Queens College

Information Sheet 1 Basic Concepts of Entrepreneurship

1.1.1 Entrepreneurship
The word “Entrepreneurship” is derived from the French verb entreprendre which means “to
undertake”. The concept entrepreneurship refers “The process of identifying opportunities in the
market place, arranging the resources required for pursuing these opportunities and investing the
resources to exploit the opportunities for long term gains. It involves creating wealth by bringing
together resources in new ways to start and operate an enterprise.”

I. Elements (steps in the implementation) of Entrepreneurship

1. Observing the environment/identifying gaps,

2. Identifying opportunities,

3. Gathering the necessary resources

4. Implementing the activity and

5. Receiving rewards for engaging in the activity

II. Entrepreneurial Functions in Business

1. Identify gaps in the market and turn these gaps into business opportunities.
2. Finances and mobilizes resources for the business
3. Organize and manage the business.
4. Bear /tolerate/ the uncertainties and risks of the business.
5. Encourage competition
6. Self-employed and applying entrepreneurship

III. Economic Principles of Entrepreneurship

1. Works best in an open market economy

2. Promotes private enterprise
3. Adds value to products and services (creates wealth)
4. Providing needed products/service
5. Developing new markets
IV. Rewards for Being an Entrepreneur
1. Self-actualization /personal fulfillment
2. Feeling of freedom and independence
3. Providing jobs and benefits to others (investors, suppliers, bankers, subcontractors, work
force, and customers)
4. Economic goods (product/service, incomes for workers, profits for shareholders/partners)

V. Importance of entrepreneurship
The followings are the major benefits of entrepreneurship
1. Employment creation
2. Local resource utilization
3. Decentralization and diversification of business
4. Promotion of technology
5. Capital formation
6. Promotion of an entrepreneurial culture

VI. Meaning of Entrepreneur

Entrepreneurs are individuals who undertake an economic activity. On one extreme, an

entrepreneur is a person who brings change, possessing characteristics found in only a very small
fraction of the population.

Types of entrepreneurs

Generally, there are four types of entrepreneurs as indicated here under:

 Personal achiever  Real manager
 Super-salesperson  Expert Idea Generator

Personal achiever
Personal achievers are the classic entrepreneurs.

They possess seven characteristics that relate to entrepreneurial success:

 Need for high achievement  Strong individual initiative

 Need for performance feedback  Strong personal commitment
 Desire to plan and set goals  Internal locus of control
Super-salesperson
Generally, onlookers don’t view super sales people as having the potential for entrepreneurial
success. Their entrepreneurial strength is their approach to selling. They truly cater to the needs
of clients and customers, thus placing a strong stress on service. Super sales people are interested
in managing the customer into a sale, not in applying pressure tactics.
 Capacity to empathize
 Social interaction and relationships are important
 Need to have strong positive relationships with others
 Sales force is critical
 Background: less education, more experience

Real manager
Real managers exhibit some of the traits of established entrepreneurs and some of the abilities of
corporate managers. They possess the following traits
 Desire to be corporate leader  Desire of power
 Desire to compete  Desire to stand out in a crowd
 Decisive
Expert Idea Generator

They become tremendously enthused about their ideas and spend a great deal of time
implementing them.
They possess a majority of the following five characteristics:
 Desire to innovate  Intelligence is the competitive
 Love of ideas, curious advantage
 Belief that new products are  Desire to avoid taking risks
crucial

VII. Personal efforts to be an Entrepreneur

The nature of entrepreneurial activity requires the following extra efforts from an entrepreneur
 Works long hours
 Always concerned about the business
 Needs high energy
 Sacrifices other important aspects of life
 Limited social life
 Not much time with family and friends
 Financial investment
Table 1: The relationship between entrepreneurship and entrepreneur
1.1.2 Entrepreneur and Intrapreneur
Intrapreneurs are individuals who notice opportunities and take initiative to mobilize resources;
however they work in large companies and contribute to the innovation of the firm.

1.1.3 Entrepreneur and manager

A manager is a person who plans, organizes, directs and controls the activities of an established
business. The entrepreneur is the person who makes judgmental decisions

Table 2: Summarized differences between the entrepreneur and manager

Point of
Entrepreneur Manager
Distinction
He starts a venture by setting up a The main aim of a manager is to
Goal
new enterprise for his personal render his/her service in an enterprise
Management
satisfaction. already set up by someone.

Entrepreneur is the owner/founder of A manager is a servant in the

Status
the enterprise. enterprise.

An entrepreneur bears all risk and A manager does not bear any risk
Risk
uncertainty involved in the enterprise. involved in the enterprise.

Entrepreneurs for his/her risk bearing A manager receives salary as a

role he/she receives profits. The reward for services rendered which is
Rewards
reward is not only uncertain and fixed and regular. It can never be
irregular but can at time be negative. negative.
 As an innovator s/he is called as
A manager executes the plans of the
change agent who introduces goods
Innovation entrepreneurs/owners/founders of the
and services to meet changing needs
business.
of the customer.

1.1.4 Enterprise and Enterprising

Enterprise means always finding a way to keep yourself actively working towards your ambition.

An enterprise is considered to be any entity engaged in an economic activity, irrespective of its

legal form.

Meaning of Enterprising

An enterprising person is one who sees opportunity in all areas of life. To be enterprising is to
keep your eyes open and your mind active. It’s to be skilled, confident, creative and disciplined
to seize opportunities that present them regardless of the economy.

 Enterprising people always see the future in the present.

 Enterprising people always find a way to take advantage of a situation, not be

burdened by it.

 Enterprising people aren’t lazy. They don’t wait for opportunities to come to them,
they go after the opportunities.

Being enterprising also means feeling good enough about yourself, having enough self-worth to
want to seek advantages and opportunities that will make a difference in your future. And by
doing so, you will increase your confidence, courage, creativity and self-worth which are aspects
of an enterprising nature.” Enterprising men and women exhibit the following characteristics
E: Energy R: Risk-taking
N: Need to achieve I: Innovation
T: Task oriented S: Skills
E: Empathy I: Independence
R: Resourcefulness N: Networking
P: Planning G: Goal oriented
Practically all undertakings can be referred to as enterprising if they fulfill the followings.
 Idea identification
 Planning
  Implementation,
 Successful completion of an activity and
 Receiving the rewards.

1.1.5 Identify the role of Entrepreneurship in Economic Development

Entrepreneurship helps to effectively utilize all the economic resources.

Entrepreneurship plays a key role in enhancing an economy in terms of the following:

 Creating jobs and additional wealth creation

 Promoting free enterprise and healthy competition
 Spreading prosperity and promoting economic growth
 Ensuring innovation and creativity
 Encouraging grassroots development
 Improving social and community conditions
 Shifting the mind set of being employed to self-employment.

Information Sheet - 2 Developments of Entrepreneurial mindset

1.2.1 Overview of mindset

“Success and failure begins in your mind and it starts today.” Robert van der Wolk
A mindset is the sum of your knowledge, including beliefs and thoughts about the world and
yourself in it. It is your filter for information you get in and put out. So it determines how you
receive and react to information. Mindset can be: fixed or Growth oriented.

While a fixed mindset assumes your talents and abilities are set, the growth mindset believes
your talents and abilities can be developed.

Our current mindset guides the collection and interpretation of new information.

1.2.2 Entrepreneurial mindset

An entrepreneurial mindset is a set of beliefs, thought processes, and ways of viewing the world
that drives entrepreneurial behavior. Typically, entrepreneurs firmly believe it’s possible to
improve their life situation and live life on their own terms. They also believe in their ability to
learn, grow, adapt, and succeed.

The characteristics of the entrepreneurial mindset which are common for all entrepreneurs are:
 1. They passionately seek new opportunities.

2. They pursue opportunities with enormous discipline.

3. They pursue only the very best opportunities and avoid exhausting themselves and their
organizations by chasing after every option.

4. They focus on execution specifically, adaptive execution.

5. They engage the energies of everyone in their domain.

1.2.3 The importance of an entrepreneurial mindset

Entrepreneurs succeed like they do because they think, act, and view the world differently from
most people. The developing an entrepreneurial mindset can help to reduce doubt, fear, and
anxiety. It can also help to drive action, focus, and growth.

The factors that help entrepreneurs to develop a positive mindset include:

• Focus on opportunities to learn from each experience.

• Being involved in positive activities.
• Choose work objectives that are achievable and have an impact.
• Make friends with other entrepreneurs.
• Acquire the thinking, mannerisms, and characteristics of successful entrepreneurs.
• Have successful entrepreneurs serve as role models and mentors.
• Avoid negative thoughts and ideas.
• Take advantage of opportunities to improve your situation, whether it is your personal
life, work life or life in the community.
The process described below in sequential order should be followed;
1. Attention (focus on something)
2. Retention (what observed must be retained)
3. Reproduction (behavior must be practiced again and again)
4. Motivation (learner must be motivated to learn from it)

1.2.4 Distinguishing characteristics of entrepreneurial mindset

Independent: Abundant:

Responsible: Goal-Oriented:
Not Afraid of Failure: Comfortable with Discomfort:

Growth-Oriented: Adaptable:

Feedback-Seeking: Problem-Solving

Learning-Oriented: Driven and Tenacious

Forward-Thinking: Focused:

Self-Accepting: Action-Oriented:

Self-Aware Decisive:

Collaborative:

1.2.5 Developing Positive mindset towards work

Science today says that we can influence our outer world by influencing our inner world. Instead
of being passive observers, we now have the power to participate in the world by using our mind
at a level where it changes what we think and feel, what we believe and which emotions we
experience.

Positive thinking means seeing opportunity where negative thinking means looking at what is
missing or what is wrong. Of course this doesn’t mean that positive thinking is all only about
seeing the nice and happy things in life and not focusing on the potential dangers..

It will change your self-image, will get you the best results and will allow you to make the best
choices in your life.

1.2.6 Positive mindset to work

There are several factors that may contribute to unhappiness at work; like a difficult supervisor,
tasks that are too mundane, too stressful, or too difficult, challenging coworkers, or maybe just a
general dissatisfaction with where you are as opposed to where you want to be in your career.
The following are some tips for how you can develop a more positive mindset at work in general
and entrepreneurship in particular; no matter how dissatisfied you may feel in your current
position.

 Pay attention to what you’re telling yourself throughout the day (Ex: “I hate my job,” “I
can’t believe I have to be here,” etc.) and recognize that thinking negatively about your job
doesn’t change anything about your situation.
 Look for other points of view. Keep in mind that you are viewing your situation from only
one perspective. While you may not think that your work situation is ideal, other people
may envy certain aspects of your job. Think about how you could view your situation
differently.
 Be sure to take breaks. Of course, follow your workplace guidelines about timing and
duration, but make the most of your allotted time by physically removing yourself from
your work station, touching base with someone from the “outside world” (friend, family
member, etc.), or simply taking a few moments to breathe deeply and do nothing.
 Try out some new communication strategies at work.
 Your home should be a place in which you can safely leave behind the daily stresses of
your job. Use a ritual, such as stopping by the gym, going for a walk, changing out of your
work clothes, etc., that serves as a link between work and home.
 Improve your life outside of work. Pursue personal interests and hobbies outside of your
job, spend more quality time with your friends and family, and/or do something generous
for someone else.
 Explore your options.
 Design long-term goals.
1.2.7 Developing effective work habit (Culture)

Work habits refer to a person’s characteristic approach to work, including such things as
organization; priority setting, and handling of paperwork and e-mail.

