I.

Introduction: Establishing a Business

A. Entrepreneur

Entrepreneur refers to the driving force that organises the other factors of production (land, labour,
and capital) used in the production process. It involves taking risks, making decisions, and seeking new
opportunities. The reward for the work done by the entrepreneur is called profits.

B. Entrepreneurship

Entrepreneurship is the process of starting and running a business or venture. Entrepreneurship is an

C. Functions of the Entrepreneur

The typical entrepreneur performs multiple functions, including:

1. Risk-bearing function: one of the primary functions of an entrepreneur is to bear the risk associated
with starting and running a business. Entrepreneurs invest their time and resources despite the
potential for business failure or loss.

2. Innovative: entrepreneurs are also responsible for driving innovation within their businesses and
industries. They are constantly looking for new and better ways to do things, whether that means
developing new products, improving existing processes, or finding new markets to target.

3. Managerial: entrepreneurs must also play a managerial role in their businesses by performing the
functions of planning, organising, directing, and controlling, motivating. They must be able to
manage resources effectively, including finances, time, and personnel.

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Other important functions of an entrepreneur include:

4. Visionary: entrepreneurs often have a clear vision of what they want to achieve with their
business, and they are able to communicate that vision to others in a way that inspires and
motivates them.

5. Financial management: entrepreneurs must be able to manage finances effectively, including

6. Networking: entrepreneurs must be able to build relationships with other business owners,
investors, and industry leaders in order to grow their businesses and gain access to new
opportunities.

Overall, entrepreneurs must be able to wear many different hats and perform a variety of functions in
order to succeed in their ventures. They must be able to balance risk-taking with sound decision-
making, and they must be able to adapt to changing circumstances and seize opportunities as they arise.

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D. Characteristics/Traits of Successful Entrepreneurs

Successful entrepreneurs tend to possess the following characteristics:

1. Propensity to take calculated risks: entrepreneurs are willing to take risks, but they do so in a
calculated manner. They weigh the potential risks and rewards of a decision before taking action,
and they are willing to take risks only when the potential rewards outweigh the potential risks.

2. Innovative: entrepreneurs are also typically inventive individuals who are able to develop new
products or processes that are different from what currently exists in the market. They are able to
find ways to improve upon existing products, or create something entirely new that meets a need
in the market.

3. Visionary: in order to succeed, entrepreneurs need to have a clear view of what they want to
achieve. That is part of the fabric of motivation. It helps them to bring others with them, both
employees and customers.

4. Opportunistic: refers to the ability of an entrepreneur to recognise and seize opportunities that
others might overlook or dismiss. Entrepreneurs who are opportunistic are always on the lookout
for new ways to create value and generate profit, and they are willing to take calculated risks to
achieve their goals.

5. Flexible: entrepreneurs must be able to pivot quickly when faced with new challenges or
opportunities, and they must be willing to change their strategy when necessary.

6. Goal-oriented: entrepreneurs are typically very goal-oriented individuals who have a clear vision of
what they want to achieve with their business. They set goals for themselves and their team, and
they work hard to achieve those goals.

7. Persistent: persistence is an important trait for entrepreneurs, as they often face setbacks and
obstacles along the way. They must be able to stay focused on their goals and keep pushing
forward, even in the face of adversity.

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The role of the Entrepreneur in Economic Development

The roles of the entrepreneur in economic development are multifaceted and can vary depending on
the specific context. However, some of the key roles that entrepreneurs play in promoting economic
development include:

1. Innovating: entrepreneurs are often the driving force behind innovation in the economy. By
creating new products and technologies, entrepreneurs can generate economic growth and create
new opportunities for business and employment.

2. Creating jobs: entrepreneurs are important job creators, particularly in developing economies. By
starting new businesses or expanding existing ones, entrepreneurs can create new employment
opportunities and contribute to reducing unemployment.

3. Promoting competition: entrepreneurial activity can help to promote competition and increase
efficiency in markets, which can lead to lower prices for consumers and better allocation of
resources.

4. Diversifying the economy: entrepreneurs can help to diversify the economy by creating new
businesses and industries. This can reduce dependency on a single industry and promote greater
resilience in the face of economic shocks.

Overall, entrepreneurs can make a significant contribution to economic development by creating new
businesses and industries, promoting innovation and competition, and creating jobs and wealth. By
playing an active role in the economy, entrepreneurs can help to drive growth and development, and
contribute to the prosperity of their communities and nations.

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Reasons for Starting a Business

There are many reasons why people decide to start a business. Some common reasons include:

1. Desire for financial independence: one of the reasons for establishing a business is the desire for
financial independence. By starting a business, individuals can create a source of income that is not
dependent on an employer or a traditional job. This can provide a sense of freedom and autonomy,
as well as the potential for higher earnings.

