makes decisions in times of uncertainty. The dream to achieve big things overpowers monetary or other external incentives. McClelland’s experiment reveled that traditional beliefs do not inhibit an entrepreneur, and that it is possible to internalize the motivation required for achievement orientation through training. Peter Drucker’s Theory of Entrepreneurship
Peter Drucker (1909-2005) holds innovation, resources, and an entrepreneurial behavior as the keys to entrepreneurship. According to him entrepreneurship involves 1.
increase in value or satisfaction to the customer from the resource
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creation of new values
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combination of existing materials or resources in a new productive combination
What theories do you think explain entrepreneurial drive?
An analysis of various entrepreneurship theories reveal while what economists differ on the force that drivesentrepreneurs or the central characteristics of entrepreneurship, they remain unanimous that entrepreneurship is a distinct concept and a central factor of the economic activity. Let us know which you think is the theory that best covers entrepreneurial motivation?
Women entrepreneurs face a series of problems right from the beginning till the the enterprise functions. Being a woman itself poses various problems to a woman entrepreneur, The problems of Indian women pertains to her responsibility towards family, society and lion work. The tradition, customs, socio cultural values, ethics, motherhood subordinates to ling husband and men, physically weak, hard work areas, feeling of insecurity, cannot be tough etc are some peculiar problems that the Indian women are coming across while they jump into entrepreneurship. Women in rural areas have to suffer still further. They face tough resistance from men. They are considered as helpers. The attitude of society towards her and constraints in which she has to live and work are not very conducive. Besides the above basic problems the other problems faced by women entrepreneurs are as follows: 1. Family ties: Women in India are very emotionally attached to their families. They are supposed to attend to all the domestic work, to look after the children and other members of the family. They are over burden with family responsibilities like extra attention to husband, children and in laws which take away a lots of their time and energy. In such situation, it will be very difficult to concentrate and run the enterprise successfully. 2. Male dominated society:
Even though our constitution speaks of equality between sexes, male chauvinism is still the order of the day. Women are not treated equal to men. Their entry to business requires the approval of the head of the family. Entrepreneurship has traditionally been seen as a male preserve. All these puts a break in the growth of women entrepreneurs. 3. Lack of education: Women in India are lagging far behind in the field of education. Most of the women (around sixty per cent of total women) are illiterate. Those who are educated are provided either less or inadequate education than their male counterpart partly due to early marriage, partly due to son's higher education and partly due to poverty. Due to lack of proper education, women entrepreneurs remain in dark about the development of new technology, new methods of production, marketing and other governmental support which will encourage them to flourish. 4. Social barriers: The traditions and customs prevailed in Indian societies towards women sometimes stand as an obstacle before them to grow and prosper. Castes and religions dominate with one another and hinders women entrepreneurs too. In rural areas, they face more social barriers. They are always seen with suspicious eyes. 5. Shortage of raw materials: The scarcity of raw materials, sometimes nor, availability of proper and adequate raw materials sounds the death-knell of the enterprises run by women entrepreneurs. Women entrepreneurs really face a tough task in getting the required raw material and other necessary inputs for the enterprises when the prices are very high. 6. Problem of finance: Women entrepreneurs stiffer a lot in raising and meeting the financial needs of the business. Bankers, creditors and financial institutes are not coming forward to provide financial assistance to women borrowers on the ground of their less c redit worthiness and more chances of business failure. They also face financial problem due to blockage of funds in raw materials, work-in-progress finished goods and non-receipt of payment from customers in time. 7. Tough competition: Usually women entrepreneurs employ low technology in the process of production. In a market where the competition is too high, they have to fight hard to survive in the market against the organised sector and their male counterpart who have vast experience and capacity to adopt advanced technology in managing enterprises 8. High cost of production:
