BUAD 406 HANDOUT 2023.docx

**DEPARTMENT OF BUSINESS ADMINISTRATION** **ABU BUSINESS SCHOOL** **AHMADUBELLOUNIVERSITY, ZARIA** **400 LEVEL B.Sc BUSINESS ADMINISTRATION** **2023/2024 SESSION (SECOND SEMESTER)** **COURSE: BUAD 406 (ENTREPRENEURIAL DEVELOPMENT)** **MODULE 1:** Overview of Entrepreneurship **MODULE 2: Attributes of Entrepreneurs** **MODULE 3: Culture of Entrepreneurs** **MODULE 4: Types of Entrepreneurs** **MODULE 5: Characteristics of Entrepreneurs** **MODULE 6:** Sources of Information and Credit Creation for Entrepreneurship Development **MODULE 7: Challenges of Entrepreneurship** **MODULE 8: Role and Functions of Entrepreneurs** **MODULE 9: Concepts of Innovation and Business Development Process** **MODULE 10: Buying an Existing Business** **MODULE 11:** Role of Support Institutions and National Associations to Entrepreneurship Development And Small And Medium Scale Industrialists **MODULE 1: OVERVIEW AND DEFINITION OF ENTREPRENEUR** The word entrepreneur originated from the French word, "entreprende" which means "to undertake". In business context, it means to start a business, identify a business opportunity, organise resources, manage and assume the risk of a business or an enterprise. It is also used to describe those who (took charge) lead a project, which would deliver valuable benefits and bring it to completion. In other words, those who can manage uncertainty and bring success in the face of daunting challenges that would destroy a less well-managed venture. Drucker (1995) defined an entrepreneur as someone who shifts economic resources out of an area of lower and into an area of higher productivity and greater yield. This definition has two aspects that deserve to be underlined. First, there are resources that undergo manipulation; second, the activity seeks to attain "higher productivity" and "greater yield". Hornby defined an entrepreneur as a person who makes money by starting or running businesses, especially when this involves taking financial risks. UNDP defined entrepreneurship as the process of using private initiative to transform a business concept into a new venture or to grow and diversify an existing venture or enterprise with high growth potential. Entrepreneurs identify an innovation to seize an opportunity, mobilize money and management skills, and take calculated risks to open markets for new products, processes and services. You will observe that entrepreneurship is a derivative word from entrepreneur. To Shane, entrepreneurship is the act of being an entrepreneur, which can be defined as \"one who undertakes innovations, finances and displays business acumen in an effort to transform innovations into economic goods\". This may result in new organizations or may be part of revitalizing mature organizations in response to a perceived opportunity. The concept of entrepreneurship has a wide range of meanings. It was first used in the early 18th century by an Irish man by name Rechard Cantillon who was then living in France. On the extreme, it is a term used broadly in connection within the innovation of modern industrial business leader, which describe an originator of a profitable business idea. **Definition of Entrepreneurship** Shane (2010), entrepreneurship is the act of being an entrepreneur, which can be defined as \"one who undertakes innovations, finances and displays business acumen in an effort to transform innovations into economic goods\". This may result in new organizations or may be part of revitalizing mature organizations in response to a perceived opportunity. UNDP (2010) defined entrepreneurship as the process of using private initiative to transform a business concept into a new venture or to grow and diversify an existing venture or enterprise with high growth potential. Entrepreneurs identify an innovation to seize an opportunity, mobilize money and management skills, and take calculated risks to open markets for new products, processes and services. You will observe that entrepreneurship is a derivative word from entrepreneur. The most obvious form of entrepreneurship is that of starting new businesses (referred to as Startup Company); however, in recent years, the term has been extended to include social and political forms of entrepreneurial activity. When entrepreneurship is describing activities within a firm or large organization, it is referred to as intra-preneurship and may include corporate venturing, when large entities spin-off organizations. The term entrepreneurship means different things to different people and with varying conceptual perspectives. He stated that in spite of these differences, there are some common aspects such as risk taking, creativity, independence and rewards. The concept of entrepreneurship has a wide range of meanings. It was first used in the early 18th century by an Irish man by name Rechard Cantillon who was then living in France. On the extreme, it is a term used broadly in connection within the innovation of modern industrial business leader, which describe an originator of a profitable business idea. According to Joseph Scheumpeter, an Australian economist, the single function which constitute entrepreneurship concept is innovation, such as: new products, new production method, new market and new forms of organisation. Wealth is created when such innovation results in new demand. Entrepreneurship is therefore a process which involves the creation of an innovative economic organisation for the purpose of gain or growth under condition of risk and uncertainty. **Definition of Development** Development is the act or process of growth, progress and improvement within a physical setting. Development is also the gradual growth of something so that it becomes more advanced and stronger. **Definition of Entrepreneurship Development (ED)** A worldwide consensus on the critical role of competitive markets and entrepreneurs in economic development has emerged in the last decade. In developing countries, the primary barrier to economic growth is often not so much with a scarcity of capital, labour or land, but it is the scarcity of both the dynamic entrepreneurs that can bring these together and the markets and mechanisms that can facilitate them in this task. Relating all the earlier three definitions of an entrepreneur, entrepreneurship and development, UNDP then defined entrepreneurship development as referring to the process of enhancing entrepreneurial skills and knowledge through structured training and institution building programmes. According to UNDP, ED aims to enlarge the base of entrepreneurs in order to hasten the pace at which new ventures are created. This accelerates employment generation and economic development. Entrepreneurship development focuses on the individual who wishes to start or expand a business. Furthermore, entrepreneurship development concentrates more on growth potential and innovation. The Federal Government of Nigeria recognized the role entrepreneurship could play in Jump starting the growth and development of the economy decided on two things in 2009, one, that entrepreneurship education should be made a general studies course for all undergraduates of the tertiary institutions. The second was that a centre for entrepreneurial development be established in each of the tertiary institutions where different skills would be taught. At the end of their program of study, graduates of the tertiary institutions would be able to set up their own businesses with a view to contributing to the economy. **MODULE 2: ATTRIBUTES OF AN ENTREPRENEUR** An entrepreneur is seen as a person who recognizes a business opportunity and who organizes, manages, and assumes the risk of a business enterprise focusing on that business opportunity. According to the authors, an entrepreneur has the following characteristics: Desire for independence; Commitment; Willingness to take risk; Ability to recognise opportunity. **Desire for Independence** One of the consistent characteristics of an entrepreneur is his desire for independence. What it means is that an entrepreneur would want to work for himself/herself rather than work for others. They want to take decisions on their own. There is that believe that when you are fired from your former organization, you are likely to become a better entrepreneur. Because of this, you are in a better position to take decision. A lot of people have resigned their position in organizations, to set up their own business. What they mostly tell you is that 'I can wake at any time to go to work'. It means that it is independence they require. **Commitment** There are two characteristic of an entrepreneur that leads him to commitment. \(a) Self-Motivation -- Entrepreneurs set their own goals rather than having them set by their bosses. Since these goals are set by entrepreneurs, it means that they will be motivated to achieve those goals. \(b) Self Discipline -- Every entrepreneur has self-discipline, if not, the business will fail. Entrepreneurs correct errors and improve on their own performance without any prompting from someone else. These are confident people who believe in what they are doing and believe that the job is worth doing. **Willingness to Take Risk** An entrepreneur is a risk taker; they take calculated risks whether formally or informally. Mostly they take risk informally because they make calculation within their brain on what to buy, keep and sell latter. They equally try to figure out the probability of success of their business once they are convince that it is high, they will go into such business, which means they take risk. Marketing research is undertaken by entrepreneur consciously and unconsciously. If this research is carried out, they venture into such businesses. Entrepreneurs are not tired of trying. If they invest in a business and they fail, they still try another business so that they can succeed. Brown 1997 say: an entrepreneur has what he called calculated risks. \(i) Is the goal worth the risk? \(ii) How can I maximize the risk? \(iii) What information do I need before I take the risk? \(iv) Why is this risk important? \(v) Am I willing to try my best to achieve the goal? \(vi) What preparation do I need to make before I take the risk? \(vii) What are the biggest obstacles to achieving my goal? **Ability to Recognize Opportunity** Entrepreneurs try their hand on opportunities that are by-pass by others; these opportunities may include: Meeting the demand that is not currently met. Pushing up a product that is much better than what is currently in the market. Solving a problem or annoyance that consumers have. Entrepreneurs recognize opportunities where they are and they utilize them by producing product or services that will fill the vacuum identified. **Psychological prerequisites of an Entrepreneur** Entrepreneur is described as the entrepreneur as one who can move an idea into a viable and profitable commercial deal -- new product, new market, or new industry. In order to achieve this, he needs the right frame of mind and the ensuing success starts building up from this mindset. He states further that, for an entrepreneur, getting to the state of mental preparedness requires the following psychological traits: **Think Positively** There is uncertainty at the core of all human activities; nevertheless, we should not be discouraged. To be successful as an entrepreneur, we need to think success. Success starts forming long before it is achieved. As humans, we need to wear the conviction that we are capable of getting to heights and places. The first step to success lies in conceiving it deep within self by inwardly envisioning self, dreaming it. We should not be afraid or negatively affected when our close friends and relatives call us dreamers because we have an "unattainable" plan. It should be noted that great spirits have always encountered violent opposition from mediocre minds, hence, the need to have belief and while in action; the mind, the brain, and the surrounding circumstances interact in ways and means that usually and surprisingly convert dreams to realities. We should therefore think positively, have self-confidence and be ready not to relent any effort required before attaining our goal. **MODULE 3: THE CULTURE OF ENTREPRENEURSHIP** **Be Ambitious** By ambition, we refer to a long-term plan. It is stratified, thus stretching through midway between ambitions or objectives. These midway objectives are like a stairway up to the top floor of a tall building ever stated. To that extent, for a deed or achievement to be worthwhile or significant, it must not necessarily be grand in volume or colossal in amount. It may even be intangible, but still very valuable. Below is a hierarchy of ambitions as postulated by Jimngang (2004) from which you discover that ambitions could obey the following classification: **survival, security, bourgeoisie, aristocracy, and charity.