Concept of Entrepreneurship

Entrepreneurship is the ability and readiness to develop, organize and run a business
enterprise, along with any of its uncertainties in order to make a profit. The most
prominent example of entrepreneurship is the starting of new businesses.

In economics, entrepreneurship connected with land, labour, natural resources and

capital can generate a profit. The entrepreneurial vision is defined by discovery and risk-
taking and is an indispensable part of a nation’s capacity to succeed in an ever-
changing and more competitive global marketplace.

Meaning of Entrepreneur
The entrepreneur is defined as someone who has the ability and desire to establish,
administer and succeed in a startup venture along with risk entitled to it, to make profits.
The best example of entrepreneurship is the starting of a new business venture. The
entrepreneurs are often known as a source of new ideas or innovators, and bring new
ideas in the market by replacing old with a new invention.

It can be classified into small or home business to multinational companies. In

economics, the profits that an entrepreneur makes is with a combination of land, natural
resources, labour and capital.

In a nutshell, anyone who has the will and determination to start a new company and
deals with all the risks that go with it can become an Entrepreneur.

Differences between Entrepreneurship and Small Business

Ownership

Small business owners focus on managing existing enterprises, while entrepreneurs are
motivated by a vision to disrupt industries, challenge the status quo, and create
something new, a hallmark of the entrepreneurial spirit.
Entrepreneurship is marked by high levels of innovation, risk-taking, and scalability.

What are the 4 Types of Entrepreneurship?

It is classified into the following types:

Small Business Entrepreneurship-

These businesses are a hairdresser, grocery store, travel agent, consultant, carpenter,
plumber, electrician, etc. These people run or own their own business and hire family
members or local employee. For them, the profit would be able to feed their family and
not making 100 million business or taking over an industry. They fund their business by
taking small business loans or loans from friends and family.

Scalable Startup Entrepreneurship-

This start-up entrepreneur starts a business knowing that their vision can change the
world. They attract investors who think and encourage people who think out of the box.
The research focuses on a scalable business and experimental models, so, they hire
the best and the brightest employees. They require more venture capital to fuel and
back their project or business.

Large Company Entrepreneurship-

These huge companies have defined life-cycle. Most of these companies grow and
sustain by offering new and innovative products that revolve around their main products.
The change in technology, customer preferences, new competition, etc., build pressure
for large companies to create an innovative product and sell it to the new set of
customers in the new market. To cope with the rapid technological changes, the existing
organisations either buy innovation enterprises or attempt to construct the product
internally.

Social Entrepreneurship-
This type of entrepreneurship focuses on producing product and services that resolve
social needs and problems. Their only motto and goal is to work for society and not
make any profits.

Characteristics of Entrepreneurship:
Not all entrepreneurs are successful; there are definite characteristics that make
entrepreneurship successful. A few of them are mentioned below:

 Ability to take a risk- Starting any new venture involves a considerable amount of failure risk.
Therefore, an entrepreneur needs to be courageous and able to evaluate and take risks,
which is an essential part of being an entrepreneur.

 Innovation- It should be highly innovative to generate new ideas, start a company and earn
profits out of it. Change can be the launching of a new product that is new to the market or a
process that does the same thing but in a more efficient and economical way.

 Visionary and Leadership quality- To be successful, the entrepreneur should have a clear
vision of his new venture. However, to turn the idea into reality, a lot of resources and
employees are required. Here, leadership quality is paramount because leaders impart and
guide their employees towards the right path of success.

 Open-Minded- In a business, every circumstance can be an opportunity and used for the
benefit of a company. For example, Paytm recognised the gravity of demonetization and
acknowledged the need for online transactions would be more, so it utilised the situation and
expanded massively during this time.

 Flexible- An entrepreneur should be flexible and open to change according to the situation.
To be on the top, a businessperson should be equipped to embrace change in a product and
service, as and when needed.

 Know your Product-A company owner should know the product offerings and also be aware
of the latest trend in the market. It is essential to know if the available product or service
meets the demands of the current market, or whether it is time to tweak it a little. Being able
to be accountable and then alter as needed is a vital part of entrepreneurship.

Importance of Entrepreneurship:
  Creation of Employment- Entrepreneurship generates employment. It provides an entry-level
job, required for gaining experience and training for unskilled workers.

 Innovation- It is the hub of innovation that provides new product ventures, market,
technology and quality of goods, etc., and increase the standard of living of people.

 Impact on Society and Community Development- A society becomes greater if the

employment base is large and diversified. It brings about changes in society and promotes
facilities like higher expenditure on education, better sanitation, fewer slums, a higher level of
homeownership. Therefore, entrepreneurship assists the organisation towards a more stable
and high quality of community life.

 Increase Standard of Living- Entrepreneurship helps to improve the standard of living of a

person by increasing the income. The standard of living means, increase in the consumption
of various goods and services by a household for a particular period.

 Supports research and development- New products and services need to be researched and
tested before launching in the market. Therefore, an entrepreneur also dispenses finance for
research and development with research institutions and universities. This promotes
research, general construction, and development in the economy.

Essential Entrepreneurial Skills

1. Leadership and Management Skills: How to Lead Effectively

Leadership and management skills, certain traits of successful entrepreneurs, are

essential for entrepreneurial success, representing core traits of successful
entrepreneurs.

As an entrepreneur, you must wear many hats, including that of a leader.

Understanding different leadership styles, such as transformational and democratic
leadership, can help you adapt your approach to different situations.

By honing your leadership skills, you can inspire your team, make tough decisions, and
drive your business forward.
2. Financial Literacy: Mastering the Basics

Financial literacy is crucial for every entrepreneur. From managing cash flow to
understanding profit margins, having a solid grasp of financial concepts can determine
the success of your startup.