Several factors including inefficient management contribute to the high cost of production which stands as a stumbling block before women entrepreneurs. Women entrepreneurs face technology obsolescence due to non-adoption or slow adoption to changing technology which is a major factor of high cost of production. 9.Low risk-bearing capacity: Women in India are by nature weak, shy and mild. They cannot bear the amount risk which is essential for running an enterprise. Lack of education, training and financial support from outsides also reduce their ability to bear the risk involved in an enterprises. 10 Limited mobility: Women mobility in India is highly limited and has become a problem due to traditional values and inability to drive vehicles. Moving alone and asking for a room to stay out in the night for business purposes are still looked upon with suspicious eyes. Sometimes, younger women feel uncomfortable in dealing with men who show extra interest in them than work related aspects. 11. Lack of entrepreneurial aptitude: Lack of entrepreneurial aptitude is a matter of concern for women entrepreneurs. They have no entrepreneurial bent of mind. Even after attending various training programmes on entrepreneur ship women entrepreneurs fail to tide over the risks and troubles that may come up in an organisational working. 12. Limited managerial ability: Management has become a specialised job which only efficient managers perform. Women entrepreneurs are not efficient in managerial functions like planning, organising, controlling, coordinating, staffing, directing, motivating etc. of an enterprise. Therefore, less and limited managerial ability of women has become a problem for them to run the enterprise successfully. 13. Legal formalities: Fulfilling the legal formalities required for running an enterprise becomes an upheaval task on the part of an women entrepreneur because of the prevalence of corrupt practices in government offices and procedural delays for various licenses, electricity, water and shed allotments. In such situations women entrepreneurs find it hard to concentrate on the smooth working of the enterprise. 14. Exploitation by middle men: Since women cannot run around for marketing, distribution and money collection, they have to depend on middle men for the above activities. Middle men tend to exploit them in the guise of helping. They add their own profit margin which result in less sales and lesser profit. 15. Lack of self confidence:
Women entrepreneurs because of their inherent nature, lack of self-confidence which is essentially a motivating factor in running an enterprise successfully. They have to strive hard to strike a balance between managing a family and managing an enterprise. Sometimes she has to sacrifice her entrepreneurial urge in order to strike a balance between the two. An entrepreneur is a person who has possession of a new enterprise, venture or idea and is accountable for the inherent risks and the outcome. The term was originally a loanword from French and was first defined by the Irish-French economist Richard Cantillon. Entrepreneur in English is a term applied to a person who is willing to launch a new venture or enterprise and accept full responsibility for the outcome. Jean-Baptiste Say, a French economist, is be lieved to have coined the word 'entrepreneur' in the 19th century; he defined an entrepreneur as "one who undertakes an enterprise, especially a contractor, acting as intermediary between capital and labour". An entrepreneur tends to be a leader because they perceive opportunities available and are wellpositioned to take advantage of them. An entrepreneur may perceive that they are among the few to recognise or be able to solve a problem. Psychological studies show that the psychological propensities for male and female entrepreneurs are more similar than different. Perceived gender differences may be due more to gender stereotyping. There is a growing body of work that shows that entrepreneurial behaviour is dependent on social and economic factors. For example, countries which have healthy and diversified labour markets or stronger safety nets show a more favorable ratio of opportunity-driven rather than necessity-driven women entrepreneurs. Empirical studies suggest that women entrepreneurs possess strong negotiating skills and consensus-forming abilities. So, in conclusion, an entrepreneur sees opportunities and acts on them, usually in the business world. They are prepared to take a chance and work on their own initiative. Not all entrepreneurs are successful however. Even though we tend to hear about the ones who make a fortune, many ventures fail each year which go undocumented.
These are the functions performed by an entrepreneur. 1. Planning of the project: He is the organizer to conceive the idea of launching the project and to program the structure of business. 2. Management: The entrepreneur is also responsible for the management of business. He tries to have a least cost combination of factors of production. 3. To Face Risks: He faces uncertainly and bears risks in his business uncertainly comprising those risks against which it is not possible to insure. He also faces the risk of other producers may enter the market.