** **"Survival"** This level of ambition is basic. The things, acts and income that result can barely afford the basics to spare one's life and the lives of those under one's care and charge. Ambition is, here, limited to a battle to exist as a creature or an animal. Food, water, shelter, clothing, and a few other things necessary for living constitute the ultimate acquisitions of this level of ambition. This level corresponds to the "gatherer/hunter/fighter" age in history. Another example of this ambition was that of a woman who ran a home-based restaurant selling a local, but coveted meal -- "tuwo". She prepared it so well that there were jams at her home during lunchtime. Regularly customers would stand and wait outside her home for seats to be liberated in her sitting room that had a very small capacity. When customers counseled her to expand the business, she retorted that she would abandon the trade the moment she got a husband. She was clearly unenthusiastic and did the selling just to have enough to make ends meet. The truth was that it was not a trade for her but a pastime and not even a favourite one. Around the same period, she trained another lady, who later set up shop in another area of the town. This second lady modernized the whole cooking and selling process -- she represented entrepreneurship. It did not take long for her to be a household name in town. Even though the second lady was more expensive than the first, the second lady's business witnessed growth in staff, logistics, income and profits. In short, she converted a local staple meal into a sought-after delicacy. Within a short period, her restaurant became an outing and a tourist attraction be drawn. These remarks relate to the credentials of the entrepreneur and the situation where there is competition. **Be of Strong Consistency** In every aspect of life, be it sports, politics, or research as in business, we need to show full determination. There is need to resolve not to relent until the point of victory, this being the ultimate objective. This desire to forge ahead must be strong, recurrent, resolute, ardent and unbending. It must also be long lasting, that is staying power, because the road is generally long, narrow and dreary; yet at the end of it all lie happiness, joy, fame, self-satisfaction, glory and honour, and even the possibility to be charitable to society. It is noteworthy that there are trials and temptations along the way. Some situations are difficult and complex that we are or may be tempted to give up. Oftentimes, there will be a way out provided we are patient and perseverant. We need effort to progress and usually the effort required is highly demanding and strenuous. We need to think, to work hard, to go out, and to 23 meet people, to be ready to face humiliation, and somehow, like a miracle, find a solution. Time can itself be the solution, so waiting should be considered. One could learn from the popular Chinese saying that: "Lack of patience can disrupt even the best plan". The highly admired wartime British Prime Minister, Winston Churchill, had this to say about success: "Success is the ability to go from one failure to another with no loss of enthusiasm". It will interest you to note that life is like a wave moment of ups and downs. Sometimes, it is very jerky, sometimes it is very calm. Therefore, keep on fighting and struggling. Expect in all circumstances to have troubles and disturbances of all sorts resulting from emotional feelings and physical pains incurred through the various efforts to break through. **Fear** Mariz Arza (quoted in Giovagnoli, 1998) expressed that "courage is not about doing something without fear, but about taking any strength you have -- even if it is just a grain of courage -- and channeling to strike out... when you know what you're doing is morally and ethically right". Fear is horrific and, if allowed, can act like a cankerworm that gnaws at the fruits of human plan and endeavour. It is that anxious feeling that manifests in us because of our awareness of the risk of failure of an operation. This sign is normal and an indication that our mental faculty is functionally normally. As a human being, it is natural to have the sense of fear. This sense has to be understood, domesticated, controlled, and well channeled. Fear should not be so strong as to overcome our other senses. It should not be exaggerated to the point of making us cancel a well-planned project or cherished ambition. The vibrant Nigerian start-up scene has been buzzing with energy as young entrepreneurs take center stage in shaping the country's economic landscape. With a population of over 200 million people, Nigeria offers immense potential for budding business owners who dare to dream big and chase their passions. After all, George Washington (the first American president, and farmer) taught that perseverance and spirit have done wonders in all ages. We will examine the world of youth entrepreneurship in Nigeria, exploring the various avenues and support systems available for aspiring entrepreneurs to kick-start and grow their own businesses. From government initiatives to private sector opportunities, we will uncover how young Nigerians are harnessing their creativity, resilience, and ingenuity to carve out successful paths in an ever-evolving market. Nigeria, often referred to as the "Giant of Africa," is experiencing a remarkable surge in start-up activity. The entrepreneurial spirit is alive and thriving among the country's youth, who are eager to make their mark on the business landscape. A factor contributing to this growth is technology. With access to smartphones and internet connectivity becoming more widespread, young Nigerians are leveraging digital platforms to launch innovative businesses across various sectors. Another driving force behind the rise of start-ups in Nigeria is the increased support from both government initiatives and private sector players. The Nigerian government has implemented policies and programs aimed at fostering entrepreneurship, such as tax incentives for small businesses and funding schemes for start-ups. Besides, the Nigerian government has recognized the importance of youth entrepreneurship in driving economic growth and job creation. As a result, several initiatives have been put in place to support young entrepreneurs in Nigeria. One such initiative is the 3 Million Technical Talent Program aimed at grooming three million youth through a Public-Private Partnership currently shortlisting for participants and training organizations. Also, the Youth Entrepreneurship Support (YES) program which has provided training, mentorship, and access to funding for young entrepreneurs. Through this program, aspiring entrepreneurs can learn essential business skills and receive guidance from experienced mentors who can help them navigate the challenges of starting a business. In addition to YES, there are various grants and loans available specifically for young entrepreneurs. The Bank of Industry (BOI), for example, offers low-interest loans to youth-led businesses through its Youth Entrepreneurship Support Fund. Furthermore, the government and private sector organizations have established technology hubs and innovation centers across the country to provide infrastructure and resources for young entrepreneurs working in sectors such as technology and digital innovation. These hubs serve as collaborative spaces where startups can connect with like-minded individuals and gain access to valuable networks. Moreover, the government has implemented policies aimed at creating an enabling environment for startups. This includes simplifying registration processes, reducing bureaucratic hurdles, and providing tax incentives for small businesses. Overall, the Nigerian government's support systems are actively fostering youth entrepreneurship by providing training opportunities, financial assistance, infrastructure support, and favorable policies. These initiatives not only empower young people to start their businesses but also contribute significantly towards economic development in Nigeria. On top of that, the private sector in Nigeria offers a plethora of opportunities for young entrepreneurs to start and grow their businesses. With its vibrant economy and dynamic business environment, the private sector is a promising avenue for youth entrepreneurship. An area where young entrepreneurs can find opportunities is in technology and innovation. The tech industry in Nigeria has witnessed significant growth over the years, with various startups emerging and making waves both locally and internationally. From mobile apps to fintechs and e-commerce platforms, there are endless possibilities for young entrepreneurs to tap into this booming sector. Another area of opportunity lies in agriculture. Nigeria has vast agricultural potential, but it requires innovative solutions to address challenges such as food security and sustainable farming practices. Young entrepreneurs can venture into agribusiness by exploring areas such as organic farming, value-added processing, or even distribution channels that connect farmers directly with consumers (tech can help here). Additionally, the retail sector presents lucrative opportunities for youth entrepreneurs. With a growing middle-class population and increasing consumer spending power, there is a demand for unique products and services. Whether its fashion boutiques, niche stores selling handmade crafts, or online marketplaces catering to specific niches -- the possibilities are endless to the passionate dreamer. Furthermore, partnerships with established companies can provide valuable support and resources for young entrepreneurs. Many corporations have realized the importance of fostering innovation through collaborations with startups. Through mentorship program To cap it up, the private sector in Nigeria holds immense potential for youth entrepreneurship. With sectors like technology, agriculture, retail, and strategic partnerships s or funding initiatives like corporate venture capital funds, these partnerships can help accelerate the growth of youth-led businesses. Aspiring youth entrepreneurs need to stay informed about industry trends and network within their chosen sectors. Attending conferences or joining professional associations can open doors to new opportunities while also providing access to mentors who can offer priceless guidance along the entrepreneurial journey. Offering diverse avenues for young innovators to build successful ventures. By leveraging these opportunities through the application of technology, young entrepreneurs can contribute to Nigeria's economic growth while also creating employment opportunities for others. We must however understand that starting a business is never easy, and young entrepreneurs in Nigeria face their fair share of challenges. A major obstacle they encounter is limited access to capital. Banks and traditional funding sources are often hesitant to provide loans to young entrepreneurs without a proven track record or collateral. Another challenge is the lack of infrastructure and support systems for startups. Inadequate electricity supply, poor road networks, and limited internet connectivity make it difficult for young entrepreneurs to operate efficiently. Additionally, the scanty number (relative to our population) of mentoring programs and business incubators leaves many feeling lost and unsupported. Navigating the bureaucratic hurdles can be overwhelming for aspiring youth entrepreneurs. The process of registering a business, obtaining licenses, and permits, and dealing with government agencies can be time-consuming and frustrating. Furthermore, there is fierce competition from established businesses that have dominated industries for years. Breaking