Establishing a Business PDF

ESTABLISHING A BUSINESS  Sharing Time ➔ Do you think you might set up your own business at some time in your life? Why or why not? ➔ What do you think are the advantages and disadvantages of running your own business? ➔ Do you know anyone personally who has their own small...

ESTABLISHING A BUSINESS  Sharing Time ➔ Do you think you might set up your own business at some time in your life? Why or why not? ➔ What do you think are the advantages and disadvantages of running your own business? ➔ Do you know anyone personally who has their own small business? Are they content with what they do? Why or why not?  Glossary ➔ Entrepreneurship - the process through which individuals identify opportunities, allocate resources, manage risks and create value through business ownership. ➔ Unemployment Rate - the percentage of a total workforce who are unemployed but actively seeking paid employment. ➔ Enterprise - the ability to organize and manage the production of goods and services. ◆ It is an important factor of production. ➔ Entrepreneurs - the people who take the risks and decisions necessary to make businesses run successfully.  REASONS FOR STARTING A BUSINESS  Reasons for Starting a Business Financial 1 Self Fulfilment 2 Independence You can generate Running and your own income operating your own without having to rely business can be more on a fulltime or satisfying than partime time job for working in a job that your salary. is dull and repetitive. Not all businesses You can make your make a steady own decisions at your income, which can own will, instead of result in owners the employers. losing money  Reasons for Starting a Business 3 Self Actualisation Increase Income 4 Allows you to fulfil Gives you the chance your potential and to use your talents make the best use of and skills, while at the your skills, interests, same time earning an abilities and ideas. income. The potential to earn more income by working hard to make your business successful and profitable.. Reasons for Starting a Business Increased Control of 5 Working Life A business owner can choose when to work, where you work and how hard you work. However, small businesses may lose revenue if no one else assists in running the business.  Sharing Time ➔ What are some other reasons that may motivate people to establish a business? ➔ In what ways could a small business in your community contribute to economic growth and development? ➔ How can establishing more small businesses in your country impact the unemployment rate? ESTABLISHIN G A BUSINESS  Establishing a Business Conceptualisation Research (Market Probe) Developing the Finds out the business idea or characteristics of concept. consumers in the target Ensure to decipher: market, product Who is the target features, price market, how will it be considerations. delivered to Helps to estimate the customers; is it demand and profitability feasible and will it of goods or services. generate an income? Determines the degree of competition in the  Establishing a Business Creation of Business Plan Acquisition of Funds Business Plan - A well Money required to start and run researched and detailed a business to buy and hire statement about the resources. business proposal. Acquisition of funds may come Includes the: business from: personal savings, aims/objectives, product borrowing money from friends description, market and family, bank loans, potential, resource investments from other requirements and sales entrepreneurs. and financial projections. Potential investors and lenders will need to see future Establishing a Business Operation of the Business A good business plan will include a detailed operations plan or ‘roadmap’ for setting up and running the business. This includes: the production process, quality control, customer services, purchasing and payment systems, stock control, etc… Once your business has been set up, the operational plan can be implemented to manage or organize  SECURING FINANCIAL COLLATERAL FOR A BUSINESS  Securing Collateral Finance for a Business ➔ What is Collateral? ◆ Possessions or physical and financial assets of value that can be sold off to raise cash to repay a loan. Example: properties, stocks, bonds, equipment and the surrender value to life insurance policies. ◆ Collateral is used to secure loans from banks and other lenders would not otherwise lend money to small businesses because of the financial risk involved.  Securing Collateral Finance for a Business ➔ A secured loan allows the lender to take possession of assets if the borrower is unable to repay the loan. The assets can then be sold off by the lender to recover the amount of the loan. ◆ A secure loan is less risk for lenders. ➔ Secured loans tend to be much lower in interest rates rather than an unsecured loan; banks are more likely to grant secured loans to small businesses. THE ROLE OF AN ENTREPRENE UR  Entrepreneur ➔ Identifies business opportunities and are innovative with new ideas, and take risks to provide goods and services for prospective customers. ➔ Good entrepreneurs will identify gaps in the market and then set up a business to fill them. ◆ The gaps in the market represent unmet customer needs that an entrepreneur sees as a profitable business opportunity.  