This assignment is based on entrepreneurship and will focus on matters which are connected with it from non-material aspects such as “the entrepreneurial spirit”,main traits and behaviour to material ones such as capital, labour and land.
Despite the fact that entrepreneurship has existed for a long time, nobody appears to know or seems to agree what exactly it is. What makes an entrepreneur and how he or she should behave her/himself in particular situations is a much debated question. There is no established and accepted model of a successful entrepreneurship. As well as with a business in general there is no standard way of doing this and the complexity and extent of feasibility studies, business plans, marketing plans and so on will vary depending on the idea and on the entrepreneur. Particularly, this following interview with Vladimir Grishakov, who founded a business based on the wholesale and retail trading in 1997, will show the main traits, motives and problems of an entrepreneur. Interview To begin with, my interviewee told me what it means to set up a business. He had started to talk quickly, because time management is indispensable ability of an entrepreneur. Vladimir talked about how the idea of wholesale trade appeared and how difficult it was to trade goods when a country had a shortage of goods. Furthermore, he mentioned that it took a year to pay the bank loan with interest and finally reach a break-even. Entrepreneur said that you also have to be self-confident, hardworking, 3 paranoid, farseeing and self-motivated by aim because of which you want to succeed in starting your own business and of course, one of the most important things is to plan your business for short and long term. For example, he saw a mess in the citizen's and government's life and therefore he thought that he should plan his business and life to avoid a disorganisation. In addition, i asked him if he faced any other problems except which he has mentioned before. Unfortunately, different entrepreneurs in different cases are facing different problems and my interviewee was not that lucky as he faced problems such as political and economic turmoil, excessive bureaucracy and extortion. On the other hand, he had the opportunity to save his profit untouched because at this time there were no taxes and intensive competition in the market. Nowadays Vladimir has 38 subordinates in his business and it still going well as healthy businesses ought to, but it is not as good as it could be because being an entrepreneur means taking risk and facing problems for whole the life or existence of a business. So, the interviewee always needs to know and plan what is he going to do in the next week, month and year. Moreover it is getting harder because government does not support small and medium business in his country besides, they are increasing taxes. Therefore he said that if he wants to survive in these conditions with more competition he needs to think about his next steps carefully. 4 1.1 Analyse the characteristics and behaviours of successful entrepreneur
In order to be successful entrepreneur it needs to have a special traits which will allow to manage the business effectively. The concept of behaviour and characteristic means that does the person has the specific nurture characteristic e.g. being a leader or his/her behaviour that makes him a good leader that he/she learns through life.These traits are being passionate and have a lot of motivation, being able to work for long hours in order to achieve certain goals and at last having an effective plan so the entrepreneur could be a cost effective. By being passionate and having a lot of motivation successful entrepreneurs can develop their ideas and making their business very successful in a chosen field. By having great motivation entrepreneurs can manage to work for longer hours which will result a good outcome at the end. Planning is a vital part at the beginning of every business because it will managing the business easier than without the plan. Planning allows the entrepreneurs to decide if they need to take a loan as well as being cost effective if he/she making a lot of expenses. The behaviour of the entrepreneur has to be very purposeful because the main aim is to achieve their goals and objectives that they settled at the beginning of their business journey. 1.2 Examine what is meant by “entrepreneurial spirit”
Entrepreneurial spirit is a part of the traits that the person possesses that 5 has a passionate and a great motivation towards the business. The characteristic that I have chosen are is being very passionate, have a great motivation, have a great stamina towards long hours of working and also have an effective plan of managing the business. All of the traits that I mentioned earlier could be nurture as well as possessing them through life. The person who has an entrepreneurial spirit has the characteristics that already were possessed at the beginning of his/her life. These characteristics are being passionate about developing new ideas by starting a brand new business. On the one hand, all of the characteristics that I mentioned earlier are based on having entrepreneurial spirit because they are all showing the passionate and hard working on having and starting a new business. On the other hand, being able to manage the business effectively it is a trait that could be taught through life which makes the person possessing the business to manage the business effectively.
1.3 Assess the value of micro, small and medium-sized business to the economy Businesses in the UK are divided to micro, small and medium-sized. Micro businesses are the businesses that are employing 9 or less employees whereas small businesses are the businesses that are employing 50 or less employees. Medium sized business are the businesses that are employing 250 or less employees. The information was taken from http://www.pabusinesssupport.co.uk/uk-small-business-statistics-infographic/
The number of micro businesses in the UK are 5,445,000 businesses which means that it has 33% of employment. One of the famous micro businesses in the UK are Beauty Boulevard https://beautyblvd.com/shop/ which sells makeup and Poptails by LAAP which sells sorbets with alcohol. 6 Each of this businesses shows a new products and innovations. Lets start with Beauty Boulevard it is a make up brand that introduce a new product to the world such as glitter lips. It showed that only five women could make a new product that changed the women's world. Poptails by LAAP business made an innovation such as mixing sorbet with a glass of alcohol which is never done before. Both of this businesses brought an innovation to the world and products that has never been introduced which means that they have a great value to the economy as these micro businesses are making a lot of choice to the customers. This leads to that the consumers are still buying products and they are not scared of purchasing something. As they are buying these products they are paying taxes which helps the UK economy to avoid recession.