into these markets requires creativity, innovation, and resilience. Also, cultural biases can hinder the success of young entrepreneurs in Nigeria. There may be societal pressure to pursue more traditional career paths rather than taking risks as an entrepreneur. Despite these challenges, many determined Nigerian youth continue to defy the odds by starting successful businesses across various sectors such as technology, agriculture, fashion, and entertainment. Aspiring young entrepreneurs must remain resilient in the face of adversity while seeking out alternative funding options like crowd funding or angel investors. They should also actively seek mentoring opportunities through networking events or online platforms like Micro Mentor where experienced professionals offer guidance. Through collaboration with stakeholders including industry leaders, business associations, and government bodies,the entrepreneurial ecosystem in Nigeria can become more supportive, resulting in increased opportunities for aspiring youth. Nigeria has been witnessing a surge in youth entrepreneurship, with many inspiring success stories emerging from various sectors. These young entrepreneurs have not only created thriving businesses but also contributed to the country's economic growth and development. An interesting success story is that of Chinedu Echeruo, founder of HopStop, a mobile app for public transit directions. After studying at Harvard Business School, Echeruo saw a gap in the market and developed an innovative solution to help people navigate cities more efficiently. His app gained immense popularity and was later acquired by Apple for a reported \$1 billion. Another remarkable example is Mark Essien, founder of Hotels.ng, Nigeria's largest hat connects hospitals with blood banks across Lagos. Her innovative approach to addressing the critical issue of blood shortage in Nigeria has saved countless lives and earned her global ronline hotel booking platform. Despite facing numerous challenges along the way, Essien remained persistent and determined to make his business succeed. Today, Hotels.ng has grown exponentially and continues to revolutionize the travel industry in Nigeria. Furthermore, Temie Giwa-Tubosun founded LifeBank -- a digital blood bank tecognition. These success stories highlight the immense potential that exists for young entrepreneurs in Nigeria. It demonstrates how their creativity, resilience, and dedication can lead them towards building successful ventures that not only generate profits but also create positive social impact. The achievements of these youth entrepreneurs serve as inspiration for aspiring business owners across Nigeria. They showcase what can be accomplished with determination and hard work despite facing obstacles unique to the Nigerian business landscape. The success stories of these youth entrepreneurs demonstrate that age should never be seen as an obstacle when it comes to starting one's own business in Nigeria. With increasing support systems from both government initiatives and private sector opportunities, young Nigerians are well-positioned to take advantage of start-up opportunities available within their reach(if only they could stay doggedly committed to their dream pursuit). By harnessing their innovative ideas, leveraging available resources, and persevering through challenges, the future of Starting a business in Nigeria can be an exciting and rewarding endeavor for young entrepreneurs. However, it is important to have the right knowledge and resources to navigate through the challenges that may arise. Here are some tips and resources that can help you get started on your entrepreneurial journey: 1\. Research: Before going into any business venture, it is crucial to conduct thorough research about the market trends, target audience, competition, and potential demand for your product or service. 2\. Business Plan: Create a well-thought-out business plan that outlines your goals, strategies, financial projections, and marketing plans. This will serve as a roadmap for your startup.3. Funding Options: Explore various funding options such as grants, loans from financial institutions or angel investors, and crowdfunding platforms like Kickstarter or GoFundMe. 4\. Networking: Build connections with other entrepreneurs and professionals in your industry through networking events or online communities like LinkedIn. 5\. Mentorship. Programs: Seek guidance from experienced mentors who can provide valuable insights and advice based on their own entrepreneurial experiences. 6\. Government Support: Take advantage of government programs such as Small Business Development Centers (SBDCs) which offer training programs and access to resources for startups. 7\. Incubators/Accelerators: Finding the right idea. Before your business can take off, you need to have a viable, profitable business plan. \... **MODULE 4: TYPES OF ENTREPRENEURSHIP** a\. Small business entrepreneurship A majority of businesses are small businesses. People interested in small business entrepreneurship are most likely to make a profit that supports their family and a modest lifestyle. They aren\'t seeking large-scale profits or venture capital funding. Small business entrepreneurship is often when a person owns and runs their own business. They typically hire local employees and family members. Local grocery stores, hairdressers, small boutiques, consultants and plumbers are a part of this category of entrepreneurship. b\. Large company entrepreneurship Large company entrepreneurship is when a company has a finite amount of life cycles. This type of entrepreneurship is for an advanced professional who knows how to sustain innovation. They are often a part of a large team of C-level executives. Large companies often create new services and products based on consumer preferences to meet market demand. Small business entrepreneurship can turn into large company entrepreneurship when the company rapidly grows. This can also happen when a large company acquires them. Companies such as Microsoft, Google and Disney are examples of this kind of entrepreneurship. c\. Social entrepreneurship An entrepreneur who wants to solve social problems with their products and services is in this category of entrepreneurship. Their main goal is to make the world a better place. They don\'t work to make big profits or wealth. Instead, these kinds of entrepreneurs tend to start nonprofits or companies that dedicate themselves to working toward social good. d\. Innovative entrepreneurship Innovative entrepreneurs are people who are constantly coming up with new ideas and inventions. They take these ideas and turn them into business ventures. They often aim to change the way people live for the better. Innovators tend to be very motivated and passionate people. They look for ways to make their products and services stand out from other things on the market. People like Steve Jobs and Bill Gates are examples of innovative entrepreneurs. e\. Hustler entrepreneurship People who are willing to work hard and put in constant effort are considered hustler entrepreneurs. They often start small and work toward growing a bigger business with hard work rather than capital. Their aspirations are what motivates them, and they are willing to do what it takes to achieve their goals. They do not give up easily and are willing to experience challenges to get what they want. For example, someone who is a hustler is willing to cold call many people in order to make one sale. f\. Imitator entrepreneurship Imitators are entrepreneurs who use others\' business ideas as inspiration but work to improve them. They look to make certain products and services better and more profitable. An imitator is a combination between an innovator and a hustler. They are willing to think of new ideas and work hard, yet they start by copying others. People who are imitators have a lot of self-confidence and determination. They can learn from others\' mistakes when making their own business. g\. Researcher entrepreneurship Researchers take their time when starting their own business. They want to do as much research as possible before offering a product or service. They believe that with the right preparation and information, they have a higher chance of being successful. A researcher makes sure they understand every aspect of their business and have an in-depth understanding of what they are doing. They tend to rely on facts, data and logic rather than their intuition. Detailed business plans are important to them and minimize their chances of failure. h\. Buyer entrepreneurship A buyer is a type of entrepreneur who uses their wealth to fuel their business ventures. Their specialty is to use their fortunes to buy businesses that they think will be successful. They identify promising businesses and look to acquire them. Then, they make any management or structural changes they feel are necessary. Their goal is to grow the businesses they acquire and expand their profits. This kind of entrepreneurship is less risky because they are purchasing already well-established companies. i\. Corporate Entrepreneurship This is a type of entrepreneur who uses their employer\'s wealth to fuel their business ideas. Their specialty is to use their talent to make their employer to build or create businesses within the ones they are employed to run because they think the new business will be success. They start such entrepreneurial business as a project within the existing one. They are usually sponsored by their employers or being supported by them. **MODULE 5: CHARACTERISTICS OF ENTREPRENEURS** Vision. Every venture starts with a vision: the desired direction of the business. \... Risk tolerance. \... Innovation. \... Discipline. \... Self-reliance. \... Adaptability. \... Leadership. \... Creativity. Traits of successful entrepreneurs\--Do you have what it takes? Strong leadership qualities. Leaders are born, not made. \... Highly self-motivated. \... Strong sense of basic ethics and integrity. \... Willingness to fail. \... Serial innovators. \... Know what you don\'t know. \... Competitive spirit. \... Understand the value of a strong peer network. Successful entrepreneurs, from Henry Ford to Steve Jobs, share similar qualities with one another. To see how you rank against these distinguished entrepreneurs, do you share at least half of these qualities? 1\. Strong leadership qualities Leaders are born, not made. Do you find yourself being the go-to person most of the time? Do you find people asking your opinion or to help guide or make decisions for them? Have you been in management roles throughout your career? A leader is someone who values the goal over any unpleasantness the work it takes to get there may bring. But a leader is more than just tenacious. A leader has strong communication skills and the ability to amass a team of people toward a common goal in a way that the entire team is motivated and works effectively to get there as a team. A leader earns the trust and respect of his team by demonstrating positive work qualities and confidence, then fostering an environment that proliferates these values through the team. A leader who nobody will follow is not a leader of anything at all. 2\. Highly self-motivated You probably know from knowing even a little bit about some of the most famous business entrepreneurs in history that leaders are typically pretty intense personalities. Nobody makes progress by sitting back and waiting for it to find them. Successful people go out into the world and invoke change through their actions. Typically, leaders enjoy challenges and will work tirelessly to solve problems that confront them. They adapt well to changing situations without unraveling and are typically expert of helping their teams change with them by motivating them toward new goals and opportunities. Often you will learn that successful entrepreneurs are driven by a more complete vision or goal than simply the task at hand and able to think on a more universal level in that regard. They are also often very passionate about their ideas that drive toward these ultimate goals and are notoriously difficult to steer off the course. 