CHAPTER 7 — ENTREPRENEURSHIP 7.1 Entrepreneurship Concept of Entrepreneurship Entrepreneurship is the process of creating and developing an enterprise or business. It involves: Identifying opportunities Taking calculated risks Making investments under uncertainty Innovative planning Making business decisions Organizing resources to achieve business objectives Entrepreneurship requires a combination of skills and qualities such as imagination, innovation, risk-taking ability, planning, and resource management. Entrepreneurship as a Career A person can turn their hobby or passion into a profession. This can provide both personal satisfaction and financial benefits. “Do what you like, or like what you do.” An entrepreneur should also act as an ethical member of the community and consider their responsibilities toward society. 7.2 Entrepreneur An entrepreneur is a person who starts, owns, organizes, and manages a business while taking the associated financial and business risks in the hope of earning profit. Entrepreneurs also move economic resources from areas of lower productivity to areas of higher productivity and greater yield. Characteristics of Entrepreneurs 1. Desire for Responsibility Entrepreneurs have a strong sense of personal responsibility for the outcomes of their ventures. They prefer to control and properly utilize their resources to achieve self-determined goals. 2. Preference for Moderate Risk Entrepreneurs are calculated risk-takers, not reckless gamblers. They analyze possible risks and rewards before making decisions. 3. Self-Reliance Entrepreneurs often have to perform multiple roles, especially during the early stages of a startup when there are few employees. 4. Confidence in Ability to Succeed Entrepreneurs have confidence in their ability to achieve their goals. This confidence is based on choosing suitable strategies and working toward success rather than simply being overconfident. 5. Determination / Grit Grit is the ability to remain focused on achieving a long-term goal despite difficulties and unfavorable circumstances. Successful entrepreneurs demonstrate strong determination when facing challenges. 6. Desire for Immediate Feedback Entrepreneurs want to know how well their business is performing. They use feedback to: Identify weaknesses Measure progress Correct problems Improve their business 7. High Level of Energy Starting and running a business requires long hours, hard work, and commitment. Therefore, entrepreneurs need a high level of energy. 8. Future Orientation Entrepreneurs focus on the future and actively search for new opportunities. They plan ahead and organize resources to build their businesses. 9. Value of Achievement Over Money Money is not necessarily the main motivation of entrepreneurs. Entrepreneurs may be primarily motivated by achievement, success, innovation, and accomplishing their goals. Money can serve as a measure or symbol of achievement. Benefits of Entrepreneurship Provides self-fulfillment Provides potential for profit Allows people to work in areas they enjoy Contributes to society and the economy Creates new products, services, and opportunities Can make a positive difference in the world Drawbacks of Entrepreneurship Risk of losing financial investment Long working hours Hard work and high workload Lower quality of life during the early stages High stress levels Complete responsibility for important decisions Business may take time to become established 7.3 Design Thinking Design thinking is an iterative, non-linear process used to understand problems and develop effective solutions based on user needs. It consists of five phases: 1. Empathize Understand the users, their needs, experiences, and problems within the context of the design challenge. 2. Define Clearly identify the problem and create an actionable problem statement. 3. Ideate Generate as many possible ideas and solutions as possible. 4. Prototype Build a simple model or sample of the solution to learn quickly, cheaply, and early. 5. Test Collect feedback from users and use it to refine the solution and better meet user needs. Design Thinking Sequence E → D → I → P → T Empathize → Define → Ideate → Prototype → Test Iterative and Non-Linear Design thinking does not always follow the stages in a fixed order. A design team can: Repeat stages Work on stages in parallel Return to an earlier stage Continuously improve the solution The team uses results and feedback to review and improve its assumptions and solutions. 7.4 Minimum Viable Product (MVP) A Minimum Viable Product (MVP) is a basic version of a product containing enough features to test an idea with users and obtain feedback. It allows entrepreneurs to test an idea early without spending excessive resources. 