Learn how to create a budget, track expenses, and forecast revenue to ensure the
financial health of your business.

Familiarize yourself with key financial terms like ROI, break-even point, and gross
margin to make informed decisions and attract investors, a crucial part of
entrepreneurship skills.

3. Marketing and Sales Skills: Driving Growth

In the competitive landscape of entrepreneurship, marketing and sales skills are vital for
reaching your target audience and driving growth, a testament to the essential
entrepreneurship skills needed.

To effectively market your product or service and stand out from the crowd, explore
digital marketing tactics, social media strategies, and traditional advertising methods.

Develop a compelling brand story, create a strong value proposition, and identify your
unique selling points to attract customers, generate leads, and increase revenue.

ENTREPRENEUR
A person who sets up a business or businesses, taking on financial risks in the hope of
profit.

An entrepreneur is an individual who creates a new business, bearing most of the risks
and enjoying most of the rewards. The entrepreneur is commonly seen as an innovator,
a source of new ideas, goods, services, and business/or procedures.
CHARACTERISTICS OF ENTREPRENEURS

People may lack the personality and skills necessary for successful entrepreneurship.
There are some general characteristics and skills that many successful entrepreneurs
have:

Problem-solving: Entrepreneurs often start their businesses after identifying a problem

and then coming up with a way to address it. Entrepreneurs are also able to figure out
how to solve problems that will occur during the development of the business.

Innovation: Entrepreneurs are innovators, and are often engaged continuously in the
process of conceiving new products and services, renewing and improving current
offerings, and developing new business processes.

Risk-taking: Entrepreneurs are not risk-averse. They are willing to risk their time,
money and even their reputation to get the business started and take their products or
services to market. Entrepreneurs are also willing to take risks even after they establish
a business, developing new products and approaches that can grow their businesses.

Contrariness: Entrepreneurs are often people who are eager to question why and how
things are being done – even if these processes are clearly "industry-standard." This
doesn't mean an entrepreneur should ignore industry best practices, but the
entrepreneur is also willing to challenge these practices if she believes that there is a
better way to do them.

Persistence: Entrepreneurs are persistent. They aren't easily discouraged and are
willing to work through discouragement and challenges. Entrepreneurs are willing to
attend trade shows, meet with bankers, call on clients and do what it takes to get the
business started, and then to make it successful.

Leadership: Successful entrepreneurs are strong leaders. Leadership is an essential

entrepreneurial skill, as the entrepreneur will need to be able to cultivate trust and
support from the people who join his business as managers and workers. Many new
businesses are cash-poor and experience significant challenges – but a good leader
can inspire loyalty in workers who may not yet be receiving high wages, as well as in
employees who are facing roadblocks in their efforts to build the company.

FUNCTIONS OF ENTREPRENEUR

The following points highlight the top five functions of an entrepreneur. The functions
are:

• Decision Making

• Management Control

• Division of Income

• Risk-Taking and Uncertainty-Bearing

• Innovation.

1. Decision Making:

The primary task of an entrepreneur is to decide the policy of production. An

entrepreneur is to determine what to produce, how much to produce, how to produce,
where to produce, how to sell and so forth. Moreover, he is to decide the scale of
production and the proportion in which he combines the different factors he employs. In
brief, he is to make vital business decisions relating to the purchase of productive
factors and to the sale of the finished goods or services.

2. Management Control:

Earlier writers used to consider the manage-ment control one of the chief functions of
the entrepreneur. Management and control of the business are conducted by the
entrepreneur himself. So, the latter must possess a high degree of management ability
to select the right type of persons to work with him. But, the importance of this function
has declined, as business nowadays is managed more and more by paid man-agers.

3. Division of Income:

The next major function of the entrepreneur is to make necessary arrangement for the
division of total income among the different factors of production employed by him.
Even if there is a loss in the business, he is to pay rent, interest, wages and other
contractual incomes out of the realised sale proceeds.

4. Risk-Taking and Uncertainty-Bearing:

Risk-taking is perhaps the most important function of an entrepreneur. Modern

production is very risky as an entrepreneur is required to produce goods or services in
anticipation of their future demand. Broadly, there are two kinds of risk which he has to
face. Firstly, there are some risks, such as risks of fire, loss of goods in transit, theft,
etc., which can be insured against. These are known as measurable and insurable
risks. Secondly, some risks, however, cannot be insured against because their
probability cannot be calculated accurately. These constitute what is called uncertainty
(e.g., competitive risk, technical risk, etc.). The entrepreneur undertakes both these
risks in production.

5. Innovation:

Another distinguishing function of the entrepreneur, as emphasised by Schumpeter, is

to make frequent inventions — invention of new products, new techniques and
discovering new markets — to improve his competitive position, and to increase
earnings.

TYPES OF ENTREPRENEURSHIP

Classic entrepreneurs: The so-called "classic" entrepreneur is someone who observes

a gap in the market or takes note of a business or consumer need, and develops a
company that addresses the deficit or the need. In some cases, the entrepreneur may
also be an inventor, although some classic entrepreneurs will team up with someone
who has invented a product. In many cases, the classic entrepreneur starts the
business and continues to own and manage it for many years.

Serial entrepreneurs: A serial entrepreneur enjoys getting businesses started, and

then sells the business to another person or company. This type of entrepreneur is
typically somebody who is excited about starting something new and taking risks. Once
the business is doing well, however, this entrepreneur wants to move on to another new
and different challenge.

Social entrepreneurs: Social entrepreneurs incorporate social conscience with

business. While their businesses may still be for-profit, there is typically a strong
mission statement connecting the business with a social cause. For example, a social
entrepreneur may import fair trade goods for resale while also educating the public
about the importance of activism in the area of sustainably and responsibly sourcing
products.

