LECTURE NOTE ON INTRODUCTION TO ENTREPRENEURSHIP EED 126at near Meaning of Enterprise, Entrepreneur, Entrepreneurship and Intrapre \ An enterprise stinply means business or venture. te wie cre, ee en at canslated into a planned and satisfactorily implemented activity. In a narrower context, It'S 4 business venture or undertaking that brings profit. Practically all projects and undertakinl® can be referred to as enterprise if the following steps are followed: . Idea adentification . Planning . implementation . Successful completion of an activity, and . Accepting the reward. The following are types of enterprises: © PrivatePublic ® Profit/Non Profit © Formal/Informal % Local/Foreign © Business/Social & Small/Large Scale + Manufacturing/Service > Consumer/Industrial * Individual/Community People in # community have many interests and different needs and wants in their lives. It is the role of enterprising men and women to identify these interests, needs and wants and establish specific enterprises through which these interests, needs and wants can be satisfied. All enterprises provide satisfying rewards for those who successfully establish them. Enterprises that succeed, irrespective of their nature, come up with irresistible and valued ‘spproaches that contribute to providing solutions to problems, as well as satisfying the desired needs and wants, The key difference between all types of enterprise lies in the rewards they provide. Business ventures provide profits as rewards, while non-business ventures provide other types of rewards which could be either physical or psychological. Enterprising men and women will therefore engage in enterprises depending on what kind ofrewards they ¢xpect from them. Spevilic enterprises In 8 community have the potential to benefit from the existence of others. Ouipul {rem one enterprise nomally becomes input for other enterprises, and this helps in money carculation ameng the enterprises and within the community. The more money that circulates un the communily, the more prosperous the community becomes. The synergistic caiure of all enterpnses in a community creates an environment where there are lots of opportunities to be exploited by enterprising men and women. It is therefore up to these men and women fo identify the opportunities available and exploit them. Almost all communities have lot of unexploited oppartunities that can increase this synergy if properly hamessed, to create even more opportunities for everyone. MEANING OF ENTREPRENEUR An entrepreneur is someone who innovates, finance, manages and exploits business opportunity. He is an individual who attempis to organise resources in new and more valuable ways and accepts full responsibilities for its outcome. Entrepreneur combines all other factors of production. According to Inegbenebor et al (2011) an entrepreneur is a person who has possession of an enterprise, or venture and assumes significant accountability for inherent risks and outcome. According to William Gartner (1988), an entrepreneur is an individual who establishes and manages a business for the principal purpose of profit and growth. An entrepreneur is an individual who rather than working as an employee, founds and runs a small business, assuming all risks and rewards of venture / business. An entrepreneur is an individual who conceives the idea of starting a new venture, consider all types of risks, not anly to put the product or service into reality but also to make it an extremely demanding one. He is someone who: Initiates and innovates a new concept, Recognises and utilises opportunity, Arranges and coordinates resources such as man, material, machine and capital, « Take suitable actions, Faces risks and uncertainties, ¢ Establishes a startup company,\ilda value to the product or service, Takes decisions to make the product or service a profitable one, 1s respansible for the profits or losses of the company. Entreprenetirs are always the market leader regards of the number of competion: ‘hey bring a relatively new concept in the market and intreduce change. Types of Entrepreneurs Before starting & business, there is need to identify various opportunities available and the \ype of entrepreneur required to explore the opportunity.. Entrepreneurs are required at all levels to boost the nation's economy. Below are different types of entreprencur:. Self-Employed: These are individuals who perform all the work and keep all the Profit. This includes everything from family-run stores, agents, repair persons, accountants, to physicians and lawyers. It can be a full-time job because no one elsc is involved or employed within the trade. - Opportunistic: Those who start a business and expand as fast as possible in order to be able to hire other employees. Usually, these additional employees have the necessary expertise that the owner does not have. Inventors: Those with particular inventive abilities who design a better product and then create companies to develop produce and sell the item. High-technology companies of this type are a new trend. Pattern Those who look for an idea someone clse has already had so that they can. then create their own business Multipliers: Those who benefit from a large volume of sales by offering discount prices and operating with very low overhead. Acquirers: Those who take over a business started by somebody else and use their own ideas to make it successful. This often happens when there is a financial problem in the current operation. Fresh management ideas may save the business. Buy-Sell Artists: Those who suy « company for the purpose of improving it su that they can sell it again for a profit. Speculators: Those who purchase a commodity and resell it for a profit. Real estate, ari, antiques and crops are typical speculator items. 