4. Distribution of Rewards: He is responsible of distributing the rewards to all factors of production. He pays the reward in the shape of rent, wage, and interest and bears the risk of profit or loss himself. 5. Sale of Products: An entrepreneur is also responsible of marketing, advertising. He wants to maximize his profits by selling his product in the market. 6. Scale of Production: He decided the scale of business in according with the provision of capital. Then, he takes the decision of what where and how to produce goods. 7. Joint stock Organization: In a partnership, the entrepreneurial functions are divided between the partners. But in public limited company, the board of directors takes this responsibility with nationalized enterprise; the entrepreneurial decisions are left to the government or a body to which government has delegated its powers. Anonymous Some of the major functions of an entrepreneur are: I) Identifying entrepreneurial opportunity – There are many opportunities in the world of business. These are based on human needs like food, fashion, education, etc., which are constantly changing. These opportunities are not realised by common man, but an entrepreneur senses the opportunities faster than others do. An entrepreneur therefore, has to keep his eyes and ears open and require imagination, creativity and informativeness. Ii) Turning ideas into action – An entrepreneur should be capable of turning his ideas into reality. He collects information regarding the ideas, products, practices to suit the demand in the market. Further steps are taken to achieve the goals in the light of the information collected. Iii) Feasibility study – The entrepreneur conducts studies to assess the market feasibility of the proposed product or services. He anticipates problems and assesses quantity, quality, cost and sources of inputs required to run the enterprise. Such a blue print of all the activities is termed as a 'business plan' or a 'project report'. Iv) Resourcing – The entrepreneur needs various resources in terms of money, machine, material, and men to running the enterprise successfully. An essential function of an entrepreneur is to ensure the availability of all these resources. V) Setting up of the Enterprise – For setting up an enterprise the entrepreneur may need to fulfil some legal formalities. He also tries to find out a suitable location, design the premises, install machinery and do many other things. Vi) Managing the enterprise – One of the important function of an entrepreneur is to run the enterprise. He has to manage men, material, finance and organize production of goods and services. He has to market each product and service, after ensuring appropriate returns
(profits) of the investment. Only a properly managed organisation yields desired results. Vii) Growth and Development – Once the enterprise achieves its desired results, the entrepreneur has to explore another higher goal for its proper growth and development. The entrepreneur is not satisfied only with achieving a set goal but constantly strives for achieving excellence. Anonymous 5 Top Reasons Why Businesses Fail Starting a business, whether it be from home, or in an office somewhere, may sound like the perfect solution to your working blues, but unless you’re committed to making it work, you can find yourself on the losing end real quick. Businesses fail for many reasons. It is important to understand those reasons so that you can decide whether or not you are up to the challenge. Those reasons include: 1. Fear—Whether it is the fear of success or the fear of failure, fear of stepping out of one’s comfort zone to try something new, or the fear of trial and error. Fear can freeze a person dead in his or her tracks. 2. Failure to plan. 3. Lack of funding. 4. Procrastination 5. Excuses. Especially making an excuse for any and everything that causes you to stumble. 6. Doing busy work. Keeping busy doing unimportant tasks. 7. Inability to delegate tasks. Sometimes delegation saves your business. If you have a weakness, hire someone who could turn that weakness into a strength. Use others to complete simple time consuming tasks so that you can do other things. 8. Failure to Research. 9. Failure to Market. 10. An inconsistent advertising campaign. It is better to have a ton of small ads on a regular basis than one large ad on a monthly or yearly basis. 11. Your pricing is too low, thus resulting in a negative cash flow. 12. Bad accounting practices.