7.5 Business Plan A business plan is a written summary of an entrepreneur's proposed business venture. It includes: Operational details Financial details Marketing opportunities and strategies Management skills and abilities Business goals Risks and strategies A business plan provides a systematic and realistic evaluation of a venture's chances of success. Importance of a Business Plan Evaluates the Venture Helps determine the chances of success in the market. Identifies Risks Helps identify the principal risks facing the business. Provides a Game Plan Acts as a plan for managing the business during startup. Measures Performance Allows actual results to be compared with targeted performance. Attracts Capital Helps attract investors and obtain funding. Business Plan as a Roadmap A business plan acts as a roadmap showing: Where the business wants to go How it intends to get there What resources and strategies are needed Business Plan Creation Tools LivePlan LivePlan is a business-planning tool that provides templates and asks users questions about their business. Based on the answers, it helps create a complete business plan. PlanMaker PlanMaker is a spreadsheet program that can be used for financial calculations and business planning. PlanRight PlanRight provides tools for creating business plans that can be presented to investors. Canva Canva is an online design tool used to create: Graphics Videos Presentations Social media content WordPress WordPress is a website creation and management tool. 7.6 Entrepreneurial Skills Entrepreneurial skills are abilities that help a person: Think effectively Communicate Interact with people Solve problems Make decisions Manage resources Identify opportunities An entrepreneur should use these skills to identify problems and create useful products or services. Ideas for a Small Business An entrepreneur should consider the needs of their community and identify products or services that can satisfy those needs. Questions to Consider What needs exist in my community? What problems are people experiencing? What product or service could solve these problems? Which of my skills can address these needs? How can I use my skills to solve the problem? Which needs could my colleagues and I develop into a business plan? 7.7 Understanding the Market If a product or service is needed by people and they are willing to pay for it, there is demand. Customers People who need and are willing to pay for a product or service are customers. Market The number of potential customers for a product or service represents its market. Competitors Businesses that provide similar products or services are called competitors. Market Survey An entrepreneur can estimate the size and characteristics of a market by conducting a survey of customer needs, preferences, and willingness to pay. Market Survey Questions Who is interested in the product? What do customers like or dislike about it? Are customers willing to pay the required price? Will they buy regularly or seasonally? How many products/services will they need? What should the product be like? Where should it be available? Who are the competitors? 7.8 Setting Up the Business Plan Most businesses aim to make a profit from the products or services they sell. Profit Profit = Selling Price − Cost Price Profit can be reinvested into the business. Selling Price The selling price should consider: Cost of Production + Overheads + Profit = Selling Price The final selling price should be realistic and reasonable. Cost of Production and Overheads The entrepreneur should accurately calculate all costs involved in producing and selling a product or service. These may include: Labour Raw materials Equipment Depreciation of equipment Other production costs Overheads Entrepreneur's salary Labour Cost Labour costs may depend on: Worker knowledge and contribution Experience Qualifications Basic wage rates Government taxes Social security contributions Setting the Profit The entrepreneur should decide a reasonable profit margin by considering the relationship between demand and supply. Demand > Supply If demand is greater than available supply, the price may be increased. Supply > Demand If supply is high but demand is low, the price may be reduced. An excessively high profit margin can discourage customers. When sales increase, an entrepreneur may reduce the profit margin and lower the selling price. This can help the business secure and expand its market. 