In order to develop effective work habits and became more productive person, things that should
be considered include
1. Overcoming procrastination
2. Developing attitudes and values that foster productivity.
3. Developing skills and techniques that lead to personal productivity.
 4. Overcoming time wasters.
Overcoming procrastination

The leading cause of poor productivity and career self-sabotage is procrastination. It is delaying
of a task for an unacceptable or weak reason. Procrastination is also the major work habit
problem for most workers and students.

People procrastinate for many different reasons. The common ones are
1. Thinking that the task to be done (such as quitting a job) is unpleasant.
2. Another reason we procrastinate is that we find the job facing us to be difficult
3. A fear of the consequences of our actions
4. Negative evaluation of your work
5. The fear of success
6. A way of rebelling against being controlled
7. To achieve the stimulation and excitement that stems from rushing to meet a deadline

Techniques for reducing procrastination

To overcome or at least minimize procrastination, we recommend a number of specific tactics.

1. Calculate the cost of procrastination

2. Counterattack
3. Jump-start yourself
4. Peck away from overburden task
5. Motivate yourself with rewards and punishments
6. Follow the WIFO principle
Understanding Entrepreneurial Competencies &
Information Sheet 3
Environment
1.3.1 Identifying Personal Entrepreneurial competencies (PECs)
Competencies: are defined as a body of knowledge, a set of skills and a cluster of traits.

Knowledge: consists of a set or body of information stored, which may be recalled at an

appropriate time.

Skill: is the ability to apply knowledge.

 Trait: is the total of peculiar qualities or characteristics that constitutes personal individuality.

Entrepreneurial competencies: refer to the key characteristics that should be possessed by

successful entrepreneurs in order to perform entrepreneurial functions effectively.

I. Levels of competencies required by entrepreneurs

There are three levels of competencies, which all entrepreneurs need:

1. Personal competencies: creativity, determination, integrity, persistence, emotional
balance and self-criticism.
2. Interpersonal competencies: communication, engagement, delegation, respect.

3. Business competencies: business vision, resource management, networking, negotiating

skills.

Personal Entrepreneurial Competencies (PECs) are specific characteristics/ traits that can be
achieved through education, hard work, and planning. There are ten most common Personal
Entrepreneurial Competencies, often called the 10 PECs, required by an entrepreneur; which can
be grouped into three clusters as follows:

i. Opportunity seeking and initiative

ii. Persistence

iii. Fulfilling commitments

iv. Demand for efficiency and quality

v. Taking calculated risks

vi. Goal setting

vii. Information seeking

viii. Systematic planning and monitoring

Systematic planning is a planning process that is based on the scientific method and includes
concepts such as objectivity of approach and acceptability of results; while Monitoring is the
systematic process of collecting, analyzing and using information to track a program's progress
toward reaching its objectives and to guide management decisions.

Successful entrepreneurs are good planners and monitors. They:

  plan by breaking large tasks down into sub-tasks with clear time-frame

 Revise plans in light of feedback on performance or changing circumstances

 Keep financial records and uses them to make informed decisions

ix. Persuasion and networking

x. Independence and self-confidence

1.3.2 Assessing Entrepreneurial potential

Entrepreneurial potential is a set of attitudes, motives and knowledge that enables

entrepreneurial activity. Such a definition shows the place of entrepreneurial potential in the
whole process of becoming an entrepreneur.

A self-assessment (personal-assessment) is an evaluation of your actions and attitudes. Self-

assessments assist individuals get in touch with what their core competencies are and how those
may overlap with what's needed to take on running a business.

If you're starting or leading a company, it's beneficial to know yourself inside and out. Even
though you've been with yourself your whole life, it's hard to identify your qualities. Assessing
your-self with professional self-assessment tools can:
 Help you to understand how you perform your work, so you can make appropriate
changes.
 Help your employees to understand what are your motivates and drives.

 Help you to recognize when you're in over your head difficulties and need someone’s
help.

 Help you to recognize your strengths and weaknesses.

 See holes and spots where you need help.

1.3.3 Understanding Entrepreneurship and Environment

Business environment refers to the factors external to a business enterprise which influence its
operations and determine its effectiveness. Business environment may be healthy or unhealthy.

 Healthy business environment means the conditions are favorable to the growth of
business.
  Unhealthy environment implies conditions hostile or unfavorable to business
operations.
I. Classification of Business Environment
Business environment may be classified into two broad categories; namely: external; and internal
environment

i. External Environment
It is the environment which is external to the business and hard to influence independently.
The following are the components of external environment:

1. Economic Environment
Economic environment is of multidimensional in nature. It consists of:
 the structure of the economy,
 the industrial, agricultural, trade and transport policies of the country,
 the growth and pattern of national income and its distribution,
 the conditions prevailing in industrial, agricultural and other sectors, t
 the position relating to balance of trade and balance of payments, and
 Other miscellaneous conditions of the economy.
2. Legal Environment
Business must function within the framework of legal structure. There are several business laws
(such as law of contract, law of sales, law of agency, law of bankruptcy, law of negotiable
instruments etc) in our country. A working knowledge of these Laws is very helpful for the
entrepreneur. Such knowledge will keep them away from innocent breaches and resultant
penalties.

3. Political Environment
Therefore, managers and entrepreneurs should understand the working of the political system in
order to discharge their responsibilities to the satisfaction of the public.

4. Socio-Cultural Environment
It consist the social and cultural norms/customs of a society in a given period of time. The level
of rigidity/flexibility of a given society towards a new Product/service/concept depends on the
socio-cultural practices of that particular society such as values, beliefs, norms, fashions and
 fads. It is important to protect traditional culture as long as it is not a hindrance to innovation,
motivation, and development.

5. Demographic Environment
It includes variables like age profile, distribution, sex, education profile, income distribution etc.
The demographic assessment can help in identifying the size of target customers.
ii. Internal Environment
Internal environment is the environment which is under the control of a given organization.
Following are the components of internal environment of a business:
1. Raw Material: It assesses the availability of raw material now and in the near future.
2. Production/Operation: It assesses the availability of various machineries, equipment,
tools and techniques that would be required for production/operation.
3. Finance: It assesses the total requirements of finance in terms start-up expenses, fixed
expenses and running expenses. It also indicates the sources of finance that can be
approached for funding.
4. Human Resource: It assesses the kind of human resources required and its demand and
supply in the market. This further helps in estimating the cost and level of competition in
hiring and retaining the human resources.
Identifying Environmental Factors Affecting Entrepreneurship
A complex and varying combination of financial, institutional, cultural and personality factors
determines the nature and degree of entrepreneurial activity at any time. The following are some
of the environmental factors which hinder/delay entrepreneurial growth:
 Sudden changes in Government policy.
 Outbreak of war or regional conflicts.
 Political instability or hostile Government attitude towards industry.
 Excessive red-tapism and corruption among Government agencies.
 Ideological and social conflicts.
 Unreliable supply of power, materials, finance, labor and other inputs.
 Rise in the cost of inputs.
 Unfavorable market fluctuations.
 Non-cooperative attitude of banks and financial institutions.
 Information Sheet - 4 Entrepreneurial motivation and Decision (4hrs)

1.4.1 Entrepreneurial Motivation

Figure 1: Entrepreneurial Motivation

Generally, motivation is the set of forces that cause people to do something. It is an inner state
that energizes and directs behavior toward goals. So, motivation is the set of intangible forces
that stimulate someone to take a desired course of action. Thus, we can say that entrepreneurial
motivation is the set of forces that energizes, directs and encourages a person to take initiative
and carry out entrepreneurial activities. It is defined as diverse factors arouse desires and activate
eagerness in entrepreneurs which make them accomplish an exacting goal.

The entrepreneurial motivation is the procedure that activates and motivates the entrepreneur to
make use of higher level of efforts for the accomplishment of his/her entrepreneurial goals.
Scholars have conducted various researches on entrepreneurial motivations and have come up
with numerous factors that motivate people to become entrepreneurs.

Motivating Factors:

While some researchers have classified the factors motivating entrepreneurs into ‘push’
(compulsion) and ‘pull’ (choice) factors, most of the researchers have classified all the factors
motivating entrepreneurs into internal and external factors as follows:

Internal Factors:

Among many internal factors motivating entrepreneurs;

1. Desire to do something new.
2. Become independent.
 3. Achieve what one wants to have in life.
4. Be recognized for one’s contribution.
5. One’s educational background.
6. One’s occupational background and experience in the relevant field.

External Factors:
1. Government assistance and support.
2. Availability of labor and raw material.
3. Encouragement from big business houses.
4. Promising demand for the product

1.4.2 Entrepreneurial Decision

As an entrepreneur, you must make different types of decisions on the everyday basis. You must
choose directions. Also, you must solve problems. You must take actions. The decision-making
process is one of the most critical processes in your company.

Decision-Making Process

Decision-making process is one of the most critical processes in your business.

The most common used approaching in the decision-making process is according the following
steps:

1. Recognize the problem/the gap

Every decision-making process starts with the problem or some discrepancy that exist between
the desired and current state. You have the desired state, and you have an existing state.

Here are some questions you need to answer as a part of this step in your decision-making
process:

 What are the most critical desired states for your small business?

 How close is your small business to these states?

 Why are you close or not close to the desired states?

 What are the most significant problems here?

2. Analyze the problem

If the impact of the problem is higher, also the importance of the problem will be higher.
3. Define possible solutions

4. Analyze all possible solutions

5. Select the best solution for the application

6. Implement the decision

Learning Outcome - 2 Business Ideas, opportunities and feasibility study

2.1.1 Definition of business ideas

A business idea is a short and precise description of the basic operation of an intended business.
Before you start a business, you need to have a clear idea of the sort of business you want to run.
Your business idea will tell you:
 Which need will your business fulfils for the customers and what kind of customers will
you attract?
 What good or service will your business sell?
 Who will your business sell to?
 How is your business going to sell its goods or services?
 How much will your business depend upon and impact the environment?
A good business idea will be compatible with the sustainable use of natural resources and will
protect the social and natural environment on which it depends.

2.1.2. Generating and Screening business ideas

Sources of Business Idea
The followings are some of the sources from which business ideas are generated
 Mass Media (newspapers, magazines, TV, Internet)
 Hobbies/Personal Interest  Natural scarcities and pollution
 Personal Skills and Experience  Changes in Society
 Business Exhibitions  Brainstorming
 Surveys  Being Creative
 Customer Complaints

Some tips to generate a successful business idea

 Start thinking! Get your brain to work
 Buy a note book  Follow your passion
  Keep your eyes open  Check your bank account
 Capitalize on your strengths  Know what you want in life
 Explore new things
 Choose a business that suits your personality
 Read about other people that started their own business

Steps in generating and screening the best viable business idea

Out of the business ideas generated through brainstorming, the best business idea can be screen
out using the following steps:
Step 1: Brain Storming
Step 2: Macro Screening
Step 3: Micro Screening
Step 4: SWOT analysis
Step 1: Brain Storming
Brainstorming is a creative idea generation technique. It is also a problem solving technique.
Step 2: Macro screening
In this step, the viability of the business idea is checked according to the following criteria:
1. Marketability
2. Availability of raw materials &other inputs
3. Ease of implementation
4. Financial ability of the entrepreneur
5. Consistency with government priorities
Step 3: Micro Screening
In this step, the viability of the business idea is checked according to the following criteria:
1. Marketing Viability
2. Technical Viability
3. Organizational and Management Viability
4. Financial Viability
5. Environmental Viability
6. Ecological Viability
1. Marketing Viability
Target market for the products and why customer would buy the product
  Size and growth rate of target market
 The level of actual market demand and anticipated future market potential
 Demand and supply situation, factors and trends
 Direct and indirect competition
 Marketing Practices
2. Technical Viability
 Technology & its source
 Machines and equipment’s
 Production process
 Raw Materials, power& other inputs
 Infrastructure and Facilities
 Location &layout of site, building & plan
3. Organizational and Management Viability
 Abilities, competencies, skills, experience, values and motivations of management/key
officers as per the Good network with customers
 Managerial experience
 Superior technology
 Distribution system
 Product requirements of project
 Sketch personnel requirements: what people will be needed now, in a year, in the long term?
 What skills and qualifications are required and what financial implication results?
4. Financial Viability
 Project startup capital
 Sources of financing/capital
 Balance sheet projections
 Cash flow projections
 Profitability/Income projections
 Break even analysis (BEA)
 Expected return on investment (ROI) & its viability for the entrepreneur (Cost benefit
analysis)
 5. Environmental Viability
 What are the types of effluents and emission generated?
 What needs to be done for proper disposal of effluents and treatment of emissions?
 Will the project be able to secure all environmental clearance and comply with all
statuary requirements?
6. Ecological Viability

 What is likely damaged caused by the project to the environment?