BASIS FOR COMPARISONENTREPRENEUR MANAGER

Meaning
Entrepreneur refers to a person who creates an enterprise, by taking financial risk in order
to get profit.

Manager is an individual who takes the responsibility of controlling and

administering the organization.
Focus
Entrepreneur; Business start-up
Manager; On-going operations
Primary motivation
Entrepreneur; Achievement
Manager; Power
Approach to task
Entrepreneur; Informal
Manager; Formal
Status
Entrepreneur; Owner
Manager; Employee
Reward
Entrepreneur; Profit
 Manager; Salary
Decision making
Entrepreneur; Intuitive
Manager; Calculative
Driving force
Entrepreneur; Creativity and Innovation
Manager; Preserving status quo
Risk orientation
Entrepreneur; Risk taker
Manager; Risk averse

COMPARISON BETWEEN ENTREPRENEUR VS INTRAPRENEU

Meaning
Entrepreneur refers to a person who set up his own business with a new idea
or concept.
Intrapreneur refers to an employee of the organization who is in charge of
undertaking innovations in product, service, process etc.
Approach
Entrepreneur; Intuitive
Intrapreneur; Restorative
Resources
Entrepreneur; Uses own resources.
Intrapreneur; Use resources provided by the company.
Capital
Entrepreneur; Raised by him.
Intrapreneur; Financed by the company.
Enterprise
Entrepreneur; Newly established
 Intrapreneur; An existing one
Dependency
Entrepreneur; Independent
Intrapreneur; Dependent
Risk
Entrepreneur; Borne by the entrepreneur himself.
Intrapreneur; Taken by the company.
Works for
Entrepreneur; Creating a leading position in the market.
Intrapreneur; Change and renew the existing organizational system and
culture

REASONS TO BECOME AN ENTREPRENEUR

Entrepreneurial efforts are like biological experiments in nature: Many variations are tried, but
only a small percentage of those go on to thrive. You, however, have an advantage over nature.
As an entrepreneur, you can set up your experiment with forethought. Entrepreneurs work under
the constraints of their environment – the political economy.

Advantages of Entrepreneurship

1. Learning to See Possibilities Everywhere

• When you have to rely on yourself and your imagination in order to generate income, this
awareness goes with the territory.

• An entrepreneur has to develop the skill and train his or her mind to stay open and receptive to
potential ideas and possibilities.

• This doesn’t mean they get involved in everything that comes their way. They must also learn
the skill of discernment – which is also of tremendous value.
• But whatever the case, being open to many possibilities gives entrepreneurs a tremendous
amount of choice.

2. Defining Your Income

• Who decides how much you’re getting paid?

• Chances are, there are several factors at play including your boss, your company’s financial
budget, the board of directors, the economy, etc.

• These factors also determine whether you’ll be staying at your job.

• So even if you’re working really hard and giving 110%, your salary might not reflect it.

• But when you’re an entrepreneur, you create the relationship between your efforts and your
income.

• Plus, the only two factors that determine and define your income are the market forces and you.

• Even though the market can be a harsh judge of your entrepreneurial skills, once you pay
attention to, and understand the market’s signals, following the current marketing trends, you’ll
be able to make informed decisions to keep your business moving in the right direction.

3. Flexibility in Your Schedule

• There are morning people and night owls and others somewhere in between.

• As an entrepreneur you can ditch the rigid schedule.

• So if you’re a night owl, you can start work at 4pm. If you love the morning, maybe works
starts at 4am. Take a break when the need arises. You are the master of your scheduling domain.

• The power of creating your own schedule isn’t just liberating, but it could be healthier too.

• Entrepreneurs focus on results rather than on hours worked. And one study found that a results-
based work atmosphere leads to greater mental and physical wellness.

4. Enjoying Your Work

• Even though, as an entrepreneur, you can create your own schedule, it doesn’t necessarily mean
there won’t be long hours.
• But unlike those energy-draining hours spent working overtime for someone else, it will be
long hours spent working toward something you love. And you will reap the rewards.

5. Learning to be in the Moment

• How much of your day at work is spent counting the hours and minutes before your lunch
break or the end of the day?

• One of the great advantages of entrepreneurship is being able to abandon the predictable and
monotonous schedule of a traditional office job.

• Instead, you plan and schedule your day, set regular goals and work to achieve them.

• Of course there will be unexpected situations you’ll have to handle. But in learning how to
handle these situations, you get the added benefit of being more present and learning how to live
in the moment.

• Is It Time For You To Be Your Own Boss?

DRAWBACKS OF ENTREPRENEURSHIP

Although managing a business offers numerous benefits and bestows many opportunities,
anyone planning to take a plunge into the world of entrepreneurship must be aware of its
potential drawbacks. Entrepreneurship is a strict no for people who fancy the security of a fixed
monthly paycheck, paid vacations, and benefit packages, among others. Some of the major
disadvantages of entrepreneurship are as follows

Risk of Loss — Business failure can ruin an entrepreneur financially, and yes, the failure rate of
small business is relatively high when compared to established businesses. Entrepreneurs should
ask themselves if they are prepared to cope psychologically with the failures associated with
entrepreneurship.

Uncertainty of Income — Starting and running an enterprise provides no guarantee of earning

money. Many small businesses barely earn enough to give the owner adequate income. During
the initial days of a start-up, a business often cannot provide an attractive salary for its owner and
meet all its financial obligations. If you are willing to live on your savings, then entrepreneurship
is for you.
Lower Quality of Life in Initial Stage — Long hours and hard work are needed to launch a
business but this can take their toll on the life of the entrepreneur. Entrepreneurs often find their
personal roles diverging and taking a backseat. Owning a business requires to make a lot of
sacrifices. As a result, personal life suffers.