13. Choosing quantity over quality. Cutting corners is bad business sense. 14. Dishonesty. 15. Not fixing mistakes. 16. Not completing tasks in a timely manner. 17. Inability to follow-up. You should always follow-up by email, snail mail, or phone. 18. Not listening to client or customer. Talking too much. 19. Spending too little. It takes money to make money. 20. Spending too much. Purchasing items when you don’t need them, upgrading when the older version will do, letting suppliers talk you into things you cannot afford, and not budgeting. 21. Being unprepared for fluctuations in business. Boom times when demands are high as well as slow times when you are struggling to get by. (Put money away during boom times to prepare for slow times.) 22. Lack of diversification. If you only offer one product or service, losing it can destroy your business. 23. Reputation. While a good reputation will gain you tons of business, a bad reputation could close your business. 24. Cockiness. There is nothing wrong with feeling great about your products, services, or accomplishments. Just don’t let pride and arrogance destroy your customer relations. 25. Discouragement. Giving in to your feelings of discouragement, when things do not work out the way you planned or succeed as fast as you thought. Also allowing others to feed on any discouragement you may already feel
Rural entrepreneurship •
Make regions attractive. Initiatives should be developed to attract entrepreneurial people from other areas to set up businesses, using marketing and promotion of the districts to a targeted entrepreneurial audience and taking advantage of the local contacts they may have. Local people currently living outside of the districts but who maintain family linkages should be a particular target group for such measures, because they will find it easier to recognise the quality of life and business opportunities the districts have to offer (e.g. lower living costs, access to grants, natural beauty) and may also have social reasons to return.
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Focus on identifying local and regional assets and converting them into entrepreneurial activity. There is a tendency in economically challenged communities, including those in rural areas, to emphasize their problems and deficiencies, often as a means of attracting public sector investment and support. As a consequence, it becomes difficult to see opportunities that may translate into economic advantage. An intentional mapping of local and regional assets – even the poorest rural communities have some assets, whether human, social, physical, or financial – can yield possibilities that might attract entrepreneurial interest and help improve economic competitiveness. Embed entrepreneurship education into the school and college c urricula, and into workforce training programs. Broadening education and career preparation to increase creating and growing businesses is potentially a powerful way to retain young people in rural communities. It also opens up new possibilities for dependent employees in trades and other professions, as well as those in agriculture and forestry, to consider how they can create their own business, particularly when they are not getting adequate rewards from their current employment and do not want to move away to the cities for better prospects. Generate local community support for entrepreneurship to increase the chances that entrepreneurs will be successful in their ventures. If people trying to start and expand their businesses are treated with suspicion or are not valued in the community, they will either abandon their venture or move elsewhere. Rural entrepreneurship has to be embraced by community leaders as an effective alternative to attracting companies to relocate from other places. Organise support services for entrepreneurs into effective networked systems for providing resources such as technical assistance and training, access to capital, land and buildings, and regulatory guidance . The aim should be to bring in ways that increase efficiency and reduce transaction costs while maintaining or improving quality outreach to dispersed rural entrepreneurs. Relationships and networks will be critical in ensuring that integrated and comprehensive support is available for those entrepreneurs with the motivation to create jobs and wealth in rural communities. Particular attention will have to be paid to regulatory frameworks and the time it takes to obtain regulatory approvals. Connect rural entrepreneurs to external markets, regionally, nationally, and internationally so that they are not dependent upon stagnant local markets for their goods and services. Strategies are likely to include the use of information and communication technologies for ecommerce, collaborative marketing strategies that might be sectoral, geographic, or both, and the fostering of networks and exchanges between entrepreneurs across regional and national boundaries. Technical assistance and training will need to be retooled to emphasise the importance of accessing broader markets for products and services. With the right support, good ideas and people can be nurtured through commercialisation to the point at which they can attract venture capital investment. Using the appropriate networks, rural-based entrepreneurs can be connected to resources and markets outside their own region to create successful businesses. Foster grass roots innovation. More should be done to encourage innovation in agricultural and food industries, basic industries and services and in smaller, less capital-intensive companies. Expand technology support and activities . The establishment and further development of external R&D services could help SMEs in rural areas to innovate. It might be that a district perceives itself as too small to create by themselves the innovation support infrastructures necessary for SMEs. In this case, collaboration with neighbouring Districts or thematically related higher education institutions should be sought.