 What is the cost of restoration measures required to ensure that the damage to the
environment is contained within acceptable limits?

Step 4: SWOT Analysis

A SWOT analysis is a simple tool to help you work out the internal and external factors
affecting your business.

Strengths
Strengths are within the control of the entrepreneur and they occur at present. Strengths should
be capitalized and harnessed to reduce or eliminate weaknesses. Examples of strengths may
include technical expertise, new improvements of product, good network with customers,
managerial experience, superior technology, distribution system, and product features (utility
durability, etc.

Weaknesses
Weaknesses are within the control of the entrepreneur; they occur at present. They are "lack
of...", "missing...", or weak points. As much as possible, weaknesses should be eliminated.
Examples of weaknesses include weak selling effort, lack of working capital, inexperienced
managers or employees, technological obsolescence and poor design of product.

Opportunities
Opportunities are positive or favorable factors in the environment which the entrepreneur.
Examples of opportunities include few and weak competitors, no such products in the market,
rising income of target market Scarcity of product in the locality, growing demand for the
product, favorable government policy/programs, availability of technical assistance, low interest
rate on loans, access to cheap raw material and adequate training opportunities.
Threats
Threats are negative or unfavorable external factors in the environment and normally beyond the
control of the entrepreneur. Examples of threats include hanging government regulations,
smuggling, Raw materials shortages, insufficient power, corruption, poor infrastructure, rising
costs of raw materials, too much/Unhealthy competition, government bureaucracy

Reasons for generating business ideas

There are many reasons why entrepreneurs or would-be entrepreneurs need to generate business
ideas. Here are just a few:
 You need a great idea to start a new business
 Business ideas need to respond to market needs
 Business ideas need to respond to changing consumer wants and needs
 Business ideas help entrepreneurs to stay ahead of the competition.
 Business ideas are needed to exploit technology and do things better
 Business ideas are needed because the life cycles of products are limited.
 Business ideas help to ensure that businesses operate effectively and efficiently.
 Business ideas help to solve natural resource scarcity, pollution and depletion.

Information Sheet - 2 Business opportunities

2.2.1 Understanding Business Opportunity

A business opportunity is an attractive investment idea or proposition that provides the

possibility of a return for the person taking the risk. Such opportunities are represented by
customer requirements and lead to the provision of a product or service which creates or adds
value for its buyer or end-user.

An opportunity, in order to be a business opportunity, must fulfill the following criteria:

 There should be a real demand
 Return on investment
 Availability of resources and skills
 Meet objectives
 Be competitive
 It must have a high level of gross profit margins
  It must have the potential to start generating profit within 12 months – 36 months
 The startup capital investments must be realistic and within the range of what an
entrepreneur can provide.
 It must have the potential to keep on improving with time
 It must have a low level of liability to risk

2.2.2 Identifying and Assessing Business Opportunities

Ideas and opportunities need to be screened and assessed for viability once they have
been identified or generated. Identifying and assessing business opportunities involves
determining risks and rewards/returns reflecting the following factors:
 Market
 Length of the “window of opportunity”
 Personal goals and competencies of the entrepreneur
 Management team
 Competition
 Capital, technology and other resource requirements
 Environment

Market
Is there a market for the idea? Are there any customers’ people with money who are able
and willing to buy the product or service? Can you provide what they need or want? How
many are there?

Length of the ‘window of opportunity’

Can you create or seize the opportunity until its full utilization?

Personal goals and competencies of the entrepreneur

Do you really want to venture into the business? Do you have what it takes? Are you
motivated enough?

Management team
Who else will be involved with you in the business? Do they have the experience, know-
how, contacts or other desirable attributes required?

Competition
Who are your competitors? Do you have something customers want that your competitors
do not have? For example, can you produce or market at lower costs?

Capital, technology and other resource requirements

How much capital, technology or other resources are required? Do you already have them
or could you get them?

Environment
Are the political, economic, geographical, legal, and regulatory contexts favorable? Will
the business do any damage to the physical environment?

Information Sheet - 3 Feasibility study/analysis

2.3.1 Meaning of a feasibility study/analysis

Feasibility study/analysis is the process of determining if a business idea is viable. As a

preliminary evaluation of a business idea, a feasibility analysis is completed to determining if an
idea is worth pursuing and to screen ideas before spending resources on them. It comes before
the development of a business Plan.

A feasibility study can be carried out on an idea, a campaign, a product, a process or an entire
business.

A feasibility study precedes a business plan. Before writing a business plan, one needs to
identify how, where, and to whom they intend to sell a service or product.

They serve as a valuable tool for developing a winning business plan.

Benefits of a feasibility study/analysis

The followings are the major benefits of any feasibility study/analysis
 It enables to identify problems that may encounter the business and their solutions;

 It enables someone to develop marketing strategies to convince a bank or investor that

your business is worth considering as an investment;

 It serves as a solid foundation for developing a business plan

  It enables someone to know what customers want, test a product's usability and the
quality of the user's experience

2.3.2 Components of a feasibility study/analysis

The components of a feasibility study/analysis include all the things that should be considered in
conducting a feasibility study/analysis. These are shown in the following diagram:

Figure 2: Components of a feasibility study

1. Description of the Business
Here, there should be descriptions of the following issues:
 The product or services to be offered and how they will be delivered.
 How customers would use and buy the product or service
 Key components or raw materials that will be used in the product, how the business will
source these and how available they are.
 Plans to test the product to ensure it works as planned and is sufficiently durable, strong,
secure, etc.
2. Market Feasibility study
Here, there should be descriptions of the following issues:
 The industry in which the business operates. Include the size, growth rate, etc
 Demand and supply factors and trends
 Target market for the products and clearly state why would customers buy the produce
  The level of actual market demand and anticipated future market potential
 Direct and indirect competition (as it pertains to the target market only).
 Unique about the enterprise’s product compared to the competition?
 List all key barriers to entry
3. Technical Feasibility study
Here, there should be descriptions of the following issues:
 Details how you will deliver a product or service (i.e., materials,
 Labor, transportation, where your business will be located, technology needed, etc.).
 additional or ongoing research and development needs
4. Financial Feasibility study
Here, there should be descriptions of the following issues:
 Projects how much start-up capital is needed and when? What sources will provide the capital?
 balance sheet projections
 income projections
 cash flow projections
 When will the enterprise begin to turn a profit, Break even analysis (BEA)?
 What is the expected return on investment (ROI)?
 Will the enterprise provide a viable return on investment (ROI) for the entrepreneur (cost
benefit analysis)?

5. Organizational and production feasibility study

Here, there should be descriptions of the following issues:
 Defines the legal and corporate structure of the business (may also include professional
background information about the founders and what skills they can contribute to the
business).
 What physical premises are required? Give location, size, condition, and capacity of
planned production and warehouse facilities.
 How complex is the manufacturing process? Describe equipment needed and costs.
 Will space be owned or leased? Will renovations be required? At what costs?

6. Management and personnel Feasibility study

There should be descriptions of the following issues:
  List the proposed key managers, titles, responsibilities, relevant background, experience,
skills, costs
 Sketch personnel requirements: what people will be needed now, in a year, in the long
term? What skills and qualifications are required and what financial implication results?

2.3.3 Steps for conducting feasibility study...

The basic steps that apply to all feasibility studies are the followings:
Step 1: Assessment Stage
Step 2: Analysis Stage
 Conducting Market Research
 Performing Organizational and Technical Analysis
 Performing Financial Analysis
Step 3: Interpretation Stage
 Completing the Feasibility Study

Each step is described below:

Step 1: Assessment Stage
In this step, decision is made if you need to do a feasibility study or not
 Conduct a preliminary analysis:
 Consider your options:
 Begin to assess the demand for your idea:
 Begin to assess the competition: Perhaps you've determined that there is in fact a demand
for your idea or services
 Assess the challenges.
 Decide if you should hire expert consultants.
 Set a time-table.
 Step 2: Analysis Stage
In this step, three things are done; these are
 Conducting a market research
 Performing Organizational and Technical Analysis
 Performing Financial Analysis
Conducting a market research
 Learn about the market.
 Use data from the Economic Census.
 Survey people directly.
 Design your surveys carefully.
 Analyze the competition's claim on the market.
 Identify your potential share of the market.

Financial feasibility analysis

The final part of your study should address the financial feasibility of the business idea which
involves the following:
 Preparing a sales forecast;
 Estimating start-up and working capital requirements;
 Estimating profitability;
 Assessing financial viability

Performing Organizational and Technical Analysis

 Determine where you'll need to  Identify your funding sources:
work:  Interpreting the data :
 Decide how your company or team  Step 3: Interpretation Stage
needs to be structured  Compile all of the information:
 Determine what materials you will  Look at your financial predictions
need: first:
 Identify the cost of your materials.  Balance your estimated business
 Performing Financial Analysis profits against your personal
 Outline your start-up costs financial needs: Consider the
 Estimate your operating costs human costs of your business:
 Estimate your revenue predictions.  Analyze your findings:
 Write it up and distribute it:

Learning outcome - 3 Starting an Enterprise

Information Sheet - 1 Enterprise and Enterprising

3.1.1 Definition of Enterprise and Enterprising
An enterprise is a business-oriented organization formed specifically so founders can pursue
entrepreneurial endeavors for a profit.

An enterprise is for the purpose of attracting customers, selling goods and services and earning
profit. Enterprises are either formal or informal. An enterprise is considered to be any entity
engaged in an economic activity, irrespective of its legal form.

3.1.2 Concept of enterprising

Enterprising men and women are able to deal positively with the challenges and problems they
face in their daily lives.

Practically all undertakings can be referred to as enterprising it fulfills the followings.

 Idea identification,
 Planning,
 Implementation,
 Successful completion of an activity and
 Receiving the rewards.

Figure 3: Some examples of the Enterprises in Your Community

Classification of Enterprise /Types of Business

1. Based on the nature and function of Business of operation

i. Service giving enterprise: - Business enterprises that render service to customers.

ii. Merchandise enterprise: - an enterprise that purchases goods for resale in normal operation
of the businesses.
iii. Manufacturing enterprise: - is purchases raw materials and different components and
convert it into end products.

