1.5-Entrepreneurs and leaders

• The 5 main roles of an entrepreneur:

  • Creating and setting up a business: identifying a gap in the market, doing market research, deciding on a business idea, and writing a business plan
  • Running and developing a business: setting aims, devising strategies, abiding by the law, handling marketing, and recruitment
  • Innovating within a business: thinking of new products or ways to differentiate existing products, and encouraging intrapreneurship
  • Overcoming barriers to entrepreneurship: dealing with lack of money and lack of confidence
  • Anticipating risk and uncertainty: considering potential issues and putting plans in place to minimize their impact
• What are the skills and characteristics of an entrepreneur?

  Skills: creative, resilient, risk taker, shows initiative, confident, hard working

  Characteristics: Communication, Team work, organisation, IT, numeracy, problem solving
• What are the financial and non-financial motives of becoming and entrepreneur?

  Financial: Profit maximising, profit satisficing

  Non-financial: Ethical stance, social entrepreneurship, independence, flexibility, challenge
• What are the business objectives and why do entrepreneurs set them?

  Objectives: Survival, profit maximisation, sales maximisation, market share, cost efficiency, employee welfare, customer satisfaction, social objectives

  Why? Coordinating employees, motivating employees, reviewing business success
• What is liability and which type of liability do business forms have?

  Liability is the legal responsibility for what happens within a business. i.e, debt

  Unlimited liability- sole traders, partnership, lifestyle business

  Limited liability- public limited companies (plc), private limited companies (ltd), franchises
• Business forms: sole trader, partnership, private limited company, public limited company, franchises, online business, lifestyle business, social enterprise
• What are the advantages and disadvantages of being a sole trader?

  Advantages: they can choose what work to do, flexible, keep all profits, most simple of the business forms

  Disadvantages: stressful as there is a lot to do for one person, unlimited liability, no economies of scale, no one to take over if something happens
• What are the advantages and disadvantages of being in a partnership?

  Advantages: easy to set up, small capital needed, easier to raise extra capital from banks than sole trader, profits go to partners, good working relationship, no need to make information public, share problems and decision, partners contribute with range of skills

  Disadvantages: unlimited liability, shared profit, partners may have disagreements, if a partner becomes bankrupt or dies the partnership is dissolved
• What are the advantages and disadvantages of being a private limited company (ltd)

  Advantages:

  • Limited liability
  • Can raise extra capital by selling more shares
  • can continue trading if shareholder dies/bankrupt

  Disadvantages:

  • Accounts of the company cannot be kept private
  • More difficult and expensive to set up than sole trader and partnership
  • Cannot sell shares on stock exchange so limit on how much capital can be raised
  • Limited by articles of association as to the type of business it can undertake
• What are the advantages and disadvantages of becoming a public limited company (PLC)


  Advantages

  • Access to different lines of capital
  • Limited liability
  • Banks more willing to lend money
  • Easier to grow and expand
  • Shareholders will appoint specialists to manage and run the company

  Disadvantages

  • Involves full transparency
  • Expensive to set up
  • Can be prone to takeover
  • Have to prepare annual accounts
  • Divorce of ownership and control
  • Competitors and public can see accounts
• What are the advantages and disadvantages of a franchisee?

  Advantages

  • able to see an already recognised and successful product
  • take advantage of control services for free (advertising, training, etc.)

  Disadvantages

  • Proportion of revenue is paid to franchisor (royalties)
  • Right to operate could be withdrawn by the franchisor
• What are the advantages and disadvantages of a franchisor?

  Advantages

  • Can expand business quickly
  • Risk is shared
  • Franchisee may have good entrepreneurial skills which will earn the franchisor revenue

  Disadvantages

  • Potential loss of control over how the product is presented
  • May be difficult to control quality
  • Some franchisees become too powerful as they acquire a number of franchises
• What are the advantages and disadvantages of an online business?

  Advantages

  • Relatively cheap and easy to set up
  • Fix costs low
  • Can be managed from anywhere
  • Can access global market
  • Can operate 24/7

  Disadvantages

  • Technical issues may occur
  • No personal contact with customers
  • Harder to persuade customers to buy
  • Some customers may prefer to see, touch, feel products
  • Serial returners cost the business money (people who wear it once and send it back)
• What is opportunity cost and trade-off?

  Opportunity cost: The value of the next best alternative foregone. Trade-off: Giving up one thing in exchange for another.
• What might an entrepreneur now have to do in order to lead people?

  Delegate responsibility- Giving power to other people to make decisions in the business

  Develop emotional intelligence- Identifying and managing their own emotions and recognising the emotions of others

  Become less reactive- entrepreneur has to consider the impact of their decisions on employees
• Profit satisficing is when a business tries to maximise profit, but only until a certain amount has been made, then they will focus on another objective.
• A business plan is a document outlining the aims and objectives of a new or existing business, including details about its financial forecasts, marketing strategy and operational plans.
• An entrepreneur is a person who takes risks to start a business.

  They are important because they:

  • Provide goods and services that meet consumer needs and wants
  • Create jobs
  • Pay and collect taxes for the government
  • Encourage innovation and development of new products
• A business objective is a target set by the business in the short to medium term to help achieve a long term aim

  Objectives have to be SMART:

  • Specific
  • Measurable
  • Achievable/agreed
  • Realistic
  • Time bound
• A sole trader is a business owned by one person, who is responsible for all the business decisions.
• A partnership is a business owned by two to twenty people who share the profits and losses.
• The owners of private limited companies and public limited companies are called shareholders.

  The shareholders in a private limited company will be friends/family of the business owner as they want trusted shareholders that will act in the best interests of the business.

  The shareholders in a public limited company can be anyone that buys shares from the stock market.
• What reasons might there be for a business to change its legal form?

  • Growth
  • Protection of limited liability to reduce risk from debts
  • Access to more funds
  • Gain a higher profile by becoming a company
• A franchise is a business that is owned by a franchisor and is sold to a franchisee.
• What are the advantages and disadvantages of a social enterprise

  A social enterprise or social business is defined as a business with specific social objectives that serve its primary purpose

  Advantages:

  • People more willing to buy from a social enterprise
  • Entrepreneur can make a living from doing something valuable
  • The better the business does, the more society benefits

  Disadvantages:

  • Regular market research to keep targeting distinct communities
  • Have to compete with bigger firms which may force them out of the market