High Levels of Responsibility — Entrepreneurs often have to take decisions beyond the domain
of their knowledge as many of them have difficulty finding advisers. When there is no one to
ask, the pressure can build quickly. The realisation of making the right decisions can have an
effect on some people.

High Stress Levels — Starting and managing a business on one hand may seem highly
rewarding but on the other, it can be extremely stressful as well. Apart from significant
investments and leaving a secure monthly income, entrepreneurs constantly thrive under the
stress of failure leading to financial ruin. In addition, the turbulences in the personal lives also
add to the stress levels.

Long Working Hours — Start-ups often demand long working. In many start-ups, the demands
of owning a business make achieving a balance between work and life difficult for entrepreneurs.
It becomes a full-time commitment where there are always some things that need to be done.

FIVE FACTORS WILL BE KEY TO ENTREPRENEURIAL SUCCESS: creativity,

tolerance for risk, responsiveness to opportunities, leadership and the ability to take advantage of
the rights afforded to you.

Creativity and Accumulation of Ideas

Do not be dissuaded by the challenge to be creative. You need not be the original wheel creator
to improve upon a stone cylinder. By standing on the shoulders of giants, you can take existing
ideas and make small improvements upon them. Your best ideas may come to you as you are
falling asleep or while you are taking a shower. Recognize when you have a fresh idea and do
not let them get away from you. Write them down! Not every idea has to be a home run. By
accumulating your ideas, you will be able to dis-till the great ones from the rest and be ready to
run with the best.

Risk Tolerance and Taking Advantage of Opportunity

Rewards rarely come without risk. Your ability to take advantage of an opportunity will depend,
in part, on your tolerance for risk. As the founder of a start-up, investors will expect you to have
a vested interest in your business. If you will not bet on your idea, why should anybody else?If
you cannot afford the risk, financially or emotionally, then you might make decisions that are too
tepid to be successful. To do well, an entrepreneur needs the strong sense of self-efficacy to
believe the risk will be surmountable.

Responsiveness to Opportunity

Opportunity can leave quickly. With the internet, the spread of information and ideas has led to
deeper, faster competition to be the first mover. The ability to respond to the market and new
business opportunities can be the difference between a successful entrepreneur and a failed
business model. To be responsive, an entrepreneur must have the flexibility of mind and
resources necessary to see and take advantage of new and upcoming possibilities. Learning from
your mistakes and those of others to implement change can keep businesses afloat. Calcifying
rigidity, on the other hand, can turn a start-up into dust.

Leadership and Inspiring Others

It is up to the entrepreneur to marshal assets. Leaders are challenged with taking possibilities and
turning them into inspiring visions for others. You will inevitably have to sell either your idea or
your product to begin your entrepreneurship. It will be up to the entrepreneur to take the idea and
turn it into actions and products to capitalize on the opportunity. Leadership can come in many
forms, but it is nevertheless essential to entrepreneurship. You must take the lead for your ideas
to come to fruition.

Intellectual Property Rights

Intellectual property laws can provide you with exclusive business rights to your ideas. If you do
not protect your ideas, they may be copied – cheaply. Once an idea is in the public domain, it
may no longer be possible to use that idea as a competitive advantage. Society values ideas being
shared. In exchange for sharing ideas, governments provide limited monopolies that will allow
you to capitalize on them for a period, making up in part for the costs you have incurred in
research and development. Intellectual property professionals can aid you in seeking such rights.
Practical Tips for Aspiring Entrepreneurs
So, you’ve got an incredible business idea and you’re eager to dive into the world of
entrepreneurship. But where do you start to become a successful entrepreneur?

Fear not, aspiring entrepreneur! Here’s a comprehensive guide to kickstart your

entrepreneurial journey:

1. Starting Your Own Business

Here’s a handy step-by-step guide to help you kickstart your entrepreneurial journey:

1. Validate Your Business Idea: Before taking the leap, ensure there’s a demand for your
product or service, which is an important validation process for entrepreneurs. Conduct
thorough market research to understand your audience and competition.
2. Create a Business Plan: A well-crafted business plan acts as a roadmap for success.
Define your goals, target market, revenue streams, and marketing strategies for your
new venture, embodying the entrepreneurial mindset for business success.
3. Register Your Business: Choose a suitable business structure and register your
business to comply with legal requirements.
4. Set Up Your Finances: Establish a business bank account, and accounting systems, and
secure funding if necessary for long-term success.
5. Build Your Brand: A key attribute of successful entrepreneurs. Develop a strong brand
identity with a compelling logo, website, and marketing materials.
6. Launch Your Product or Service: A crucial step even the most successful entrepreneurs
must master for a successful business venture. Roll out your offering and attract your
initial customers using social media and other marketing channels to boost your
entrepreneurship skills, a strategy employed by the best entrepreneurs to ensure long-
term business success.
7. Evaluate and Adapt, is a practice successful entrepreneurs are adept at to ensure the
sustainability and growth of their long-term business. Monitor your business
performance, gather feedback, and be open to pivoting if needed to stay ahead in the
evolving business landscape.
2. Avoiding Common Pitfalls: Learn from Others’ Mistakes

As a new entrepreneur, it’s crucial to learn from the failures of those who have walked
this path before you.

Here are some common pitfalls to steer clear of on your journey to becoming an
entrepreneur.

