ENTREPRENEURSHIP

THE CONCEPT OF ENTREPRENEURSHIP

DEFINITIONS:
 Entrepreneurship is the ability to create and build something from
practically nothing. It is initiating, doing, achieving and building an
enterprise or organization, rather than just watching, analyzing or
describing one.
 Entrepreneurship is a process involving various actions to be
undertaken to establish an enterprise. It is thus, process of giving birth
to a new enterprise. Entrepreneurship is composite skill, the resultant
of a mix of many qualities and traits- these include tangible factors as
imagination, readiness to take risks, ability to bring together and put to
use other factors of production, capital, labour, land, as also tangible
factors such as the ability to mobilize scientific and technological
advances.
 Entrepreneurship is a dynamic process of adding value to existing
products or services in a nontraditional way in order to create more
wealth. Entrepreneurship is not about invention but on the contrary
deals more with innovation. That is, by adding more value to existing
products, the final products become more effective and efficient than
the original ones. Therefore, a person who takes the risks of
entrepreneurship is called the Entrepreneur.
 Khanka, S.S (2012) also clearly defines entrepreneurship as the
attempt to create value through recognition of business opportunity,
the management of risk-taking appropriate to the opportunity, and
through the communicative and management skills to mobilize human,
financial and material resources necessary to bring a project to
fruition.

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WHO IS AN ENTREPRENEUR?
An entrepreneur is a person with a dream, originality and daring, who acts as
the boss, who decides as to how the commercial organization shall run, who
co-ordinates all activities or other factors of production, who anticipates the
future trend of demand and prices of products.

OTHER DEFINITIONS:
 An entrepreneur is somebody who does something in a new way,
whether it is a business venture or any activity of human life.
 Entrepreneur is one who innovates, raises money, and assembles
inputs, chooses managers and sets the commercial organization going
with his ability to identify them and opportunities which others are not
able to identify and is able to fulfill such economic opportunities.
 An entrepreneur is one who always searches for change, responds to it
as an opportunity. Entrepreneurs innovate. Innovation is a specific
instrument of entrepreneurship.

CHARACTERISTICS OF AN ENTREPRENEUR

INNOVATION
Innovation, i.e. doing something new or something differently. The
entrepreneurs are constantly on the look out to do something different and
unique to meet the requirements of the customers.

WILLING TO TAKE RISKS

Entrepreneurship is the tendency of mind to take calculated risks with
confidence to achieve a prearranged business or Industrial objective or aim.
The capacity to take risk independently and individually with a view to

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making profits and seizing the opportunity to make more earnings in the
market-oriented economy is the dominant characteristic of modern
entrepreneurship.
In fact he needs to be a risk taker, not risk avoider.

COMMITMENT
Commitment means that you are willing to put your business before almost
everything else. It means that you want to stay in business for a long time
and that you are willing to risk your own money on the business.

MAKING DECISIONS
Being able to make important decisions that could have serious
consequences in running your own business.
FAMILY SITUATION
It is important to have your family’s support and if they agree with your
plans to start a business, they can even be involved and help in the business.

CREATIVITY
This is being able to come up with new ideas and make new innovations.

FLEXIBLE AND ADAPTABLE

The entrepreneur should be able to change his or her business ideas suiting
the economic situation at hand, as a way of diversification.

MOTIVATED
The entrepreneur is in business to make profit, so he or she will be motivated
if the business is making profits and not losses.

QUALITIES FOR AN ENTREPRENEUR TO BE SUCCESSFUL

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  Enthusiasm- enthusiastic people are excited people. They enjoy life
and what they are doing and are not always trying to find excuses.
 Hard working- they should focus on what they are doing and be
prepared to work hard.
 Positive- It is not always easy to be positive, remember that negative
thoughts will cause you to fall deeper and deeper into despair and you
may even become sick. You must therefore always try to think
positive thoughts.
 Wide interest-Have wide interests, be inquisitive and sharpen your
powers of observation. You should be interested in everything around
you. Widen your reading habits, talk and especially listen to
stimulatingand successful people.
 Able to handle setbacks- Should learn to handle failures and
disappointments. Life is not the same all the time and plans do not
always work out as you planned them. It is important to accept and
handle setbacks.
 Develop talents- Concentrate on and develop your talents and
abilities. There is no single person who does not have at least one good
talent or ability. Some have many talents, are prosperous and are even
spending many hours to improve their abilities even further.

PERSONAL ATTRIBUTES OF ENTREPRENEURSHIP

These include the following:
 Age – can be young or old.
 Gender – can be male or female.
 Family environment – whatever the case positive or negative the
entrepreneur must be pro-active.
 Profile of Parents – good names or profiles already advantages you but
even low profiles can be turned positive.
 Education – some bit of it is necessary in order to interact well with the
environment.

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  Experience – this can be gained through entrepreneurial activities.
 Role models – should be a shining example to others.

WAYS OF STRENGTHENING ENTREPREURIAL ABILITIES

 Reading books
 Communication (with customers and suppliers – use modern tools)
 Observe successful business people
 Training
 Help from people i.e. family, friends, and other business people.
 Activities being done in the communities

ENTREPRENEURIAL ACTIVITIES (SKILLS) FOUND IN THE COMMUNITY

 Farming
 Fishing
 Poultry
 Bee keeping
 Dairy
 Selling
 Etc

NEED/REASONS FOR ENTREPRENEURSHIP

Entrepreneurship promotes small business in the society. Government has
accepted the fact that small firms have a crucial role to play in the economic
development of the country. Small businesses are an essential part of our
future economic prosperity because of the following reasons-

 EMPLOYMENT GENERATION:
Entrepreneurial development is looked at as a means for employment
generation through promotion of small business by the government and
other stakeholders.

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  SMALL BUSINESS DRIVE:
Great drive is one of the qualities of the small and medium enterprises.
This quality of drive originates in the inherent nature of the small business.
The structure of small and medium enterprises is less complex than that of
large enterprises and therefore facilitates quicker and smoother
communication and decision- making. This allows for the greater flexibility
and mobility of small business management. Also, small enterprises, more
often make it possible for owners, who have a stronger entrepreneurial spirit
than employed mangers, to undertake risk and challenges.

 BALANCED ECONOMIC DEVELOPMENT:

Small business promotion needs relatively low investment and therefore can
be easily undertaken in rural and semi-urban areas. This in turn creates
additional employment in these areas and prevents migration of people from
rural to urban areas. Since majority of the people are living in the rural areas,
therefore, more of our development efforts should be directed towards this
sector. Small enterprises use local resources and are best suited to rural and
underdeveloped sector.
This in turn will also lead to dispersal of industries, reduction in concentration
of economic power and balanced regional development.

IN SUMMARY THE NEED FOR ENTREPRENEURSHIP ARE TO:

 Create jobs
 Maintain free enterprise
 Promote healthy competition
 Generate wealth/profit
 Spread prosperity
 Enhance wealth stability
 Ensure innovation and creativity
 Encourage glass root development
 Social progress

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  Entrepreneurship growth
 National development
 Self-employment
 flexibility
ENVIRONMENTAL FACTORS IN ENTREPRENEURSHIP
FACTORS INFLUENCING ENTREPRENEURESHIP
The emergence of entrepreneurs in a society depends upon closely
interlinked social, religious, cultural, psychological, political and economic
factors.

 FAMILY TRADITION:
Individuals who for some reason, initiate, establish maintain and expand new
enterprises generate entrepreneurship in society. It is observed that
entrepreneurs grow in the tradition of their families and society and accept
certain values and norms from these sources.

 RELIGIOUS, SOCIAL AND CULTURAL FACTORS:

Religious, social and cultural factors also influence the individual taking up
an entrepreneurial career, in some countries there is religious and cultural
belief that high profit is unethical. This type of belief inhibits growth of
entrepreneurship.

 PSYCHOLOGICAL FACTORS:
The psychological factors like high need for achievement, determination of
unique accomplishment, self-confidence, creativity, vision, leadership etc,
promote entrepreneurship among individuals. On the other hand
psychological factors like security, conformity and compliance, need for
affiliation etc restrict promotion of entrepreneurship.

 POLITICAL FACTORS:

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The political and also the political stability of a country influence the growth
of entrepreneurship. The political system, which promotes free market,
individual freedom and private enterprise, will promote entrepreneurship.

 ECONOMIC POLICIES:
The economic policies of the government and other financial institutions and
the opportunities available in a society as a result of such policies play a
crucial role in exerting direct influence on entrepreneurship.

In view of the haphazard development of economic zones, Government is

encouraging the entrepreneurs to establish their business in backyard and
tribal areas. This is primarily to arrest the migration of people from the
villages to cities and to create employment opportunities locally.
Government is promoting such development by giving incentives like tax
holidays (both sales and income), subsidized power tariff, raw materials,
transportation cost
etc.
Discussion: Identify and explain the different strategies for
mitigating the environmental factors affecting entrepreneurship.

QUALITIES OF ENTREPRENEURSHIP
The qualities that contribute to the success of an entrepreneur are as
follows: -
 Risk Taking: - Entrepreneurs are moderate risk takers. They enjoy
the excitement of a challenge, but they do not gamble. Entrepreneurs
avoid low- risk situations because there is a lack of challenge. They
avoid high risk situations because they want to succeed. They like
achievable challenges. They do not tend to like situations where the
outcome of a quest depends upon a chance and not on their efforts.
They like to influence the outcome of their quest by putting in more
efforts and then experiencing a sense of accomplishment. A risk

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 situation occurs when an entrepreneur is required to make a choice
between two or more alternatives whose potential outcomes are not
known and must be evaluated in advance, with limited information. A
risk situation involves potential gain and potential loss. As the size of
the business expands the problems and opportunities become more
numerous and complex. Business growth and development require an
entrepreneur not to be afraid of taking decisions and certain risks.
Most people are afraid to take risks because they want to be safe and
avoid failure. An entrepreneur always takes a calculated risk and is not
afraid of failure.

 Self- Confidence: - A man with self – confidence has clear thoughts

and well- defined goals to achieve in his life. An entrepreneur gets into
business or industry with a high level of self- confidence. He is able to
evaluate his competencies and capabilities in a realistic manner. He
can set realistic and challenging goals. He is confident of achieving
these goals. He possesse s a sense of effectiveness, which ultimately
contributes to success of his venture. He puts forward his case
confidently and gets needed help from concerned agencies/
authorities.
 Optimist: - An entrepreneur is able to visualize the hidden
opportunities in the environment and translate them into business
realities. An entrepreneur exhibits a positive and optimistic attitude
towards such opportunities. The entrepreneur approaches his task
with the hope of success and not with a fear of failure. In the process
of accomplishing his task he may also fail but the failure experience
does not change his thinking. He is always an optimist in his outlook.
The positive outlook develops a drive in the entrepreneur to attempt
new things and innovate.