2. Based on the size/scale of the operation

 i. Micro enterprise
ii. Small enterprise
iv. Medium enterprise
v. Large enterprise

3. Based on the nature of ownership

i. Proprietorship
ii. Partnership
iii. Joint stock company (Share Company)
iv. Corporation

Table 3: Some Function of business operation based classifications of Enterprises

Function of business operation based classifications of Enterprises

No Service giving enterprise Merchandising enterprise Manufacturing enterprise

Cosmetic/beauty care Wholesale trade (durable
1 Food and kindred products
service goods)
Wholesale trade( non- Furniture and fixtures ,
2 Educational services
durable goods) Wood products (except furniture)
Building materials, Measuring, analyzing and controlling
a dry cleaner, an accountant,
3 hardware. Garden supplies instruments (photographic, medical &
or a car wash
dealers optical goods ;watches & clocks)
General merchandizing
4 Repairing items Apparel and other finished products
stores
3.1.3 Legal forms of business enterprises

The enterpreneur has to be sure of the administrative and legal issues involved in the business
project which is going to be selected. These includes,choice of the form of the business
ownership, registration and clearness and approval from the authorities.

Types of business ownership in Ethiopia

The concepts and legal forms of business enterprises in Ethiopia/ need contextualized example.
Every small business must select a legal form of ownership.
A. The sole proprietorship has only one owner.
B. A partnership has two or more co-owners.
C. A limited company is an association of stockholders or owners chartered by the
government. It has the authority to transact business in same manner as one person.
D. A cooperative is a group of people operating a business through a jointly owned and
democratically run organization.

1. Sole proprietorship/Sole trader

A sole proprietorship is a business that is owned and operated by one person. The enterprise has
no existence apart from its owner

Table 4: Advantage and Disadvantage of Sole proprietorship

Advantage Disadvantage
Simplicity: it is very easy to establish and dissolve Unlimited liability, Limited skills
the business., Quick decision
No separation of tax return Potential difficulty in borrowing money
High secrecy, Low costs to start, Minimum Lack of continuity/uncertain life: The business is
regulations, Low working capital requirement terminated upon the death or incapacity of the
owner.
Direct control of business/ personal touch: the Difficulty in raising capital/limited financial
owner can maintain personal contact with his sources
employees & clients.
Tax advantages, Owner receives all profits/ direct The sole proprietor is responsible for all
motivation, Flexibility decisions
2. Partnership
 It is formed through an agreement among two or more persons to carry on jointly a
legalized business as co-owners.
 Like the sole proprietorship, it is not a separate legal entity from its owners.
 It is recommended that a partnership agreement, called the Articles of Co-partnership or
Memorandum of Association, be prepared in writing by a competent attorney.
Characteristics of Partnership
 Association of two or more persons, Contractual relationship/ mutual agreement
  Existence of lawful business, Sharing of profit and loss
 Mutual agency among partners: Each partner is responsible and liable for the faults and
wrongful acts of a co-partners with regard to business obligations.
 No separate legal entity of the business, Unlimited liability
 Restriction on transfer of interest, Utmost good faith

Table 5: Advantage and Disadvantage of Partnership

Advantage Disadventage

Easy to form , Low costs to start, Larger/added Unlimited liability, Lack of continuity, Lack
capital sources of harmony

Business secrecy as compare to corporation

Difficulty in finding suitable partners
business type

Protection of minority interest: each partner has

Risk of implied agency, Shared authority,
an equal role in management of firm’s affair. ,
Non-transferability of interest
Shared management/specialization

Tax advantages as compare to corporation Difficulty in raising additional capital/limited

business type financial sources
Classification of partnership
i. General partnership: A partnership in which all partners have mutual agency and
unlimited liability for partnership debt.
ii. Limited partnership: A partnership that has two classes of partners:
a) Limited partners b) General partners
a) Limited partners: A partners who have no personal liability for debts of partnership beyond
the amount they have invested in the partnership.

b) General partner: a partner who assume unlimited liability for the debt of the partnership.
Hence, general partner in the limited partnership are responsible for its management.

3. Share Company (Corporation)

 It is an association of stockholders that has been established to allow a group of
entrepreneurs to act as one.
 The officials of the share company must file a special document, called the Articles of
Incorporation/Charter.
  It is essentially an "artificial person" created and operated with the permission of the state
where it is incorporated.
 It's a person like you, but only "on paper.’’

Characteristics of Share Company

 Artificial personality: separate legal personality distinct from owners., Limited liability
 Continuity: it has a separate and continuous life of its own, and does not dissolve if a
stockholder dies or the stock is sold to another person.
 Double taxation/taxed twice: first there is tax on the amount of the business profits. Then
the owners are also taxed on any dividends they may receive.
 Managed by professional managers

Table 6: Advantage and Disadvantage of Share Company

Advantages Disadvantages
Limited liability, Management can specialize, Closely regulated by state, Most expensive
Transferable of ownership form to organize (cost, time and paperwork)

Easier to raise capita, Separation of ownership

Double taxation (company and stockholders)
and management

Continuous existence/perpetuity, Separate legal Red-tape , Charter restrictions, Extensive

entity, Potential tax advantages record keeping required

4. Cooperative

It is a group of ten or more people operating a business through a jointly owned and
democratically run organization.The cost of registering a cooperative is usually lower than the
cost for registering a share company. A written cooperative agreement is required and must be
filed with the appropriate government authorities.The management of a cooperative is elected by
the members of the cooperative.

Principle of Cooperative
 Registered and have limited liability for its members
 Members have an equal vote in decisions
 Membership is open to everyone who fulfils specified conditions
 Assets controlled and usually owned jointly by members
  Profit shared equally b/n members with limited interest payable on loans made by members
 Share capital remains at its original value
 Members benefit from participation, not investment
Table 7: Advantage and Disadvantage of Cooperative
Advantage and Disadvantage of Cooperative
Advantages Disadvantages
Means to empower poor women, disabled Hard to keep qualified members, Members
persons and other groups who often lack a voice contributing to cooperative unequally
Joint self-help, Organizational structure helps Shared authority, Gender issues, Governance
all members challenges
Shared risk-taking, Easier to raise capital,
Combines individual skills
 Types of Business Structures
Personal Formation
Ownership Tax Management
Liability Documents
None but doing
Sole Unlimited personal liability Business not taxed.
business as
Proprietorshi One owner for obligations of the Owner taxed on Owner
Certificate may be
p business profits and losses.
needed
None but General
Unlimited Unlimited personal liability Business not taxed.
Partnership Partners have equal
General number of general for obligations of the Profits and losses are
Agreement may be management rights unless
Partnership partners business passed through to
needed to set forth they agreeotherwise
partners
partner duties
Limited number Unlimited personal liability
Certificateof Limited Business not taxed. General Partner manages the
of general of the general partners;
Limited Partnership Profits and losses are business, subject to the
and limited liability for limited partners
Partnership Limited Partnership passed through to Limited Partnership
partners is generally based on the
Agreement partners Agreement
invested. amount invested.
Board of Directors has
Unlimited Articles of
Tax on earnings at overall Responsibility with
number of Limited liability Incorporation
Corporation corporate level officers having the day-to-day
shareholders Bylaws
responsibility
t Types of Business Structure
 Information sheet - 2 Micro and Small Enterprises in Ethiopia
3.2.1 Facts of Micro and Small Enterprises in Ethiopia
Small and medium enterprises (SMEs) cover a wider spectrum of industries and play an
important role in both developed and developing economies. Ethiopia is no exception and SMEs
occupy a prominent position in the development of the Ethiopian economy. MSEs are the
natural home of Entrepreneurship. The sector is also an important force to stimulate economic
development by:
 Generate employment , Equitable income distribution , Activate competition
 Exploit niche markets , Enhance productivity and technical change
Table 8: Proposed classification of enterprises based on size in Ethiopia
Size Based Classifications of Enterprises
Level of No. of Total Asset in Total Asset in
Economic Sector
Enterprise Employees ETB USD
Industry < 10 employees < 250,000 <7,500
Micro Service &
< 10 employees < 200,000 < 6,000
Agriculture
11 – 50 250,001 – 4
Industry 7,500 – 115,000
employees Million
Small
Service & 11 – 50 200,001 – 2.5
6,000 – 75,000
Agriculture employees Million
51- 100 4,000,001 - 45 115,000 – 1.5
Industry
employees Million Million
Medium
Service & 51- 100 3,000,001 - 25 75,000 –
Agriculture employees Million 750,000
Industry >100 employees >50 Million > 1.5 million
Large Service &
>100 employees >25 Million > 750,000
Agriculture

1) Previous Definition of Enterprises in Ethiopia:

This definition of MSMEs is provided in the Federal Urban Job Creation and Food Security
Agency establishment regulation No 374/2016.
 Micro enterprises: means an enterprise having a total capital, excluding building, not
exceeding Birr 50,000 in the service sector or not exceeding Birr 100,000 in the industrial
sector and engages 5 workers, including the owner, his family member and other
employees.

 Small enterprises: means an enterprise having a total capital, excluding building, from
Birr 50,001 to Birr 500,000 in the case of service sector or Birr 100,001 to Birr 1,500.000
 in the case of urban agriculture, artisanal mining and construction sector engages from 6 to
30 workers including the owner, his family members and other employees.

 Small manufacturing industry is an industry with total capital, excluding building, from
Br. 100,001 to Br. 1,500,000 with 6 to 30 workers

 Medium manufacturing industry is an industry with total capital, excluding building

from Br. 1,500,001 to Br. 20,000,000 engaging from 31 to 100 workers

There are two main approaches to define MSEs. These are:

1) By some measure of Size/Quantitative Approach
2) Using an economic/Control definition/ Qualitative Approach

1) By some measure of Size/Quantitative Approach - Size refers to the scale of operations.

Some criteria are applicable to all industrial areas, while others are relevant only to certain types
of business.
Examples of Criteria used to measure size/ Quantitative Approach are:
 Number of employees is the most widely used criteria because it is inflation proof,
transparent, comparable, and available
 The best criteria in any case depends up on the user’s ,
 Volume/value of sales turnover
 Asset size , Insurance in force, Volume of deposits, Total capital investment ,

3.2.2. Using an economic/Control definition/ Qualitative Approach

Size does not always reflect the true nature of an enterprise. In addition, qualitative
characteristics may be used to differentiate small business from other business. The
economic/control definition covers:
 Market share
 Independence
 Personalized management

3.2.3 Economic social & political contributions of small business enterprise

Small and medium enterprises (SMEs) cover a wider spectrum of industries and play an
important role in both developed and developing economies.
They need a strong support on Scio- economic and political ground. Some of the contributions
are hereunder.
  Equitable distribution of wealth and decentralization of economic power
 More Employment creation capacity
 Removing Regional Imbalance
 Ancillary Function - (supply parts and accessories to bigger enterprises)
 Export Promotion

Characteristic and role of small business

Characteristics of Micro and Small Scale Industries The following are some of the important
characteristics of small scale industrial sector/unit.
1) Closely held
 Mostly managed by single person/one man show
 All activities are usually carried out by the owner
2) Personal Character
 The owner his/her self is generally the manager of small scale industries.
 Owners actively participates in all aspects of business decision making such as:
purchasing, production, Labour, Sale of product
3) Limited scale of operation
 It has lesser gestation period, It has limited share of a given market
 Its size in the industry is small
4) Indigenous resources
 They can easily located anywhere subject to availability of raw materials, labour, finance, etc..
 They use local resources
5) Labour intensive
 The capital investment is limited due to the use of simple technology
6) Local area of Operation
 Except marketing activities, all operation of MSEs industry are local/domestic
7) Simple Organization
 MSE unit has few or no layers of management

Why are Micro and Small Enterprises Important to the Economy?