3\. Strong sense of basic ethics and integrity Business is sustainable because there is a common, understood code of ethics universally that underpins the very fabric upon which commerce is conducted. While cheaters and thieves may win in the short term, they invariably lose out in the long run. You will find that successful, sustainable business people maintain the highest standards of integrity because, at the end of the day, if you cannot prove yourself a credible business person and nobody will do business with you, you are out of business. With importance in working with clients or leading a team, effective leaders admit to any error made and offer solutions to correct rather than lie about, blame others for, or dwell on the problem itself. 4\. Willingness to fail Successful entrepreneurs are risk takers who have all gotten over one very significant hurdle: they are not afraid of failure. That\'s not to say that they rush in with reckless abandon. In fact, entrepreneurs are often successful because they are calculating and able to make the best decisions in even the worst of cases. However, they also accept that, even if they make the best decision possible, things don\'t always go according to plan and may fail anyhow. If you\'ve heard the old adage, \"nothing ventured, nothing gained,\" that\'s exactly what it\'s saying: do not be afraid to fail, put it out there and give it your best shot. Again, there\'s not one successful entrepreneur out there sitting on his couch asking, \"what if?\" 5\. Serial innovators Entrepreneurs are almost defined by their drive to constantly develop new ideas and improve on existing processes. In fact, that\'s how most of them got into business in the first place. Successful people welcome change and often depend on it to improve their effectiveness as leaders and ultimately the success of their businesses as many business concepts rely on improving products, services and processes in order to win business. 6\. Know what you don\'t know While successful entrepreneurs are typically strong personalities overall, the best have learned that there\'s always a lesson to be learned. They are rarely afraid to ask questions when it means the answers will provide them insight they can then leverage to effect. Successful entrepreneurs are confident, but not egotistical to the point that their bull-headedness is a weakness that continually prohibits them from seeing a bigger picture and ultimately making the best Entrepreneurs enjoy a challenge and they like to win. They would have to since starting a business is pretty much one of the biggest challenges a person can take on in their lifetime. I decisions for the business. 7\. Competitive spiritn business it\'s a constant war with competition to win business and grow market share. It\'s also a personal challenge to use all of this to focus inward and grow a business from nothing into a powerhouse that either makes a lot of money or is so effective that it is sold or acquired for a profit as well. 8\. Understand the value of a strong peer network In almost every case, entrepreneurs never get to success alone. The best understand it takes a network of contacts, business partners, financial partners, peers and resources to succeed. Effective people nurture these relationships and surround themselves with people who can help make them more effective. Any good leader is only as good as those who support him. **Entrepreneur as an Investor** Hornby (2006) defines an investor as someone who spends his energy, time, efforts, financial resources, etc. on something he considers to be good or useful in anticipation that it will yield benefits. Finance is a fundamental issue in the development of an entrepreneurship. An entrepreneur relies heavily personal savings, contributions from friends, relations and business partners as well as loan from the banks. Modern businesses derive their finances from two sources which include owned capital and loan capital. **Own Capital** The own capital available to an entrepreneur is made up of the personal savings, contributions from family, friends and relations. It also includes support from business partners. \(i) Personal Savings -- Many individuals during their working life he decided to save and that is the money he used in setting up his business. We have a lot of sole traders who got money from this method to setup their business. \(ii) Borrowing particularly from Friends and Relatives -- It is common, among families that once their brothers are willing to do business, they give him a helping hand by borrowing him some amount of money to start his business, when he starts making profit, he will pay. This borrowing is not limited to brothers alone; friends and relatives equally help out in this situation for people to start up a one man business. \(iii) Credit Purchase from Manufacturers or Wholesalers -- Sole traders get financed through credit buying from the manufacturers or a wholesaler by selling goods to sole traders at credit the wholesalers are financing a sole trader. \(iv) Donations from Friends and Relatives -- Friends and relatives can dash you money purposely to help you continue with your business. **Entrepreneurship as a Business Activity** We had earlier on described entrepreneurship as the activities of the entrepreneur geared towards identifying an innovative idea, to seize an opportunity, mobilize money and management skills, and take calculated risks to open markets for new products, processes and services. Business is all of the activities of an individual or group of individuals in producing and distributing goods and services to customers. According to them, an entrepreneur or a business wants to identify the needs, wants, goals, values etc. of the potential and prospective buyer or consumer with a view to developing a product or service that would be tailored to satisfying these needs, wants, goals, values etc. The business of an entrepreneur therefore involves the following activities. **MODULE 6: CHALLENGES OF ENTREPRENEURSHIP** 1. Technology 2. Globalisation 3. Time management... 4. Hiring and managing employees. \... 5. Marketing and sales. \... 6. Competition. \... 7. Adapting to change. 8. Managing finance. 9. Lack of funding... **MODULE 7: FUNCTIONS OF AN ENTREPRENEUR** 1 Risk Taking - In the last unit, we had identified that willingness to take risk was one of the characteristics of an entrepreneur. This characteristic stands an entrepreneur out from among the people just as it is one of the important functions performed by him. Any entrepreneur is a risk taker; they take calculated risks whether formally or informally. Mostly they take risk informally because they make calculation within their brain on what to buy, keep and sell latter. They equally try to figure out the probability of success of their business once they are convince that it is high, they will go into such business, which means they take risk. Marketing research is undertaken by entrepreneur consciously and unconsciously. If this research is carried out, they venture into such businesses. Entrepreneurs are not tired of trying. If they invest in a business and they fail, they still try again so that they can succeed. Brown 1997 say: an entrepreneur has what he callS calculating risk. \(1) Is the goal worth the risk? \(2) How can I maximize the risk? \(3) What information do I need before I take the risk? \(4) Why is this risk important? \(5) Am I willing to try my best to achieve the goal? \(6) What preparation do I need to make before I take the risk? \(7) What are the biggest obstacles to achieving my goal? The goal of every manager is to create a surplus (in business organisations, this means profit). Clear and verifiable objectives facilitate measurement of the surplus as well as the effectiveness and efficiency of managerial actions. Producing Production is the transformation of inputs such as raw materials through the transformation processes to produce outputs such as finished products that are available and highly affordable. The duty of the entrepreneur is to harness all human and material resources with a view to improving production and distribution efficiency such that the goods get to the final consumers. The entrepreneur ensures that necessary funds are provided from time to time to source for the needed raw materials at the right quantity and quality, right price and specification to produce the products desired by the consumers. He will also ensure proper inventory management so as to minimise, in total, the costs associated with stock. Over-stocking are stocks which are in excess of current needs and it results in capital being tied up and increased costs of storage and obsolescence. Under-stocking may result in costly production hold-ups, which may mean increased costs of goods. It also interrupts production, making machines and men idle and causing sales loss. However, there are benefits to be derived by an entrepreneur when a proper stock management is in place, and these include: 1\. ensuring proper execution of policies covering procurement and use of materials and make possible rapid shifts in business to meet changes in market conditions. 2\. obtaining economics through a reduction in needless variety of items carried in stock 3\. helping to eliminate delays in production caused by non-availability of required materials and tools. 4\. avoiding over accumulation of inventories and tools and thereby maintain the minimum investment consistent with production needs and procurement policies. 5\. reducing inventory losses caused by inadequate inspection of incoming materials, damaged, deterioration, obsolescence, waste or theft. 6\. providing balance stores records to serve as a reliable basis for effective production planning, economical procurement, cost accounting and preparation of financial reports. Exchange Marketing takes place when people decide to satisfy needs and wants through exchange. Exchange is therefore the act of obtaining a desired object from someone by offering something in return. Exchange is only one of the many ways people can obtain a desired object. For example, hungry people can find food by hunting, fishing or gathering fruits. They could offer money, another food or a service in return for food. Marketing focuses on this last option. As a means of satisfying needs, exchange has much in its favour, people do not have to depend on others, nor must they possess the skills to produce every necessity for themselves. They can concentrate on making things they are good at in exchange for the needed items made by others. Thus, exchange allows a society to produce much more than it needs. However, Kotler (1984) states that for exchange to take place, it must satisfy five conditions, namely: There are at least two parties; Each party has something that might be of value to the other party; Each party is capable of communication and delivery; Each party is free to accept or reject the offer; Each party believes it is appropriate or desirable to deal with the other party. These five conditions make exchange possible. Whether exchange actually takes place, however depends on the parties coming to an agreement. It is often concluded that the act of exchange has left both of them better off, or at least not worse off. Hence, exchange creates value just as production creates value. It gives people more consumption possibilities. Relationship Marketing Relationship marketing is a process of creating, maintaining and enhancing strong value added relationships with customers and other stockholders. Markets A market is defined as a set of all actual and potential buyers of a product and service. These buyers share particular needs or wants that can be satisfied through exchange. The size of a market depends on the need of people with common needs and that has resources to engage in exchange, and is willing to offer these resources in exchange for what they want. Originally, the term 'market' stood for the place where buyers and sellers gathered to exchange their goods, such as a village square. However, Economists often use the term to refer to a collection of buyers and sellers who transact in a particular product class, such as clothing market electronic market, cattle market, etc. **Functions of Marketing** The functions of marketing can be classified into three: namely merchandising function, physical distribution and auxiliary function. Merchandising Function 1\. Product Planning and Development: Product planning starts with idea generation, idea screening and development of a prototype product. It also takes into consideration the purchasing power of the consumers, taste and market segmentation. Research and development is established for the analyses of ideas generated. 