The number of small businesses in the UK are 208,000 which has 15% of employment whereas the number of medium sized businesses are 34,000 and has 12% of employment rate. Now governments made it easier to hire people which makes it provide a lot of new jobs to the UK which makes unemployment rate lower. This means that it can stimulate the UK economy by hiring a lot of people and making more choices to the consumer. Also, now it is easier to develop new ideas because the governments made a SMART GRANT which gives an opportunity to the small business to realise their ideas. Furthermore, it plays a vital role and a great value to the economy as they are making the unemployment decrease and realise ideas that have not been realised yet. As I mentioned earlier this small business making a lot of choices to the consumer which stimulates them to buy products. In addition, these businesses are in the main three sectors that makes the economy grow. These three sectors include retail, manufacturing and repair of motor vehicles which all have a great part in stimulating the UK economy.
7 1.4 Identify the challenges faced by entrepreneurs
There are a lot of challenges that are facing by every entrepreneur. These challenges include developing a new idea, starting and running a new business. It is really hard to develop new ideas as many people started their small businesses and most of them do not have enough a start-up capital to realise it. Also another factor which challenges the entrepreneurs is that while they are entering a new market they have a significant level of competition and most of the businesses can not survive their first year. Secondly, it is hard to start a new business because as I mentioned earlier most of the entrepreneurs do not have a start-up capital, so they have to take a loan. It takes a lot of time to make a business plan to make sure that the investors want to invest in your business. Also, they need to make a survival budget as well as cash flow forecast to know if their business is going to survive and where they need to cut costs. Thirdly, while you managing a new business you will have a lot of competition which makes it even harder because the new business needs to gain a lot of customers so the business can break-even. This are the example of failed brand and its product: new coke 1985 http://uk.businessinsider.com/biggest-product-flops-in-history-2016-12?r=US&IR=T/#1985-new-coke-3.
The new coke it is a failed product where the Coca Cola company made a new coke after the Pepsi challenge. However, most of the people hated the new taste, so it made coca cola reduce the amount of millions cans of the new coke and make a new production with the old flavour. After that situation Coca Cola ltd lost millions of dollars which still frightens new companies to develop new products. 8 2.1 Identify sources of finance for a small business
There are a lot of source of finance that small business are using. They are divided on several categories such as start-up and running costs , capital expenditure and current expenditure, fixed costs and variable costs, direct and indirect costs. Start-up capital is the capital that is being used when the entrepreneur starts the new business. Running capital is the capital that is being used in day-to-day activities. Capital expenditure is the money that is being spent on the premises such as fixed assets that includes e.g. building whereas current expenditure is the money that is being spent on the expenses within one year. Direct costs are the costs that are happening within the business e.g. direct labor whereas indirect costs are the costs that are outside of the business e.g. insurances and licences. Other sources of finance can be categorised to internal and external, free and costly, long term and short term, requiring collateral and not requiring collateral. Internal source of finance is the money that are in the business e.g. business can keep their profit in order to expand or they can sell some of their premises. External sources of finance is the funds that are being taken outside the business e.g. taking a loan form the bank. Free sources of finance is a trade credit which means that the business can pay their bills later so they can improve their short term finance position whereas costly source of finance is taking a loan from the bank which means that they need to repay the whole debt as well as the interest rate. Long term source of finance means that it can be repaid over the one year whereas short term source of finance has to be repaid over a one year. Short term source of finance includes overdraft where the business can take from the bank more than they have in the account, trade credits where the business can pay after the bill being placed and factoring where the business sells their debt to another business. Long term source of finance includes owners savings, loans where the businesses are taking money from the bank for a 9 specific period of time, debentures where the businesses take a loan from another business and a mortgage where the business purchases a land and has a monthly payment. Requiring collateral is when the banks and the loaners are requiring security that the business will repay its debts whereas not requiring collateral when the banks and loaners are not asking for the security document.