The need for and growth of rural industries has become essential in a country like India because of the following reasons: 1. Rural industries generate large-scale employment opportunities in the rural sector as most of the rural industries are labor intensive. 2. Rural industries are capable of checking rural urban migration by developing more and more rural industries. 3. Rural industries/entrepreneurship help to improve the per capital income of rural people thereby reduces the gaps and disparities in income of rural and urban people. 4. Rural entrepreneurship controls concentration of industry in cities and thereby promotes balanced regional growth in the economy. 5. Rural entrepreneurship facilitates the development of roads, street lighting, drinking water etc. in the rural sector due to their accessibility to the main market. 6. Rural entrepreneurship can reduce poverty, growth of slums, pollution in cities and ignorance of inhabitants. 7. Rural entrepreneurship creates an avenue for rural educated youth to promote it as a career.
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Types of entrepreneurs The literature has distinguished among a number of different types of entrepreneurs, for instance: [edit]Social
entrepreneur
A social entrepreneur is motivated by a desire to help, improve and transform social, environmental, educational and economic conditions. Key traits and characteristics of highly effective social entrepreneurs include ambition and a lack of acceptance of the status quo or accepting the world "as it is". The social entrepreneur is driven by an emotional desire to address some of the big social and economic conditions in the world, for example, poverty and educational deprivation, rather than by the desire for profit. Social entrepreneurs seek to developinnovative solutions to global problems that can be copied by others to enact change.[4] Social entrepreneurs act within a market aiming to create social value through the improvement of goods and services offered to the community. Their main aim is to help offer a better service improving the community as a whole and are predominately run as non profit schemes. Zahra et al. (2009: 519) said that “social entrepreneurs make significant and diverse contributions to their communities and societies, adopting business models to offer creative solutions to complex and persistent social problems”.
[edit]Serial
entrepreneur
A serial entrepreneur is one who continuously comes up with new ideas and starts new businesses.[5] In the media, the serial entrepreneur is represented as possessing a higher propensity for risk, innovation and achievement.[6] Psychological studies show that the psychological propensities for male and female entrepreneurs are more similar than different. Perceived gender differences may be due more to gender stereotyping. There is a growing body of work that shows that entrepreneurial behavior is dependent on social and economic factors. For example, countries which have healthy and diversified labor markets or stronger safety nets show a more favorable ratio of opportunity-driven rather than necessity-driven women entrepreneurs. Empirical studies suggest that male entrepreneurs possess strong negotiating skills and consensus-forming abilities. [edit]Lifestyle
entrepreneur
A lifestyle entrepreneur places passion before profit when launching a business in order to combine personal interests and talent with the ability to earn a living. Many entrepreneurs may be primarily motivated by the intention to make their business profitable in order to sell to shareholders.[examples needed ] In contrast, a lifestyle entrepreneur intentionally chooses abusiness model intended to develop and grow their business in order to make a long-term, sustainable and viable living working in a field where they have a particular interest, passion, talent, knowledge or high degree of expertise.[7] A lifestyle entrepreneur may decide to become self-employed in order to achieve greater personal freedom, more family time and more time working on projects or business goals that inspire them. A lifestyle entrepreneur may combine a hobby with a profession or they may specifically decide not to expand their business in order to remain in control of their venture. Common goals held by the lifestyle entrepreneur include earning a living doing something that they love, earning a living in a way that facilitates self-employment, achieving a good work/life balance and owning a business without shareholders.[further explanation needed ] Many lifestyle entrepreneurs are very dedicated to their business and may work within the creative industries or tourism industry,[8] where a passion before profit approach to entrepreneurship often prevails. While many entrepreneurs may launch their business with a clear exit strategy, a lifestyle entrepreneur may deliberately and consciously choose to keep their venture fully within their own control. Lifestyleentrepreneurship is becoming increasing popular as technology provides small business owners with the digital platforms needed to reach a large global market. [9]
Younger lifestyle entrepreneurs, typically those between 25 and 40 years old, are sometimes referred to as Treps.[10] [edit]Theory-based
Typologies
Recent advances in entrepreneurship research indicate that the differences in entrepreneurs and heterogeneity in their behaviors and actions can be traced back to their the founder's identity. For instance, Fauchart and Gruber (2011, Academy of Management Journal) have recently shown that -based on social identity theory - three main types of entrepreneurs can be distinguished: Darwinians, Communitarians and Missionaries. These types of founders not only diverge in fundamental ways in terms of their self-views and their social motivations in entrepreneurship, but also engage fairly differently in new firm creation.