2. Pursue a passion: many entrepreneurs start a business because they are passionate about a
particular product or idea. They want to turn their passion into a viable business that they can grow
and develop over time.

3. Solve a problem: many successful businesses start by identifying a problem or need in the market
and creating a solution to address it. Entrepreneurs who are able to find a unique solution to a
problem can create a successful and profitable business.

4. Increased income: another reason for establishing a business is to increase income. By starting a
successful business, individuals can potentially earn more than they would in a traditional job, and
they can have greater control over their earnings potential.

5. Increased control of working life: lastly, some individuals may choose to start a business in order to
have greater control over their working life. By being their own boss, entrepreneurs can set their
own schedules, work on projects that are meaningful to them, and have greater flexibility in their
work-life balance.

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Steps in Starting a Business

The following represents the essential steps need to start a business:

1. Conceptualisation: this is the first step in starting a business, and it involves generating and
developing a business idea. At this stage, entrepreneurs may brainstorm ideas and evaluate their
feasibility, considering factors such as market demand, competition, and resources needed.

2. Research (market probe): this step involves gathering information about the industry, market,
target audience, and competition. The goal is to validate and refine their business concept and
make informed decisions about how to position and market the business.

3. Feasibility study: after the initial research, a feasibility study is conducted. The feasibility study is an
assessment aimed at determining the economic viability of a business concept.

It involves a thorough analysis of various factors – including technical, economic, legal,

4. Identification of resources: resources includes financial resources (start-up capital), human

5. Creation of business plan: based on the findings of the feasibility study and the identified resources,
a business plan is developed. A business plan is a document which sets out a firm’s expected course
of action for a specified period.

It describes the firm’s objectives, strategies, market and financial forecasts. The business plan
serves as a roadmap for the business and is often required when seeking funding from investors or
lenders.

6. Acquisition of funds: this involves the entrepreneur seeking funding to implement the business
idea and cover startup and operational costs. Sources of funding may include personal savings,
loans from banks or other financial institutions, or investment from venture capitalists or angel
investors. The funds acquired will be used to cover the costs of starting and operating the business.

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7. Operation of the business: this includes overseeing the day-to-day operations, managing finances,
marketing and selling products, and building relationships with customers and suppliers.

The Business Plan

A business plan is a document which sets out a firm’s expected course of action for a specified period.
It describes the firm’s objectives, strategies, market and financial forecasts. A business plan provides a
“roadmap” of how a business will be created and developed.

Benefits and Purpose of a Business Plan

A business plan is a valuable tool that can benefit a business in many ways. Here are some of the key
benefits of a well-written business plan:

1. Roadmap for the business: it outlines the objectives, strategies, market and financial forecast of
the business. It provides a clear direction for the firm, helping stakeholders understand where the
business is headed and how it intends to get there.

2. Attracts investors: a well-written business plan can help convince investors or lenders to provide
funding for the business.

3. Make informed decisions: a business plan provides a framework for decision-making, allowing
business owners to assess different options and choose the best course of action.

4. Measures progress: a business plan includes key performance indicators (e.g. sales and earnings
growth) that can be used to track progress and make adjustments as needed.

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Elements of a Business Plan

The constituent parts of a typical business plan are set out below:

1. Executive summary: this is a summary of the entire business plan, usually one or two pages long. It
provides an overview of the business, including its objectives, products, target market,
competition, and financial projections.

2. Operational plan: this section outlines the day-to-day activities required for the business to
function, including its legal structure, location, management team, staffing needs, suppliers,
equipment, and any other operational details. It should also include the business's goals and
objectives, both short-term and long-term.

3. The business opportunity: this section describes the product that the business will offer. It should
include details such as how the product works, its unique features or benefits, and how it will
meet the needs of the target market.

4. The marketing plan: this section outlines the strategies and tactics the business will employ to
promote its products, attract customers, and achieve its marketing goals. It should also include a
detailed analysis of the market, including trends and opportunities.

5. Financial forecast: this section provides a detailed overview of the firm's financial health, financial
projections, and strategies to achieve its financial objectives.

It should include details such as sources of finance, sales forecasts, cash flow projections, and
profit and loss forecasts. It should also include an analysis of the risks and challenges that the
business may face and how these will be managed.

Overall, these basic elements are essential for creating a comprehensive and effective business plan that
can help guide the business towards success.

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Primary and Secondary Sources of information for Conducting Research

Primary and secondary research are two types of research methods used to collect data and
information. The main differences between primary and secondary research are:

1. Definition: Primary research involves collecting data directly from the source, while secondary
research involves collecting data that have already been collected by someone else.

2. Originality: primary research is original and unique to the researcher as the data is collected
specifically for the research purpose. Secondary research, on the other hand, involves analysing
existing data that may have been used by other researchers or organisations.

3. Cost and time: primary research can be time-consuming and costly as the data needs to be
collected from scratch. In contrast, secondary research is usually less time-consuming and less
expensive as the data has already been collected and is readily available.