All the businesses need to have a start up capital in order to start the business it means that they need to make sure that they have enough money to start the business. There is a high level of risk in internal and external sources of finance because in internal such as own saving could not be enough to start a business as well as external source of finance where the business takes a loan and can repay it. It also has factors which ownership the owner of the business has because if he/she has unlimited liabilities, bank can take their personal belongings in order to pay their debts. From the owners point of view, my interviewee as a sole trader who has unlimited liabilities faced a risk by taking a loan from the bank in order to buy vans which was ended successfully. This means that the owners of the businesses need to make sure that they can repay their debts to the bank or mortgages because at first they all are sole traders. Also, it includes if they use internal source of finance such as own savings because sometimes its not enough money to by assets and pay the wages. 10 2.2 Explain the importance of a business plan and the factors to be taken into account when presenting to investors Business plan is a legal document that the entrepreneurs make before starting the business in order to identify individual aspects such as marketing aspects, financial aspects, operational plan, products and services that the business provides and growth and development plan. It is very good step for an entrepreneur as they will know every detail of their future business in order to understand if a business can actually be developed and what are the risks it will face in their future. The main motives of the business plan is to plan and set the vital objectives that the business wants to achieve and predict the future of your business that would probably attract some investors so they can invest in your business. This means that by having investors the business can develop further by creating new products and services. Firstly in the business plan most entrepreneurs include their goals and Smart objectives by that business shows that they know what they want to achieve and further in the business plan they will explain how. After that business states who are their target market and why they will attract these kind of people in their business. It also shows the business' competitive strength which tell to the potential stakeholders that the business could survive their first year. On the third part of the business plan its states the products and 11
services of the business where the business describes in depth their products and service as well as their competitive advantage. Fourth part of the business plan is a marketing plan where it shows the current demand in the business' target market and also the vital part that shows that the product will be successful is the primary and secondary market research. By having a market research in the business plan it shows to the investors that the current customers wants and needs are the same as the business' products and services. The fifth part of the business plan is operational plan where its states the human resources which shows pay plan for any employee as well as their working hours. Furthermore, it includes parts such as the financial resources and where the business going to take this money in order to realise their idea. The sixth part of the business plan is the personal financial statement where it shows the personal survival budget which further shows that the business is ready to face the challenges. The seventh component of the business plan is financial plan where it states the capital needs budget, the main running costs and the vital parts cashflow forecast and profit and loss account. Also, it has a part where the business should show when potentially their business will start break-even, so the stakeholders can understand when the business will become profitable. The business should be ready for anything starting with the recession or increase in competition which means that they need to 12 complete contingency plan which will include sources of additional finance. The last part of the business plan is the growth and development in order to show to the potential stakeholders that the business will develop in the future. This means that it has factors such as long term strategy and the capacity for expansion. By being really positive and enthusiastic in the business plan many investors will be happy to invest in your business. The businesses also should consider the implication of the legal and financial aspects that will affect the start-up of the business so they can reduce the risk and have a back up systems in order to address such issues e.g. failure with an ownership type or the licenses.
3.1 Explain the principles of risk analysis, identification, mitigation and management Risk assessment is a systematic process for identifying and evaluating events (i.e., possible risks and opportunities) that could affect the achievement of objectives, positively or negatively. Such events can be identified in the external environment (e.g., economic trends, regulatory landscape, and competition) and within an organisation's internal environment (e.g., people, process, and infrastructure). When these events intersect with an organisation's objectives—or can be predicted
to do so—they become risks. Risk is therefore defined as “the possibility that an event will occur and adversely affect the achievement of objectives.” Taking risks is an indispensable part of an entrepreneurship, it can be meant, that every entrepreneur should safeguard their business by producing an elaborate risk assessment in order to manage or mitigate a risk(appendix ). In addition, such action plan should be based on the business' campaign and fit into the business' practices(appendix ).
To begin with, there are four different groups of risk such as financial(not enough capital or customers do not want to purchase product or service), strategic(new serious competitors in the market), compliance(health and safety legal system) and operational(connected with equipment and employees). Every type of risk should be evaluated and mitigated if possible in every step of the business life cycle(appendix ). Furthermore, the risk manager should monitor and update the risk assessment system in order to be able to mitigate or avoid a risk. Therefore, it could have positive effect on risk's likelihood.
In order to identify risks it has to be followed by six steps(appendix ). First step is to identify the relevant business objectives, which can be recognised by SWOT analysis. These risks could be avoided by hiring a company which would get a responsibility for risk management in terms of identifying and avoiding a risk. Second step is to identify events that could affect the achievement of objectives. An advance forecast of these events could be established and therefore, it would have a positive effect on internal and external risks(appendix ).
Third step is to determine risk tolerance. ‘It would appear from the literature that the terms ‘risk tolerance' and ‘risk-taking propensity' are used interchangeably in the entrepreneurial context, and hence can be viewed as one and the same in the context of this study. The concept of risk tolerance is described by Van de Venter (2006) as the amount of risk (financial or other) that an individual is willing to accept and thus take.' (https://www.ajol.info/index.php/sabr/article/download/76342/66800.) Next step is meant to assess inherent likelihood and impact of risks. These risks should be assessed and considered in terms of likelihood and impact on specific objectives(appendix ). Another step is to evaluate the portfolio of risks and determine risk responses(appendix ). It should be recognised because of possibility of negative effect on company's or entrepreneur's benefits(appendix ). Sixth step is to assess residual likelihood and impact of risks which means that after all of these steps of controlling risks the risk manager should be able to evaluate the amount of risks left over.
...(download the rest of the essay above)