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 Need for achievement: - The need to excel known as achievement
is a critical factor in the personality of an entrepreneur. People with
high need for achievement have desire for success in competition with
others or with a self- imposed standard of excellence. They try to
accomplish something new and try to innovate themselves in longterm
goals. They try to accomplish challenging tasks. They know their own
strengths and weaknesses, the facilitating factors and constraints in
the environment and the resources needed to accomplish their tasks.
If the objectives are accomplished they feel elated.

 Need for independence: - The need for independence is the prime

characteristic that has driven the entrepreneurs to start their
ownbusiness. These entrepreneurs do not like to be controlled by
others.They do not wait for direction from others and choose their own
courseof action. They set their own challenging goals and put efforts
toachieve this goal. The independence provides opportunity for
tryingout new ideas and helps them achieve their goals.
 Creativity: - Entrepreneurs are highly creative people. They always
tryto develop new products, processes or markets. They are
innovative,flexible and are willing to adopt changes. They are not
satisfied withconventional and routine way of doing things. They
involvethemselves in finding new ways of doing the things for the
better.
 Imaginative: - Successful entrepreneurs possess a high degree
ofimagination and foresightedness. Entrepreneurs have a great
vision.Knowing the present and the past the entrepreneur is able to
predictthe future events the business more accurately than others. It
is becauseof their visionary nature and power of imagination that
helps them inanticipating problems and evolving actions strategies for
suchproblems.

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 Administrative ability: - A successful entrepreneur is always a
goodadministrator. He knows the art of getting things done by other
peoplewithout hurting their feelings of self- respect. He has strong
motivationtowards the achievement of a task and puts in necessary
efforts ingetting things done by others.
 Communication ability: - Communication ability is the ability to
communicate effectively. Good communications also means that
boththe sender and the receiver understand each other and are
beingunderstood. An entrepreneur who can effectively communicate
withcustomers, employees, suppliers and bankers will always succeed
intheir business.
 Clear objectives: - An entrepreneur has clear objectives as to the
exactnature of the business, the nature of the goods to be produced
and thesubsidiary activities to be undertaken. A successful
entrepreneur hasthe objective to establish the product to make profit
or to render socialservice.
 Business Secrecy: - An entrepreneur who is successful always
guardshis business secrets. Leakage of business secrets to trade
competitors isa serious matter; therefore an entrepreneur should
carefully guard it.An entrepreneur must be able to make a proper
selection of hisassistant since most of the time it is the assistant who
leaks the tradesecret.
 Emotional stability: - The most important personality
factorscontributing to the success of an entrepreneur are emotional
stability,personal relations, consideration and tactfulness. An
entrepreneurmust maintain good relations with the customers if he
wishes to enjoytheir continued patronage. He must also maintain good
relation withhis employees, whom he shall motivate to perform their
jobs at a highlevel of efficiency. An entrepreneur who maintains good
humanrelations with customers, employees, suppliers and the
community hasa better chance to succeed in his/ her business.

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  Open-mindedness: - Open- mindedness means a free and
frankapproach in accepting one’s own errors and change for the
better. Anentrepreneur must be willing to learn from his past
experience,mistakes and molds himself for better.
 Technical knowledge: - Technical knowledge implies
knowledgeabout the product, process or technology used in
manufacturing. Anentrepreneur who has reasonable level of technical
knowledge willalways be successful. Technical knowledge is easy to
acquire if theentrepreneur tries hard to acquire it.
 Patience: - Patience means ability to wait. Patience also means
doingthe work and waiting for the result. A certain amount of patience
isnecessary in any type of vocation. An entrepreneur should not wait
foractions but can certainly wait for result for his efforts.
 Hard working and energetic: - Ability and willingness to work hard
isan important quality of an entrepreneur. A person having physical
andmental stamina to cope with the hard work and human relation is
fit tobecome a successful entrepreneur. By carrying out well- planned
andsystematic work, success is always the end result.
 Good organizer: - Entrepreneurs are good organizers of resources
likemen, machines, materials and money needed to start and run
thebusiness smoothly. They can convince the employees,
investors,customers and co- ordinate the activities of individuals and
groups inthe accomplishment of business objectives. An entrepreneur
works likea coordinating force among the resources, mold and
manages themeffectively.

ADVANTAGES OF ENTREPRENEURSHIP
 Creativity- the entrepreneur develops a sense of creativity.
 Personal satisfaction- there is personal satisfaction especially where his
objectives are met.

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  Independent-he is able to make business decisions and enjoys all the
benefit of the business.
 Enjoy profit- he has all powers to decide what to do with the profits
made in the business whether to plough it back in the business or
spend it on personal needs.
 Job security- Since he or she is the owner of the business job security is
guaranteed.
 Status-he or she is highly respected in the community.

DISADVANTAGES OF ENTREPRENEURSHIP
 Possible loss of invested capital- All your efforts will be of no avail if
you do not market your Products and services very well.
 Low incomes-Not all businesses may be profitable to the entrepreneur,
poor choice of business activity may render the entrepreneur to
receive low income from the business which may not sustain his or her
livelihood.
 Long working hours- He may have less time to relax because all
activities are burdened on him or her.
 Routine chores-the entrepreneur may get bored doing the same thing
all the time usually routine work brings in boredom and an
unenthusiastic spirit in the entrepreneur.
 Dependent on employee actions-Employees may be dissatisfied with
work or call for a strike or rebel against their conditions of work. This
would lead to stoppage of work and loss of profits.
 Must take risks- This cannot be avoided because it is nature of
business ventures on where the business in run well can risk be
avoided.

CLASSIFICATION OF ENTREPRENEURS
The entrepreneurs have been broadly classified according to:

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  Types of business
 Use of professional skill
 Motivation
 Growth
 Stages of development

ENTREPRENEURS ACCORDING TO TYPES OF BUSINESS

(Explain briefly the headings not giving notes)
 Business entrepreneurs are those individuals for a new product or
service and then translate the same into business reality. Tap both
production and marketing resources to develop a new business
opportunity. Setup big establishment or small unit such as printing
press, textile processing house, advertising agency, ready made
garments or confectionery. In majority of cases, entrepreneurs are
found in small trading and manufacturing business. Entrepreneurship
flourishes when the size of business is small.

 Industrial entrepreneurs are essentially a manufacturer who

identifies potential needs of customers and products or service to meet
the marketing needs. He should have the ability to convert economic
resources and technology into a profitable venture.
 Corporate entrepreneur is an individual who demonstrates his
innovative skill in organizing and managing corporate undertaking. He
plans, develop and manage a corporate body.
 Agricultural entrepreneur are the ones who undertake agricultural
activities such as raising and marketing of crops, fertilizers and other
inputs of agriculture. They are motivated to improve agriculture
through mechanization, irrigation, and application of technologies for
dry land agricultural products.

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THE FOUR (4) TYPES OF ENTREPRENEURS
1. Innovative entrepreneurs
- Is one who introduces new goods,
- inaugurates new methods of production,
- discovers new market and recognizes the enterprise,
- works well where development is already achieved and people
look forward to change and development.
2. Imitative Entrepreneurs
- These entrepreneurs, creatively imitate or copy business
activities of other firms or people,
- They are less innovative due to high cost of innovation,
- They are suitable in under developed countries.
3. Fabian Entrepreneurs
- They are characterized by great caution and skepticism in
experimenting any change in their enterprises.
- They imitate only when it becomes perfectly clear that failure to
do so would result in a loss of the relative position in the
enterprise.
4. Drone Entrepreneurs
- These are characterized by refusal to adopt opportunities to
make changes in production formulae even at a time they are
not making good profits when compared to other producers.
- They are not ready to make changes in production methods even
if they make losses.
(briefly describe the following other types of entrepreneurs who
may be called as, solo operators, active partners, inventors,
challengers, buyers and life timers)

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FORMS OF BUSINESS ORGANISATIONS
1. Sole trader – minimum/maximum number of persons required to
commence a business is 1.
2. Partnership - minimum is 2, maximum number of persons required to
commence a business is 20.
3. Private limited company – minimum is 2, maximum number of persons
required to commence a business is 50.
4. Public limited company – minimum is 1, no maximum.

SOLE TRADER
A Sole trade r is a business person who owns and controls his or her own
business.
CHARACTERISTICS (both merits and demerits)
 A sole trader has unlimited liability. This means that in an event of the
business being in financial difficulties, the owner of the business can
be forced by creditors to sell his or her personal property at home in
order to settle business debts.
 He lacks borrowing capacity. This means that he may experience
difficulties in obtaining loans and overdrafts from banks etc.
 He lacks continuity of existence. The death of the business owner may
bring the business to an end.
 A sole trader does not share profits made in business made in business
with any one.
 The sole trading business is easy to set up, does not need a lot of legal
requirements.
 A sole trader does all the business activities with the help of the family
members.

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  The sole trader has no separate legal existence. The business owner
can be sued or sue others in his or her individual capacity in court of
law.
 He or she has little capital hence facing difficulties to expand the
business.
 Limited sharing of ideas.

PARTNERSHIP
A Partnership is an association of people who have agreed to run the
business together with a view to make profits.

CHARACTERISTICS (both merits and demerits)

 The control of a partnership is shared amongst the partners
 More capital is raised through 2 or more people, usually up to 20.
 Partners share the proceeds of the business.
 Partners share skills and ideas of running the business.
 The partners are the owners of the business (partnership)
 A partnership has limited capacity and lacks borrowing capacity.
 A partnership is easy to set up
 Financial accounts of a partnership are kept private. They are not
made known to members of the public.
 Partnership lacks continuity of existence. The death of a partner may
end the business. When a partner dies or retires, the partnership is
dissolved.
 A partnership has no legal status. There is no difference between the
owners and the business and therefore partners can sue or be sued in
their individual capacities.
 An action of one partner affects or binds the other.
 Delayed decisions since each partner has to be consulted.
 Partners have unlimited liability except for limited partners.

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Note: a limited partnership is one whose liability is limited to his/her
investment, no personal property is at risk from creditors in case of business
going down.