Introduction
Often the hardest part of starting a business is raising the money to get going. The entrepreneur might have a great idea and clear idea of how to turn it into a successful business. However, if sufficient finance can’t be raised, it is unlikely that the business will get off the ground. Raising finance for start-up requires careful planning. The entrepreneur needs to decide: • • • •
How much finance is required? When and how long the finance is needed for? What security (if any) can be provided? Whether the entrepreneur is prepared to give up some control (ownership) of the start-up in return for investment?
The finance needs of a start-up should take account of these key areas: • •
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Set-up costs (the costs that are incurred before the business starts to trade) Starting investment in capacity (the fixed assets that the business needs before it can begin to trade) Working capital (the stocks needed by the business –e.g. r raw materials + allowance for amounts that will be owed by customers once sales begin) Growth and development (e.g. extra investment in capacity)
One way of categorising the sources of finance for a start-up is to divide them into sources which are from within the business (internal) and from outside providers (external).
Internal sources The main internal sources of finance for a start-up are as follows:
Personalsources These are the most important sources of finance for a start-up, and we deal with them in more detail in a later section. Retainedprofits This is the cash that is generated by the business when it trades profitably – another important source of finance for any business, large or small. Note that retained profits can generate cash the moment trading has begun. For example, a start-up sells the first batch of stock for £5,000 cash which it had bought for £2,000. That means that retained profits are £3,000 which can be used to finance further expansion or to pay for other trading costs and expenses. Sharecapitalinvestedbythefounder The founding entrepreneur (/s) may decide to invest in the share capital of a company, founded for the purpose of forming the start-up. This is a common method of financing a start-up. The founder provides all the share capital of the company, retaining 100% control over the business. The advantages of investing in share capital are covered in the section on business structure. The key point to note here is that the entrepreneur may be using a variety of personal sources to invest in the shares. Once the investment has been made, it is the company that owns the money provided. The shareholder obtains a return on this investment throughdividends (payments out of profits) and/or the value of the business when it is eventually sold. A start-up company can also raise finance by selling shares to external investors – this is covered further below.
External sources Loancapital This can take several forms, but the most common are a bank loan or bank overdraft.
A bank loan provides a longer-term kind of finance for a start-up, with the bank stating the fixed period over which the loan is provided (e.g. 5 years), the rate of interest and the timing and amount of repayments. The bank will usually require that the start-up provide some security for the loan, although this security normally comes in the form of personal guarantees provided by the entrepreneur. Bank loans are good for financing investment in fixed assets and are generally at a lower rate of interest that a bank overdraft. However, they don’t provide much flexibility. A bank overdraft is a more short-term kind of finance which is also widely used by start-ups and small businesses. An overdraft is really a loan facility – the bank lets the business “owe it money” when the bank balance goes below zero, in return for charging a high rate of interest. As a result, an overdraft is a flexible source of finance, in the sense that it is only used when needed. Bank overdrafts are excellent for helping a business handle seasonal fluctuations in cash flow or when the business runs into short-term cash flow problems (e.g. a major customer fails to pay on time). Two further loan-related sources of finance are worth knowing about: Sharecapitaloutsideinvestors For a start-up, the main source of outside (external) investor in the share capital of a company is friends and family of the entrepreneur. Opinions differ on whether friends and family should be encouraged to invest in a start-up company. They may be prepared to invest substantial amounts for a longer period of time; they may not want to get too involved in the day-to-day operation of the business. Both of these are positives for the entrepreneur. However, there are pitfalls. Almost inevitably, tensions develop with family and friends as fellow shareholders. Business angels are the other main kind of external investor in a start-up company. Business angels are professional investors who typically invest £10k - £750k. They prefer to invest in businesses with high growth prospects. Angels tend to have made their money by setting up and selling their own business – in other words they have proven entrepreneurial expertise. In addition to their money, Angels often make their own skills, experience and contacts available to the company. Getting the backing of an Angel can be a significant advantage to a start-up, although the entrepreneur needs to accept a loss of control over the business. You will also see Venture Capital mentioned as a source of finance for start-ups. You need to be careful here. Venture capital is a specific kind of share investment that is made by funds managed by professional investors. Venture capitalists rarely invest in genuine start-ups or small businesses (their minimum investment is usually over £1m, often much more). They prefer to invest in businesses which have established themselves. Another term you may here is “private equity” – this is just another term for venture capital. A start-up is much more likely to receive investment from a business angel than a venture capitalist.
