Principles of Business - Establishing a Business

Entrepreneurship

• Entrepreneur: A person who identifies business opportunities, risks time and money to start and operate a business, bringing resources together to generate wealth.
• Functions of an Entrepreneur:
  • Conceptualizing
  • Planning
  • Accessing funds/financing
  • Organizing the business
  • Operating the business
  • Evaluating performance
• Characteristics of a typical entrepreneur:
  • Creative
  • Innovative
  • Flexible
  • Goal-oriented
  • Persistent
  • Risk-taker
• Reasons to establish a business:
  • Financial independence
  • Being your own boss
  • Using skills and knowledge
  • Self-actualization/fulfillment
  • Creating employment

Steps in Establishing a Business

• Conceptualization: Envisioning a product or service idea.
• Research: Market research to ascertain the extent of the need for the product or service.
• Identification of resources: Identifying necessary resources like land, labour, and capital.
• Creation of a business plan: Outlining goals and strategies.
• Acquisition of funds: Identifying ways of acquiring funds to start a business.
• Operation of the business: Commencing business activities that are geared towards producing a product or service.

Role of the Entrepreneur in Decision-Making

• Conceptualizing: Developing the business idea.
• Planning: Assessing the feasibility of the plan.
• Accessing Financing: Raising the necessary capital.
• Organizing the factors of production: Identifying suitable combinations of land, machinery, equipment, materials, and people.
• Operating the business: Daily activities and decisions to keep the company running. Entrepreneurs must make strategic, tactical, and operational decisions to ensure business success.
• Evaluation: Monitoring and evaluating business performance.

Role of the Entrepreneur in Economic Development

• Providing goods and services to satisfy citizens
• Creating Jobs
• Collaborating
• Contributing to nation building
• Earning foreign exchange

Reasons to Establish a Business

• Financial independence
• Self-actualization
• Self Fulfillment
• Increase income
• Increase control

Reasons for Preparing a Business Plan

• To research the business idea
• To attract potential investors
• To source financing
• To guide decision making

Elements of a Business Plan

• Executive summary: Brief overview of the business.
• Operational plan: Details about the business and its objectives.
• The business opportunity: Focus on the specific product or services that the business offers.
• Marketing plan: Market research details and prospective customers.
• Financial forecast: In-depth description of predicted finances.

Sources of Information for Business Research

• Primary Data: Originally collected data through interviews, observations, or questionnaires.
• Secondary Data: Information already collected by someone else from books, newspapers, magazines, libraries, and publications.

Relationship Between Planning and Operation of a Business

• Long-term plans: 3-5 year periods, determine company direction.
• Medium-term plans: 1-2 years, made by department managers.
• Short-term plans: Daily, weekly, monthly targets, made by supervisors.

Regulatory Practices by Governments

• Local rules: Management of waste, parking regulations.
• Regional rules: Free movement of capital and labor.
• Global rules: Climate change.
• National policies: Monetary & fiscal policies, consumer protection agencies, environmental policies, intergovernmental agreements.

Factors Determining Business Location

• Power and water supplies
• Transport links
• Telecommunications
• Supply of labor
• Government regulations
• Availability and location of raw materials and supplies
• Infrastructure
• Geography
• Health facilities

Significance of Collateral in Accessing Capital

• Collateral: Money or property pledged as security for repayment of a loan.
• Examples: Property, stock, bonds, money, motor vehicles, appliances, cash surrender on life insurance policies.