FORMATION OF PARTNERSHIP (by deed or act)

CONTENTS OF PARTNERSHIP AGREEMENT (DEED)

The written agreement can contain as much, or as little, as the partners
want. The law does not say what it must contain.
 The name of the partnership
 The capital to be contributed by each partner
 The ratio in which profits or losses are to be shared.
 The rate of interest, if any, to be paid on capital before the profits are
shared.
 How much each partner can draw from the business for personal use.
 How and where financial records would be kept
 Salaries to be paid to partners
 Arrangements for the admission of new partners.
 Procedures to be carried out when a partner retires or dies.

WHERE NO PARTNERSHIP AGREEMENT EXISTS

Where no partnership agreement exists, express or implied, section 24 of the
Partnership Act 1890 governs the situation. The contents are as follows:
 Profits and losses are to be shared equally.
 There is to be no interest allowed on capital.
 No interest is to be charged on drawings.
 Salaries are not allowed.
 Equal capital contribution.
 Partners who put a sum of money into a partnership in excess of the
capital they have agreed to subscribe are entitled to interest at the
rate of 5% per annum on such an advance.

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COOPERATIVE
A Cooperative is a business run and owned by a number of people who
decide to work together for a common purpose. The common purpose can be
economic gain or providing certain services for the members of the
cooperative. These services can, for instance be marketing services or
supply of raw materials. All the members of the cooperative have one vote
each when making decisions, but often they appoint a management
committee to handle the day to day operations of the cooperative.
The cooperative must be registered with the authorities, the Registrar of
Societies. It is complicated and take long time, but it is normally not as
expensive as starting a limited company.
The cooperative itself is taxed for the profits. The profit is then divided
among the members, for which they pay tax according to the tax laws in the
country. Most types of cooperatives are agro and retail oriented.
Note: briefly outline merits and demerits of cooperatives.

LIMITED COMPANY
A limited company is owned by one or more owners called shareholders.
There can be one or more owners who are all working in the business. There
can also be both owners who are working in the business and investors who
are not active in the business but still owners.
To start a limited company, you should normally follow these steps:
 The name you have chosen for the business must be approved by the
registrar of companies or a similar authority
 After approval of the name, the Memorandum and Articles of
Association for your proposed company must be drawn
 The Memorandum and Articles of Association are filed with the
registrar of companies or similar authority.
 The registrar of companies issues a certificate of incorporation, which
means that your limited company is now formed.

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TUTORIAL: Name the two types of Limited Companies, explain their merits
and demerits.

LEGAL REQUIREMENTS OF SETTING UP A LIMITED COMPANY

MEMORANDUM OF ASSOCIATION
The main purpose of drawing up a memorandum of association is to regulate
the relationship of the company with the outside world. This document
contains information that people outside the company must know about
especially those who may wish to deal with it.
Contents of a memorandum of association:
 The name of the company, which must end with:
i) Ltd for private limited company
ii) Plc for a Public limited company
 The address of the company’s registered Headquarters so that
correspondence on various matters concerning the company can be
sent to the right place.
 The objects of the company. This shows the activities of the company.
i.e farming, fishing or type of goods to deal in.
 A statement that shareholders have limited liability.
 The amount of authorized capital.
 A list of founders or promoters with the type and number of shares
they have agreed to hold in the company indicated against their
names.

ARTICLES OF ASSOCIATION
An Article of Association contains internal rules of conducting the affairs of
the company such as:
 Voting rights of shareholders.
 Powers and duties of the Board of Directors.

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  Procedures for transfer of shares and payment of dividends.
 Procedure for conducting annual general meetings.
 Methods of keeping books of accounts etc.

Note: briefly explain the terms, prospectus, certificate of

incorporation and certificate of trading.

LEGAL RESPONSIBILITIES AND INSURANCE

LEGAL RESPONSIBILITIES

All businesses which are formally established operate within a certain legal
framework and have responsibilities that they should fulfill. These
responsibilities include:

1. Paying taxes to Government

 Sales tax

 Value Added Tax (VAT)

 Income tax on each employee

2. Meeting the welfare of workers in terms of

 Observing the minimum wage payment

 Observing acceptable working hours (8 hours)

 Allowing them to rest during public holidays

 Safety and health

 Allowing them to go on leave

 Promotion

3. Applying for licences from local authorities and certificates of

incorporation from the Registrar of Companies.

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INSURANCE

To insure is to acquire cover for risks that may befall the business in future
by paying premiums to an insurance company. The risks that a business may
insure itself against include:

1. Damage by fire to all the property or part of it

2. Damage in a riot

3. Theft

4. Accidents and injuries to the workers or customers

5. (explain further terms such as Licenses, permits and meaning

of types of taxes)

FACTORS TO BE TAKEN INTO CONSIDERATION BEFORE FORMING A

COMPANY:
 Locality
 Start-up capital
 Trading hours
 Source of raw materials
 Competitors
 Advertising
 Banking

REASONS FOR DISSOLVING COMPANIES

 End of time frame for which the company was intended to run
 Pay back the start-up capital to the shareholders
 Sharing of profits

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The table below show the difference between the forms of business:
SOLE PARTNERSHI LIMITED COOPERATIV
TRADER P COMPANY E

Registration Might have Might have to Has to be Has to be

to be be registered registered registered
registered

Cost of Low cost Low cost High cost High cost

starting the
business

Simplicity of Simple simple complicated Complicated

starting the
business

Number of Only one At least two One or more At least five

owners

Financial Unlimited Unlimited No personal No personal

responsibility personal personal liability by liability by the
of the owner liability by liability by the the members for
for the the owner owner for all shareholders the debts
business’ for all debts debts for the debts
debts

Decision All decisions Decisions are Shareholders Every member

making in made by made jointly appoint has one vote
the business the owner by all owners, board of
unless agreed directors who

23
 otherwise can appoint A management
managers to committee is
run the often
business appointed

Taxation The owner The owners The company The

is taxed for are taxed pays tax for cooperative
business individually for business pays tax for
profits their share of profits business
business profits
profits

ENTREPRENEURS IN TECHNOLOGY (skip topic)

 Technical entrepreneur is the one who is essentially a craftsman.
Hedevelops improved quality of goods because of his craftsmanship.
Heconcentrates more on production than on marketing. He
demonstrateshis innovative capabilities in matter of production of
goods andrendering of services.
 Non- technical entrepreneur are those who are not concerned with
thetechnical aspects of the product in which they deal. They are
concernedonly with developing alternative marketing and distribution
strategiesto promote their business.
 Professional entrepreneur is interested in establishing a business
butdoes not have interest in managing or operating it once it
isestablished. He sells out the running business and starts
anotherventure with the sales proceeds.

ENTREPRENEUR AND MOTIVATION (skip topic)

24
An entrepreneur is motivated to achieve or prove his excellence in job
performance. He influences others by demonstrating his business
capabilities.
 Pure entrepreneur is an individual who is motivated by
psychologicaland economic rewards. He undertakes entrepreneurial
activity for hispersonal satisfaction in work, ego and status.

 Induced entrepreneur is one who is induced to take up an

entrepreneurial task due to policy measures of the government that
provides assistance, incentives, and concessions and other facilities to
start a venture. Enter business due to financial, technical and other
facilities provided to them by the state agencies to promote
entrepreneurship.
 Motivated entrepreneur: they come into being because of the
challenge involved in developing and marketing a new product for the
satisfaction of consumers. If the product succeeds, the entrepreneur is
further motivated for launching of newer products.
 Growth and entrepreneur are those who take up a high growth
industry which has substantial growth prospects. Super growth
entrepreneurs are those who show enormous growth or performance in
their venture.

ENTREPRENEUR AND STAGES OF DEVELOPMENT (skip but explain in

brief)
 First generation entrepreneur is the one who starts an industrial
unitby his innovative skill. He is the one who combines
differenttechnologies to produce a marketable product or services.

25
 Modern entrepreneur is one who undertakes those ventures which
gowell with the changing demand in the market. He undertakes
thoseventures that suit the current market needs.
 Classic entrepreneur is one who is concerned with maximizing
theeconomic returns at consistent level. He is concerned more about
thesurvival of the firm with or without an element of growth. Apart
fromthe above, there are entrepreneurs who can be classified
intoinnovative and imitative categories.
 Innovating entrepreneurs are generally aggressive in
collectinginformation, analyzing and experimenting attractive
possibilities intopractice. They are quick to convert old established
products or servicesby changing their utility, their value, their
economic characteristics intosomething new, attractive and utilitarian.
They can see the opportunityfor introducing a new technique of
production process or a newcommodity or a new service or even the
reorganization of an existingenterprise.They are very commonly found
in developed countrieswhile there is dearth of such entrepreneurs in
underdevelopedcountries. They are always creative and bringing in
innovation in theirwork.
 Imitative entrepreneurs are ready to adopt and are more flexible
inimitating techniques developed by others. They exploit
opportunitiesas they come and are mostly on a small scale. He is more
of anorganizer of factors of production than a creator. In the context of
apoor country, he is definitely a change agent and hence he is
important in underdeveloped countries.

26
FORM OF BUSINESS

The business will operate as a

The reason for choosing this form of business is

The owners will be

Name

_______________________
___________________

Description of skills

_____________________________
_________________________

______________________________
_________________________

Relevant experience

__________________
____________________

_____________________
______________________

27
DEVELOPING BUSINESS IDEAS

BUSINESS IDEA

A business idea is a thought or concept which comes across someone’s mind

with a view of making a profit. The idea is centered on a commodity or
service which can be sold for money. Your business idea will tell you:

 WHAT product or service your business will sell

 WHO your business is going to sell to.
 HOW your business is going to sell its products or services.
 WHICH need your business will fulfill for the customers.

SOURCES FOR BUSINESS IDEAS

o Own skills and talents

o Unsolved problems
o Current events or changes
o New knowledge and technology
o New laws and regulations
o Development of new markets

28
 o Available natural resources.
o Friends, family members
o Books
o Media
o Existing businesses

Market based ideas:

o Market implies the buyer

o When one knows who the customer is, one may try to satisfy a specific
need.

Product based ideas:

o Entrepreneur tries to provide goods or services which are in short

supply.
o It could be that an entrepreneur wants to produce a cheaper or better
quality or complementing product to the one already on the market.

HOW TO DEVELOP BUSINESS IDEAS

Developing ideas involves the following steps:

o Brainstorming – generating many ideas out of which the best can be

picked.
o Assessing the using alternative using the Plus Minus and Interest
method
o Choosing the most credible alternative idea.