According to ILO (2003), MSEs are pulling economic and employment growth worldwide.
 They can spark off socio-economic revival, as they need little small capital to operate,
but can contribute much
  They use minimum, simple, and inexpensive equipment and inputs
 They often available locally, use limited space, operate with basic technical and
management skills., adapt swiftly, (quickly , rapidly , fast ), repair or replace
infrastructure and equipment
 They produce basic tools for Agriculture, manufacturing, and Construction
 They fabricate basic goods and services needed by societies
 They create quickly self-employment and jobs
 Too many eggs in one basket(no expansion or product diversification)
 Greater flexibility, Less bureaucracy

. Advantages of Going in to small Businesses

The desire of individuals to own and operate their own small business is growing
For individuals pursuing a career in business ownership, numerous benefits can be attained
personally and professionally.
The following are more common advantages of owning a MSEs:
 Independence, Financial opportunities, Community service, Job security, Family employment

Disadvantage of going in to Small Businesses

The major disadvantages of going in to business include the following:
 Sales Fluctuation ,Competition, Increased responsibilities, Financial loses
 Employee relations, Laws and regulations, Risk of failure

Factors that support the success of small business

 Special contribution of Small Businesses

 As part of the business community, small firms unquestionably contribute to our nation’s
economic welfare.
 They produce substantial portion of our total goods and services.
 Thus, their general economic contribution is similar to that of big business
 Their special contribution include the following:
 Providing new jobs,Introducing innovation, Stimulating economic competition
 Aiding big business, Producing goods and services efficiently
Small Business Failure Factors
 Every year many small business firms cease operations
 Most of the time small business failed because of failure to pay debts.

Some Specific causes of failure

1) Incompetence - The owners simply do not know how to run the enterprise
2) Unbalanced experience - This means owners do not have well-rounded experience in the
major activities of the business, such as finance, purchasing, selling, and production
3) Lack of managerial experience - The owners simply do not know how to manage people.
4) Lack of experience in the business line (field) - The owner has entered a business field in
which he/she has very little knowledge
5) Others such as neglect, fraud, and disaster, (mischance, Bad luck, tragedy, accident

Challenges and Opportunities of Ethiopian MSEs

Challenges
Most MSEs face critical constraints, at both operation and start up level. Some of the constraints
include:
 Lack of access to finance, Lack of access to premise, Lack of infrastructure,

 Lack of training in entrepreneurial and management skills, Social and cultural facts,
 Lack of information on business opportunities, Deficient entrepreneurial culture
 Excessive corruption, Technology, Market problem
Opportunities
Some favourable factors for entrepreneurial activities in Ethiopia include:
 Liberalization of policies, Exemption from paying import duties and various taxes,

 Availability of untouched natural resources, Availability of labour forces,

 Favourable physical environment

Reasons for Interest in Small Business

 Small business operators constitute a large political pressure group whose voice and
concerns cannot be ignored.
 There are large numbers of people involved in small enterprise.
 Employees and sometimes owners of small enterprises tend to be underprivileged.
  Small enterprises offer many job opportunities.
 Small enterprises reduce poverty and contribute to development.
 Self-employment may appeal to many women and men, especially some persons with
disabilities or for those who have family responsibilities.

3.2.4 Key success factors in setting up a micro and small enterprises

Figure 4: The MAIR Model

Motivation and Determination
It is widely acknowledged that, to be successful, the individual or group needs to be highly
motivated and determined to set up the business to make it succeed. This will be reflected
Example
 Persistent ,Information seeking ,Opportunity seeking
Ability

Idea and Market

Resources

Business plan
On the whole a business plan should show main things, namely:
 Where you currently are with your idea, project or business;

 What you wish to do;

  How you propose to go about it; and that the project is worthwhile.
Organization and Management
The business then needs to actually start operating and, once this is done, it would need to be
managed. The whole business and the process need to be managed, and how well this is done –
in particular, finding and dealing with customers, management of cash and finances, marketing,
handling employees, dealing with suppliers, control systems – will all affect performance.

Information sheet - 3 Establishing an enterprise

3.3.1 Buying an Existing Business versus Starting a New Business

1. Buying an existing business

If someone has never owned a business, buying and operating an existing business offers
many advantages such as established customers and business procedures, trained
employees, inventory and premises which are in place and a business which already has a name
in the market.

There are many questions which the potential entrepreneur needs to ask about any business
which is for sale:
• Why do I want to buy this business?
• Why does the owner want to sell?
• Does the business have a future where it is and the way it is operating?
• Will I be happy operating this business?
 Do I have the skills?

The question of price is a difficult one. Consider what you are getting for the price you are
paying.
 Are you getting land and buildings?

 Are you buying the stock, furniture and appliances?

 Are you buying the name of the business and the rights to use that name forever?
 • Are you paying for the present owner of the business not to set up another business
nearby?
Table 9: Advantage and Disadvantage of Buying an Existing Business
Advantages Disadvantages

Less risk legality Product or service may be in a declining market

Significant personal freedom Limited growth potential
Cash flow already being generated Debts or stock may be too high
Relationships have been established with
Merchandise may be obsolete
suppliers and banks
An established service or product, with
Seller may have hidden reasons for selling: the
customers, a method of operation, staff
business may have been declining for years
and a name
The business may have a bad reputation in the
Location may be excellent
neighbor hood. Location may be poor

2. Starting a new business

3. Becoming a franchisee
Table 10: Advantage and Disadvantage of Becoming a franchisee
Advantages Disadvantages

Lower risk for the start-up Less entrepreneurial decision-making power

Start-up investment cost well known Franchising fees would decrease profits

Good market introduction of the product or No possibility of introducing a new product from
service other suppliers

Proven marketing concept Strong dependency on the franchiser

If the franchiser’s business loses the market, your

Training assured by the franchiser
business loses the market

Information sheet - 4 Basic Concepts of Marketing

3.4.1. Definition of marketing

The following are some of the important definitions of marketing by Philip Kotler and et.al
1. Marketing is too often confused with selling. Today, marketing must be understood not in
the old sense of making a sale—“telling and selling”—but in the new sense of satisfying
customer needs. “Selling is the art of finding clever ways to dispose of what you make. It
focuses on creating sales transactions rather than on building long-term, profitable customer
relationships.
2. But Marketing is the art of creating genuine customer value. It is the art of helping your
customers become better off. The marketer’s mottos are quality, service, and value.”
3. Broadly marketing is defined, as social and managerial process by which individuals and
organizations obtain what they need and want through creating and exchanging value with
others. In a narrower business context, marketing involves building profitable, value laden
exchange relationships with customers. Hence, we define marketing as the process by which
companies engage customers, build strong customer relationships, and create customer
value in order to capture value from customers in return.
Generally Marketing answers the following questions:
1. Who are your customers?
2. What are my customer’s needs and wants?

1. Who are your customers? Your customers are the people or other businesses that want
your products/ services and are willing to pay for them. They include;
 People who are buying from you now.
 People you hope will buy from you in the future.
 People who stopped buying from you but you hope to get them back.
2. What are my customer’s needs and wants? - An important point to note is that
customers want to look at different products so that they can choose what they like best.
Some customers want a different design and others want high quality and are willing to
pay extra for that.

How can I satisfy my customers’?

You need to do everything to find out who your customers are and what they need and want in
order to satisfy them improve your sales and make a profit. You need to find out;
 Products/services your customers want.
 Price your customers are willing to pay.
  Location of your business in-order to reach your customers (Place)
 Promotion to use to inform your customers and attract them to buy your products or
services
3. Understanding the Market place and Customer Needs - Marketing is all about creating
value for customers. Marketers need to understand customer needs and wants and the
marketplace in which they operate. We examine five core customer and marketplace
concepts: 1) needs, wants, and demands; 2) market offerings (products, services, and
experiences); 3) value and satisfaction; 4) exchanges and relationships; and 5) markets.
1. Customer Needs, Wants, and Demands

Need: Human needs are states of felt deprivation. They include basic physical needs for food,
clothing, warmth, and safety; social needs for belonging and affection; and individual needs for
knowledge and self-expression. Marketers did not create these needs; they are a basic part of the
human makeup.

Wants: wants are the form human needs take as they are shaped by culture and individual
personality. Example a person in Ethiopia needs food but wants Burger. Wants are shaped by
one’s society and are described in terms of objects that will satisfy those needs.

Demand: when backed by buying power, wants become demands. Given their wants and
resources, people demand products and services with benefits that add up to the most value and
satisfaction. Outstanding marketing companies go to great lengths to learn about and understand
their customers’ needs, wants, and demands. They conduct consumer research, analyze mounts
of customer data, and observe customers as they shop and interact, offline and online. People at
all levels of the company—including top management—stay close to customers.

2. Market Offerings—Products, Services, and Experiences

Consumers’ needs and wants are fulfilled through market offerings—some combination of
products, services, information, or experiences offered to a market to satisfy a need or a want.

Market offerings are not limited to physical products. They also include services—activities or
benefits offered for sale that are essentially intangible and do not result in the ownership of
anything. Examples include banking, airline, hotel, retailing, and home repair services.

3. Customer Value and Satisfaction

“Always give the customer quality, value, selection, and service”( Fred G. Meyer)
In terms of marketing, the product or offering will be successful if it delivers value and
satisfaction to the target buyer. The buyer chooses between different offerings on the basis of
which is perceived to deliver the most value. We define value as a ratio between what the
customer gets and what we gives .Customer satisfaction depends on a product‘s perceived
performance in delivering value relative to a buyer‘s expectations. If the product‘s performance
falls short of the customer‘s expectations, the buyer is dissatisfied. If performance matches
expectations, the buyer is satisfied. If performance exceeds expectations, the buyer is delighted.
Smart companies aim to delight customers by promising only what they can deliver, then
delivering more than they promise.

4. Exchanges and Relationships

Exchange is the act of obtaining a desired object from someone by offering something in return.
Marketing consists of actions taken to create, maintain, and grow desirable exchange
relationships with target audiences involving a product, service, idea, or other object. Two
parties are engaged in exchange if they are negotiating-trying to arrive at mutually agreeable
terms. When an agreement is reached, we say that a transaction takes place. Relationship
marketing aims to build long-term mutually satisfying relations with key parties: customers,
suppliers, distributors in order to earn and retain their long-term preference and business
effective.

Markets

The term market ‘has traditionally been used to describe a place where buyers and sellers gather
to exchange goods and services (for example, a fruit and vegetable market or a stock market).

A market is the set of actual and potential buyers of a product or service. These buyers share a
particular need or want that can be satisfied through exchange relationships. Sellers must search
for buyers, identify their needs, design good market offerings, set prices for them, promote them,
and store and deliver them.

A market for a business consists of all the potential customers within a specific geographical
area, who need or want a specific product or service and are willing and able to engage in
exchange to satisfy the need or want. Every business sells some type of product or service to
people. Potential customers can be described as:
1. People who need or want the product or service.
2. People who are able to buy the product or service.
3. People who are willing to buy the product or service.
What should entrepreneurs know about potential customers?
1. Know the customers: The market can be segmented either by dividing it into meaningful
buyer groups or dividing it according to characteristics such as age, sex, marital and family
status, employment, income and trends regarding any of these characteristics.

Figure 5: Know the Customer

2. Know what different customer groups wants: By segmenting the marketing into groups,
it is easier for entrepreneurs to determine what products or services each group wants or
needs.