1. Lack of Market Research: Understand your target market and competition to identify
opportunities and challenges, a practice many successful entrepreneurs follow,
highlighting the importance of being true for entrepreneurs in their strategic planning.
2. Ignoring Financial Management: Stay on top of your finances, track expenses, and
maintain a healthy cash flow.
3. Overlooking Marketing Strategies: Invest in effective marketing to reach your audience
and boost sales.
4. Neglecting Customer Feedback: Something to avoid as an entrepreneur, as it can lead
to missing critical insights for business improvement. Listen to your customers, address
their needs, and continuously improve based on their input.

3. Cultivating a Growth Mindset: Embrace Continuous Learning

In the dynamic world of entrepreneurship, a growth mindset is essential, a position true

for entrepreneurs aiming for the helm of successful startups.

Here’s why continuous learning is key: successful entrepreneurs are able to adapt to
new challenges and environments, underscoring the importance of never-ending
improvement and the ability to overcome challenges.

 Adaptability: Embrace change and seize new opportunities in the evolving business
landscape.
 Innovation: A key trait among the 10 traits of successful entrepreneurs, highlighting what
makes a successful entrepreneur. Fuel innovation by staying curious, exploring new ideas,
and challenging the status quo, a practice that embodies what makes a successful
entrepreneur.
 Resilience: True for entrepreneurs, this trait is decisive in overcoming the challenges faced
by successful startups. Bounce back from setbacks, learn from failures, and keep moving
forward on your entrepreneurial journey.

As an aspiring entrepreneur, these practical tips can guide you toward building a strong
foundation for your business venture.

Remember, success in entrepreneurship is a journey of growth, learning, and resilience.

Types of Entrepreneurship
Entrepreneurship is a diverse field with various approaches tailored to different business
models and industries.

Let’s explore three key types of entrepreneurship: social entrepreneurship,

technopreneurship, and intrapreneurship, each playing a unique role in shaping the
entrepreneurial landscape and exemplifying the broad meaning of entrepreneurship.

Social Entrepreneurship

Social entrepreneurship merges traditional business practices with a focus on

addressing social or environmental issues. It aims to create sustainable solutions that
benefit society while also generating profits.

Examples of successful social entrepreneurship include showcasing how entrepreneurs

ask challenging questions to bring about significant social change.

 TOMS Shoes: For every pair of shoes sold, TOMS donates a pair to a child in need,
combining business with social impact.
 Grameen Bank: An example of social entrepreneurship with a clear understanding of its
business goals, demonstrating entrepreneurship is a long-term commitment. Providing
microfinance services to empower low-income individuals to start their businesses, fostering
 financial inclusion, and entrepreneurship, and laying the groundwork for potentially
successful business ventures.

Technopreneurship

Technopreneurship revolves around technology-driven businesses that leverage

innovation to disrupt industries through technological advancements.

Major players in the tech industry like Apple, Google, and Tesla have reshaped their
sectors through groundbreaking technologies and products, setting the bar for
technopreneurship excellence and embodying the entrepreneurial spirit.

Intrapreneurship

Intrapreneurship involves employees within an organization taking on an entrepreneurial

role to foster innovation and spur growth from within, leveraging parts of the business in
unique ways.

Companies like Google have embraced intrapreneurship through initiatives such as

the 20% Time Policy, encouraging employees to dedicate a portion of their work hours
to side projects, leading to innovations like Gmail and Google Maps.

Improving Your Entrepreneurial Skills

When it comes to entrepreneurship, continuous learning and skill development are
essential for success, demonstrating the traits and qualities of successful
entrepreneurs.

Here are some key strategies to enhance your entrepreneurial skills and stay ahead in
the competitive business world, including developing problem-solving skills and learning
to make difficult decisions.
1. Education and Training

One of the fundamental ways to boost your entrepreneurial skills is through education
and training, providing an opportunity to learn. Investing in your knowledge base can
equip you with the tools and insights needed to navigate the complexities of
entrepreneurship.

Here are some resources to consider for entrepreneurs starting a new venture.

 Entrepreneurial Education: Key to nurturing the traits and qualities needed for starting a
successful business, covering essential entrepreneur characteristics. Seek out specialized
courses and programs that focus on entrepreneurship to develop the skills every
entrepreneur needs. Platforms like Coursera, Udemy, and LinkedIn Learning offer a wide
range of courses to help you sharpen your entrepreneurial skills, ideal for types of
entrepreneurs aiming for business success.
 Online Courses and Certifications for aspiring entrepreneurs to embrace the entrepreneurial
mindset and acquire the characteristics of an entrepreneur. Enroll in online courses covering
topics such as business development, marketing strategies, financial management, and
more, to foster the characteristics of an entrepreneur. These courses can provide valuable
insights and practical knowledge to apply to your business, equipping you with the skills
every entrepreneur needs for a successful business venture.

2. Networking and Mentorship

Building a strong network and seeking mentorship can significantly impact your
entrepreneurial journey. Surrounding yourself with like-minded individuals and
experienced mentors can offer invaluable support and guidance.

Here’s why networking and mentorship are essential: they allow entrepreneurs to gain
problem-solving skills and learn how to avoid common mistakes as an entrepreneur.

 Importance of Building a Network: Networking opens doors to new opportunities,

collaborations, and potential partnerships. By connecting with other entrepreneurs and
 industry professionals, you can gain valuable insights, feedback, and support, a strategy
successful entrepreneurs are comfortable employing.
 Example: A mentor can provide you with personalized guidance, share your experiences,
and help you navigate challenges. Look for mentors who have achieved success in your
industry and are willing to offer their expertise and advice.

3. Continuous Learning and Adaptation

In the fast-paced world of entrepreneurship, staying updated with industry trends and
continuously learning is key to staying relevant and competitive.

Here’s how you can ensure you’re always learning and adapting, an approach crucial
for any entrepreneur to stay ahead.