PMI-PLUS MINUS INTEREST

o List all the good points first

o List all the bad points
o Lastly, List points that are neither good nor bad but interesting.

29
FEATURES OF A GOOD BUSINESS IDEA

 Adaptable- it should be able to survive different situations

 Focuses on the customers
 The business idea must be formulated in writing
 Ability to be explained clearly in fewer words.
 Easy access of the product and comprehensibleidea.
 It should be a guiding star for the employees.
 The idea must express the characteristics of the enterprise
 It should be a flexibleActivity
 Be different from existing ones
 Must not be common on the market.

SWOT ANALYSIS

The word SWOT represents the words Strengths, Weaknesses, Opportunities

and threats. When you think about your own business and write down all the
strengths, weaknesses, opportunities and threats you are doing SWOT
analysis.

Strengths and weaknesses can be looked at from inside the business. These
are things that can affect your business.

 Strengths represent things that the business can be good at e.g. you
can have qualitable salable products, good hard working teachers or
your shop can be located in a strategic point with a lot of customers.
(assets owned)
 Weaknesses are things in which the business will or is not likely to do
well e.g. competitors may have lower prices than you, you may not

30
 have enough capital to beat the competitors in advertising, and other
promotional activities.
Opportunities and threats, you have to look outside the business for
things that cannot affect you.
 Opportunities are things around you in the community that will be
good for your business e.g. the product you offer is popular to the
community, no other business offer them or many people are
establishing new businesses in the community hence increasing
number of customers.
 Threats are things around you in the community that will be bad for
your business in the community e.g. the product you offer is also
offered by other businesses in the community or the sales tax goes up
which will make goods in the shop be more expensive, customer may
dislike your products and may stop buying.

When the SWOT Analysis has been done it’s now possible to evaluate
your business idea and decide:

o If you are going to continue with the business idea and make a full
business plan
o If you are going to make changes to your business idea.
o If you are going to give up this business idea completely.

BUSINESS PLAN

A business plan is a written document prepared by an entrepreneur or

partners that describes the type of business, its goals and objectives, the
products or services to be produced and supplied, the market and the steps
necessary to achieve the goals and objectives of the business.

BUSINESS PLAN OUTLINE

31
1. Executive Summary
 The executive summary gives an outline of your business idea.
 It contains the most important information from the rest of the
Business Plan.
 It is important that the summary is clearly worked out and looks
tidy, because it is the first impression anyone who reads it will
get of your business idea.
2. The business idea
 All business are based on an idea
 It is an idea about what product you are going to produce
 What service you are going to provide or what goods you are
going to sell
 Where and how you are going to sell
 Who will be your customers
3. The marketing plan
 Marketing is everything you do to find out who your customers
are
 What they need and want
 Marketing is satisfying your customers’ needs while making
profit

A detailed marketing plan should contain the following:

o What products or services you will be selling

o What price you will be charging
o Location of the business
o Method of distribution
o How the business will be promoted

4. FORMS OF BUSINESS
 There are different legal forms of business you can choose.
32
  They all have advantages and disadvantages
 However the form you choose depends on the characteristics of
your own business.

4. 1 The following are the key forms of business

o Sole trader
o Partnership
o Limited company
o Cooperative
5. Staff
 What skills and experience are needed
 Number of employees
 Tasks to be performed by each employee.
 The organization chart can be included.
6. Legal responsibilities and insurance
Legal responsibilities include:
o Paying taxes
o Obeying regulations regarding employees
o Licenses and permits
o Lease and other contractual agreements

Insurance

o Property such as machines , stock and vehicles can be insured

against theft
o Property can be insured against damage caused by fire or
accidents
o You and your employees can be insured against accidents and
medical expenses.
7. Costing

33
  Costs are all the money your business spends to make and sell
your products and services

Costing helps your business to:

o Set prices
o Reduce and control costs
o Make better decision about business
o Plan for the future
8. Financial Planning
 Start-up costs
 Cash flow statement
 Income statement
 Balance sheet
9. Required Start-up Capital
 Start- up capital is the amount of money you need to start your
business.
 You need money for equipment, materials, rent, wages
10. Sources of start - up capital
 Loans
 Grants
 Owner’s equity

Activity

Using a chart, list the main parts of the business plan.

FUNCTIONS OR USE OF A BUSINESS PLAN

 It forces the entrepreneur to come up with a clearer and more

organized business idea.
 It leads to putting down of ideas into a written document.

34
  It is an operational plan used to direct the operations of the
business. The plan will tell the entrepreneur what he/she should be
doing and at what time.
 Many businesses use the business plan to get loans from lending
institutions.
 Helps in determining the viability of the business idea.
 The plan will provide you with an answer as to the profitability of the
business.
 Provides more clearer and organized business ideas

DEMAND FOECASTING AND ESTIMATION

-discuss types of demand forecasting and estimation

- discuss method of demand forecasting and estimation

(in brief, 1. Discuss types of demand forecasting and estimation. 2.

Discuss methods of demand forecasting and estimation)

Demand forecasting is predicting future demand for the product. In other

words, it refers to the prediction of probable demand for a product or a
service on the basis of the past events and prevailing trends in the present.
Demand estimation is a process that involves coming up with an estimate
of the amount of demand for a product or service. The estimate of demand is
typically confined to a particular period of time, such as a month, quarter or
year.

The methods of forecasting demand can be classified into two broad

categories:

35
 1. Survey Methods: Under the survey method, the consumers are
contacted directly and are asked about their intentions for a product
and their future purchase plans. This method is often used when the
forecasting of a demand is to be done for a short period of time. The
survey method includes:

 Consumer Survey Method

 Opinion Poll Methods

2. Statistical Methods: The statistical methods are often used when the
forecasting of demand is to be done for a longer period. The statistical
methods utilize the time-series (historical) and cross-sectional data to
estimate the long-term demand for a product. The statistical methods
are used more often and are considered superior than the other
techniques of demand forecasting due to the following reasons:

 There is a minimum element of subjectivity in the statistical methods.

 The estimation method is scientific and depends on the relationship
between the dependent and independent variables.
 The estimates are more reliable
 Also, the cost involved in the estimation of demand is the minimum.

The statistical methods include:

 Trend Projection Methods

 Barometric Methods
 Econometric Methods

36
These are the different kinds of methods available for demand forecasting. A
forecaster must select the method which best satisfies the purpose of
demand forecasting.

Related terms:

Read more: http://businessjargons.com/methods-of-demand-

forecasting.html#ixzz4b6U8n6PX

Barometric Method of Forecasting

Definition: The Barometric Method of Forecasting was developed to

forecast the trend in the overall economic activities. This method can
nevertheless be used in forecasting the demand prospects, not necessarily
the actual quantity expected to be demanded.

Often, the barometric method of forecasting is used by the meteorologists in

weather forecasting. The weather conditions are forecasted on the basis of
the movement of mercury in a barometer. Based on this logic, economists
use economic indicators as a barometer to forecast the overall trend in the
business activities.

The Barometric Method of forecasting was first developed in 1920’s, but,

however, was abandoned due to its failure to predict the Great Depression in
1930’s. The Barometric technique was, however, revived, reformed and
developed further by the National Bureau of Economic Research
(NBER), USA in the late 1930’s.

The barometric method is based on the approach of developing an index of

relevant economic indicators and forecasting the future trends by analyzing
the movements in these indicators. A time-series of several indicators is
developed to study the future trend. These can be classified as:

1. Leading Series: The leading series is comprised of indicators which

move up or down ahead of some other series The most common
examples of leading indicators are- net business investment index, a
new order for durable goods, change in the value of inventories,
corporate profits after tax, etc.
2. Coincidental Series: The coincidental series include indicators which
move up and down simultaneously with the general level of economic
activities. The examples of coincidental series – the rate of
unemployment, the number of employees in the non-agricultural
sector, sales recorded by manufacturing, retail, and trading sectors,
gross national product at constant prices.

37
 3. Lagging Series: A series consisting of those indicators, which after
some time-lag follows the change. Some of the lagging series are-
outstanding loan, labor cost per unit production, lending rate for short-
term loans, etc.

The following are the criteria on which the indicators are chosen:

 The economic significance of the indicator; such as greater the

significance the greater is the score of the indicator.
 Time Series- statistical adequacy; a higher score is given to the
indicator provided with adequate statistics.
 Conformity with the movement in overall economic activities.
 Immediate availability of the time series.
 The consistency of the series to the turning points in overall
economic activities.
 Smoothness of the series.

The problem of indicator selection may arise if some indicators appear in

more than one class of the indicators.

The only advantage of the barometric method of forecasting is that is helps

to overcome the problem of finding the value of an independent variable
under regression analysis. The major limitations of this method are; First,
Often the leading indicator of the variable to be forecasted is difficult to find
out or is not easily available. Secondly, the barometric technique can be
used only for a short-term forecasting.

Read more: http://businessjargons.com/barometric-method-of-

forecasting.html#ixzz4b6vp2RCo

Methods of demand estimation

Several methods are available for accuracy up
to 95%,but requires accurate collection and
analysis of data; For estimation of demand of
agri inputs, following three methods are found
suitable;
1.Survey of buyers intention method
2. Composite sales staff opinion
method
3.Expert opinion method
1.Survey of Buyer’s Intentions
Method
•
Relies on the information base of “what

38
people say”
• Believes that buyers themselves are the
best source of information
• A questionnaire is prepared asking how
much inputs will farmer use next year.
•
Questionnaire are posted to as many as
possible farmers/opinion leaders
1.Survey of buyers-
-
contd
• A wholesale dealers may ask info from
retail dealers, farmers and extension staff
• Provided Information is analyzed to draw
inferences
• This is a good method as information is
provided by right people
• This method can provide estimates as
accurate as 90%
2.Sales staff Opinion Method
• IS based on the belief that sales staff can
provide correct estimates of their Sales
territories
IS appropriate when number of customers
is large and spread out in wide locations
Info is collected from field and regional
sales offices and consolidated at HQ
3.Expert Opinion Method
• Believes that experts, research agencies,
advisors,consultants,opinion leaders and
sales executives maintain useful
information and area good source
• Information can be secured as per need
at a short notice with less cost
• Is convenient for small enterprises

Accuracy depends on the level of experts

and can be up to 90%
he following types of budgets are commonly used by businesses:

 Master Budget. A master budget is an aggregate of a company's

individual budgets designed to present a complete picture of its
financial activity and health. ...
 Operating Budget. ...
 Cash Flow Budget. ...
 Financial Budget. ...

