1.3.1 Enterprise and entrepreneurship:
- Characteristics of successful entrepreneurs
- Contents of a business plan and how business plans assist entrepreneurs
- Why and how governments support business start-ups, e.g. grants, training schemes
An enterprise is an activity or a project that produces services or products. Within enterprise we have entrepreneurs.
Entrepreneurship
An entrepreneur is a person who organises, operates and takes risks for a new business venture. The entrepreneur brings together the various factors of production to produce goods or services. Here are traits that make up an entrepreneur; Hard working, Innovative, Self-confident, Risk taker, Creative, Independent
Business plan
A written document containing the business aims and objectives; important details about the operations, finance and owners of the that business. How, when and what they will do. A look into future of the business, the steps it will take to get where they need to be.
A typical business plan includes several key components:
Executive Summary: This is a concise overview of the entire plan, summarizing the business concept, goals, target market, and financial projections.
Business Description: Detailed information about the business concept, the problem it solves, products or services offered, target market, and unique selling propositions (USPs).
Market Analysis: Research and analysis of the industry, target market, competitors, and market trends. This section helps to demonstrate an understanding of the market and how the business fits into it.
Organization and Management: Details about the organizational structure, management team, and key personnel involved in the business, including their roles and responsibilities.
Products or Services: Comprehensive information about what the business offers, including features, benefits, and how they fulfill customer needs.
Marketing and Sales Strategy: Plans for reaching and acquiring customers, including marketing channels, sales strategies, pricing, and promotional activities.
Funding Request (if applicable): If seeking funding, this section outlines the funding requirements, how the funds will be used, and the potential return on investment for investors.
Financial Projections: Forecasts of the financial performance of the business, including income statements, cash flow projections, and balance sheets for the next few years.
Additional documents or information that supports the content of the business plan, such as resumes of key team members, detailed market research, or legal documents.
Business plans can vary in length and detail depending on the purpose, audience, and stage of the business. They are essential tools for entrepreneurs to articulate their vision, strategy, and operational plans to potential investors, partners, and team members.
Governments aid start-ups to help economic growth, job creation, and innovation. They provide financial assistance like grants, loans, and subsidies targeting specific industries or regions that are struggling.
The government may also offer Training, mentorship programs, and incubators offer essential skills, resources, and networking opportunities. Tax incentives and simplified regulations ease the start- up process.
Access to research facilities, technology hubs, and market connections further supports their growth. Overall, government support nurtures an environment conducive to entrepreneurial success, fostering innovation, job opportunities, and economic advancement.
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1.3.2 The methods and problems of measuring business size:
- Methods of measuring business size, e.g. number of people employed, value of output, capital employed (profit is not a method of measuring business size)
- Limitations of methods of measuring business size
Businesses come in many sizes. They can be owned by a single individual or have up to 50 shareholders. They can employ thousands of workers or have a mere handful. But how can we classify a business as big or small?
Business size can be measured in the following ways:
Number of employees: larger firms have larger workforce employed
Value of output: larger firms are likely to produce more than smaller ones
Value of capital employed: larger businesses are likely to employ much more capital than smaller ones
However, these methods have their limitations and are not always accurate.
Example:
When using the ‘number of employees’ method to compare business size is not accurate as a capital intensive firm ( one that employs a large amount of capital equipment) can produce large output by employing very little labour (workers). Similarly, value of capital employed is not a reliable measure when comparing a capital-intensive firm with a labour-intensive firm. Output value is also unreliable because some different types of products are valued differently, and the size of the firm doesn’t depend on this.
1.3.3 Why some businesses grow and others remain small:
- Why the owners of a business may want to expand the business
- Different ways in which businesses can grow, e.g. internal/external
- Problems linked to business growth and how these might be overcome
- Why some businesses remain small
Businesses want to grow because growth helps reduce their average costs in the long-run, help develop increased market share, and helps them produce and sell to them to new markets.
There are two ways in which a business can grow- internally and externally.
internal – This occurs when a business expands its existing operations. For example, when a fast food chain opens a new branch in another country. This is a slow means of growth but easier to manage than external growth.
External growth – This is when a business takes over or merges with another business. It is sometimes called integration as one firm is ‘integrated’ into the other.
Merger – is when the owner of two businesses agree to join their firms together to make one business.
Takeover – is when one business buys out the owners of another business , which then becomes a part of the ‘predator’ business.
Businesses might stay small due to various reasons. Some entrepreneurs prefer manageable operations to maintain quality or personal control. Limited access to funding, resources, or skilled labour can restrict growth.
Market niche focus or serving local communities may also limit expansion. Fear of risk or market uncertainty can deter scaling. Regulatory burdens or competition pressures might constrain growth.
Additionally, some businesses intentionally choose to stay small to avoid complexities or maintain a specific company culture. These factors collectively contribute to businesses opting for smaller scales despite potential opportunities for growth.
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1.3.4 Why some (new or established) businesses fail:
- Causes of business failure, e.g. lack of management skills, changes in the business environment, liquidity problems
- Why new businesses are at a greater risk of failing
Business failures can stem from various reasons, affecting both new startups and established companies:
Poor Planning: Inadequate market research, flawed business models, or insufficient financial planning can lead to failure.
Lack of Market Fit: Not meeting consumer needs, misjudging the market demand, or failing to adapt to changing trends can cause a business to falter.
Financial Challenges: Cash flow problems, mismanagement of funds, or overestimating revenue can cripple a business.
Competition and Innovation: Inability to innovate or differentiate from competitors can render a business irrelevant or outpaced in the market.
Leadership Issues: Weak management, lack of vision, or internal conflicts can impede growth and success.
External Factors: Economic downturns, unforeseen market changes, or legal/regulatory issues can significantly impact businesses.
Ineffective Marketing: Poor branding, marketing strategies, or inadequate customer acquisition efforts can limit growth.
Operational Problems: Inefficient processes, logistical issues, or inadequate infrastructure can hinder scalability.
Failure to Adapt: Inability to pivot or adapt to changing customer preferences, technology advancements, or industry shifts can lead to obsolescence.
Overexpansion or Rapid Growth: Growing too quickly without proper infrastructure or resources can strain a business beyond its capacity.
Success in business often requires a blend of strategic planning, market responsiveness, financial prudence, innovation, and adaptability. Failure may result from a combination of these factors or the inability to address and overcome these challenges effectively.
I have prepared a lesson, watch as you will find it very useful. This video covers the who lesson!
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