49 Framchisee: A franchisee is an individual who starts a business for which a widely knows product image has already been established. The franchisee owns the business and assumes its operuting responsibilities subject 10 specifications sct out by the franchisor, 10 Necessity: An usaemployed person who chooses to establish his/her own business in order to survive rather than die of hunger or continue to be dependent on parents, e.g. shoe shine boy. Ventures/Qualities of Entrepreneurs * Sense of purpose: A feeling of mission motivates the entrepreneur to go into business; the entrepreneurship activity has meaning. These factors may be the desire to make an attractive profit, the desire tu sell some necessary and unique product or service, or the desire to develop your ideas of skills without the constraints of other's expectation. % Objectivity: Entrepreneurs have ability to distinguish themselves from the business, so when they make mistakes they have the strength to admit it and take corrective action; desire to deal with issues and decisions rationally and logically rather than emotionally. + Flexibility: Entrepreneurs are receptive to change i.e. bas the ability to adjust perception goals and actions based on an assessment of information. & Desire to create: A strong desire to originate an idea or product, to develop something new, to make something happen, to dream and ideas on @ concept in a unique and different way. . Self-confidence: Entrepreneurs typically have an abundance of confidence in their ability to achieve the goals they set and confident that they choose the correct path. Perseverance: The quality of sticking to a job he/she decides to undertake. = Drive and Energy: Entrepreneurs are more energetic, they possesses the capacity to work fora long hours and several days with less amount of sleep. \ Long-term perspective: Comprehension of the long-term goal so that each step of the business plan can be seen in context. This attitude makes the short and medium- term goals clear and easy to attain, = Technical and Industrial Knowledge: Comprehensive understanding of the industry 5find products or service that the business depends on directly; accc8S tO Tesourc, People and additional knowledge, Human Relations; Ability to understand and interact well with people of varying Personalities and values. This is important when dealing with employees, bankers, investors, partners, suppliors or customers and is reflected in characteristics such as Sociability, consideration, cheerfulness, cooperation and tact. Effective use of Time: Time is the most important of organization's resources. An Snlreprencur survives due to their effective use of time. He has deadlines and daily Specific goals that he wants to achieve. Risk bearing: The essence of entrepreneurship is the willingness to assume risks arising out of the creation and implementation of new idea. Entrepreneurs are not wild ‘isk tnkers but instead take and moderate risks, Gest setting: Entrepreneurs have the ability and commitment to set goals tht are Poth essomble and atsinable for them. These goals end obo high and chalenging, ‘bur they are realistic and attainable. Persistent problem solving: Entrepreneurs possess an intense level of determination “i esr 0 overcome hurdles, solve problems and complete the ob athe coure of Ssseraily Mueing few enterprise. Desire to pay tention to detail and obisin ‘he ‘eformation required to gt solutions so the best one i tine.[NTRAPRENEUR an Intraprencur 18 an employee y nd : bg uthority ™ support to cteale 8 new product, without having to be Concemeal n the 3 7 nthe os = pecome a source of FeVENUE FOF The coy. <. rencur is nothing but ve oe within the boundaries of the any An intrap! \repreneur sarge organisation veo has ie SFeaMision, AR ineraprencer is an employce of a company’s yooh services © authoony gy gnivating creativity and innovation in the " ices and piective of - Projets, redesigning We processes, workflows and system with the objective o! transforming them inte 4 successful Venture of the enterprise. Intraprencuts believe in change and do yoy fear failure: they discover new ideas, look for such opportunities that can benefit the whole ciganizations take risks, promote, innovation to improve the performance and profitability of the organisation. ‘The job of an intraprencur is extremely challenging; hence they are appreciated and rewarded by the organisation accordingly. Difference between Entrepreneur and Intrapreneut Entrepreneur and intrapreneur share similar qualities like conviction, creativity, zeal and insight, the two are used interchangeably, However, the two are different entrepreneur is & person who takes a considerable amount of risk to own and operate the busi of earning returns and rewards, from that business. He is the most important person who envisions new opportunities, products, techniques and business lines and coordinates all the to make them real. While, an intrapreneur is an employee of the organization who ion according to the success of the business unit, for which he/she is hired ness, with an aim activities is paid remunerati or responsible. trapreneur is that the former refers to ce between an entrepreneur and int cept, the latter represents an uusiness with a new idea or com nthe limits of the