THE FUNCTIONS OF AN ENTREPRENE UR  Functions of an Entrepreneur Conceptualisin Planning g the Developing business idea and turning it into a Gathering the working business necessary resources generating profit and 1 and organizing them sales. efficiently. Understanding how Proper planning can guard against customer wants and needs will be delivered 2 business failure. and who will benefit. Forecasting is also Research all aspects of important when the business idea. planning for your (sources of finance, business venture. customer preference and buying patterns…)  Functions of an Entrepreneur Accessing Organising Finance Organising business Identifying sources for resources to get the finance. (personal saving, loans - 3 best product to customer should be a family/friends/banks/g priority for the rants. entrepreneur. A business plan with 4 All resources should financial projections be fully employed to when applying for a maximize production loan or grant. and achieve business success.  Functions of an Entrepreneur Evaluating Operating the Business Business Performance For operating a Performance should business, a good 5 be monitored and management team assessed against need to be hired to target on a regular undertake the overall supervision and 6 basis, so that measure can be take management of the to correct areas that business. are underperforming.  Functions of an Entrepreneur Make a Profit & Risk Bearing Managing a If the business Loss Making a profit is a fails/succeeds, it is the key aim. If the business is sole responsibility of the entrepreneur. 7 losing money, It is important to take corrective actions all necessary steps to need to be taken. make a profit, 8 The use of profits needs to be especially if there is a loan to be repaid and determined. personal savings ○ Eg - how much involved. profit to reinvest back. CHARACTERI STICS OF AN ENTREPRENE UR  Characteristics of an Entrepreneur Creative Innovative Persistent Leader Willingness to Flexible take calculated risks Perseverance (Adaptable) Goal Oriented ENTERPRISE AND ENTREPRENE URS SUPPORTING ECONOMIC DEVELOPME  Supporting Economic Development Enterprise and entrepreneurs contribute significantly to economic development locally, nationally and globally in the following ways: Collaborating ➔ Entrepreneurs work with many organizations when they create new ones, or expand existing ones, including suppliers, bank and recruitment agencies. ➔ They work closely with various stakeholder groups including the government, communities and charitable organizations in order to promote economic growth and development.  Supporting Economic Development Providing Goods and Services to satisfy Citizens ➔ Entrepreneurs develop and produce goods and services that consumers need and want and are willing to pay for. This is done through market research. ➔ Competition will help business be more creative in satisfying customers’ needs. This will impact the production processes. ➔ Goods and services provided can improve consumers standard of living, solve a problem, or simplify their lifestyle.  Supporting Economic Development Creating Jobs ➔ Creation/expansion of business provides employment opportunities both within those businesses and within suppliers. ➔ These economic opportunities support and enhance communities through an overall standard of living. ➔ These jobs reduce unemployment and provide incomes for employees- improves their standard of living and financial stability.  Supporting Economic Development Contributing to Nation Building ➔ Business creation and expansion supports economic, social and political integration and development within a country in the following ways: ◆ Collaborating and trading with other local, regional and national organizations. ◆ Providing incomes and employment- reduce levels of poverty and crime ◆ Train workers to increase their knowledge, expertise, productivity, inventiveness ◆ Taxes and wages help to fund government investments in infrastructure, policing, national security and defence, healthcare, education and social programmes. ◆ International trade generates foreign earnings which can be used to funds imports of goods and services from producers in other  Supporting Economic Development Contributing to Nation Building ➔ Business creation and expansion supports economic, social and political integration and development within a country in the following ways: ◆ Innovation in products and production processes can reduce waste and pollution- contributes to sustainable growth and development ◆ Collaborating with government organizations to develop solutions to social and economic problems. E.g. implementing social programmes, funding education for youths,,,