7.9 Devising a Business Plan Executive Summary The executive summary is a concise overview of the main aspects of the entire business plan. It is normally prepared after the complete business plan has been developed. It should cover: Business goals Products/services Costs Timeline Target audience Major strategies Remember: Executive Summary = Short overview of the complete business plan. Your Startup / Company A business plan should explain: Company Team Company hierarchy Vision Goals Short-term objectives Long-term objectives Short-Term Goals Goals intended to be achieved in the near future. Long-Term Goals Goals intended to be achieved over a longer period and provide direction for the future of the company. SMART Goals Business goals should be SMART. S — Specific The goal should be clear and precise. M — Measurable The goal should be quantifiable and assessable. A — Achievable The goal should be attainable. R — Realistic The goal should be practical and reasonable. T — Time-Bound The goal should have a specific time frame or deadline. Memory Trick SMART = Specific → Measurable → Achievable → Realistic → Time-Bound 7.10 Market Analysis Market analysis is essential before starting a business. An entrepreneur should study: Current market conditions Customer needs Market trends Demand Supply Competitors Market trends can change, so entrepreneurs should continuously monitor the market and adjust their strategies when necessary. SWOT Analysis SWOT analysis is a technique used to evaluate a business, product, or idea in relation to its market. S — Strengths Internal advantages of the business. W — Weaknesses Internal disadvantages or limitations. O — Opportunities External possibilities that the business can take advantage of. T — Threats External factors that may negatively affect the business. Memory Trick SWOT = Strengths → Weaknesses → Opportunities → Threats Products and Services Products and services are a major part of a business plan. The business plan should clearly describe: What the product/service is Its features How it works What it provides to customers How it is different from alternatives The entrepreneur should have a thorough understanding of their product or service. Target Market The target market is the specific group of customers a business intends to serve. An entrepreneur should identify: Potential buyers Customer needs Customer preferences Competitors Product differences Potential threats Competitive advantages Entrepreneurs should develop strategies to attract and retain customers by providing quality products and services. Marketing and Promotional Strategies Businesses need effective marketing strategies to reach their target customers. Digital Marketing Methods Website Marketing Promoting products and services through a website. SEO — Search Engine Optimization Improving a website's visibility in search engine results. Video Marketing Promoting products or services through videos. Social Media Marketing Using social media platforms to promote products and services. PPC — Pay-Per-Click Marketing Online advertising in which payment is generally based on clicks. Content Marketing Creating useful or relevant content to attract customers. Email Marketing Promoting products or services through email. Affiliate Marketing Promoting products through affiliates who may receive a commission for successful referrals. 7.11 Deciding the Budget Every product or service requires time, money, and effort. An entrepreneur should: Estimate expenses Measure resources being used Consider business goals Consider potential customers Monitor financial performance Budget requirements vary depending on the business and its target market. Important Financial Statements Balance Sheet Shows the financial position of a business. Cash Flow Statement Shows money flowing into and out of the business. Income Statement Shows revenue, expenses, and profit or loss over a period of time. Financial information should be reviewed periodically. 🔥 CHAPTER 7 — ULTRA-QUICK REVISION Entrepreneurship Creating/developing a business + calculated risk + resources + innovation. Entrepreneur Person who starts/manages a business and takes financial risk for potential profit. Entrepreneur Characteristics Responsibility → Moderate Risk → Self-Reliance → Confidence → Grit → Feedback → Energy → Future Orientation → Achievement Benefits Self-fulfillment → Profit → Society → Enjoyment → Opportunities Drawbacks Financial Risk → Long Hours → Stress → Lower Early Quality of Life → Decision Responsibility Design Thinking Empathize → Define → Ideate → Prototype → Test MVP Basic product used to test an idea and obtain feedback. Business Plan Written roadmap of the business, including operations, finances, marketing, goals, and strategies. Business Plan Tools LivePlan → PlanMaker → PlanRight → Canva → WordPress Market Demand → Customers → Market → Competitors → Survey Profit Selling Price − Cost Price = Profit Selling Price Cost of Production + Overheads + Profit Demand & Supply Demand > Supply → Price may increase Supply > Demand → Price may decrease Executive Summary Concise overview of the complete business plan. SMART Specific → Measurable → Achievable → Realistic → Time-Bound SWOT Strengths → Weaknesses → Opportunities → Threats Target Market Specific group of customers the business wants to serve. Marketing Website → SEO → Video → Social Media → PPC → Content → Email → Affiliate Finance Balance Sheet → Cash Flow → Income Statement