organization. The primary differen as a person who starts his own b employee who promotes innovation withiparison between Entrepreneur and Intrapreneur Basic Com Fnrreneu refer 108 pao Meaning — who set up his own business with Anew idea or concept. f the refers to an employee a! aoueai who is in charge of und: te innovations in product, service, process Restorative Approach | Intuitive Use resources provided by the company. Resources | Uses own resources. Cepital | Raised by him. Financed by the company: Enterprise Newly established An existing one Dependency Independent Dependent | Bome by the ‘entrepreneur the company. Risk himself. Taken by pan Works be | Creating leading postion i in the | Change and renew the existing organizational system and culture. Major Differences between Entrepreneur and Intrapreneur The important distinguishing points between entrepreneur and intrapreneur are given in the following points: kk An entrepreneur is defined as a person who establishes a new business with an innovative idea or concept. An employee of the ‘Organisation who is authorised to undertake innovations in product, service, process, system, etc. is known as Intrapreneur. An entrepreneur is intuitive in nature, whereas an intrapreneur is restorative in nature. An entrepreneur uses his own resources, ic. man, machine, money, etc. while in the case of an intrapreneur the resources arc readily available, as they are provided to him, by the company. 4. An entrepreneur raises capita! himself. Conversely, an intrapreneur does not need to raise funds himself; rather jt is Provided by the company. 5. An entrepreneur works in a newly established company. On the other hand, an intrapreneur is a part of an existing organisation. 26. An entroprencur is his own boss, so he is independent to take decisions. As opposed \o untrapreneur, who works for the organisation, he cannot tke independent decisions. This is one of the salient features of an entrepreneur, he is capable of bearing risks and uncertainties of the business. Unlike intraprenour, in which the company bears ll the risks, 8. The entrepreneur works hard (0 enter the market successfully and create a place subsequently, In contrast to Intraprencur, who works for organization-wide change to bring innovation, creativity and productivity. ENTREPRENEURSHIP Entrepreneurship is the process of pursuing opportunity without regard for resources currently controlled. Entrepreneurship can also be defined as the capacity and willingness to establish, develop, organise and manage a business venture along with any of its risks in order to make profit. Entrepreneurship is the act of being an entrepreneur. Or an act of combining all other factors of production in the right proportion for the purpose of making profit. It is the generation of business idea or identification of a business opportunity and putting in place a business to take advantage of the idea/opportunity, It is the art or science of innovation and risk-taking for profit in business.FORMS OF BUSINESS OWNERSHIP AND STRUCTURE ; The general forms of business entesprises, which are actively observed _ part or, i i ip, public corporation a... world include but are not limited to: sole proprictorship, partnership, pul any, Limited Liability Company. SOLE PROPRIETORSHIP with This is @ form of business enterprise owned, financed and managed by one — 5 Primary aim of maximizing profil. The sole proprictorship is also called one man so 7 1s among the casiest kind of business to start because it does net require a lot of paper W establish Features + Ownership: The business is owned by one person ~ Objectives: ‘The main objective of one man business is to make profit ; Source of espital: The capital required to run the business is provided by the Proprictor/owner; > Liability; The sole proprietor has unlimited liability bd Legal entity It is not a legal entity , because the owner is not separated from the UsINeSS: * Life span; The life span depends on the owner. It can fold up anytime Sources of Capital of Sole Proprietorship Personal savings > Loans from friends Trade credit > Grants/oan from government % Loans and overdraft from banks Advantages of Sole Proprietorship % Flexibility of Registration/Ease of formation: One man ‘business can be established easily because of the small capital requirement and it may not involve undertaking any legal obligations. > Quick decision making and easy management: Decisions are easily taken without consulting or seeking the consent of other workers in the organisation. The business can also be managed without the service of experts outside the business, @ High standard of secreey: A sole trader being the owner of the business has high standard of secrecy due to their own managing of the affairs of the business.vireet relationship with customers; A sole trader has close relation with bis customers, Therefore, he offers everything according to the taste of the customers. ‘ints creates his goodwill in the market. Also, the close relationship between the wwner and customer allows the busincas men to attend to complaints of customers wfien. > Personal Reward: The sole proprietor invests time, money and effort into business so as (0 carn reward. As a result, all the profits derived from the business belong to him. ‘> Development of personal qualities: In sole proprietor, the personal qualities of a proprictar like self-reliance have full scope for development. Sole Authority: The owner of the business has complete authority to deal with the affairs of business. He