Personal sources As mentioned earlier, most start-ups make use of the personal financial arrangements of the founder. This can be personal savings or other cash balances that have been accumulated. It can be personal debt facilities which are made available to the business. It can also simply be the found working for nothing! The following notes explain these in a little more detail.
Savingsandother“nest-eggs” An entrepreneur will often invest personal cash balances into a start-up. This is a cheap form of finance and it is readily available. Often the decision to start a business is prompted by a change in the personal circumstances of the entrepreneur – e.g. redundancy or an inheritance. Investing personal savings
maximises the control the entrepreneur keeps over the business. It is also a strong signal of commitment to outside investors or providers of finance. Re-mortgaging is the most popular way of raising loan-related capital for a start-up. The way this works is simple. The entrepreneur takes out a second or larger mortgage on a private property and then invests some or all of this money into the business. The use of mortgaging like this provides access to relatively low-cost finance, although the risk is that, if the business fails, then the property will be lost too. .
Borrowingfromfriendsandfamily This is also common. Friends and family who are supportive of the business idea provide money either directly to the entrepreneur or into the business. This can be quicker and cheaper to arrange (certainly compared with a standard bank loan) and the interest and repayment terms may be more flexible than a bank loan. However, borrowing in this way can add to the stress faced by an entrepreneur, particularly if the business gets into difficulties. Creditcards This is a surprisingly popular way of financing a start-up. In fact, the use of credit cards is the most common source of finance amongst small businesses. It works like this. Each month, the entrepreneur pays for various business-related expenses on a credit card. 15 days later the credit card statement is sent in the post and the balance is paid by the business within the credit-free period. The effect is that the business gets access to a free credit period of aroudn30-45 days! A business plan is a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals. Business plans may also target changes in perception and branding by the customer, client, taxpayer, or larger community. When the existing business is to assume a major change or when planning a new venture, a 3 to 5 year business plan is required, since investors will look for their annual return in that timeframe.[1] Business plans may be internally or externally focused. Externally focused plans target goals that are important to external stakeholders, particularly financial stakeholders. They typically have detailed information about the organization or team attempting to reach the goals. With for-profit entities, external stakeholders include investors and customers.[2] External stake-holders of non-profits include donors and the clients of the non-profit's services.[3] For government agencies, external stakeholders include tax-payers, higher-level government agencies, and international lending bodies such as the International Monetary Fund, the World Bank, various economic agencies of the United Nations, and development banks. Internally focused business plans target intermediate goals required to reach the external goals. They may cover the development of a new product, a new service, a new IT system, a restructuring of finance, the refurbishing of a factory or a restructuring of the organization. An internal business plan is often developed in conjunction with a balanced scorecard or a list of critical success factors. This allows success of the plan to be measured using non-financial measures. Business plans that identify and target internal goals, but provide only general guidance on how they will be met are called strategic plans. Operational plans describe the goals of an internal organization, working group or department.[4] Project plans, sometimes known as project frameworks, describe the goals of a particular project. They may also address the project's place within the organization's larger strategic goals.[5] Business plans are decision-making tools. There is no fixed content for a business plan. Rather the content and format of the business plan is determined by the goals and audience. A business plan represents all
aspects of business planning process declaring vision and strategy alongside sub-plans to cover marketing, finance, operations, human resources as well as a legal plan, when required. A business plan is a summary of those disciplinary plans. For example, a business plan for a non-profit might discuss the fit between the business plan and the organization’s mission. Banks are quite concerned about defaults, so a business plan for a bank loan will build a convincing case for the organization’s ability to repay the loan. Venture capitalists are primarily concerned about initial investment, feasibility, and exit valuation. A business plan for a project requiring equity financing will need to explain why current resources, upcoming growth opportunities, and sustainable competitive advantage will lead to a high exit valuation. Preparing a business plan draws on a wide range of knowledge from many different business disciplines: finance, human resource management, intellectual property management,supply chain management, operations management, and marketing, among others.[6] It can be helpful to view the business plan as a collection of sub-plans, one for each of the main business disciplines.[7] "... a good business plan can help to make a good business credible, understandable, and attractive to someone who is unfamiliar with the business. Writing a good business plan can’t guarantee success, but it can go a long way toward reducing the odds of failure." [7]