Figure 6: Know the different Customer Groups’ wants

3. Know where the customer buys: Entrepreneurs need to find out where the customers in
their market are presently buying, and determine what factors will cause them to switch and
buy from their new businesses.
4. Know when the customer buys: By knowing when customers buy (daily, weekly,
monthly, yearly, seasonally), entrepreneurs will be able to determine such things as possible
hours of operation, when to advertise and quantity of merchandise to have on hand at
specific times of the year.
5. Know how the customer buys: Knowing how the customer pays for products and services
can help the entrepreneur to determine a credit policy as well as a pricing policy for the
business.

Traditionally the term market stood for the place where buyers and sellers gathered to
exchange their goods, such as Shola Gebeya and Markato.

Marketers are no longer asking only “How can we influence our customers?
 But also “How can our customers influence us?
 How can our customers influence each other?”

3.4.2. Importance of Marketing

Marketing plays a major role in achieving organization goal and socio-economic system of a
given country and further in the global economy. Since marketing is consumer oriented, it has a
positive impact on the business firms. It enables the entrepreneurs to improve the quality of their
goods and services.

Marketing helps in improving the standard of living of the people by offering a wide variety of
goods and services with freedom of choice, and by treating the customer as the most important
person. Marketing generates employment both in production and in distribution areas.

Since a business firm generates revenue and earns profits by carrying out marketing functions, it
will engage in exploiting more and more economic resources of the country to earn more profits.
A large scale business can have its own formal marketing network, media campaigns, and sales
force, but a small unit may have to depend totally on personal efforts and resources, making it
informal and flexible.
A customer purchases a product because it provides satisfaction. That something that makes a
product capable to satisfying want is its utility. And it is through marketing that much of a
products utility is created.

While the benefits of channel systems are clear, these cannot be enjoyed without an element of
cost. When responsibilities are shared or passed on, the company must pay a cost in terms of loss
of control. Ideally, the channel structure should operate to the mutual satisfaction of all members

The advantages of the channel system can be summarized by describing the utilities that
channels create:

1. Possession utility - Possession utility is created when a customer buys the product. That is,
ownership is transferred to the buyer. Thus, for a person to consume and enjoy the product a
transaction must take place. This occurs when you change your money for a product.
2. Time utility - Time utility refers to having a product available when you want it. Having a
product available when we want it is very convenient but it means that the retailers must
anticipate our desires and maintains an inventory. Thus, there are costs involved in providing
time utility.

3. Place utility - Place utility exists when a product is readily accessible to potential customers.
So physically moving the products to store near the customers add to its value.

4. Information utility - Information utility is created by informing prospective buyers that a

product exists. Unless you know a product exist and where you can get it, the product has no
value. Advertising that describes a sales person answering a customer question about the
durability of a product creates information utility. Image utility is a special type of
information utility. It is the emotional or psychological values that a person attaches to a
product or brand a person attaches to a product or brand because of its reputation or social
standing.

5. Form utility - Form utility is associated primarily with production – the physical or chemical
changes that makes a product more valuable. When limber is made into furniture, form utility
is created. This is production not marketing. However, marketing research may aid in decision
making regarding product design, color, quantities produced, or some other aspect of product.
All of these things contribute to the product form utility.
3.4.3. Sales and customer service

Customer Service: customer service means providing a quality product or service that satisfies
the needs/wants of a customer and keeps them coming back. Good customer service means much
more – it means continued success, increased profits, higher job satisfaction, improved company
or organization morale, better teamwork, and market expansion of services/products.
Customer Service Qualities:
Customer Service = Accountability + Delivery
Good customer service means accountability, responsibility and taking action to satisfy the
customer. If your customer is unsatisfied (for just or unjust reasons), you will have to use some
of the many techniques of the customer service professional to win their support and continued
loyalty.

When you listen to the customer’s complaint you take responsibility to solve the problem by:
o Listen without interruption and with full attention.
o Behave without aggression, and without arguing.
o Do not extend excuses for the problem, and thank the customer for drawing their
attention to it and helping solve it.
o Find out exactly what the customer needs you to do for them
o Explain first what you can do, and then gently add what you cannot do
o Undertake immediately what was discussed
o Check the result to make sure the customer is completely satisfied

Table 11: Helpful Reminders for Polite and Friendly Responses to your customers
Wrong Approach Polite and Friendly Alternative
“I don’t know.” “I’ll find out.”
“No.” “What I can do for you…”
“That’s not my job.” “Let me find the right person who can help you with …”
“You’re right – this is bad.” “I understand your frustrations.”
“That’s not my fault.” “Let’s see what we can do about this.”
“You want it by when?” “I’ll try my best.”
“Calm down.” “I’m sorry.”
“I’m busy right now.” “I’ll be with you in just a moment.”
“Call me back.” “I will call you back, what is your telephone number.”
You Need to Talk to My Supervisor “Let me find that out for you.”
Sales
Selling is important enough to be considered as a function of marketing in its own right, even
though it is not included separately as one of the ‘Four Ps’ of the marketing mix. Selling
contributes to the overall effectiveness of the marketing effort; however, it also has a more
fundamental role to play, in that the act of selling is the end result of all marketing activity.

The basic difference between marketing and selling lies in the attitude towards business. The selling
concept takes an inside-out perspective. It starts with the factory, focuses on the company‘s existing
products, and calls for heavy selling and promoting to produce profitable sales.

Table 12: Marketing Vs. Sales

Marketing Selling

It focus on customer needs It focus on sellers need

Customer enjoys supreme importance Product enjoys supreme importance

Converting customer’s needs into product. Converting product into cash.

Profits through customer satisfaction Profits through sales volume.

Emphasis is given on product planning and Emphasis is placed on sale of products already
development to match products with the market produced

Integrated approach to marketing is practiced. Fragmented approach to selling is practiced.

The principle of caveat vendor (let the seller The principle of caveat emptor (let the buyer
beware) is followed. beware) is followed.

General Skills Every Salesperson Should Have;

Listening Skills Organization Skills

Problem Solving Skills Self-Motivation Skills

Interpersonal Skills Persuasion Skills

Customer Service Skills Integrity

3.4.4. Marketing Mix

Marketers use numerous tools to elicit the desired responses from their target markets. These
tools are classified into four broad groups that are called the four Ps of marketing: product, price,
place, and promotion. Marketing-Mix decisions must be made to influence the trade channels as
well as the final consumers.

1. Product
The marketing mix is a combination of many factors, but consumers tend to view the whole of
marketing effort in more tangible terms of the product or service. It is important for marketers to
recognize that much of the ‘want satisfying’ nature of the product is derived from consumer
perceptions of the product.

Product refers to goods/services produced for sale, the product /service should relate to the needs
and wants of the customers. Thus, a product is anything tangible or intangible that can be offered
for purchase or use by consumers.

Some important questions you need to ask yourself include;

 What products/services do I sell?
 Why did I decide to sell these products?
 Do I have the products customers want?
 Do any of my products not sell well?
 Do I stock products that do not sell well?
 Always listen to what your customers like and don’t like. When their needs change,
change your products and services to satisfy the new needs.
 Do more market research in order to provide those products or services and increase
your sales. If your product is not selling well, think of new ideas like finding new
customers.

Figure 7: Block diagrams

Product attributes - such as quality, features, style and design of product
 A brand: is a name, term, sign, symbol, or design or a combination of these, that
identifies the maker or seller of a product or service.

 Packaging: involves designing and producing the container or wrapper for a product.

 Labeling: Labels may range from simple tags attached to products to complex graphics
that are part of the package.
 Product support services: services that augment actual products.

2. Pricing
Price is a particularly potent element of the marketing mix because of its direct impact on the
customer, the company and the economy. To the consumer, price is a major indication of quality
and an important factor in the decision-making process.

Price is simply the amount of money that consumers are willing to pay for a product or service

Pricing refers to the process of setting a price for a product/service.

To set your price you need to;
 Know your costs / cost based approach
 Know how much customers are willing to pay/ Demand based approach /
 Know your competitors price / Competition based approach
 Know how to make your prices more attractive
3. Place
Place means the different ways of getting your products or services to your customers. Place
refers to having the right product, in the right location, at the right time to be purchased by
consumers.
You can distribute your products to your customers through; different channels
 Selling directly to the consumers of the products or
 Indirectly through intermediaries (consumer intermediaries or business intermediaries)
Figure 8: Distribution Channels

4. Promotion
The purpose of promotion is to create and stimulate demand.

Promotion means informing or communicating your customers about your products and services
and attracting them to buy the given product /service. Promotion includes advertising, sales
promotion, publicity, personal selling, direct and internet marketing

Figure 9: The Promotion Mix

Some useful ways of advertising include signs, boards, posters, handouts, business cards,
brochures, Price lists, photos and newspapers. You can use sales promotion to make customers
buy more when they come to your business, you could also;

 Ensure you maintain attractive displays.

 Let customers try new products.
  Have competitions
 Give demonstrations
 Sell complementary products (products that go together)

3.4.5. Selecting suitable market

Choice of market is a strategic long-term decision that cannot be changed except at considerable
loss. Therefore, great care and planning is required to select the most appropriate market.
Marketing analysis is the dynamic process of analyzing and comparing the appropriateness or
otherwise of alternative market with the aim of selecting the best market for a given enterprise.

It consists of the following:

a. Trade area analysis: It is an analysis of geographic area that provides continued client or
customer to the firm. Convenience and accessibility to the trade area from alterative site,
needed to be analyzed.
b. Demographic Analysis: It involves study of population in the area in terms of total
population, age composition, perception income, education level, occupation structure, etc.
c. Competitive Analysis: It helps to judge the nature, location, size and quality of competition
in a given area.
d. Traffic Analysis: The relative desirability of alternative sites can also be judged in terms of
pedestrian and vehicular traffic passing a site. It will give an idea about the number of
potential customers passing by the proposed site during the work hours of the shop.

e. Economics: A major concern in choosing a community in which to initiate a small business

is the economic base of the community. Why do people live in the area? What is their
standard of living? Why are other businesses located in the area? A study should be made of
the industries in the area.

Information sheet 5 Financing an Enterprise

Raising finance for start-up capital requires careful planning. The entrepreneur needs to decide:
 How much finance is required?
 When and how long the finance is needed for?
 What security (if any) can be provided?
  Whether the entrepreneur is prepared to give up some control (ownership) of the start-up
in return for investment?
The finance needs of a start-up should take account of these key areas:
 Set-up costs (the costs that are incurred before the business starts to trade)
 Starting investment in capacity (the fixed assets that the business needs before it can
begin to trade)
 Working capital (the stocks needed by the business –e.g. r raw materials + allowance for
amounts that will be owed by customers once sales begin)
 Growth and development (e.g. extra investment in capacity)

3.5.1. Sources of Finance

Generally, the source of finance for a start-up is divided into sources. These are internal source
(equity financing) and external source (debt financing).
Figure 10: Different sources of Financing

Internal sources (Equity financing)

The main sources of equity financing includes personal investment, funds obtained from family
members or parents, partners, venture capital, angles among others.

1. Personal Sources - A large number of start-ups are 'self-funded' through savings or existing
sources of personal borrowings.
2. Saving - Saving refers to the money set aside for future use. It can be made through
 Small but regular deposit in financial intuition
 Automatic deduction from salary or wage
Forms of Saving
 Formal saving : it refers to saving made in formal financial institutions such as banks and
microfinance institutions
 Informal saving; it is saving made in village based or community based financial setup
such as credit and saving associations
 Traditional saving: this saving is made through the purchase asset which can be
liquidated into investment capital such as jewelry , house, Edir .and Equib
3. Venture Capital - Venture capital is obtained by large companies who are interested to
have ownership in exchange for capital. The percentage of ownership is negotiable.
4. Angels / Investors
Investor’s money is better for entrepreneurs than creditor’s money; because:-
 Creditor’s money involves a definite promise to repay a lender.