 Staying Updated with Industry Trends: Keep a pulse on the latest developments,
technologies, and consumer preferences in your industry, a habit many entrepreneurs
maintain to stay ahead. Subscribe to industry publications, attend conferences, and engage
with thought leaders to stay informed.
 Tutorial: Develop a personalized learning plan that outlines your learning goals, resources,
and timelines. Set aside dedicated time for learning activities, whether it’s reading books,
attending webinars, or taking online courses.

WHAT IS THE ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT

Entrepreneurship is a powerful force in driving economic development and growth. It plays a

pivotal role in creating jobs, fostering innovation, and enhancing the overall prosperity of a
nation. In this comprehensive guide, we will delve into the various facets of entrepreneurship’s
impact on economic development, exploring the significance of startups, small businesses, and
innovation as key drivers of economic growth.

Entrepreneurship as an engine of Entrepreneurship serves as a catalyst for economic

development in several ways:
Job creation

Entrepreneurs are at the forefront of job creation. They establish new businesses and expand
existing ones, which, in turn, require a workforce. Small and medium-sized enterprises (SMEs)
are particularly effective in this regard, as they often employ a significant portion of the labor
force. When employment opportunities increase, it leads to higher income levels and reduced
unemployment rates, ultimately contributing to economic development.

Innovation and technological advancement

Entrepreneurs are known for their ability to innovate and bring new ideas to the market. They
constantly seek solutions to existing problems or identify opportunities for improvement. This
drive for innovation leads to the development of new products, services, and technologies,
which can revolutionize industries and stimulate economic growth.

Investment and capital formation

Entrepreneurs are integral to the process of capital formation. They raise capital to start or
expand their businesses, attracting investments from various sources, including venture
capitalists, angel investors, and financial institutions. This infusion of capital not only aids in the
growth of individual enterprises but also bolsters the overall economy.

Market competition and efficiency

Entrepreneurial activities introduce competition into markets, which is essential for promoting
efficiency and consumer welfare. Competition drives businesses to improve their products,
services, and operational processes. This not only benefits consumers but also encourages
economic growth by optimizing resource allocation.

THE ROLE OF SMALL BUSINESSES IN ECONOMIC DEVELOPMENT

Small businesses, often spearheaded by entrepreneurs, hold a particular significance in
economic development. These enterprises play a pivotal role in local and national economies,
contributing in various ways:

Job creation

Small businesses are major job creators. They are responsible for employing a substantial
portion of the workforce in many countries. As they grow and expand, they hire more
employees, thus reducing unemployment and enhancing economic stability.

Support for local communities

Small businesses often have strong ties to their local communities. They source goods and
services locally, contributing to the growth of other businesses. Additionally, they participate in
community activities, sponsor local events, and support charitable initiatives, which further
fosters economic development.

Innovation and agility

Small businesses are known for their agility and ability to quickly adapt to changing market
conditions. Their nimbleness enables them to experiment with innovative ideas, which can lead
to the development of new products or services that stimulate economic growth.

Nurturing entrepreneurship

Small businesses often serve as breeding grounds for aspiring entrepreneurs. They provide a
platform for individuals to gain valuable experience and insights into running a business. As
employees gain expertise, they may eventually choose to start their own ventures, contributing
to the cycle of entrepreneurship and economic development.

ENTREPRENEURSHIP AND ECONOMIC DEVELOPMENT IN

EMERGING MARKETS

The role of entrepreneurship in economic development is especially pronounced in emerging

markets. These markets often face unique challenges and opportunities that entrepreneurs can
leverage to drive growth:

Job creation and poverty reduction

In many emerging markets, unemployment and poverty are pressing issues. Entrepreneurship
can create job opportunities, lifting individuals out of poverty and improving their quality of life.
This, in turn, contributes to the overall economic development of the region.

Access to basic services

Entrepreneurs in emerging markets often identify gaps in access to basic services, such as
healthcare, education, and clean water. By addressing these gaps through innovative solutions,
entrepreneurs can significantly enhance the well-being of the population and promote economic
development.

Market formalization

Many emerging markets have substantial informal sectors. Entrepreneurship can help formalize
these markets by bringing businesses into the legal and regulatory framework. This
formalization not only increases tax revenues for the government but also creates a more
transparent and efficient business environment, fostering economic development.

Technology adoption

Entrepreneurs in emerging markets often play a critical role in adopting and adapting technology
to local needs. Whether it’s using mobile phones for financial transactions or creating low-cost
renewable energy solutions, technology-driven entrepreneurship can lead to economic
development.

Innovation ecosystems and economic development

The establishment of robust innovation ecosystems is a key driver of economic development in

the modern world. These ecosystems are composed of various elements, including research
institutions, startups, incubators, accelerators, and venture capitalists. They promote innovation,
technology transfer, and the development of new businesses, all of which contribute to
economic growth.

KEY ELEMENTS OF AN INNOVATION ECOSYSTEM:

Research and development

Investment in research and development (R&D) is essential for innovation. Government,

industry, and academic institutions collaborate to advance technology and knowledge, fostering
entrepreneurship and economic development.
Startup incubators and accelerators

Startup incubators and accelerators provide critical support to early-stage companies. They
offer mentorship, funding, and access to resources, helping startups grow and thrive.

Access to capital

Venture capital firms and angel investors are crucial for providing the financial backing that
startups need to scale. Access to capital is a vital component of an innovation ecosystem.

Collaboration and networking

Effective ecosystems promote collaboration and networking among entrepreneurs, researchers,

and investors. This interaction leads to the exchange of ideas and the formation of partnerships,
which drive innovation and economic development.