Typical structure for a business plan for a start up venture[8]
cover page and table of contents
executive summary
business description
business environment analysis
industry background
competitor analysis
market analysis
marketing plan
operations plan
management summary
financial plan
attachments and milestones
What to Include in a Business Plan: Business Plan Features A good business plan accomplishes three key tasks. One, it focuses on the projected goals. Next, once the goals are down on paper, it compels the entrepreneur to come to some hard decisions about the
feasibility of the venture. And finally, it can work like a sales document, aiming to draw the attention of potential investors by highlighting the features of the business. Here are 7 things to include for your business plan to be effective:
1. The Mission Statement Use this statement to spell out the reasons for getting into your chosen business. Perhaps you are starting a health and fitness center because you have the expertise and believe you have new ideas that you can put into practice. Although it doesn't have to be lengthy, you do need to highlight your motives for choosing your venture.
2. Describe the Business Provide detailed descriptions about every aspect of your business. Do you provide services, such as a consultancy firm or a beauty parlor? Or is it products you deal with? Describe your products. Do you source your products from a wholesaler? Or do you produce them yourself? What is it that makes your business different?
3. Long-term and Short-term Goals Project your goals over a period of 3-5 years as your long-term objectives. These could include factors like marketing plans or new products for the future. Or perhaps opening new offices or stores, or setting up new online websites. Your short-term period could be from a few months up to a year. Goals could include getting a license for the business, thinking of a name for the business, finding space for setting up your office, or anything required to get your business going.
4. Specify your Customers You need to specify who you envision as your customers. Who will need your products or services? Why would they require or want your products or services? This will also help you to concentrate on the kind of marketing you will need to do in order to attract your customers.
5. Analysis of the Competition In order to determine what the odds are for your business to be successful, it is vital to learn about the competition. If you take the health and fitness center example, you will need to find out about all similar businesses in your locality and the kind of services they provide. If, for instance, most of them are machine-based centers, perhaps you could provide something different - additional services of yoga and meditation, for example. This will increase the chances of your business being a success, because you will be able to identify a niche that has less competition.
6. Analyze Your Finances It is important to conduct a realistic financial analysis of your business. You need to spell out all your monthly expenses, both for the business and your own requirements, along with what you realistically think your monthly earnings will be. See that you put everything in the list such as upgrades of computers, the rent of the office, electricity charges, and so on. This will tell you whether you can afford your business while also maintaining your present lifestyle. You could discover that you will need to take out a small loan to manage your expenses until you start earning adequately from your business. Or, you could take a part-time job to cover for your current expense, until your business starts earning enough to become a full time enterprise for you.
7. Marketing your Business Specify where and how you will market or advertise your business. You could do it through websites, write articles to be published in online article websites, via press releases, newspaper articles, or by offering presentations, free of cost, at local organization forums or groups. Try everything. You may be amazed at the amount of business that can be garnered just by making a free presentation at a meeting held by an association of homeowners in your locality. In order to keep your business on track, keep referring to your business plan at periodic intervals. You can also change some of it down the road as you identify what is working for you and what is not. If you have trouble formulating a business plan, or simply cannot find the time, consider hiring a professional to help. But whatever you do, just get started.