 It has double obligation- repaying the loan and paying the interest on the loan.

 If entrepreneurs can’t meet this obligation, it results in failure. But;

 Investor’s money doesn’t involve a definite promise to repay.

 Investors buy shares at their own risk.

 If they want to sell their share, entrepreneurs are not enforced to buy, investors themselves
search for buyer to sell their share.
5. Families, Friends and Relatives - At times, loans from friends or relatives may be the only
available source of new financing. Such loans can often be obtained quickly.
6. Partner Financing - This is a type of financing in which a partner who has interest in the
business raises some capital to finance the operation of the business

3.5.2. Debt Financing

Debt financing is a financing method involving interest payment. Debt financing requires the
entrepreneurs to pay back the amount of funds borrowed with an interest within predetermined
period of time. Debt financing is asset based financing in that it requires collateral of fixed asset
(such as car, house, plant, machine, or land).

The most common source of funding comes from commercial banks and micro finances. There
are prerequisites to get loan from financial institutions. The common requirement include the
following
 Decision on the amount and installment plan
 convincing business plan
 collateral
 appraisal by the bank
1. Bank loan - Commercial Banks are sources of short-term funds most frequently used by the
entrepreneurs when collateral are available. The funds provided are in the form of debt
financing and requires some tangible collateral. The collateral can fixed asset such as land,
equipment, building, car and other assets.

2. Loan from Micro-Finances - Microfinance is the provision of financial services to low-

income clients for personal consumption or investment.

3. Trade credit - It is a credit obtained from suppliers who sell goods and service on credit.
The credit is usually paid within 30-90 days. It is a short term financing scheme.

4. Lease Financing - Lease financing is one of the important sources of medium and long
term financing here the owner of an asset gives another person with a right to use it against
periodic payment. The owner of the asset is named as lesser and the user as lessee.
5. Other Sources - Other sources of funding include grants (both Government and private
sector) - there are thousands of grants available depending on entrepreneur industry and
location. Entrepreneur can also have the following alternative sources of finance..
 Crowd financing
 Business Incubators
 Hire Purchase

Information sheet - 6 Basics of Business Plan

3.6.1. Business Plan

A business plan is a written document prepared by the individual entrepreneur or partners that
describes the goals and objectives of the business along with steps necessary to achieve those
goals. A Business Plan sets objectives, defines budgets, engages partners, and anticipates
problems before they occur. The preparation of a business plan requires considerable investment
of time, effort, and energy.

3.6.2. Uses of the Business Plan?

Once completed, there are many potential uses of a business plan for entrepreneurs. First, it is a
powerful sales document for raising money. A business plan is a prerequisite for talking to a
venture capitalist, and/or other investors. If entrepreneurs want to borrow money, it is an
impressive document to convince bankers to consider a request for a loan. As a rule of thumb,
the more entrepreneurs want to borrow, or the more money entrepreneurs want to raise capital
from investor, the more thorough the business plan must be.

A second major use of a business plan is that it serves as an operational plan to direct
entrepreneur’s operations. Like a blueprint for a house, entrepreneur’s plan will tell what
entrepreneur to do and when to do it. Many entrepreneurs use their business plan for the critical
start-up and expansion periods of operation so that they will stay both on target and on budget.

Generally, the business plan benefits the internal and external users
 The plan helps the enterprise to develop a “road map” to follow in executing its strategies
and plans.
 The plan introduces potential investors and other stakeholders the business opportunity the
firm is pursuing and how it plans to pursue it.

3.6.3. Contents of the business plan

Contents of a Standard Business Plan
Cover page
A standard business plan contains the following elements.
Executive summary

Company Description

Product/service

Market Analysis

Marketing Plan

Operation Plan

Management Plan

Financial Plan

Exist Strategy

Economic Analysis

Environmental Analysis

Figure 11: BusinessRisk

PlanAnalysis
Element

The brief reference to each content of the business plan is given below
1. Cover page contains the name of the business, name of the applicant and the date .
2. Executive Summary gives an overview of the whole document in which the main contents
are summarized.
3. Company description presents organizational set up, vision, mission, objective, core values
and success factors.
4. Product/service. this part describes the type of products or service the prospective business
has to offer to the market
5. Market analysis presents the market situation including industry analysis, competition,
current and future markets trends
6. Marketing plan sets out the plan to reach target customers and get products/services sold
7. Operation Plan deals with how the work is organized and done
8. Management plan shows the human resource requirement for the planned operation and
appropriate structure is proposed.
9. Exit Strategy talks about future development plan and milestone.
10. Financial Plan projects the financial requirement to start up and run the business
11. Economic Analysis points out the economic benefits of the business to the individual
entrepreneur, the local community and the nation
12. Environmental Analysis presents the impact of the the business on the ecosystem of the
environment and mitigation strategies
13. Risk Analysis project potential risks and risk management plan.
Business model Canvas
Business model canvas is a model that Summarize a series of untested hypotheses of framework,
use customer development to test their hypotheses and Practice agile development (developing a
product iteratively and incrementally).Business model describes how a company creates value
for itself while delivering products and services for customers.
• Business model canvas is a language that describes, challenge, design and invent business
models more systematically. It is used for preparation and easily understands main
components of business plan.
The following Business model Canvas is a guideline for trainees to prepare mini business plan.
Figure 12: Business Model Canvas (The nine Building Blocks for business plan)

1. Customer Segments
 Define the different groups of people or organizations a business targets to reach and serve
  Make a conscious decision about which segments to serve and which segments to ignore
Separate customer segments if:
 Their needs require and justify a distinct offer;
 They are reached through different distribution channels;
 They require different types of relationships;
 They have substantially different profitability’s; and
 They are willing to pay for different aspects of the offer

2. Value proposition
 It solves a customer problem or satisfies a customer need.
 It also describes the uniqueness of a business.
 For each customer segment identified
 Describe the bundle of products and services that create value for each specific customer
segment
 Identify the reason why customers will turn to your company over its competitors. It
solves a customer problem or satisfies a customer need

3. Distribution Channels
 Describes how your company communicates with and reaches its customer segments to
deliver the value proposition
 Functions of distribution channels include:
 raising awareness among customers about a company’s products and services;
 helping customers evaluate a company’s value proposition;
 allowing customers to purchase specific products and services;
 delivering a Value Proposition to customers; and
 Providing post-purchase customer support.

4. Customer Relations
 Describes the types of relationships your company needs to establish and nurture with
specific customer segments
 Focused on:
 Customer acquisition
 Customer retention

5. Revenue streams
  For what value is each customer segment truly willing to pay?
 Identify and quantify the cash your company can generate from each customer segment
through one or more revenue streams (sales pipelines)
 Consider two different types of revenue streams:
 Transaction revenues (resulting from one-time customer payments)
 Recurring revenues (resulting from ongoing payments)

6. Key Resources
 Identify, describe and quantify assets required to deliver on the value proposition to each
of the identified customer segments
e.g. Land, Buildings, Equipment ,Facilities ,Platforms ,Systems ,Technology

7. Key Activities
 Identify, define and describe the most important things (actions) your start-up company
must do to: create and offer a value proposition ,reach markets, maintain customer
relationships ,earn revenues, to make its business model work and to operate successfully

8. Key Partnerships
 Identify and describes the network of suppliers and partners that make the business model
work, e.g.
 strategic alliances between non-competitors;
 co-operation: strategic partnerships between competitors;
 joint ventures to develop new businesses;
 buyer-supplier relationships to assure reliable supplies
9. Cost Structure
 Describe the most important costs incurred while operating under a particular business
model to:
o creating and delivering value,
o maintaining customer relationships,
o Generating revenue.
 Such costs can be calculated relatively easily after defining key resources, key activities,
and key partnerships.
Practical Task- OPERATION SHEET- Project work
Operation Title: preparing a business plan
Instruction; Use the business plan format appendix I and prepare a comprehensive business plan
in group which you think to use it after your graduation.
1. using the appropriate business plan format, prepare a complete business plan
2. Request your teacher for evaluation and feedback

Purpose: To prepare a comprehensive and feasible plan

Equipment Tools and Materials:

Computer, printer, pen, pencil, paper, marker, sample business plan, demonstration room.

Conditions or Situations for the Operations:

A Cooperativeness of business enterprises, trade organizations, government agencies, NGOs,
chamber of commerce, MSEs, and other specialists.

Procedure:
1. Select the appropriate business plan format
2. Describe the business
3. Prepare the marketing plan
4. Prepare operation plan
5. Prepare organization and management plan
6. Prepare financial plan
7. Checking the feasibility of the plan

Precautions:
• Adequate and reliable data/information
• Basic entrepreneurial competencies
• Fulfilling legal requirements
• Business ethics
Quality Criteria:
• Marketability, Technical and managerial feasibility, and Finical feasibility
 Learning Outcome- 4 Employability skills

Information Sheet - 1 Definition of Employability Skill

4.1.1 Employability Skill

The ILO defines employability as relating to “portable competencies and qualifications that
enhance an individual’s capacity to make use of the education and training opportunities
available in order to secure and retain decent work, to progress within the enterprise and between
jobs, and to cope with changing technology and labor market conditions. Individuals are most
employable when they have broad-based education and training, basic and portable high-level
skills, including teamwork, problem solving, information and communications technology and
communication and language skills. This combination of skills enables them to adapt to changes
in the world of work.

Employability skills are defined as skills required not only to gain employment, but also to
progress within an enterprise so as to achieve one’s potential and contribute successfully to
enterprise strategic directions.

4.1.2 Core Employability Skills

The core skills are:
1. Basic/foundation skills
2. Vocational/technical skills
3. Professional/personal

4. Core work skills

Table-21: Core Employability Skills and their Definition

Type of skill Definition

 The literacy and numeracy skills necessary for getting work that can
pay enough to meet day-to-day needs. These skills are also a
Basic/foundation prerequisite for continuing in education and training, and for acquiring
skills other vocational, professional and core work skills that enhance the
prospect of getting a good job

Vocational or Specialized skills, knowledge or know-how needed to perform specific

technical skills duties or tasks
Professional or Individual attributes relevant to work, such as honesty, integrity, work
personal skills ethic
The abilities to learn and adapt; to read, write and compute
competently; to listen and communicate effectively; to think
creatively; to solve problems independently; to manage oneself at
Core work skills
work; to interact with co-workers; to work in teams or groups; to
handle basic technology; and to lead effectively, as well as follow
supervision

Important core skills necessary for employability skills include the following though it is not an
exhaustive list:
 Communication skills that contribute to productive and harmonious relations between
employees and customers;
 Team work skills that contribute to productive working relationships and outcomes;
 Problem-solving skills that contribute to productive outcomes;
 Initiative and enterprise skills that contribute to innovative outcomes;
 Organizational skills :planning and organizing skills that contribute to long-term and
short-term strategic planning;
 Self-management skills that contribute to employee satisfaction and growth;
 Learning skills that contribute to ongoing improvement and expansion in employee and
company operations and outcomes; and technology skills that contribute to effective
execution of tasks.
 Numeracy skills : literacy in basic arithmetic and statistical tools
 Negotiation skill: ability to engage with others
 Valuing diversity and difference
 Digital skills (technology).
Table-22: The broad categories of core employability skills for