4. Control over data quality: in primary research, the researcher has full control over the data
collection process, which can help ensure the data's quality and accuracy. In contrast, the quality
and accuracy of the data in secondary research may be uncertain or difficult to verify.

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Primary Sources of Information

1. Surveys or questionnaires: these can be used to gather data directly from potential customers,
suppliers, or other stakeholders.

2. Interviews: conducting interviews with industry experts, can provide valuable insights into the
market and industry trends potential customers, or suppliers.

3. Focus groups: bringing together a small group of potential customers or stakeholders can provide
insights into their needs, preferences, and opinions.

4. Observation: direct surveillance of the market, competitors, or other aspects of the industry can
provide valuable insights.

Advantages of Primary Research

1. Up-to-date

2. More reliable than secondary data

3. Specific to the study

Disadvantages of Primary Research

1. Can be costly

2. Time-consuming

3. Subject to bias e.g. questionnaire bias – when questions tend to lead respondents towards one
particular answer

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Secondary Sources of Information

1. Government statistics and reports: these can provide data on industry trends, demographics, and
economic conditions.

2. Market research reports: these reports provide data on the size, growth, and trends of a particular
industry or market.

3. Trade publications: industry-specific magazines and journals can provide insights into the latest
trends, products, and services.

4. Business websites: business websites can provide information on the products offered by firms in
the market, as well as financial and operational data.

Advantages of Secondary Research

1. Cheap to obtain

2. Obtainable quickly without the need to devise complicated data gathering methods

3. Allows comparisons of data from different sources

Disadvantages of Secondary Research

1. May be out-of-date

2. May not be suitable for the purpose at hand

3. Might not be available for completely new product developments

Overall, a combination of primary and secondary sources of information is usually necessary to gather
the most comprehensive and accurate data for establishing a business.

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Business Plan versus Feasibility Study

A feasibility study is indeed an assessment aimed at determining the economic viability of a business
concept. It involves a thorough analysis of various factors – including technical, economic, legal,
operational, and scheduling factors – to evaluate whether the proposed business idea can generate
profits and be financially sustainable.

Key Differences between the Feasibility Study and the Business Plan

1. Purpose: the purpose of a feasibility study is to determine the viability of a business idea or project,
while the purpose of a business plan is to provide a roadmap for the business.

2. Scope: the scope of a feasibility study is narrower and focuses on determining whether the
business idea is viable. A business plan, on the other hand, covers all aspects of the business,
including operations, marketing, finances, and strategy.

3. Timing: a feasibility study is typically conducted at the early stages of the business idea to
determine its viability, while a business plan is developed after the feasibility study has been
completed and the decision to start the business has been made.

Importance of Feasibility Study

1. Identifies potential problems and risks associated with the business idea or project.

2. Helps to determine the financial feasibility of the business idea.

3. Assists in making informed decisions about the business idea, such as whether to proceed or
modify the idea.

4. Serves as the foundation for business plan. The study's findings inform the creation of strategies,
financial forecasts, and operational plans outlined in the business plan.

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Case Study: Lisa's Fitness App Business Plan

Lisa is an aspiring entrepreneur planning to develop a fitness app to help users achieve their health and
wellness goals. Her business plan serves as a roadmap for her fitness app venture.

Business Plan Benefits:

 Clarifies goals and provides a roadmap for success.

 Attracts potential investors or lenders.

 Enables informed decision-making and identifies potential challenges.

 Measures progress using key performance indicators.

Elements of the Business Plan:

1. Executive Summary: Brief overview of the business plan.

2. Operational Plan: Details about the app, its structure, and objectives.

3. The Business Opportunity: Description of the fitness app, including unique features.

4. Marketing Plan: Strategies for targeting users, pricing, promotion, and distribution.

5. Financial Forecast: Projections of financial performance, including costs, sales, and risks.

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Primary and Secondary Research:

 Primary Sources: Surveys, interviews, focus groups, and observation.

 Advantages: Up-to-date, specific to the study.

 Disadvantages: Can be costly and time-consuming.

 Secondary Sources: Government reports, market research reports, business websites, online
databases.

 Advantages: Cost-effective, quickly obtainable.

 Disadvantages: May be out-of-date or not suitable for some purposes.

Business Plan vs. Feasibility Study:

 A business plan provides a comprehensive roadmap for the entire business.

 A feasibility study determines the viability of a business idea, focusing on practicality and initial
assessment.

Lisa aims to create an innovative fitness app, attracting health-conscious users and potential investors.

