1.5 Entrepreneurs

• intrapreneur

  an employee who works for a large business but thinks like an entrepreneur
• innovation

  an invention taken to market and sold
• risk

  the possibility of financial loss
• uncertainty

  something in the future which is not known e.g. world recession
• simplified steps on starting a business

  1. market research - find out what customers want
  2. start small - at a market stall or similar context if possible
  3. draw up a business plan
  4. grow the business
• business plan

  • aims and objectives
  • timeline/steps
  • finance - sources of finance, cash flow
• sole trader

  self employed for tax purposes

  if the entrepreneur's business is B2B then customers may ask to see evidence that they've registered with the UTR (unique taxpayer reference) code

  unlimited liability
• day to day work

  completing finances

  buying stock

  listing stock for sale

  contacting customers

  chasing payments
• expanding a business

  open in another location

  offer the business as a franchise/business opportunity

  license the product

  diversify - spread risk

  target other markets

  merge with or acquire (takeover) another business
• intrapreneurship

  takes risks

  creative/innovative

  solves problems

  focus on processes to improve productivity

  drive innovation

  understand trends

  self-confident

  proactive in adding value
• barriers to entrepreneurship

  entrepreneurial capacity

  access to finance

  lack of training/know how

  fear of failure

  lack of confidence
• risk

  a situation involving exposure to danger, harm or loss

  • financial risk
  • the owner may put their own cash and other assets into a business
  • if the business is a sole trader or partnership they have unlimited liability
  • lack of security
  • entrepreneur may leave their job:
  • may have a mortgage, a car and other bill to pay
  • may be an insecurity of sales with falling consumer incomes
  • will no longer be entitled automatically to sick pay and company pensions
• uncertainty

  if entrepreneurs know what's going to happen, they can plan for it

  during covid restrictions, firms like pubs and restaurants hired/brough outdoor shelters to facilitate reopening

  main areas of uncertainty:

  • extreme weather
  • currency/exchange rate changes
  • health scares
  • interest rate changes
• creativity

  helps entrepreneurs when designing or inventing new products or services

  in dynamic markets, new products need to be more creative so that they add value in order to stand out from established products
• hardwork

  some entrepreneurs will put 100s of hours into their business to get it off the ground and may have to continue working long hours to get the business established

  • can include time working on website, social media, selling to customers, developing products, thinking about their next move
• resilience

  capacity to recover quickly from difficulties

  an entrepreneur may have many 'knock backs' before their business is a success:

  • problems with finding suppliers
  • difficulties getting the right staff
  • slow sales
• initiative

  inventiveness, enterprise, ingenuity or resourcefulness

  many entrepreneurs start a business as they have a good idea and want to take it to a market
• self confidence

  how an entrepreneur feels about their own abilities

  easy for an entrepreneur to become frustrated and give up if they lack self-confidence in their own ability and in their products and services
• risk taking

  a risk of leaving a secure job to start up on your own

  a financial risk of loosing any money that is put into the business, if the business fails
• communication

  entrepreneurs need to be good communicators

  • may need to write exciting product descriptions on their websites
  • may have to talk to customers or clients face to face or on the phone
  • may need to negotiate deals with suppliers
• team working

  an entrepreneur may decide not to work alone but as part of a pair or a team

  advantages:

  • more ideas
  • more capital

  disadvantages:

  • conflicts - not always negative - ideas should be challenged - group think - parallel thinking
  • shared profits
• problem solving

  entrepreneurs will come across many problems when setting up and running their business

  • they need to be good at working out cost effective solutions that help to move the business forwards
• organisation

  entrepreneurs need to be organised

  when first starting the business, they have to develop a range of systems for dealing with enquiries, suppliers and orders from customers

  • may need to buy stock, sell to customers, make products all in the same day which takes organisation skills
• numeracy


  entrepreneurs need to be numerate

  • need to complete their own tax returns when they first start
  • have to balance sales books, keep records of goods and services purchased to keep the business running
  • have to complete cash flow forecasts if they wish to attract more funding from lenders
• IT

  entrepreneurs need to be IT literate

  • if the business is online, they need some web design skills
  • if the business isn't online, they may still need to know how to process an order, send and print invoices, keep data bases of customers, process accounts on a spreadsheet etc
• profit maximisation (financial skills)

  entrepreneur may aim to make the highest amount of profit possible

  • difference between revenue and costs
  • seek to minimise costs and maximise revenue

  sole trader

  • larger wages can be drawn from the profit

  Ltd and PLC company

  • dividends will be larger on shares, may attract more investors
• profit satisficing

  entrepreneur may aim to make just enough profit to keep the business plus another aim at the same time

  • reward employees with higher wages
  • invest in environmental project
  • serve the community in some way
• independence

  the idea that they can work for themselves and no longer have to commute to work for someone else is all the motivation that they need to set up their own business
• flexibility

  many entrepreneurs seek to start their own business to gain flexibility in their life

  can be hard to balance the needs of a family with the requirements of work, work life balance can be better achieved if the entrepreneur can work from home or for themselves
• ethical reasons

  ethics

  organic and anti-GM crops

  fair wages for workers in African nations (Divine chocolate)

  animal rights

  environmental trading at their heart
• social purposes

  social enterprises are businesses trading for social and environmental purposes

  many commercial businesses consider themselves to have social objectives

  • social enterprises are distinctive due to their social and/or environmental purpose is central to what they do
  • profits are reinvested to sustain and further their mission for positive change
• personal challenge

  some entrepreneurs find working for another business boring and unchallenging

  • decide to set up their own business for daily challenge and the excitement they seek
• profit reasons for sharing a business

  • want to make more money than at their current job
  • want to earn more than minimum wage
  • want to be self-employed
  • want unlimited earnings
• non profit reasons for starting a business

  • as a legacy for their children to take over
  • want flexibility and a work life balance
  • want control, independence and creativity in their life
  • want to be their own boss - don't want to be ordered around
• ethical reasons for starting a business

  • want to help others - fair trade/ethical trading
  • want to make a difference to the planet - eco friendly
  • want to benefit others - community café
  • want to give something back to society
• survival

  short term objective of a business, usually applied to a new business or start-up

  a business in the first year may have survival as the objective while it builds a customer base and establishes itself in the market

  • reach a sustainable level of sales to allow the business to reach its break-even point
  • may involve penetration pricing of products or services at the outset to establish the business
• profit maximisation


  when a business wants to make the most profit possible from a given amount of resources

  helps a business to recoup any research and development costs

  helps a business to maintain high levels of product development and innovation
• sales maximisation

  profit figures tend to be annually so sales figures can be examined on a daily, weekly or monthly basis

  managers find sale figures more satisfying as targets as profits go to owners and salaries are often linked to sale levels

  anyone interested in investing in the business may want to see the sales data and judge it as an indicator of performance
• market share

  % of a market that a business has, either in revenue or units sold

  may be an objective in a very competitive market where consumers switch between suppliers (supermarkets)

  loss in market share can be an indicator of long-term serious financial problems
• cost efficiency

  lowering average costs means economies of scale

  can be achieved by:

  • paying minimum wage to unskilled workers
  • subcontracting where economically viable
  • lean production/construction where material, time and process waste is eliminated to save costs
  • lower the quality and price of the product
  • increase the perceived value of the product through strong branding