Supportive policies

Governments play a significant role in creating a conducive environment for entrepreneurship.

Policies that support business registration, protect intellectual property, and provide tax
incentives can foster economic development.

CHALLENGES AND OBSTACLES TO ENTREPRENEURSHIP IN ECONOMIC

DEVELOPMENT

While entrepreneurship is a powerful driver of economic development, it also faces several

challenges and obstacles. These challenges can hinder the full realization of its potential:

Access to finance

Entrepreneurs often struggle to secure adequate funding, especially in the early stages of their
ventures. Limited access to finance can inhibit business growth and expansion.

Regulatory barriers

Cumbersome and unclear regulations can deter entrepreneurs from starting or expanding
businesses. Simplifying the regulatory environment can encourage entrepreneurship.

Skills and education

Entrepreneurship requires a specific skill set, and a lack of entrepreneurial education can be a
barrier for potential business owners. Access to training and education is crucial for nurturing
entrepreneurship.
Market competition

Intense market competition can be a challenge for new entrepreneurs, especially when entering
established industries. Access to markets and customers can be a significant obstacle.

Cultural and social norms

Cultural and social norms can influence individuals’ attitudes toward risk-taking and
entrepreneurship. Encouraging a culture of innovation and risk-taking is essential for fostering
entrepreneurship.

Entrepreneurship is undeniably a powerful force in driving economic development. Its role in

creating jobs, fostering innovation, and supporting small businesses is critical to the prosperity
of nations. By recognizing the significance of entrepreneurship and addressing the challenges it
faces, governments, institutions, and individuals can unlock its full potential, leading to
sustained economic growth and development. Entrepreneurship isn’t just about starting
businesses; it’s about shaping economies and transforming lives.

The entrepreneur is the key to the creation of new enterprises that

energize the economy and rejuvenate the established enterprises that
make up the economic structure. The following are the role
of entrepreneurship in economic development:

1. Capital Formation
2. Improvement in Per Capita Income
3. Improvement in Living Standards
4. Economic Independence
5. Backward and Forward Linkages
6. Generation of Employment
7. Harnessing Locally Available Resources and Entrepreneurship
8. Balanced Regional Growth
9. Reducing Unrest and Social Tension amongst Youth
 10. Innovations in Enterprises.

DEVELOPMENT OF ENTREPRENEURSHIP AS A CONCEPT

Risk and Uncertainty

Richard Cantillon (1680-1734) was born in France and belonged to the French School of
thought although he was an Irish economist. He appears to be the person who introduced the
term entrepreneur to the world. “According to Cantillon, the entrepreneur is a specialist in taking
on risk, ‘insuring’ workers by buying their output for resale before consumers have indicated
how much they are willing to pay for it” (Casson & Godley, 2005p. 26). The workers’ incomes
are mostly stable, but the entrepreneur risks a loss if market prices fluctuate.

Cantillon distinguished entrepreneurs from two other classes of economic agents; landowners,
who were financially independent, and hirelings (employees) who did not partake in the
decision-making in exchange for relatively stable incomes through employment contracts. He
was the first writer to provide a relatively refined meaning for the term entrepreneurship.
Cantillon described entrepreneurs as individuals who generated profits through exchanges. In
the face of uncertainty, particularly over future prices, they exercise business judgment. They
purchase resources at one price and sell their product at a price that is uncertain, with the
difference representing their profit (Chell, 2008; Hebert & Link, 2009).

Farmers were the most prominent entrepreneurs during Cantillon’s lifetime, and they interacted
with “arbitrageurs” – or middlemen between farmers and the end consumers – who also faced
uncertain incomes, and who were also, therefore, entrepreneurs. These intermediaries
facilitated the movement of products from the farms to the cities where more than half of the
farm output was consumed. Cantillon observed that consumers were willing to pay a higher
price per unit to be able to purchase products in the smaller quantities they wanted, which
created the opportunities for the intermediaries to make profits. Profits were the rewards for
assuming the risks arising from uncertain conditions. The markets in which profits were earned
were characterized by incomplete information (Chell, 2008; Hebert & Link, 2009).
Adolph Reidel (1809-1872), form the German School of thought, picked up on Cantillon’s notion
of uncertainty and extended it to theorize that entrepreneurs take on uncertainty so others,
namely income earners, do not have to be subject to the same uncertainty. Entrepreneurs
provide a service to risk-averse income earners by assuming risk on their behalf. In exchange,
entrepreneurs are rewarded when they can foresee the impacts of the uncertainty and sell their
products at a price that exceeds their input costs (including the fixed costs of the wages they
commit to paying) (Hebert & Link, 2009).

Frank Knight (1885-1972) founded the Chicago School of Economics and belonged to the
American School of thought. He refined Cantillon’s perspective on entrepreneurs and risk by
distinguishing insurable risk as something that is separate from uncertainty, which is not
insurable. Some risks can be insurable because they have occurred enough times in the past
that the expected loss from such risks can be calculated. Uncertainty, on the other hand, is not
subject to probability calculations. According to Knight, entrepreneurs can’t share the risk of loss
by insuring themselves against uncertain events, so they bear these kinds of risks themselves,
and profit is the reward that entrepreneurs get from assuming uninsurable risks (Casson &
Godley, 2005).

Distinction Between Entrepreneur and Manager

Jean-Baptiste Say (1767-1832), also from the French School, advanced Cantillon’s work, but
added that entrepreneurship was essentially a form of management. Say “put the entrepreneur
at the core of the entire process of production and distribution” (Hebert & Link, 2009, p. 17).
Say’s work resulted in something similar to a general theory of entrepreneurship with three
distinct functions; “scientific knowledge of the product; entrepreneurial industry – the application
of knowledge to useful purpose; and productive industry – the manufacture of the item by
manual labour” (Chell, 2008, p. 20).