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Questions

1. What is the primary purpose of Lisa's business plan for her fitness app? a. To outline the advantages
of her app b. To attract investors for her business c. To describe her app's daily operations d. To track
user progress

2. What key benefit does Lisa expect to gain from her business plan? a. Identifying potential problems b.
Measuring daily app usage c. Conducting market research d. Designing fitness programs

3. In the business plan, what does the marketing plan section cover? a. Financial forecasts b. Potential
challenges c. Strategies for targeting users d. App development details

4. What is the main difference between primary and secondary research sources? a. Primary research is
less costly than secondary research. b. Primary research involves analyzing existing data. c. Secondary
research is up-to-date and specific. d. Primary research involves collecting data directly from the source.

5. What type of research is conducted through surveys, interviews, and focus groups? a. Primary
research b. Secondary research c. Marketing research d. Financial research

6. What is the primary advantage of secondary research? a. It is up-to-date. b. It is specific to the study.
c. It is usually less time-consuming. d. It involves collecting data directly from the source.

7. How does a feasibility study differ from a business plan? a. A feasibility study is conducted after a
business is established. b. A feasibility study focuses on practicality and initial assessment. c. A business
plan identifies potential problems. d. A business plan determines the financial feasibility of a business.

8. What is the scope of a feasibility study in comparison to a business plan? a. A feasibility study covers
all aspects of the business. b. A feasibility study is conducted at a later stage of the business idea. c. A
feasibility study is narrower and focuses on viability. d. A feasibility study focuses on attracting investors.

9. Why might Lisa conduct interviews with industry experts during her research? a. To track user
progress b. To create focus groups c. To collect primary research data d. To assess financial forecasts

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10. Which section of the business plan includes projections of the app's financial performance? a.
Executive Summary b. Operational Plan c. Marketing Plan d. Financial Forecast

Multiple Choice

1. What is the primary role of an entrepreneur in the production process? a. Financial management b.
Decision-making c. Risk-bearing d. Networking

2. Successful entrepreneurs tend to possess which of the following characteristics? a. Fear of taking
risks b. Resistance to change c. Inability to set clear goals d. Visionary thinking

3. Which function of an entrepreneur involves taking calculated risks to start and run a business? a.
Risk-bearing b. Innovative c. Managerial d. Networking

4. What is one of the key roles that entrepreneurs play in promoting economic development? a.
Lowering market competition b. Reducing job opportunities c. Innovating and creating jobs d.
Focusing on a single industry

5. Primary research differs from secondary research in that: a. Primary research is generally more up-
to-date. b. Secondary research is original and unique to the researcher. c. Secondary research
involves collecting data directly from the source. d. Primary research involves analyzing existing
data.

6. What is a primary source of information often used in research? a. Surveys b. Market research
reports c. Academic research d. Trade publications

7. Which section of a business plan provides a summary of the entire document, including objectives,
products, and financial projections? a. Operational plan b. Marketing plan c. Executive summary d.
Financial forecast

8. Why might someone decide to start a business? a. Desire for a traditional job b. Financial
independence c. Avoidance of setting goals d. Pursuing a hobby

9. In the process of starting a business, what typically comes after the conceptualization stage? a.
Research b. Acquisition of funds c. Operation of the business d. Identification of resources

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10. What is the primary purpose of conducting a feasibility study? a. Identifying potential problems and
risks b. Setting clear business goals c. Promoting competition in the market d. Attracting investors
with a detailed plan

True or False

1. True or False: Entrepreneurs are risk-averse and avoid taking any business risks.

2. True or False: Secondary research involves analyzing existing data that was collected by someone
else.

3. True or False: A well-written business plan cannot attract investors or lenders.

4. True or False: Successful entrepreneurs tend to be inflexible in their approaches.

5. True or False: A feasibility study helps determine the viability of a business idea.

6. True or False: The business plan is usually developed before the feasibility study.

7. True or False: Primary research methods are typically less time-consuming than secondary research.

8. True or False: Entrepreneurs' ability to set clear goals is not important for their success.

9. True or False: Entrepreneurship is not a driver of economic growth.

10. True or False: Entrepreneurs always shy away from innovative approaches in their businesses.

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Structured Questions

1. Explain the primary role of an entrepreneur in the production process, and provide an example.

2. List and describe three key functions that an entrepreneur typically performs.

3. What are some of the essential characteristics that successful entrepreneurs tend to possess? How
do these characteristics contribute to their success?

4. Discuss the role of entrepreneurs in promoting economic development. Provide examples of how
entrepreneurs contribute to economic growth.

5. Explain the differences between primary research and secondary research, and provide situations
in which each type of research would be more appropriate.

6. Describe the primary sources of information used in conducting research and provide examples of
when each source might be useful.

7. Why is the executive summary section of a business plan essential? What key information should it
include?

8. What factors or motivations can lead individuals to decide to start a business? Provide real-world
examples for each motivation.

9. Outline the steps involved in starting a business, from conceptualization to operation.

10. Compare and contrast the purpose and scope of a feasibility study and a business plan. What key
differences exist between the two?

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