39
  Static Budget.

SOURCES OF FINANCING BUSINESS

Financing of business comes in where the business wants to source funds for
expansion of business, purchase of assets and meet revenue expenditure for
the business operations.

A business can be financed through the following means:

o Sale of shares, stocks and other securities e.g. bonds and treasury
bills.
o debentures
o borrowing from banks
o borrowing from government credit schemes
o borrowing from nongovernmental credit schemes
o borrowing from friends
o other sources e.g. grants
o Saving money at the bank or personal savings, lottery money etc.
o leasing i.e. renting buildings or machines
o subletting of buildings

DESIRABLE BUSINESS ETHICS

The following are the main desirable business ethics:

 Honest-You have to always be honest if you have to criticize people,

do it in front of them but in private they will appreciate your
consideration not to put them at a disadvantage in front of others. If
you want to praise them do it.

40
  Intensity- You must develop a pleasant personality entrepreneurs
are known for their good sense of humor and are nice people to
work with.
 Fairness- You must treat everybody in the same way. If you have a
habit of being good to your seniors but shouting at your juniors, few
will regret your downfall.
 Loyalty-You have to be loyal, dedicated and prepared to work hard.
You must be productive, which means that you must not waste time
with unimportant things. You must also be willing to do more than
one person’s work and dedicated workers sees his or her work to
finish.
 Independent-He must be same with sound mind his ideal plan must
be original, dependable and working in line with the business at
hand.
 Flexible and adaptable- in this dynamic world things are changing it
could be economic, social, politically and technologically. In view of
this an entrepreneur must be flexible and able to adapt to these
challenges.
 Punctual- Punctuality in the most important quality for any work.
Work must be started at the right time as set by the company.
Delays in the reporting for work will affect the workers performance
and productivity.
 Responsibility- Take responsibility for errors, but share success. Do
not blame everybody else for things that go wrong and always find
excuses to clear themselves.

CHARACTERISTICS OF A GOOD PRODUCT AND SERVICE

-explain different types of products and services

41
-describe characteristics of a good product

THE PRODUCT

A product is the outcome of the production process which can be touched. It

can only be consumed after it has been processed or semi processed. The
other characteristic is that you are able to view and assess the product
before you purchase it.

CHARACTERISTICS OF A PRODUCT

1) QUALITY
This refers to service performance, customer value and satisfaction.
The product should be reliable and free from defects.

2) FEATURES
A product can be offered with varying features. Features are a
competitive tool for differentiating the company’s product from
competitors’ products. E.g. adding perfume to a detergent.
3) BRANDING
This is a name, term, symbol, design, or a combination of these that
identifies the products or services of one seller and differentiates it
from those of competitors. Consumers view a brand as an important
part of a product and branding can add value to a product or service. ..

SERVICE
This is an intangible product whose production and consumption are
simultaneous. It is very difficult then to sell or buy a service due to this
characteristic.

42
 NATURE AND CHARACTERISTICS OF A SERVICE
A company must consider four special characteristics when designing
marketing programs;
1) SERVICE INTAGIBILITY
A major characteristic of service – it cannot be seen, tasted, heard, or
smelled before it is bought.
2) SERVICE INSEPARABILITY
They are produced and consumed at the same time and cannot be
separated from their providers.
4) SERVICE VARIABILITY
Their quality may vary greatly, depending on who provides them and
when, where, and how.
5) SERVICE PERISHABILITY
They cannot be stored for later sale or use.
Therefore, the only way through which a company can gain
competitive advantage in the service industry is through physical
evidence. For example banks have beautiful surroundings, well
ventilated and decorated banking halls and smart looking personnel to
attract customers and give the perception that they should expect a
high quality service.

PRODUCTION

By “production” we mean the turning or changing of raw materials into semi-

finished or finished products to meet market needs. Production is also
defined as making products and services available to the consumer.

Successful production and marketing are evidence of entrepreneurial

abilities of those who wish to enter or carryon business. Before starting the
production, one has to be sure that there is a market for it. This will have to
be based on a market research, which will give an estimate of the expected

43
market share and in turn the expected production levels. The market
research also provides information on the upper and lower price limits.

Types of production

There are three basic types of production. These are;

 Primary production: - this includes farming, forestry, fishing, and

mining. This involves extracting or tapping products form nature.
Examples: catching fish from the lake, making planks from tree logs,
growing crops on the soil, and mining copper ores from the ground.
 Secondary production: - this involves manufacturing and
processing. Resources tapped from nature are worked on in order to
make them into semi-finished or finished products. Examples: making
shoes from turned animal hides, grinding mealie meal from maize,
making bread from wheat flour and other ingredients, and assembling
vehicles or radios.
 Tertiary production: - this involves making products from the
primary and secondary production available to the final consumer
through retailing and wholesaling. It also involves provision of services
like banking, insurance, electricity, water and sanitation, and
transportation.
(Describe the types of products in economic terms)

SALESMANSHIP

SALES

44
Definition: Sales is the act of meeting prospective buyers and providing
them with a product or service in return for money or something of value.

Selling a product involves process through which the customer goes from the
time of identifying a need to the actual purchase of a product/service.

THE NATURE OF PERSONAL SELLING

Personal selling is simply the personal presentation by the firm’s sales

force for the purpose of making sales and build customer relationships.
These are called by many names: salespeople, sales engineers, sales
representatives, account executives, agents etc.

A salesman is a person who represents a company to customers by

performing one or more of the following activities: prospecting,
communicating, selling, servicing, information gathering, and relationship
building.

CHARACTERISTICS OF A SALESMAN

- Intelligence – able to deal with difficult customers and answer queries

- Knowledgeable – about the product/service they are selling
- Perseverance – approach new customer with same vigor
- Ready to learn – open minded to learn new things about products
- Good communication skills – ability to speak and listen to outcomes.

PERSONAL SELLING PROCESS

The selling process consists of steps that the salesman must master. These
steps focus on the goal of setting new outcomes and obtaining orders from
them. However, most salesmen spend much of their time maintaining
existing accounts and building long-term customer relationship.

45
STEPS IN THE SELLING PROCESS

(1)PROSPECTING – the step in the selling process in which the salesmen

identifies qualified potential customers
(2)PRE-APPROACH – this is the step in the selling process in which the
salesmen learns as much as possible about a prospective customer
before making a sales call.
(3)APPROACH – the step in the selling process in which the salesmen
meets the customer for the first time.
(4)PRESENTATION – the step in the selling process in which the
salesman tell the “value story” of the buyer. Showing the how the
company offer, solve the customers’ problems.
(5)HANDLING OBJECTIONS – stage at which the salesman seeks out,
clarifies and overcomes customer objections to buying.
(6)CLOSING – point at which the salesman asks the customer for an
order
(7)FOLLOW-UP – the last step in the selling process in which the
salesman follow-up after the sale to answer customer satisfaction and
repeat business.

BUYER DECISION PROCESS

Buying is the process through which the customer goes from time of
identifying a need to the actual purchase of a product/service. The
customer’s buying process goes through the following stages:

 Problem identification: this is the stage where the customer identifies a

problem that requires to be attended to. For example the customer
problem may be that of feeling thirst. (Problem identification - the need
to find water).

46
  Solution specification: the need to get to the nearest shop or borehole
to buy or draw water.
 Assessment: comparing the different water brands available, for
example, Manzi Valley, Aquasavanna, etc if buying from a shop.
 Selection: choosing the best water type by brand.
 Agreement: agreeing on the quantity of water bottles you need, the
price and accompanying service.
 The ability to control impulses. Some people buy things they do not
necessarily need because of impulse buying.
 Feedback: measuring the value of what was purchased against what
was paid and the expectation.

MARKET

The word market has two different meanings:

1. A market is any place where people meet to buy and sell. For
example, a fish market, salaula market, stock exchange market.
2. In Marketing, market also means customers, people or other
businesses, which want your product or service and are willing to
pay for them.

MARKET ASSESSMENT?(in brief explain it and skip)

Market assessment is a detailed and objective evaluation of the potential of

a new product, new business idea or new investment.

It is a comprehensive analysis of environment forces, market trends, entry

barriers, competition, risks, opportunities and the company’s resources and
constraints. Whether you are thinking of venturing into a new market or
launching a new product, conducting a marketing assessment is the crucial

47
first step in determining if there is a need or a potential customer base for
your product.

A well-executed market assessment will enable your company to

decide where to use limited resources and to go after markets and
opportunities that will provide the best returns on investments.

Failure to conduct proper market assessment could result in wastage of

resources, missed opportunities, poor returns on investments and even
substantial financial losses which could be detrimental to the future of your
company.

MARKET RESEARCH

Market research is about acquiring and analyzing information required for

making marketing decisions eventually the market plan. The two basic areas
in which the information is sought are (a) markets (existing and potential),
and (b) marketing tactics and methods. The former is oriented towards what
is happening outside the organization, in the market place. The latter is
oriented towards the way in which the organization is responding internally
to its customers, present and future.

AIMS OF MARKET RESEARCH

 To gather sufficient knowledge about the target groups, those who

want to buy your products or use your services
 To find out what types of products the target groups are interested in
so that the business does not waste resources by producing goods or
services that are not required.
 To discover what will influence consumers’ willingness to buy the
goods or services, i.e product name, style and colour of packaging,
best target audience, price range and effective hidden persuaders.
 To assess the likely volume of demand to ensure that over production
does not occur.

48
TYPES OF MARKET RESEARCH

 Experiments
 Observation
 Surveys

Importance of Market research

Market research provides a market with information which will help in

making decisions about.

 Where to sell a product or services

 How to sell it
 Which customers need the product and exactly what they want
 How to price the product
 How to promote the products
 Who are the competitors in the market place
 What the size of the market is

Market research tools

The following are the tools used in market research:

 Talk to potential customers. Ask them, for instance

o What they think about your competitors

o What products or services they want to buy

 Study the competitors’ business. Find out about:

o Their products and what they do not stock

o What prices they charge

49
 o How they attract customers to buy
o Their sources of supplies

 Ask suppliers and business friends:

o Which products sell well in their business

o What they think about your business idea
o What they think about your competitors’ products

 Read newspapers, catalogues, and business magazines to get

information and ideas on new products or services.