2\. Standardization and Grading: This is concerned with setting certain standards/levels to accomplish the produced goods. This is carried out by the production department and regulated by some government agencies, such as Standards Organization of Nigeria. For example, Sprite is 30 cl, Coke is 35 cl, etc. 3\. Buying and Assembling: Here, we are concerned with the marketing institutions that purchase goods or services at cheaper prices in order to resell at minimum prices to the end-users. These marketing institutions include the wholesalers, retailers and agents. 4\. Selling: This is concerned with selling of the finished goods to the end-users either through the manufacturers or the marketing channels. In order to get the attention of their target consumers, they embark on various promotional strategies, such as discounts, promo tools, bundle sales, bonuses, etc. Physical Distribution 1\. Storage: Storing of goods to meet future demands and for time and other utilities. 2\. Transportation: The movement of goods from the manufacturer down to the target consumers. This includes material handling, warehousing, etc. Auxiliary Functions 1\. Marketing Finance: That is, allowing credits to customers and as well as obtaining credit from customers, such as Banks, individuals etc. 2\. Risk-Bearing: Risk means 'uncertainty'. Entering into a business entails risks, such as loss of items, road attack, weather risk, etc. 3\. Market Information: Gathering necessary information about the markets, the target consumers in terms of their purchasing power, taste, colour, choices, competition, and their products. The Role of Marketing 1\. The first and foremost role is that it stimulates potential aggregate demand and thus enlarges the size of the market. You might ask how does it help in the economic growth of a country?. The answer is that through stimulation of demand people are motivated to work harder and earn additional money (income) to buy the various ideas, goods and services being marketed. An additional advantage which accrues in the above context is that it accelerates the process of monetizing the economy, which in turn facilitates the transfer of investible resources. 2\. Another important role which marketing plays is that it helps in the discovery of entrepreneurial talent. Peter Drucker, a celebrated writer in the field of Management, makes this point very succinctly when he observes that marketing is a multiplier of managers and entrepreneurs. 3\. It helps in sustaining and improving the existing levels of employment. You may ask, how does it happen? The answer is that when a country advances economically, it takes more and more people to distribute goods and proportionately a lesser number to make them. That is, from the employment point of view, production becomes relatively less significant than marketing and the related services of transportation, finance, communication, insurance, etc. which spring around it. Marketing Management philosophies Marketing management has been described as carrying out tasks to achieve desired exchange with target markets. But then what philosophy should guide these activities. What weight should be given to the interests of the organization, customers and society that carry out these activities? This section examined five philosophies that underlie marketing activities. 1\. Production Concept -- The production concept holds that consumers would favour products that are available and highly affordable. Management therefore should focus on improving production and distribution efficiency. This concept is one of the oldest philosophies that guide sellers. The production concept is a useful philosophy which applies to: 2\. The Product Concept -- The product concept holds that 'consumers will favour products that offer the most quality, performance, and innovative features, and that an organization should thus devote energy to making continuous product improvements'. In modern marketing, the product concept plays an important role. This is because; consumers are diverse in their needs and wants and sparsely distributed. Thus, they need to be served base on their peculiarity of needs and environmental consideration. For example, the Toyota and Honda companies adopt this concept for their brands of cars for Nigeria markets. In hospitality industry, services are provided base on the expectation of the guests. This is why rooms in the same hotel are not charged equally. However, marketing executives should be careful in applying this concept. Quality and innovative features may involve additional production costs, which in the long-run; the consumers might be compelled to bear the burden. Thus, income of the consumers and their willingness to pay for these new features should be sought. Otherwise, the product concept can lead to 'market myopia'. 3\. The Selling Concept -- The selling concept or sales concept is another common approach adopted by some firms in penetrating their target markets. The selling concept holds that consumers, if left alone will ordinarily not buy enough of the organization's products. The organization must therefore undertake an aggressive selling and promotion effort. The concept assumes that consumers having shown buying inertia or resistance and has to be coaxed into buying more, and that the company has various strategies of effective selling and promotion tools to stimulate more buying. This selling concept is being practiced by both profit and non-profit making organizations. For instance, in an insurance industry, the selling concept is practiced aggressively with 'unsought goods'. These are goods that buyers normally do not think of buying, such as insurance policies. Thus, various sales techniques are used to locate potential and prospective buyers. 4\. The Marketing Concept -- The marketing concept is a business philosophy that arose to challenge the previous concepts. The marketing concept holds that the key achieving organizational goals consists in determining the needs and wants of target markets and delivering the desired satisfactions more effectively and efficiently than competitors. This concept concern it with: Find wants and fill then Make what will sell instead of trying to sell what you can make Love the customer and not the product, etc The selling and marketing concepts contrasted. Selling focuses on the needs of the sellers; marketing focus on the needs of the buyers. Selling is pre-occupied with the sellers' need to convert his product into cash; marketing concerned itself with idea of satisfying the needs of the customers by means of the product and whole cluster of things associated with creating, delivery and finally consuming it. In selling, management is sales-volume oriented; while in marketing, management is profit oriented. In selling, planning is short-run oriented in terms of today's products and markets. However, in marketing, planning is long-run oriented in terms of new products, tomorrow's markets and future growth. (That is, the marketing concept is a philosophy of business that states that the customers' want-satisfaction is the economic and social justification for a firm's existence). This thus implies that all company's activities must be devoted to finding out what the customers want and then satisfying those wants, while making profits in the long-run. The marketing concept rests on four main pillars, namely: A market focus Customer orientation Coordinated marketing and Profitability **MODULE 8: CONCEPTS OF INNOVATION AND BUSINESS DEVELOPMENT PROCESS** Fundamentally, innovation has to do with changes leading to improvement in the quality and quantity of products as well as techniques of doing things. Innovation is dynamic and creates new things out of existing ones. Through innovation, the entrepreneur introduces new production techniques, new commodities, improve on existing ones, open up new markets, explore new source of raw materials and design new techniques of management. Research and Development Programs are formal avenues of introducing or inculcating innovative skills in the entrepreneur. These skills are what the entrepreneur translates into business establishment and development. The process of entrepreneurship starts from the generation of business idea, through implementation to the realization of output and profit. **(A) Business ideas** Business ideas and opportunities come from a variety of ways. These include: i\. **Consumers**: Opinions, information and complaints of consumers can be useful source of information as to what the consumer wants. The entrepreneur can obtain this from market survey of preferences, discussion, age, socio-cultural background, biological and wealth status of the consumers etc. The entrepreneur can map out critical areas of consumer's need, deficiency and inefficiency and exploit it. ii\. **Existing business**: Entrepreneurs and intra-preneurs can get business clues by constantly monitoring and evaluating market performance of products and services of existing businesses. iii\. **Research and development**: The entrepreneur as an agent of change, should constantly explores and gets involved in research to develop new products, improving on existing ones or establish new ways of production. iv\. **Distributive channels**: Distributive trade both at local and international levels provide opportunities for ancillary industries to spring up. v\. **Governmental activities**: Governmental activities such as registration of business, patent right and government agencies provide opportunity for business. Also government programmes of economic, social and community development provides opportunities for business/entrepreneur. vi\. **Adverts**: Advertisement in News print and radios/TV, bill boards are a source of new line of business to the entrepreneur. vii. Sundry activities: The entrepreneur can lean about things needed by the consumers but which are not supplied from activities such as marketing, seminars/symposia, marriages, burial ceremonies, picnic centers, traveling, sporting activities, catalogues etc. **FLOW OF BUSINESS PROCESS** **(B)** **Developing a Business Idea** The translation of business idea into a business venture takes the following process. When a business idea struck an entrepreneur, the first thing is to write it down to avoid forgetting. The various ideas that have been so recorded are then screened and the feasible or plausible and more profit-oriented ones selected for implementation. A good feasibility or business plan must be systematic and integrates market, finance, production and human resources. It should have (Esiomo, 2010): \(i) **A clear mission statement** of the business line to be involved. Think Business ideas Record Business Idea Assess Feasibility Studies. Business Plan Implement Ideas by starting the venture Output of goods/services Sales and revenue maximization Planning and expansion \(ii) **A design of production**, process, detail logistic and operational activity plan of a complete business circle. \(iii) **A detailed marketing** and sales plan. Forecasting sales and identifying Consumers problems with existing products. \(iv) **An organizational plan** of administrative relations, legal relations, duty schedule, customer service etc. \(v) **A detailed financial** record plan projected for a 3-year period, explaining income, expenses and profit. \(vi) **Evaluation of business** operations and objectives. \(vii) **Provision for minimizing risk** and uncertainty e.g. starting a business that the entrepreneur is familiar with or that has been tested in that environment of operation. **(C) Converting Business Dream to Reality** Just as it could be difficult choosing the best business to pursue, so also is the difficulty to get it started! It may take many years to get off the ground a business plan. The entrepreneur needs to struggle to obtain the basic and necessary facilities to get the new business off the ground. He should not spend the whole time planning but review his initial plan, jump in and get started. He should stop talking about the business instead of starting it up because