Broad skill
Core work skills/abilities
category
 Willingness to learn
 Using learning techniques to acquire and apply new knowledge and skills
 Working safely
 Pursuing independent learning
 Taking responsibility for own learning
Learning to  Thinking abstractly
learn  Organizing, processing and holding information
 Interpreting and communicating information
 Conducting systematic enquiry, following through to find answers
 Using time effectively and efficiently without sacrificing quality
 Selecting the best approach for tasks
 Beginning, following through and completing tasks
 Reading competently
 Reading, understanding and using materials, including graphs, charts and displays
 Understanding and speaking the language(s) in which the business is conducted
 Writing effectively in the language(s) in which the business is conducted
Communication  Listening and communicating effectively
 Listening to understand and learn
 Using numeracy effectively
 Articulating own ideas and vision
 Being adaptable
Teamwork  Managing oneself at work
 Working in teams or groups
 Interacting with co-workers
 Respecting the thoughts and opinions of others in the group
 Working within the culture of the group
 Understanding and contributing to the organization’s goals
 Planning and making decisions with other sand supporting the outcomes
 Taking accountability for actions
 Building partnerships and coordinating a variety of experiences
 Working towards group consensus indecision-making
 Valuing others’ input
  Accepting feedback
 Resolving conflicts
 Coaching, mentoring and giving feedback
 Leading effectively
 Mobilizing a group for high performance
 Thinking creatively
 Solving problems independently
 Testing assumptions
 Identifying problems
Problem-solving
 Taking the context of data and circumstances in to account
 Identifying and suggesting new ideas to get the job done(initiative)
 Collecting, analyzing and organizing information (planning and organization)
 Planning and managing time, money and other resources to achieve goals

4.1.3 Personal Attributes of Job Seekers

 Loyalty  Enthusiasm  Balanced attitude towards
 Commitment  Commonsense work and home life
 ‘honesty and integrity  Positive self esteem  Ability to deal with pressure
 Reliability  Sense of humor  Motivation
 Personal presentation  adaptability
Importance of Employability Skills

4.2.1 Why Employability Skills are Important?

These set of "job-readiness" skills are, in essence, behaviors that are necessary for every job and
are essential attitudes that allow you to grow in your career and also efficiently let you:
 Connect with co-workers
 Solve problems
 Be a part of and understand your role within the team
 Make responsible choices for your job and your career
 Be independent and take charge of your career

Personal characteristics, habits, and attitudes influence how you interact with others.

Competitive World

Adapt to changing situations

Common Elements of Employability Skills

Return on Investment

A degree is not enough

4.3.1 Employability skills

Employability skills are transferrable skills that are useful in nearly every job. They involve the
development of an expertise, knowledge base or mindset that makes you more attractive to
employers. Employability skills are also often referred to as employment skills, soft skills, work-
readiness skills or foundational skills. They often improve your performance, minimize errors
and promote collaboration with your coworkers, enabling you to perform your role more
effectively.

1.3.2 Elements of Employability Skills

1. Communication 5. Organization and planning

2. Teamwork 6. Initiative
3. Reliability 7. Self-management
4. Problem-solving 8. Leadership
 9. Learning 10. Technology

1. Communication

Communication is one of the most important employability skills because it is an essential part
of almost any job. The communication process involves five elements:

a. Sender, d. Medium and

b. Receiver, e. Feedback.
c. Message,

The best way to improve your communication skills is to communicate as frequently as possible.
Some of the activities that can help you develop better communication skills include:
1. Communicating on social media
2. Joining a local club
3. Practicing awareness of your facial expressions and body language

4.3. Job Application

4.3.1. Resume

A short document showing an employer that an applicant is a desirable candidate for a job.
Resume is a Statement of facts (using keywords and action verbs) that highlights the
accomplishments, skills and education/training.

Creating effective Resumes

What is the purpose of a resume?

 To gain a potential employer’s interest.

 To obtain an interview.

Contents of a Resume

The sections most commonly included in a resume are the following:

i. Heading

ii. Objective
 iii. Strengths or Skills Summary

iv. Education

v. Study/special training

vi. Work Experience

vii. Volunteer Experience/Community Service.

viii. Activities/Awards/Special Skills

References

Do not list any references on the resume. Instead key the phrase, “References available on
request” at the bottom of the page. This is optional because all employers expect that references
will be provided if requested. The line can serve the purpose of signaling the end of the resume;
but if an applicant doesn’t have room, leave it off.

 On a separate sheet of paper have the references listed so an applicant will have them
available. On this sheet, use the same heading as the resume page.
 Use three to five adult references. Include full name, title (relationship to you), organization
with which the person is affiliated, complete address, phone number and e-mail address.
 Suggestions for good references include past and present employers, volunteer work
supervisors, teachers, coaches, counselors, etc. Do not use family members or school
friends.
 Make sure the references can discuss the work-related qualities positively.
 Get permission before an applicant use anyone for a reference.
 Keep the references informed about key accomplishments and make them aware of
positions an applicant is seeking.

A cover letter has several purposes:

 A cover letter tells the employer the type of position you’re seeking.
 A cover letter tells the employer exactly how an applicant is qualified for the position.
 A cover letter highlights the aspects of the experience that are most useful to the
employer.
 A cover letter can explain things that the resume can’t.
  A cover letter can serve the same function as the “objective” on the resume, and expand
upon it.
 A cover letter is a little window in to the personality.
The cover letter is all about specifics:
1. Always address the letter to a specific person.
2. Target the letter to a specific position and be very specific when describing the skills and
qualifications related to that position.
3. Specifically ask for an interview and tell the company how an applicant will follow up.
Tips for Completing a Job Application
1. Follow all directions printed on the job application.
2. Fill out the application yourself. Employers want to know how well an applicant read and
write, not how well the friend or parents can write.

3. Print using black ink. Printing is much easier to read. Use the best penmanship.

4. Think before an applicant write to avoid mistakes.

5. Have all of the data handy.

6. Be as specific as possible with all answers.
7. Be specific about employment history in the application
8. Salary desired? Do not pin yourself down to a dollar figure
9. Where to Look for a Job

Once an applicant has the above information organized, it is time to start looking for a job.

Here are some common sources of job information:

1. Word of Mouth/Networking
2. Pounding the Pavement
3. “Help Wanted” Signs
4. Public Employment Agencies
5. Newspapers
6. List of Employers
7. Government opportunities.
8. Unions
Online Application Process

Tips for Completing Online Applications

1. The focus should be on making the application unique, to avoid its being swallowed up in
the technology abyss.
2. Follow directions. Be careful to enter the correct data in the correct field.
3. Tailor the information to the position. Don’t copy and paste text from the resume.
4. Use key words, buzz words, and industry verbiage. Use the verbiage in the job ad as the
model.
5. Include numbers and statistics if available. Example counted five cash drawers daily;
Responsible
6. Complete all fields – even those that aren’t required
7. If the company offers an optional assessment test online, take it. Some employers have
said that candidates who don’t take the optional assessment test are automatically screened
out.
8. Make sure the resume can hold its own in a very simple format. Fancy bullets, text, italics,
and bold do not convert well in an electronic application.
9. Spell check and grammar check the application before submitting it. Have an error-free
application because this application serves as the employer’s first impression of you.
10. Include a strong objective tailored to the specific job for which an applicant is interested.
11. Another use for the comments section: use it to demonstrate that you’ve done research on
the company and the industry.
12. Follow-up the electronic application with a personal e-mail to the hiring manager. A
follow-up phone call is acceptable if the ad does not say “No phone calls.”

1. Interviews

2. Teamwork

There are many things you can do to boost your teamwork skills, including:
 Volunteering to help coworkers with projects
 Working with others in a local organization
 Joining a sports team

3. Reliability
You can become more reliable by:
 Consistently meeting or exceeding your expected levels of work performance
 Creating schedules for your daily tasks and maintaining them
 Acknowledging your mistakes and making a conscious effort to avoid them in the future

4. Problem-solving

You can become a better problem-solver by:

 Undertaking research assignments and projects
 Participating in brainstorming sessions
 Regularly developing your skills by solving puzzles and playing games

5. Organization and planning

You can develop organizational and planning skills by:
 Developing a timetable for your daily activities
 Organizing an event
 Writing down your tasks and activities in a planner

6. Initiative
Taking initiative means recognizing a problem and solving it, preparing for a potential crisis by
taking preemptive action, taking advantage of opportunities and having a positive attitude
You can improve your ability to take initiative by:
 Approaching companies and other organizations to inquire about job opportunities
 Proposing changes to the policies or activities of a group you belong to
 Setting up a local club or fundraiser

7. Self-management

Self-management refers to the ability to perform job duties satisfactorily with little or no
supervision.

You can develop self-management skills by:

 Asking for more responsibilities at work
 Creating schedules for certain activities and maintaining them
 Participating in volunteer work that allows you to work independently
 8. Leadership

You can learn to become a better leader by:

 Attending a leadership course
 Starting a local group
 Reading about the habits of successful leaders, particularly those in your industry
9. Learning

You can increase your ability to learn by:

 Taking a course to improve your learning skills, such as a speed-reading, memory-
boosting or an accelerated-learning course
 Researching skills and activities related to your job, such as organizing, teamwork or
presentation skills
 Teaching yourself a new skill or hobby
10. Technology

improve technology skills include:

 Enrolling in a technology course
 Trying out new apps and technology in your daily life
 Staying up-to-date with the latest technology in your industry

REFERENCE
1. Entrepreneurship[ training Guide for TVET….(prepared by Federal TVET Agency)
2. Budget and Accounts supports Level II with selected Competency assessment questions and their
answers (prepared by Ahmed Melke)

OTHER REFERENCES

1. COMCEC (2017). Training on Entrepreneurship and Management of Small Business for Women
in Gambia, Senegal and Sierra Leone.
2. Geoff Lancaster and Paul Reynolds (2002). Marketing: The One-Semester Introduction. Reed
Educational and Professional Publishing Ltd .ISBN 0 7506 4381 1
3. ILO (2008).Know about Business. ISBN 92-9049-396-8
4. Federal Urban Job Creation and Food Security Agency establishment regulation No 374/2016.
5. Philip Kotler and Gary Armstrong (2018). Principle of marketing (17th edition). Global edition.
Pearson Education company.
6. Hailay Gebretinsae Beyene(2007). Entrepreneurship and Small business management, Mekelle
7. KAB/Know about the business(2008)
8. Internet: Citigroup(2006)
9. Timothy S. Hatten (2012) Small Business Management : Entrepreneurship and beyond
10. COMCEC (2017). Training on Entrepreneurship and Management of Small Business for Women
in Gambia, Senegal and Sierra Leone.
11. Geoff Lancaster and Paul Reynolds (2002). Marketing: The One-Semester Introduction. Reed
Educational and Professional Publishing Ltd .ISBN 0 7506 4381 1
12. ILO (2008).Know about Business. ISBN 92-9049-396-8
13. Philip Kotler and Gary Armstrong (2018). Principle of marketing (17th edition). Global edition.
Pearson Education company.
14. Hailay Gebretinsae Beyene(2007). Entrepreneurship and Small business management, Mekelle
15. KAB/Know about the business(2008)
16. Internet: Citigroup(2006)
Website link
1. https://www.yourarticlelibrary.com/entrepreneurship/motivation-entrepreneurship/
entrepreneurial-motivating-factors-internal-and-external-factors/40682
2. https://qsstudy.com/business-studies/entrepreneurial-motivation
3. https://riseupaddis.wordpress.com/2018/02/05/top-seven-ethiopian-entrepreneurs-to-watch-in-
2018/
4. https://www.solerebels.com/pages/bethlehem-tilahun-alemu
5. http://www.simplynotes.in/mbabba/entrepreneurial-competency/