prepares the plan, invests his money, supervises the business and enjoys the profit. Disadvantages of Sole Preprictorship Burden of unlimited liability: There is no legal separation between business and personal liability, In the event of business failure/bankruptey, his personal assets and properties will be used to pay debt, ° Limited eapabilisies for expansion: One of the main demerit of sole trading business is that it faces difficulties to expanding the business in large scale, due to unavailability of high resources, because everything is managed by the owner himself. He suffers limited expansion, both in ideas and business as 4 result of inadequate capital. © Inadequate Fund: Inadequate fund to run the business is another challenge faced by a one man business because of the size and the inability to access/source find outside the business. ‘> Limited managerial ability: In this type of business, the proprictor has to rely on his/her own skill and managerial experience, which makes the owner unable them to perform all the duties and functions of management efficiently and limits the size of the business according to his capacity. © Lack of continuity: The continuity or performance of a sole proprietorship is sometimes difficult to maintain because the death of the owner may be an end to the business especially where there is no successor to take over from him. itPARTNERSHIP gather their resources \s a form of business organisation whereby two or : making profit in the together to finance and manage a business/venture with the sole aim of making 0 0 fearest future as a benefit for taking risk. Partnership is a type of business organisation in which two or more individuals poo! money skills and other resources and share profit or loss in accordance with terms of the partnership agreement The people involved in partnership agreement are referred to as partners and they share the profits, losses and risks of the business, Deed of parmership may be defined as the agreements, rules and regulations guiding the members of a partnership. Characteristics of Partnership + Ownership: The partnership is owned by two to twenty persons. > Objective: The sole objective of the partnership is to make profit . > Source of Capital; The capital required to set up the business is provided by the Partners based on legal agreement. * Legal Entity: It is not » legal entity as the partners are not separated from the business. + Liability; the partners have unlimited liability Sources of Capital for Partnership | Personal contribution from partners 2 Contribution from friends and relatives 3 Trade credit 4+ Undistributed profits 5 Admission of new partners Types of partmers Limited partners General parmers Active parmers Nominal or quasi-partners Dormant or siceping partners Partnership Formation Before partnership is formed, the people concemed must draw up certain agreement which will assist in governing the operation of the business. The agreement may be written, oral or inferred from the conduct of the partners. When the agreement is put in writing it is called “partnersiup deeds’ ‘ Articles of Partnership’ or ‘partnership agreement’. The deed spells out weaurepreven! crisis and misunderstanding among the pariners, Deed of Parinership may be defined a the agrecment, rules and regulations guiding the members of a partnership. ‘The deed of Partnership contains the following rules and regulations: ‘The name of partners The name of the firms Objectives of the partners The nature of the busingss formed ‘The rights and duties of cach partner ‘The proportion in which capital is to be provided and whether interest should be paid on capital Sharing of profit and provision for drawings Duration of the partnership The circumstance which shall dissolve the partnership Salaries of partners: Methods of admitting new partners Dissolution of parmership By dissolution of partnership, it means bringing the existence of partnership business to an end. This may be as a result of any or all of the following reasons: . The expiration of the agreed life span of partnership. The completion of the project that led to the formation of partnership Through the mutua! consent of al! the parmers. The death, retirement or insolvency of a partner especially an active partner. When the business becomes illegal When the court orders that the partnership should be dissolved. Avewene? It should be noted that in case the firm is dissolved, the rights and obligations of partners are not affected until the business is completely wound up. Advantages of Partnership ~ Sufficient Capital: Due to a greater number of members the partnership firm has larger resources for the business operations as compared to sole proprictorship. > Easy Formation: In forming a partnership business, no major legal formality and procedure of establishment is required. Registration under the Corporate Affairs Commission (CAC) is not compulsory in the case of parmership firm. Continuity: There are better chances of continuity because the death or exist of a partner may not lead to the end of the business. ~ Better Management: By combining skills and abilities, partnership businesses are usually better managed than sole proprietorship and the principle of division of labour can be applied in the business. 