MARKETING

DEFINITION: Marketing is defined as the process of identifying customers,

their needs and wants, and providing them with the product or service to
satisfy them at a profit.

In other ways: Marketing is the managementprocess through which

goods and services move from concept to the customer. It includes the
coordination of four elementscalled the 4 P's of marketing: (product, price,
place and promotion)

Key Marketing concepts

(a) The Production Concept - under this concept, enterprises focused

on increasing output in order to achieve economies of scale and lower
unit cost of production.
(b)The Product Concept – this concept worked on the assumption that if
an enterprise could manufacture a better product, customers would be
enticed to buy it no matter what.

50
(c) The Selling concept – the selling concept sought to embark on more
promotional activities and involved assisting sales people to be very
aggressive in order to ensure higher sales that the enterprise wanted.
(d)The Marketing Concept – this is the philosophy that holds that
achieving organizational goals depends on knowing the needs and wants
of target markets and delivering the desired satisfactions better than
competitors do.
(e) Societal Marketing Concept – is the idea that a company’s marketing
decisions should consider consumer’s wants and the company
requirements.

Branding- means selling of goods under the Trade Mark or Brand Name
of the manufacturer, the wholesaler or retailer. The trade-mark is clearly
displayed on the package or container. The aim is to differentiate the goods
of one manufacturer from those of others, even though they are basically the
same (i.e. used for the same of purpose). Product differentiation aims at
earning and creating goodwill of customers so that they become Brand
conscious and be loyal to only one brand. Branded goods are of uniform
size, weight and quality and sometimes prices. They are often beautifully
packed. Branded goods are often advertised a great deal.

MARKET MIX ELEMENTS (The 4 Ps)

This is a set of controllable tactical marketing tools –after deciding on its

overall marketing strategy, the company is ready to begin planning the
details of the marketing mix, one of the major concepts in modern
marketing.

This involves everything the firm can do to influence the demand for its
product. The many possibilities can be collected into four groups of variables
known as “the four Ps-product, price, place and promotion .

51
1) PRODUCT: Means the goods –and-- services combination the company
offers to the target market. This product should meet the expectations
of the customers, as far as quality, size, packaging and brand name
are concerned. So before it can be made the company should
understand the needs of its target customers.

2) PRICE: This is the amount of money customers must pay to obtain the
product. The price should take into consideration the total cost per unit
plus a mark-up. However it’s vital to take into consideration the
expected response from the customers as they need to get value for
whatever money they part away with. So prices should be within
acceptable limits by the customers. Furthermore the prevailing market
prices are also supposed to be taken into consideration as you can kick
out yourself from the market due to over pricing or eat into your profits
(pricing by far below the market price).

3) PLACE: This includes company activities that make the product

available to target customers. There are several methods that you can
use and some of them are; you can sell directly to end users or you
can employ intermediaries (middlemen). The essence is that your
product should be taken to a point where it is convenient for your
customers to buy it.

4) PROMOTION: This means activities that communicate the merits of

the product and persuade target customers to buy it. Companies come
up with integrated market communications, which is a carefully
integration and coordination of companies channels to deliver a clear,
consistent, and compelling message about the organization and its
product.

52
 Marketing Plan

Through strategic planning the entrepreneur decides what he/she wants to

do with his/her business enterprise. Marketing Planning involves deciding on
marketing strategies that will help the enterprise attain overall strategic
objectives. A detailed marketing plan is needed for the business enterprise
product or brand.

The plan begins with an executive summary that quickly reveals major
assessments, goals and recommendation. The main section of the plan
presents a detailed SWOT analysis of the current marketing situation as well
as potential threats and opportunities. The plan next states major
objectives for the brand and outlines the specifics of a marketing strategy for
achieving them.

A marketing strategy consists of specific strategies for target markets,

position, the market mix (four Ps) and marketing expenditure levels.

Positive Negative

Internal Strengths Weaknesses

Internal capabilities Internal limitations that

that may help a may interfere with a
company reach its company’s ability to
objectives achieve its objectives
External Opportunities Threats

53
 External factors that Current and emerging
the company may be external factors that
to exploit to its may challenge the
advantage company’s performance

Marketing Plan Format

 Title Page

The title page must be planned and presented logically.

Systematic explanation is important in the presentation of the
plan.

 Executive Summary and Table of Contents

The executive summary is probably the most important part of

the plan because it gives a very good, short overview of the
business. It is written at the end after the rest of the plan has
been completed. The table of contents should follow the
executive summary and should clearly state what is contained
within the marketing plan.

 The current marketing situation

This section presents relevant background data on sales, costs, profits, the
market, competitors, distribution and the macro environment. The section
should discuss why the specific business was chosen and the advantages of
the business.

54
It should also briefly discuss the social-cultural factors, legal, economic,
political and technological factors as they relate to the proposed business.

 Opportunity Analysis

This section should identify the major Strengths, Weaknesses, Opportunities

and Threats facing the proposed product line.

 Objectives

This section should spell out the financial marketing objectives of the
proposed business. The objectives must be SMART (Specific, Measurable,
Achievable, Realistic and Time bound).

Marketing Strategy

This section should clearly state the target market after

evaluating each market segment’s attractiveness and selecting
one or more of the market segments.

The section should talk about the marketing mix, namely, the
product, price, promotion, and place. It could also discuss the
human resources, the process (technology to be applied) and
the physical environment.

 The marketing Plan must specify the broad marketing

programs for achieving the business objectives. Each marketing
strategy element must take note of the following questions:
1. What will be done?
2. When will it be done?
3. Who will do it?

55
 4. How much it will cost?
 Projected Profit and Loss

There should be a supporting budget which will show the

following:

 Forecasted revenue showing sales volume in units and

the average price.
 Expenses will show the cost of production, physical and
distribution and marketing costs.
 The difference between revenue and costs shall be the
projected profits.
 Controls

How will management monitor the marketing plan to ensure

that actual results are as planned?

56
FINANCIAL PLANNING

Under this section, entrepreneurs decide on how a business should use its
money. Financial planning is predicting revenues and costs and then
comparing the estimated profits with the cost of investment. The financial
plan section of the business plan provides information on calculating your
start up and operating expenses. It is of utmost importance to estimate the
profitability of the project as early as possible. It serves little purposes to
carry out much research on impossible ideas. The following are some
financial issues that should be considered

 Budgeting

 The calculation of the cost of producing a product or services

 Sales forecast

 Cash flow

BUDGETING (clearly bring out types and importance budgeting)

A budget is a plan that outlines an organization's financial and operational

goals. Making a budget helps a business allocate resources, evaluate
performance, and formulate plans. For student companies just starting their

57
businesses, making a budget plays an important role in determining their
start- up capital and operating costs.

While making a budget can occur at any time, for many businesses, making
a budget is an annual task where the past year's budget is reviewed and
budget projections made for the coming year(s).

The basic process of making a budget involves listing the business's fixed
and variable (fluctuating) costs on a monthly basis and then deciding on an
allocation of funds.

Fixed costs are costs that will not change even though the quantities of
production or purchase of products vary. The following gives examples of
fixed costs:
 Wages for the administration

 Office costs

 Accounting

 Auditing

 Sales and marketing

 Telephone

 Vehicles and running costs

 Depreciation of vehicle

 Interest bearing costs

 Tools and instruments

Variable costs are costs that change when the quantities of production or
purchase change. The following gives examples of variable (fluctuating)
costs:

58
  Production wages

 Material costs

 Production costs (electricity, housing, etc.)

In order to come up with budget calculations, the following information is

needed:

1. Income related;

 Sales

 Loans

2. Expenditure related;

 Types and quantities of equipment needed

 Types and quantities of raw materials

 Advertising/sales promotion

 Wages

EXAMPLE OF A BUDGET

BUSINESS PREMISES

Construction 500 000

EQUIPMENT

Fixtures (benches, shelves) 200 000

Oven 600 000

Tools for baking 100 000

59
OTHER

Raw materials 800 000

Advertising 50 000

Wages 150 000

Other costs 100 000

TOTAL 2 500 000

It being that the amount for start-up capital is derived from the budget, it
means therefore that K2, 500,000 is what would be required in this business
as start-up capital.

COSTING A PRODUCT

The unit cost of producing a product is calculated by finding the sum of

direct and indirect costs of producing the product or service. This is
summarized as:

Direct material costs Direct labour Indirect costs Total production cost
costs
+ + =

Direct Material Costs

60
This includes all the money the business spends on the materials that
become part of, or directly related to, the product or service being produced.
Below is an example of direct material costs of making a loaf of bread.

Raw Quantity Cost (K)

material

Wheat flour 0.10kg 450

Yeast o.5 kg 100

Sugar 0.5kg 100

Salt 0.2kg 50

Charcoal 1kg 500

Fat 0.10lt 100

Total cost 1300

Direct labour costs

This is the money the business spend on wages, salaries, and the benefits of
the people who are directly involved in the production of the product or
service. Note that retailers and wholesalers don’t have workers directly
involved in the production of the product or service. Here is an example
based on the loaf of bread:

61
 Worke Type of Monthly Direct Indirect
r work pay (K) Labour Labour
done Costs (K) Costs (K)

Zilung Baker 30 30 -
e

Muleya Baker 30 30 -

ZESCO Electricit 10 - 10
y
Indirect
Maggie Packing 30 15 15 costs

Total 100 75 25 These are all

other costs
which add to the unit cost of a product. They may include the electricity used
to power the stoves used to bake the bread. It may also include rent for the
premises.

Using the calculations above, we could come up with the unit cost of a loaf of
bread as;

Direct labour
Direct material costs Indirect costs Total production cost
costs
+ + =

1300 75 25
140

SALES/COST FORECAST

It shows the excepted costs and profit in a month for the whole year.

62
 Sales/Cost Forecast Plan

DETA JAN FE MA APR MA JUN JUL AU SE OC NOV DE TOT

ILS B R Y G PT T C AL

Sales 160 460 760 109 136 136 136 136 136 136 1360 136 1335
0 0 0 00 00 00 00 00 00 00 0 00 00

Direct 210 610 660 880 880 880 880 880 880 880 8800 880 9400
Mater 0 0 0 0 0 0 0 0 0 0 0 0
ial
Costs

Direct 100 100 100 100 100 100 100 100 100 100 1000 100 1200
Labou 0 0 0 0 0 0 0 0 0 0 0 0
r
Costs

Gross (15 (25 00 110 380 380 380 380 380 380 3800 380 3150
Profit 00) 00) 0 0 0 0 0 0 0 0 0

Indire 310 240 240 240 240 240 240 240 240 240 2400 240 2950
ct 0 0 0 0 0 0 0 0 0 0 0 0
Costs

Net (46 (29 (24 (130 140 140 140 140 140 140 1400 140 1120
Profit 00) 00) 00) 0) 0 0 0 0 0 0 0 0

ACTIVITY

GROUP WORK

Make your own sales and cost plan for the first year of your business.