action speaks louder than voice. Execute your business with excellence focusing on customers' needs/satisfaction. Try to avoid mistakes and when you make one quickly correct it. Do not jump into cut throat competition especially with older successful entrepreneurs or business persons but instead involve in a life time friendship and a possible franchise. Explore and access government's policies and infrastructural supports that will help you translate your innovative dreams into reality so as not to remain a mere dreamer. Constantly search for new, competitive and innovative ideas to remain relevant in your business and do not go into huge debt to start a business. The New Business and the Business Plan When starting a business, there are many issues that the entrepreneur must consider. The business plan helps the entrepreneur to fully consider all of the topics that must be addressed in order for the business to be successful. It is especially helpful to develop the plan and give it to others for feedback. Often, the entrepreneur is so optimistic that the flaws in the proposed business are not evident. Giving the plan to others who objectively may provide insight on how potential customers will see the business and may prevent costly mistakes. **New Product Development** Gana (2009) states that the life-wire of any manufacturing company is the 'Product' it produced. Products are of various types and qualities. A layman calls them generally products, but the professional is concerned about the level of stage and geographical location of such products. Hence, the issue of old and new products come to play. An old product is such a product that has been existing in a particular market and generally accepted by the target markets for period of time. It is regarded as old because the existing features have not changed or improved upon. However, as the needs of human beings are dynamic, and as well as the society transcend from one level to another/from one stage of development, then products cannot avoid remaining old or unchanged. Hence, the concept of new product comes in; this is in response to yearning and aspirations of consumers and the society at large. Therefore new definition varied from one place to another. This is because by definition some products are not new in real sense. This unit concerned itself with the various definitions of a new product, i.e. process of creating a new product **Reasons for New Product Failure** Commercializing of new product does not mean that such product is totally free from defeats. The new products may be accepted at the early stay, but reactions may stem from the competitors, changes in government policies, the cultural influence, etc. on the products would cause it to fail after commercialization. Stanton (198) provides major reasons why products fail: 1\. Inadequate market analysis -- Over estimating potential sales of the new product inability to determine buying motives and habits, and misjudgment as to what the market unit is. 2\. Product deficiencies -- Poor quality and performance, complicated products and products that do not offers significant advantage over competitions products. 3\. Lack of effective marketing effort -- Failure to provide sufficient follow-up after introduction of the new products, and failure to train marketing personnel for new products and new markets. 4. Higher cost than anticipated -- This led to higher prices, which in turn led to lower sales volume than anticipated. 5\. Competitive reaction -- Speed and ease of copying an innovation soon overcrowded the market. 6\. Poor timing: - The usual mistake here is to introduce a product too late, premature entry, etc. 7. Production problems: - Companies that could not produce sufficient quantities to meet demand, thus competition gained an unanticipated share of market. It should however be noted that the above factors is into exhaustive. Reaction and failures of new products depends on the nature of the product, technological availability and accessibility and knowledge of the market and consumer needs and wants. **MODULE 9: BUYING AN EXISTING BUSINESS** For someone who is seeking the independence of small business ownership but who is not interested in undergoing the trials so frequently encountered in starting a new business, the purchase option should be explored. While both routes -- starting a new business and buying an existing one -- have as their goal ownership of a business, the routes themselves differ considerably. In the previous unit, we examined the challenge of starting a business. In this unit we would explore the process leading to the purchase of a business. Our discussions will lead to comparing the purchase and start-up options, the process for finding a business to buy is then discussed, followed by a description of the processes used to determine the value of a business. The last topic is negotiating; we describe it as a process and identify the sources of power held by the participants. **3.1 Advantages of Buying an Existing Business:** A number of reasons for buying an existing business, rather than starting a new one, can be identified. There is less risk, it is easier, and there is a chance to buy the business at a bargain price. These points include: **1. Less Risk** Regardless of how much pre-entry planning has been done, there is always the chance that a critical factor has been overlooked, that our investigation missed some fatal flaw. If such misfortunate awaits the entrepreneur, it will not matter that all other elements are as good as hoped. For example, imagine you spotted the opportunity to open a bookstore to serve students at your school. The university-run facility looks successful to you despite what seems to be a lessthan-total dedication to customer satisfaction. There is a large facility across the street from campus that would be suitable in terms of both size and costs. The school has about 14,000 students, each of whom buys four to five books per semester. You anticipate that you should easily capture 10 percent of the market and, with book prices and profit margins being what they are, you'll make handsome profits even during the first semester. Everything points to go, until you discover that professors' book selection information goes only to the bookstore. The information is not available to anyone else until it is too late to order from the publishers. How viable does your new business idea look now? While more exhaustive investigation into how bookstores do business could have uncovered the problem, the point of the illustration is that every business has a number of elements that must mesh if the enterprise is to accomplish its goals. When we start a business from the scratch, we occasionally do not know what these elements are. By buying a business we are able to side-step that problem, thereby reducing the level of risk we face. **2. Less Time and Effort Required** A moment's reflection tells us that any firm needs enough customers to generate the sales volume it must have to meet its expenses. Seldom do start-ups achieve this base until they have been in business for a while; often they need a year or more. The early days of many businesses are in large part devoted to intensive efforts to expand the customer base. Furthermore, the operations of any business require more than customers. Employees must be hired, suppliers must be located, and service providers must be lined up. Each of these contacts takes time; arrangements must be made, details must be worked out and costs negotiated. Every entrepreneur has a number of groups or individuals with who to deal as the business gets off the ground. Beyond these dealings, many details require careful planning before the business can open. Inventory, furniture, layout, and physical facilities must be given attention -- in some cases, painstaking attention. Items like these can require analysis, decision making, and planning. There is no escaping these requirements for the start-up entrepreneur, but the buyer of an ongoing business are spare such demands. **3. The Possibility of Buying at a Bargain Price** Sometimes businesses are sold for less than they are worth. This possibility gives us the last advantage of buying, instead of starting, a business. Obviously, not all businesses are underpriced; many are overpriced, and some are correctly priced. The chance of a business being priced too low seems to be largely dependent on three factors: the owner's reasons for selling, the owner's financial sophistication, and the way in which the sale is handled. The owner's reasons for selling the business frequently have an important influence on the price demanded for the business. For example, an owner who is involved in the operation of the firm, who enjoys good health, and who has no plans other than to "may be try something else" is not likely to accept one cent less than what he or she feels is fair. On the other hand, someone who is no longer involved in managing the business, has health worries, and has concrete plans to move on to the next phase of his or her life may want to reach a prompt conclusion by offering an attractive price. **Disadvantages of Buying an Existing Business** As you can see, there are many good reasons for buying, rather than starting a business, but some problems or disadvantages should be acknowledged. Put differently, although an ongoing business does not require the entrepreneur to look after the many details and problems of a start-up, it does provide certain limitations. Before an entrepreneur decides on the buy option, he or she should understand the kinds of inherent limitations that may be encountered in the purchase of an existing business. These limitations or disadvantages, can be categorised as external (environmental), internal, and the impact of the owner's departure. ***The Environment*** One reason for selling a business is inadequate sales volume. If sales levels are low, even an extremely well-run operation can fall short of the profit level needed to support the owner. Firms with low sales either face too much competition or are in a market that is too small. For example, a bakery in a community of 100,000 may face such difficult competition that it will be stuck with marginal sales volume until it finds a more effective way to compete. That same bakery in a community of 2,500 may have no competition but nonetheless face the same inadequate sales problem. The problem looks the same, but in the first instance, it is caused by tough competition, something the store can respond to; in the second case, the market is simply too small. There are not enough customers in a town of 2,500 to support the store, and no amount of hardwork or clever promotion is going to change that. ***Internal Problems*** These are problems unique to the business. Perhaps the most vexing of these problems is one of poor corporate image or reputation. We have all seen signs telling us a business is "under new management". The real message is "We know you have not been happy with the company. Please give us another try". It is impossible to say how effective the appeal is in winning back customers, but it seems clear that there would be no such announcement if there weren't some concern about image or reputation. Another difficult type of problem occasionally faced by buyers is provided by employees. A history of employee-management conflict will not be erased by a change in ownership. The employees, or their union representatives, may use the opportunity to improve relations, or they may dump on the new owner a number of unsettled grievances. The nature of their reception of the new boss is obviously crucial and must be carefully assessed. Even a friendly reception, however, can be accompanied by some powerful union restrictions on any personnel changes, no matter how reasonable and badly needed they may be. Another example of an internal problem is something as basic as location. This factor is particularly important, of course, in relating. If the business is in a mall or shopping district that has developed a bad reputation, the business will surely suffer. If the business depends on automatic traffic, any future or even potential re-routing of highways could have devastating effects. ***Departure of the Current Owner*** Many businesses are "one-man shows". Any firm in which