13themselves, they are ny secrets with > Privacy: As the partners can keep the business lance sheet for public ball required by law 10 publish its profit and loss account and consumption he mutual consent > Ease of Dissolution: The parmership can easily be dissolved witht of partners oF according to the contract. business, they can “+ Benefits of Specialisation: Since all the partners are owners of the busines of i aress actively participate in every aspect of business accordingly to their specialisations, knowledge and experience. Disadvantages of Parmership ‘> Unlimited Liability: All the partners are jointly liable for the debt of the firm. They can share the liability among themselves or any one can be asked to pay all the debts even from his personal properties depending on the arrangement made between the partners. > Uncertain Life: The partnership firm has no legal existence separate from its Partners. It comes to an end with the death, insolvency, incapacity or the retirement of 4 partner. Besides, any unsatisfied or discontent partner can also give notice at any time for the dissolution of the partnership. % Lack of Harmony: In partnership firm every partner has an equal right to Participste in the management. Also, every partner can place his or her opinion or viewpoint before the management regarding any matter at any time. Because of this, sometimes there is 8 possibility of friction and discontent among the partners. Difference of opinion may lead to the end of the partnership and the business. % Slow decision making: Decision making is slow in partnership business, because all partners must participate in decision making. No pride of ownership: Since the business is jointly owned by the partners, none of them can boldly lay claim on the business. > Not 2 legal entity: Parmership business is not a separate and distinct personality, It cannot be sued and be sued in its own name. “4Company 4 company can be defined as a \ega) person or entity created by the associmtion of a number peuple in accordance with the law for purpuse of pooling their capital together in other set up a business venture. Examples of companies are Dunlop Nigeria Plc, Nestle Pie, Julius Berger Nigeria Plc. Etc TYPES OF COMPANY « Uniimited Hsiiity company: In this company liability of a member is limitless and he may be liable to the full amount of the company’s debt in the event of liquidation. (u) LIMITED LIABILITY COMPANY (LLC) Limited liability company (LLC) is a corporate structure whereby the members of the company are not personally liable for the company's debts or liability. It is a form of incorporation that limits the amount of liability undertaken by the company’s shareholders. It refers to a legal structure that ensured that the liability of company members or subscribers is limited to their stake in the company by way of investments ‘or commitments. We two type of compauies under Limited liability company (a) Companies limited by guarantee arc not formed with the aim of engaging in trading activities or making profits they are formed by societies and other charitable contributions from members of the public to promote and develop certain interests or professions. (b) Companies Limited by shares is the companies in which the liability of the shareholders is limited to the full value of the shares they have acquired. Two major types of limited liability companies are: : 1. Private Limited Liability Company: This type of company is defined as one which by its articles restricts the rights the right to transfer its shares, limit the number of its shareholders from two to fifty where the minimum membership is two. It is otherwise known as a close company. The company can neither request nor subscribe for shares from the general public and the holder of the company shares cannot transfer such shares without the knowledge of the registrar of companies. Besides, such shares 15= why it is called a close be sold on the stock exchange market and this explains oampany This fom of business organisation can be formed by a family. In tmnt te business, the business name, nature of the business, ste ofthe busines, mem! P 4s well as the type of product to be produced will be included 7 the ater or agreement of association. This charter will be then be registered with the registered of companies, Features of a Private Limited Company tis establish by two to fifty persons. 1 {tis managed by Board of Director headed by a Chairman 2. Limited Liability up to the amount of shares held. Members of the public cannot be invited to subscribe to shares, . Payment of shares of profits is on the basis of the number of shares held. ‘There is restriction on transfer of shares. {does not require by law to publish its financial statements at the end of year. ‘The shares are not quoted in the stock exchange. 8 ‘Voting right is according to the number of shares held. aw ew Public Limited Liability Company This type of company can be formed by minimum number of seven Persons while it has no maximum number. It is otherwise known as an open company. This means that its shares are available for sale to the public and it is usually through the stock exchange, The shareholders sr the rel owners ofthe company and ae fre to transfer their shares to other people The liability of shareholders is limited to the amount invested in the company, Features of Public Limited Liability Company . It has seven minimum owners but has no upper limit, * The public can subscribe to its shares. * Shareholders can transfer their shares on stock exchange market. Itis managed by Board of Directors through appointed Managing Director. The liability of the shareholders is limited. * Ibis a legal entity different from the owner. Dividend is paid to shareholders on the basis of the shares they held 16