63
CASH FLOW PLAN

This is a forecast which shows how much cash you expect to come (flow) into
and go (flow) out of your business each month. It is the difference between
the receipts from the sales and the amount spent on expenses such as raw
material, interest paid on loans, dividends paid to shareholders etc. Money
received into the business adds to its capital reserves while money paid out
reduces them

CASH IN

CASH OUT

It is important that the money going out of a business does not exceed the
money it receives

HOW TO PREPARE THE CASH FLOW

64
 JAN FEB MARCH APRIL MAY JUNE
Cash at the 21600 10700 6000 3800 2600 4100
CASH IN

beginning of the
month
Cash in from sales 1600 4500 7500 10900 13600 13600
Any other cash in 12100 - - - - -
TOTAL CASH IN 35300 15200 13500 14700 16200 17700
Cash out for Dir mat 2100 6100 6600 8100 5100 8100
cost
CASH OUT

Cash out or Dir lab 1000 1000 1000 1000 1000 1000
cost
Cash out for ind. 2800 2100 2100 2100 2100 2100
costs
Cash out for 13600 - - - - -
planned
Loan repayment - - - 900 900 900
Any other ash out 5100 - - - - -
Total cash out 24600 9200 9700 12100 12100 12100
Cash at the end 10700 6000 3800 2600 4100 5600
of month

Cash at the start of the month- This is the amount of cash a business
expects to have in cash or expects to have in their bank account at the
beginning of the month. The first entry shows the invested money.

Cash in from sales- This is cash realized from sales during the months

65
Any other cash in- this is the amount of cash the business expects from
any other sources of income such as loan from the bank, donations, grants to
help you start the business

Total cash in- This is the sum of all the cash coming in the business as cash
at the start of the month, cash in from sales, and any other cash-in.

Cash out for direct material cost- This is the amount of money paid for
the raw materials only i.e. Materials used to produce the goods e.g. flour for
baking bread.

Cash out for direct labor cost- This is the amount of cash a business is
expecting to pay the workers who are directly involved in the production of
the items or services. e.g. working who are baking bread

Cash out for indirect costs- This is the amount of cash the business is
expecting to pay out for indirect costs (something not directly involved in the
production of goods) such us electricity, and rent.

Cash out for planned investment in equipment- This is the money the
business has planned to spend in procuring equipment e.g. a truck, stoves
etc.

Loan repayment- This is the money paid toward the repayment of loans
got

Any other cash out- This is the money paid out may be on renovation to
the building

Total cash out- This is the sum of all the cash out of the business, that is;

= Cash out for direct material cost + Cash out from direct labor
cost + Cash out for indirect costs +Cash out for planned
investment in equipment + Loan repayment + Any other cash
out

66
Cash at the end the end of the month- This is the difference between
the total cash in and total cash out.

Total cash in - total cash out = Cash at the end of the Month.

The answer from the calculation above represents cash at hand and the bank
balance. It is the same figure which becomes the cash at the start of the
following month.

ACTIVITY

Make your own cash flow for the first year of your business.

BUSINESS FINANCING

This section addresses how entrepreneurs acquire capital for their

businesses. Capital is the money, buildings, machinery, and other resources
put in a business for it to start operating. It does not include the people.
Business financing is concerned with the sources and uses of money capital.
There are several ways of raising capital for the business and these include;

 One`s own assets

 Loans

 Donations

 trade credits

 gifts

67
  sale of shares

 investments

SHARE CAPITAL

In financial markets, a share is a unit of account for various financial

instruments such as stocks and investments in Limited Companies.

Capital is the money, equipment and machinery, buildings, premises and

other materials mobilized to start a business venture.

Share capital therefore is the fund raised by a company through the issuance
of shares to individuals/ institutional investors for the growth and expansion
related aspects of the company. It is also known as Equity Financing by
which the shareholders of the issued capital receive rights of ownership in
the concerned company by buying its shares. Buyers of the Share Capital
become owners of the company in accordance to their stake in the company
and hence possess certain degree of control over its operation.

Amount of share capital a company possesses is a variable and dependant

on the number of shares bought by the shareholders. As already seen, it is
calculated at budgeting stage of the financial planning.

TYPES OF CAPITAL

Paid-up capital

This is the total amount of capital that has been paid in full by shareholders.

68
Working capital

This represents operating liquidity available to a business. Along with fixed

assets such as plant and equipment, working capital is considered a part of
operating capital. It is calculated as current assets minus current liabilities. If
current assets are less than current liabilities, an entity has a working capital
deficiency, also called a working capital deficit.

Working Capital = Current Assets – Current Liabilities

Positive working capital is required to ensure that a firm is able to continue

its operations and that it has sufficient funds to satisfy both maturing short-
term debt and upcoming operational expenses. The management of working
capital involves managing inventories, accounts receivable and payable and
cash.

Working capital measures how much in liquid assets a company has

available to build its business. The number can be positive or negative,
depending on how much debt the company is carrying. In general,
companies that have more working capital will be more successful since they
can expand and improve their operations. Companies with negative working
capital may lack the funds necessary for growth.

The main disadvantage of financing through share capital route is that the
owner(s) has to give-up certain amount of control from the business because
buyers of the Share Capital become part owners of the company in
accordance to their stake in the same and hence possess certain degree of
control over its operation. Thus, the owner is now not free to take any
decision as per his ideas but has the obligation of getting it approved from
the board of shareholders.

LOAN

69
Loaning is a financial transaction in which one party ( the lender) agrees to
give another party (the borrower) a certain amount of money with the
expectation of total repayment ( which includes interest)

Purpose of getting a loan

 To raise start-up capital

 To increase working capital

 To buy business assets equipment

Entrepreneurs are cautioned to borrow for a good reason and not just for the
sake. The loan must be for an investment which yields good returns. The
entrepreneur should first assess other options before committing his/her
business to a loan.

Requirements for getting a loan

Most financial institutions ask for two things:

 a well written business plan that the lender believes in, and

 Collateral security for the loan. E.g. land, house, documents of title to
goods

Essentials of a good collateral security

 Must readily and easily realised

 Its value must be stable

 There must be no liability attached to the security

 The security must not entail heavy expenses to convert to cash

 The estimated realizable value should yield a margin over the amount
the mount of loan

70
 1. FINANCIAL MANAGEMENT

As the business comes near to be established, the entrepreneurs should

prepare financial management documents and account books which will
show the company’s transactions from the day of its creation to the day of
its liquidation. All entrepreneurs should maintain records of all transactions
and assets in books of Accounts and accounting documents. Some of the
books and documents of accounts that companies are expected to have in
place are cash book, vouchers, receipt books, and invoices. The books and
documents require regular entries and must be closed and revised at least
once a month.

CASH BOOK

Cash book is a very important book of prime entry. It shows the actual daily
cash and bank transactions for the company. The left ‘DR’ gives receipts
while the right ‘CR’ shows payments. Below is an example of cash book
entries.

DATE RECEIP DETAILS LEDGER RECEIPTS PAYMENTS BALANCES

T FOLIO
CASH BANK CASH BANK CASH BANK

10/05/ Share - 500 500

07 capital

10/05/ Cash 200 200 200 300

07 withdraw

71
11/05/ 1432 Tomatoes C 150 50 300
07

11/05/ 5640 Stove C 50 - 300

07

12/05/ - Tomato 75 75 300

07 sauce

13/05/ - Tomato 82 157 300

07 sauce

14/05/ - Bank 157 157 - 457

07 deposit

14/05/ - Tomato 96.5 96.5 457

07 sauce

15/05/ - Bank 96.5 96.5 - 553.5

07 deposit

15/05/ - Cash 300 300 300 253.5

07 withdraw

15/05/ 5923 tomatoes C 300 - 253.5

07

BANKING

What is a bank?

 A financial institution which collects, safe guards surplus funds and

make them available when required by owner.

 In this case, S.I.E bank is the Office of the Accounting officer.

72
Services provided by banks

 Handling and safe guarding cash.

 Paying bills

 Keeping valuables

 Providing overdrafts and loans

 Operating the cheque system

 Offers financial advice etc

Business banking procedure- deposits

 Daily sales are recorded in the sales book by the sales manager.

 Hands over the money to the company accountant

 Company Accountant debits the amount received in the cash book

 Company Accountant fills in deposits slips.

 Accountant takes the money to the bank.

73
DEPOSIT SLIP

BANK
CASH DEPOSIT SLIP

NAME OF ACOUNT: ...............................................................................

DATE:………………………
Account No: …………………………………….
Amount in Words: ……………………………………………………
……………………………………………………………… K

74
DEPOSITORS NAME:………………………………SIGNATURE: …………………

Officia
A/OFFICERS’S NAME: ………………………… SIGNATURE: ......………… l stamp

S.Ibanking procedure-withdrawals

 Purchasing Manager prepares a budget of items needed to be bought.

 Company Accountant fills in a withdrawal slip as per budget.

 Money withdrawn is debited in the company ’ ledger.

 Accountant signs on the entry in the ledger

 The company accountant credits the cash book.

WITHDRAWAL SLIP

BANK
CASH WITHDRAWAL SLIP

NAME OF ACCOUNT: ....................................................................................

DATE:………………………
Account No: …………………………………….
Amount in Words:

75
………………………………………………………………………………

……………………………………………………………………………..

PAYEES NAME: …………………………………SIGNATURE: ……………………

Bank ledger

BANK LEDGER

NAME OF THE COMPAY: ………………………………………………………………

ACCOUNT NO: ……………………………………………………………………………….