the owner is the only employee is probably linked inextricably to that individual. Taking over the business may mean having to operate in the shadow of the founder for a long time. This kind of situation is particularly troublesome when the company's business involves providing close service to clients. One-person firms in public relations, advertising, and accounting are examples of such businesses. The level of trust and confidence that the founder has worked for years to establish cannot be automatically transferred to the new owner. **Finding the Business** Once you have decided to go into business by buying one that is up and running, the next step is to find it. In doing so, you will probably have to consider a number of them before you get to the one that fills the bill for you. Locating these candidates is a daunting prospect, but considers the fact that there are several businesses in existence, say 22 million. Granted, some of them are extremely large and therefore beyond the price range of individuals, some are unacceptable because of the kind of industry in which they operate, and some are owned by people who would sooner sell their souls than their businesses. But if these and other factors result in the pool of candidates being reduced by 99 percent, there are still more than 200,000 remaining -- a vast pool of prospects. Your tasks are to cut that figure down to a manageable number -- that is, one for which careful research can be conducted -- and then find the best of those remaining businesses to determine how much it is worth and to negotiate the right deal for it. We cover these topics in this unit. **Businesses on the Market** These businesses are often listed in the classified advertisements of newspapers in much the same way that houses and cars are listed. Sometimes, the owner is doing the selling, just as is the case with houses. For many businesses, however, a broker has been enlisted to make the sale. Although brokers have a number of channels for telling prospective buyers what is available, they use the classified advertisements, as do private sellers. Local businesses can be found in the local newspapers; the journal features businesses from around the country and the world in its classified section. In addition to the candidates appearing in the newspaper advertisements, business brokers can be used. Not all brokers use the advertisements, and, for those that do, not all of their listings are put in newspaper advertisements. Consequently, discussions with the brokers of a community should be an early part of any search. **Determining the Price of a Business** Before any bid on the business is made, the prospective buyer will have to determine the value of the enterprise. Notice we used the word value. Value is defined by Webster (1983) as "the monetary worth of something: marketable price. It is the price for which the business can be purchased; consequently, it is the figure we are given when we ask how much the owner wants for the business. The owner can put the business on the market for any price he or she chooses. The response of prospective buyers determines whether the price exceeds the value they ascribe to the business. The seller has to set the price of the business while the market will determine its value -- and that happens when a buyer agrees that it is worth the amount the owner is asking. While coming up with a figure is an inexact process that takes on many forms, two basic considerations should be included: **the value of the business's assets and its future earnings.** When a business is purchased, the new owner gets the assets. There are four ways to figure the value of these assets. First, we can simply look up the values in the firm's books; this figure is called, not too surprisingly, the **book value**. The figure reflects the original cost of the assets minus the depreciation that has occurred. The **replacement value** is also a straightforward figure but not as readily available as book value. To get this figure, we have to check the market for each of the firm's assets to determine what it would cost to purchase them. Another way to view the value of assets is by what they would bring if we were to sell them; this is their **liquidation value**. Finally, there is the assets' **appraisal value**, or the value of an asset as determined by an independent industry expert. This figure should reflect the appraiser's knowledge of the market for the asset, and it should take into account both the supply of and demand for the item. **The Method: How the New Business will be Established?** Two basic routes exist for a start-up. The new firm can introduce a product that is not available to customers, or it can add its product to those already being marketed. Each of these routes presents its own opportunities and difficulties. The new product option is regarded by many as the purest type of entrepreneurship because it has innovation as its source. The innovative response to a need, or the creation of a need, can provide splendid opportunities for the start-up business. Introduction of a product needed by large numbers of consumers, but previously unavailable, occasionally leads to the stories of spectacular results. The difficulties with this as a route into business include the uncertainty of consumer response to the product. Some of this uncertainty can be reduced through careful market research, as anything less than careful research can lead to disastrous results. Sound, objective analysis of the market has proven difficult for people who would not buy their products. The founder of the firm is often "in love with the product" and, as a result, exaggerates the interest consumers have in his or her product. This groundless optimism, often buoyed by supportive friends, leads to reassuring, but worthless, conclusions such as "If only 2 percent of the potential market buys from us, we'll break even and we'll surely get more than that". Even carefully conducted, unbiased market research can be hazardous as a source of data for use in financial planning. The primary problem with new product research concerns the difference between the expression of interest and actual behaviour. Getting supportive answers in market research interviews is a lot easier than getting orders. In most industries, customers are given a great deal of attention. Buyers typically have a choice of sellers, with no need to tolerate dissatisfaction for long. If a firm does not meet the expectations of 90 its customers, the chances are great that many of them will find \`1t another supplier. Given these circumstances, most firms try hard to please their customers. The consequences of bad service are clear. Customers will take their business elsewhere. The importance of customer expectations is obvious, so the question of how to meet them demands careful analysis and planning. Three basic options are available. The start-up can develop a low-cost strategy, a differentiated product or a focus on a segment of the market. In situations in which a large number of sellers are competing for buyers, competition is likely to be intense. Under these conditions, failure to meet a customer's needs will have unfortunate consequences for the seller -- it will lose the customer. Buyers are seldom unaware of the bargaining power they enjoy in the buyer-seller relationship. Not only is it clear that expectations must be met, the set of expectations often becomes increasingly demanding. This escalating set of demands frequently focuses on price. When the pressure for lower price is heavy, many sellers submit to it rather than lose customers. Quality is only one of the bases upon which to build a differentiation strategy. Other possibilities include styling, service, and availability. Whatever the basis, product differentiation can be a powerful device by which a start-up can gain entry into a market. A final strategy to consider for use in market entry is that of focus. This strategy is customer-oriented in that its basis is to understand and respond to the needs of a segment of the market in the most complete way possible. A supplier of office products, for example, may find that its real strength is its ability to anticipate and serve the needs of the educational market. Such a focus may allow the firm to establish itself as the segment leader and thereby protect itself -- at least to a degree -- from the difficulties of competing strictly on price. **Business Growth and Development** Rapidly growing companies have been the subject of studies for many years. Researchers have tried to identify the factors that cause some businesses to grow rapidly while others remain small or grow slowly. Most researchers agree that growth is not automatic and is not the result of chance or luck. It is instead the result of "positively motivated business intentions ad actions on the part of the owner-manager". They posited that entrepreneur's characteristics, educational level, knowledge of business, and continued learning all affect the growth potential of the business. A company's growth, according to them, is also affected by internal company factors, the resources available, and external factors. Therefore, if poor market conditions exist or if government regulation limits growth, the entrepreneur's efforts may not be as successful. Business Growth and Management Skills Although it is commonly believed that company growth follows a simple linear progression, with sales and company size consistently expanding, often it is not that smooth. According to them, some firms grow and then backslide while some skip growth stages that others experience. They felt that though it was not always smooth, business growth stages can nevertheless be categories. One study by them identified six stages of business development, namely: **conception, survival, stabilization, growth orientation, rapid growth, and maturity**. Within each stage, the entrepreneur's leadership style and necessary skills were forced to change. This is because the problems faced during the start-up phase are not always the same ones the entrepreneur must tackle when the business has grown. Some of the biggest problem areas and, therefore, some of the skills needed by owners of growing companies are personnel management, financial management and marketing. Options for Growth If the entrepreneur becomes unhappy with growth or finds that outside management skills are needed, he or she has several options, some of which are discussed below. 1\. Keep the Company Small When faced with a growing company, the entrepreneur often makes a conscious decision to limit company growth or even reduce the company size. Although the potential exists to own a large business, the entrepreneur forgoes the financial rewards in favour of a smaller, simpler one. By limiting the customer base, the number of hours of operation, the number of outlets, and so on, the business remains at a given level for the entrepreneur's entire career. 2\. Rediscover the Entrepreneurial Spirit Some entrepreneurs adjust to the growing business and use their skills to build a company that is strong enough to let the founder be entrepreneurial again. This may be accomplished with the same company. Entrepreneurs may develop a company to a mature phase and then hire a good team of managers to run the business on a daily basis. The entrepreneur can then use his or her skills to decide where the company is going next and what opportunities should be pursued. One entrepreneur says she believes that entrepreneurs should know their own strengths and build on. Mary Kay Ash, founder of Mary Kay Cosmetics (Lambing and Kuehi, 2007), gave similar advice to entrepreneurs. Her advice was to "stay in the area that you do best" and find qualified people to handle the other tasks". The entrepreneurial spirit can also be rediscovered by keeping the larger business and starting a second one. This allows the founder to experience the challenge of a start-up while maintaining the larger, more profitable business. In one small study of entrepreneurs who had been self-employed for more than six years, 44 percent indicated that they owned more than one company. **Cash In** Other entrepreneurs at the same stage may have different reactions. Cashing in is always an option, but even then there are several alternatives. Some entrepreneurs realise that they do not want sole responsibility for the company's management but they still want to be involved. For many, the solution is to sell a portion of the company to a key employee. One entrepreneur who started an auto repair firm sold a portion of the company to an employee when the business became too large and time consuming for one person to handle. This provided additional management expertise and also gave the entrepreneur more time for family and leisure activities. Others decide to sell the business to an outsider and take a break from self-employment. One owner of a rapidly growing automotive equipment company found the business overwhelming. He chose to sell to another entrepreneur and then accepted a job at an engineering firm. Still others sell one business and start another. One veterinarian's successful animal hospital became too demanding. His solution was to sell the practice to another veterinarian and start a muffler repair shop instead. Growth and the Business Plan The growth of the company is shown in the business plan through the financial projections. The entrepreneur must project future sales, expenses, and profit, and this is closely tied to growth plans. The projected growth of the company must seem achievable to bankers and investors or they will think the entrepreneur is being overly optimistic. Many entrepreneurs have failed after expanding too rapidly, so the business must show consistent but manageable growth. **Forms of Business Ownership** A business is all of the activities of an individual or group of individuals in producing and distributing goods and services to customers. Business wants to know the needs, wants, goals, values etc. of prospective and potential consumer before they can sell their goods to them. Business therefore is involved in the production of goods and services, undertake organizing, managing, and marketing. The resources used by the businesses include human, material and financial resources. Business, no matter the type or form, has certain characteristics such as involvement in the exchange / sale or transfer of goods and services, profit motive, production of goods and services and bearing risks and uncertainties. As mentioned earlier in the unit, we mentioned objectives of a business to include: \(i) survival and continuity \(ii) profit maximisation \(iii) growth \(iv) control of a fair share of the market \(v) improvement in productivity \(vi) initiating innovative ideas for quality product \(vii) employee welfare \(viii) service to consumers \(ix) social responsibility to the community that hosts the enterprise. **The Sole Trader** The definitions of a sole trader are almost the same depending on the different authors consulted. A sole trader is a person who enters business working for him/herself. He/she puts in the capitals to start the enterprise, works either on his/her own or with employees and, as a reward receives the profit. A sole trader is a form of business enterprise in which one man owns and manages the business. A sole trader goes with other names as "one-man business", "sole proprietor". Sole trading is mostly found in retailing business. This type of business is the oldest type of business in Nigeria. Up to 19th century, most production companies were owned by individuals. In Nigeria it is one of the commonest types of business you see around. You see them around the cities and villages. **Features of a Sole Trader Ownership:** A sole trader as the name implies is own by one person. Liability: The liability of the one man business in unlimited. i.e., if the owner is indebted, both, the business asset and his personal asset can be sold to offset the debt. Sources of Capital or Finance: The capital outlay is provided by the owner. This source of fund could be through: Personal saving, Intended capital, Credit, Borrowing from relatives and Banks etc. Legal Entity: It is not a legal entity. By law the business and the owner are regarded as one person. They are not different, unlike corporate business; a company is a legal entity, different from the owners. Motive: It is believe, that a sole trader is into business to make profit. Method of Withdrawing Capital: The owner can withdraw his capital anytime from the business without consulting with anybody. No Board of Directors: Because he is the owner, no board of directors that is why he does what comes to his mind Its Nature: It is a simplest and the commonest type of business unit you can think of. **Sources of Funds of a Sole Trader** \(i) Personal Savings Many individuals or group of individuals raise money from their personal savings to set up business. \(ii) Borrowing particularly from Friends and Relatives It is common, among the Igbo business traders that once their brothers are willing to do business, they give him a helping hand by borrowing him some amount of money to start his business, when he starts making profit, and he will pay. This borrowing is not limited to brothers alone; friends and relatives equally help out in this situation for people to start up a one man business. \(iii) Credit Purchase from Manufacturers or Wholesalers Sole traders get financed through credit buying from the manufactures or a wholesaler by selling goods to sole traders at credit the wholesalers are financing a sole trader. \(iv) Donations from Friends and Relatives Friends and relatives can dash you money purposely to help you continue with your business. Advantages of a Sole Trader Sole trader is the earliest form of business ownership. The advantages of this form of business ownership are as stated below: \(i) It requires small capital. Can be established quickly and easily with small cash, there are no organization fees and the services of lawyers to draw up terms are not generally required. It is the commonest and the cheapest form of business organization. \(ii) Easy to establish: This is because it requires no formalities and legal processes attached to establishing the business and is subject to very few government regulations as no business of balance sheet to the registrar of companies is required. \(iii) Ownership of all profit: The sole trader does not share profit of the business with any one. (iv) Quick decision-making: The sole trader can take quick decisions since he has no parties to consult or a boss whose permission he must get. He takes action as soon as circumstances arise or as soon as he conceives an idea, such flexibility could be very vital to his success. Disadvantages of a Sole Trader The disadvantages of this form of business ownership include: \(i) Bear All Losses and Risks Alone - Business is full of risks and uncertainties and unlike other forms of business organizations where risks and losses are shared among partners, the owner of one-man business does not share these risks and losses with anybody as it does not share the profits of the business with anybody. \(ii) Limited Financial Resources - The greatest single cause for the abandonment of one man business form is the desire for expansion and the resultant need for additional capital which is not forthcoming because the capital used in running the business comes from only one-man and is limited to the extent of his own personal fortune. His inability to raise more capital limits its plan of expansion. \(iii) Unlimited Liability - Unlimited liability means that in the event of failure of the business, the personal assets of a person can be claimed to pay debts of the business. For a sole trader, it means that everything he owns is subject to liquidation for the purpose of setting the ability of the business if the business fails. \(iv) Lack of Continuity - When the sole proprietors retires or dies, the business may end like that. Though his children or relatives may attempt to continue with the business, most often than not they lack the zeal, and or, the ability to operate efficiently. The imprisonment or bankruptcy of the sole proprietor spells similar doom for the business. \(v) Absence of Specialization - As stated earlier the sole proprietor does so many things by himself. As a result of this, he may not handle aspects of the work efficiently. This negatively affects the prospects of the business. \(vi) Limitation on Expansion - Because of limited capital, the sole proprietor may not be able to increase the size of his business no matter how ingénue he is. As enumerated earlier, the sole proprietor has few source of capital. Except for banks, he may not get any substantial capital for expansion frantically; his ability to borrow from banks depends on his collateral which may not be enough for bank finding. Partnership Partnership is an association of two to twenty persons carrying on a business in common with the view of making profit. The partners contribute both funds and efforts to set up and manage the business sharing profit (or loss) on an agreed basis. Partnership can also be define as the relationship that exist when two or more persons who contribute small money or moneys worth in order to establish, own and manage business organization with the sole aim of making profit. Partnership is an association of 2-20 persons or 2-10 persons as in case of a bank to carry on as co-owners of business for profit. They also share the losses that arise from such businesses. Features of Partnership Following are the features of a partnership form of business ownership: Ownership: It is formed by between 2-10 people and between 2-10 people in case of banks. Capital: The initial capital is contributed by partners. Liability: Their liability is unlimited except for limited partner. Formation motives: They are formed for profit reasons. Sources of capital: contribution from the partners ploughing back profit, loans from banks. Method of withdrawing capital must be approved by other partners as laid down in their partnership deed. It has no separate legal entity. It has no board of directors. Types of Partnership We have principally two types of partnership namely; ordinary and limited partnership: Ordinary Partnership - All members or partner take active part in the management of the business and are generally liable to any loss or risk. All partners have equal responsibility and bear all the risks of the business equally. All the partners have equal powers, unlimited liabilities, take active part and profits are shared equally. Limited Partnership - Any members in this category, his debts are restricted to the amount of money contributed in running the business. Not all partners take equal part in the management of their business. But there must be a member who bears the risk and also takes active part in the business activities. In other words, in limited partnership, there is at least one ordinary partner who has unlimited liability. Kinds of Partners Active Partner: This is the partner(s) who take active part in the formation, financing and management of the business. They receive salary for the role they play as a manager or managing director or director of the business as spelt out in the partnership deed. Dormant/Sleeping Partner: This partner contributes only the money needed for formation of the business or for running of the business. He is not involve in managing of the business and doesn't receive salary. He is only entitled to profit sharing and losses as it is agreed upon before formation. Normal/Passive Partner: A normal partner is one who is not actually a partner but who allows his name to be used in the partnership or who gives the public the impression that he is a partner even though he may not share in the profit of the business. This is a partner appointed because of his experience, fame or wealthy position. These members may be men and women of substance whose name are greater than silver and gold like retired army generals, politicians, civil servants, successful business men. Silent Partners: A silent partner is an individual who is known to the public as a partner but who does not take active part in the management of the firm. Secret Partner: A secret partner is that who is active in the affairs of the business but not known to the public as a partner. Sources of Funds for Partnership The following method could be used by partner to fund their business. \(i) Contribution from members \(ii) Ploughing back profits \(iii)

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