DEPOSIT

76
 DATE DESCRIP DEPO WITHDRA BALAN OR/ TELLER’S
TION SIT WAL CE SIGN.
PAYEE

SIGNATU
RE
15/09/ Share 500 - 500
09 capital 000 000
15/09/ Loan 200 - 700
09 capital 000 000
20/09/ Equipment - 200 000 500
09 000
21/09/ Raw - 300,000 200
09 materials 000
22/09/ Cash sales 50 000 - 250
09 000

LEGAL RESPONSIBILITIES AND INSURANCE

LEGAL RESPONSIBILITIES

All businesses which are formally established operate within a certain legal
framework and have responsibilities that they should fulfill. These
responsibilities include:

4. Paying taxes to Government

 Sales tax

 Value Added Tax (VAT)

 Income tax on each employee

5. Meeting the welfare of workers in terms of

77
  Observing the minimum wage payment

 Observing acceptable working hours (8 hours)

 Allowing them to rest during public holidays

 Safety and health

 Allowing them to go on leave

 Promotion

6. Applying for licences from local authorities and certificates of

incorporation from the Registrar of Companies.

INSURANCE

To insure is to acquire cover for risks that may befall the business in future
by paying premiums to an insurance company. The risks that a business may
insure itself against include:

6. Damage by fire to all the property or part of it

7. Damage in a riot

8. Theft

9. Accidents and injuries to the workers or customers

PROCEDURE ON REGISTERING THE ENTERPRISE

Any form of enterprise should register with the local authority, registrar of
companies or Patents department. It is necessary to work out a printed form
for the enterprise to fill in.

78
Suggestions for The contents of registration forms

 Name of enterprise

 Address of enterprise

 Phone- / fax number / e-mail address

 Name and address of headquarters of the company

 Name of company secretary as a contact person

 Auditor

 Business idea of the enterprise

 Initial capital funds of the enterprise

 Name of board members

 Name of board chairperson

 Positions in the enterprise (position and name of the position holder)

 Signatures (authorization)

 Signature by the Head of the Enterprise and / or Board Chairperson.

In addition, the following should be enclosed:

 A copy of the Articles of the Enterprise

 Minute book from the day of foundation with signatures in original

 Signed agreement by founders of the business.

Suggestions for The contents of the Articles of the enterprise

 Name of enterprise

 Address of enterprise

 The board consists of all elected members engaged in the enterprise

79
  The object of the enterprise is primarily to provide the owners with
skills and knowledge in trade, through the founding, running, and
eventual liquidation of an enterprise in the course of a settled period of
time.

 The business idea of the enterprise

 The capital of the enterprise

 At least 50 percent of the board members must be present if a board

decision is to be made.

 The board elects its own board chairperson and vice-chairperson

 Each board member has 1 (one) vote in the board

 In the event of a tie, the board chairperson has a double vote

 The frequency of board meetings

 The board appoints the manager

 Who is in charge of appointing for the other positions in the enterprise?

 Members of the enterprise only may occupy these positions

 Two board members will together be authorized to sign on behalf of

the enterprise on business matters. These should be named in the
document.

Activity

Discuss and come up with Legal responsibilities for your business plan.

RECORDS TO BE MAINTAINED

80
MINUTE BOOK

……………………………………………………………………………………..

Name of enterprise

On the ……. of ………… ……. The meeting of foundation was held at

……………………

Date month year place

in …………………………………………. District

The following persons were present as founders of the enterprise

(alphabetically listed)

Founders not present:

The following persons were also present:

………………………………………………………………………………………………………
……………………………………………………………………………………………

Agenda

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 1. Approval of summons and agenda

2. Constitution

a. Election of Chair of meeting

b. Election of Secretary of meeting

3. Approval of Articles

4. Elections

a. Board Chairperson

b. Board

c. Auditor

5. The signing of documents of registration

6. A.o.b.

TERMLY AND ANNUAL REPORTS

Termly and Annual reports are important milestones in running a company.

They are important because they contain documentation on the
development of the business. The reports may be used in marketing and it is
therefore important to work on layout as well as high quality content.

They should have the following details on its front page:

 Name and logo of the company

 Year of reporting
 Company
 Region
 Mentor`s name and company affiliates

The Contents of the annual report should be:

82
  Business idea
 Owners
 Activity
 Events
 Investments
 Personnel
 Financial capacity and liquidity
 Lessons learnt, experiences made
 Results
 Balance
 Comments with regard to results and balance
 Place, date and signatures
 Auditor`s report

APPENDICES

A. MARKETING PLAN WORKSHEET

This is the marketing plan of _____________________________________

I. MARKET ANALYSIS

A. Target Market - Who are the customers?

1. We will be selling primarily to (check all that apply):

Percent of Business

a. Private sector ________

b. Wholesalers ________

83
c. Retailers ________

d. Government _______

e. Other ________

2. We will be targeting customers by:

a. Product line/services. We will target specific lines ___________________

b. Geographic area? Which areas? ___________________

c. Sales? We will target sales of ___________________

d. Industry? Our target industry is ___________________

e. Other? ___________________

3. How much will our selected market spend on our type of product or
service this coming year?

___________________________________________________________________________

B. Competition

1. Who are our competitors?

Name ___________________________________________

Address _________________________________________

Years in Business ___________________

Market Share ___________________

Price/Strategy ___________________

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Product/Service ___________________

Features ___________________

Name ________________________________________

Address ______________________________________

Years in Business ____________________

Market Share ____________________

Price/Strategy ____________________

Product/Service ___________________

Features ___________________

2. How competitive is the market?

High ____________________

Medium __________________

Low ____________________

3. List below your strengths and weaknesses compared to your competition

(consider such areas as location, size of resources, reputation, services,
personnel, etc.):

Strengths Weaknesses

1.________________________ 1._______________________

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2.________________________ 2._______________________

3.________________________ 3._______________________

4.________________________ 4._______________________

C. Environment

1. The following are some important economic factors that will affect our
product or service (such as country growth, industry health, economic
trends, taxes, rising energy prices, etc.):

________________________________________________________________

________________________________________________________________

________________________________________________________________

2. The following are some important legal factors that will affect our market:

________________________________________________________________

________________________________________________________________

________________________________________________________________

3. The following are some important government factors:

________________________________________________________________

________________________________________________________________

________________________________________________________________

4. The following are other environmental factors that will affect our market,
but over which we have no control:

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________________________________________________________________

________________________________________________________________

________________________________________________________________

II. PRODUCT OR SERVICE ANALYSIS

A. Description

1. Describe here what the product/service is and what it does:

________________________________________________________________

________________________________________________________________

________________________________________________________________

B. Comparison

1. What advantages does our product/service have over those of the

competition (consider such things as unique features, patents, expertise,
special training, etc.)?

________________________________________________________________

________________________________________________________________

________________________________________________________________

2. What disadvantages does it have?

________________________________________________________________
________________________________________________________________
________________________________________________________________

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C. Some Considerations

1. Where will you get your materials and supplies?

________________________________________________________________

2. List other considerations:

________________________________________________________________

________________________________________________________________

III. MARKETING STRATEGIES - MARKET MIX

A. Image

1. First, what kind of image do we want to have (such as cheap but product,
or exclusiveness, or customer-oriented or highest quality, or convenience, or
speed, or ...)?

________________________________________________________________

B. Features

1. List the features we will emphasize:

a. ______________________________________________________

b. ______________________________________________________

c. ______________________________________________________

C. Pricing

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1. We will be using the following pricing strategy:

a. Mark up on cost ____ What % Mark up? ______

b. Suggested price ____

c. Competitive ____

d. Below competition ____

e. Premium price ____

f. Other ____

2. Are our prices in line with our image?

YES ___ NO ___

3. Do our prices cover costs and leave a margin of profit?

YES ___ NO ___

D. Customer Services

1. List the customer services we provide:

a. ____________________________________________

b. ____________________________________________

c. ____________________________________________

2. These are our sales/credit terms:

a. _____________________________________________

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b. _____________________________________________

c. _____________________________________________

3. The competition offers the following services:

a. ______________________________________________

b. ______________________________________________

c. ______________________________________________

E. Advertising/Promotion

1. These are the things we wish to say about the business:

________________________________________________________________
________________________________________________________________
________________________________________________________________

2. We will use the following advertising/promotion sources:

1. Television ________

2. Radio ________

3. Direct mail ________

4. Personal contacts ________

5. Trade associations ________

6. Newspaper ________

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7. Magazines ________

8. Yellow Pages ________

9. Billboard ________

10. Other ___________ ________

3. The following are the reasons why we consider the media we have chosen
to be the most effective:

________________________________________________________________

________________________________________________________________

________________________________________________________________

Business planning Checklist

Name __________________________________________________________________

Date ___________________________________________________________________

Company ___________________________________________________________________

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The following checklist provides a guided framework for exploring,
researching and planning a business opportunity.

Yes No Questions:

 Is the opportunity identified?

 Is the opportunity assessed (Rationale)?

 Is the business idea formulated based on the

identified opportunity?
 Is the business idea assessed based on specified
criteria?
 Are the overall goal and objectives of the
business identified?
 Is the market research completed satisfactory?

 Are the required resources obtained?

 Is the implementation and management strategy

organized?
 Are the risks involved assessed?

 Are finance and funding information prepared?

 Is the back-up strategy developed?

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  Are opportunity costs considered?

Comments:

______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________

A Framework for Assessing a Business Plan

Name/Group _____________________________________________________________

Date ______________________________

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Business idea
________________________________________________________________________

The following rating scale contains a sampling of criteria that may be used to
assess a Business plan.

Criteria Poo Avera Good Excelle

r ge nt

Process

 The students demonstrated the ability

to:
 define the task

 seek and gather various sources

of research information
 organize information in a logical
manner
 analyze information

 extract the appropriate

information from identified
resource/materials to produce
new information
 communicate the processes
involved in preparing the plan
 predict the probability that the
suggested outcomes or
consequences of the plan were
likely to occur

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  make judgment on the feasibility
of the business plan
Content

 Required elements present (some

examples follow);
 Cover and Binding

 Table of Contents

 Executive Summary

 Marketing Strategy

 Financial Strategy

 Contingency Plan

 Summary

 Appendices

Technical Skills

 Legible
 Free of spelling/proofreading errors

 Correct grammar/communication style

 Professional appearance/appropriate
format
 Appropriate use of white space

 Page headings

 Line spacing

 Document free of smudges and

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 wrinkles
Attitude and Effort
 Time or task
 Personal initiative demonstrated in the
gathering /researching/collecting of
resource/material
 Curiosity demonstrated in seeking the
assistance of professionals or others (as
necessary)
 Enthusiasm shown with the addition of
an extra-ordinary amount of detail
 Regulated time to meet the project’s
timelines
Others

Remarks

______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________

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______________________________________________________________________________
______________________________________________________________________________
_________________________________________________________

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