Frank Knight made several contributions to entrepreneurship theory, but another of note is how
he distinguished an entrepreneur from a manager. He suggested that a manager crosses the
line to become an entrepreneur “when the exercise of his/her judgment is liable to error and
s/he assumes the responsibility for its correctness” (Chell, 2008, p. 33). Knight said that
entrepreneurs calculate the risks associated with uncertain business situations and make
informed judgments and decisions with the expectation that – if they assessed the situation and
made the correct decisions – they would be rewarded by earning a profit. Those who elect to
avoid taking these risks choose the relative security of being employees (Chell, 2008).

Alfred Marshall (1842-1924), from the English School of thought, was one of the founders of
neoclassical economics. His research involved distinguishing between the terms capitalist,
entrepreneur, and manager. Marshall saw capitalists as individuals who “committed themselves
to the capacity and honesty of others, when he by himself had incurred the risks for having
contributed with the capital” (Zaratiegui & Rabade, 2005, p. 775). An entrepreneur took control
of money provided by capitalists in an effort to leverage it to create more money; but would lose
less if something went wrong then would the capitalists. An entrepreneur, however, risked his
own reputation and the other gains he could have made by pursuing a different opportunity.

Let us suppose that two men are carrying on smaller businesses, the one
working with his own, the other chiefly with borrowed capital. There is one set of
risks which is common to both; which may be described as the trade risks of the
particular business … But there is another set of risks, the burden of which has to
be borne by the man working with borrowed capital, and not by the other; and we
may call them personal risks (Marshall, 1961, p. 590; Zaratiegui & Rabade, 2005,
p. 776).

Marshall recognized that the reward capitalists received for contributing capital was interest
income and the reward entrepreneurs earned was profits. Managers received a salary and,
according to Marshall, fulfilled a different function than either capitalists or entrepreneurs –
although in some cases, particularly in smaller firms, one person might be both an entrepreneur
and a manager. Managers “were more inclined to avoid challenges, innovations and what
Schumpeter called the ‘perennial torment of creative destruction’ in favour of a more tranquil
life” (Zaratiegui & Rabade, 2005, p. 781). The main risks they faced from firm failure were to
their reputations or to their employment status. Managers had little incentive to strive to
maximize profits (Zaratiegui & Rabade, 2005).

Amasa Walker (1799-1875) and his son Francis Walker (1840-1897) were from the American
School of thought, and they helped shape an American perspective of entrepreneurship
following the Civil War of 1861-1865. These scholars claimed that entrepreneurs created
wealth, and thus played a different role than capitalists. They believed that entrepreneurs had
the power of foresight and leadership qualities that enabled them to organize resources and
inject energy into activities that create wealth (Chell, 2008).

Entrepreneurship versus Entrepreneur

Adam Smith (1723-1790), from the English School of thought, published An Inquiry into the
Nature and Causes of the Wealth of Nations in 1776. In a departure from the previous thought
into entrepreneurship and economics, Smith did not dwell on a particular class of individual. He
was concerned with studying how all people fit into the economic system. Smith contended that
the economy was driven by self-interest in the marketplace (Chell, 2008).

Also from the English School, David Ricardo (1772-1823) was influenced by Smith, Say, and
others. His work focused on how the capitalist system worked. He explained how manufacturers
must invest their capital in response to the demand for the products they produce. If demand
decreases, manufacturers should borrow less and reduce their workforces. When demand is
high, they should do the reverse (Chell, 2008).

Carl Menger (1840-1921), from the Austrian School of thought, ranked goods according to their
causal connections to human satisfaction. Lower order goods include items like bread that
directly satisfy a human want or need like hunger. Higher order goods are those more removed
from satisfying a human need. A second order good is the flour that was used to make the
bread. The grain used to make the flour is an even higher order good. Entrepreneurs coordinate
these factors of production to turn higher order goods into lower order goods that more directly
satisfy human wants and needs (Hebert & Link, 2009).

Menger (1950 [1871], p. 160) established that entrepreneurial activity includes:

(a) obtaining information about the economic situation, (b) economic calculation –
all the various computations that must be made if a production process is to be
efficient, (c) the act of will by which goods of higher order are assigned to a
particular production process, and (d) supervising the execution of the production
plan so that it may be carried through as economically as possible (Hebert &
Link, 2009, p. 43).
Entrepreneurship and Innovation

Jeremy Bentham (1748-1832), from the English School of thought, considered entrepreneurs to
be innovators. They “depart from routine, discover new markets, find new sources of supply,
improve existing products and lower the costs of production” (Chell, 2008).

Joseph Schumpeter’s (1883-1950) parents were Austrian, he studied at the University of

Vienna, conducted research at the University of Graz, served as Austria’s Minister of Finance,
and was the president of a bank in the country. Because of the rise of Hitler in Europe, he went
to the United States and conducted research at Harvard until he retired in 1949. Because of
this, he is sometimes associated with the American School of thought on entrepreneurship
(Chell, 2008).

Whereas Menger saw entrepreneurship as occurring because of economic progress,

Schumpeter took the opposite stance. Schumpeter saw economic activity as leading to
economic development (Hebert & Link, 2009). Entrepreneurs play a central role in
Schumpeter’s theory of economic development, and economic development can occur when
the factors of production are assembled in new combinations.

Schumpeter (1934) viewed innovation as arising from new combinations of materials and
forces. He provided the following five cases of new combinations.

1. The introduction of a new good – that is one with which consumers are not yet familiar –
or of a new quality of good.
2. The introduction of a new method of production, that is one not yet tested by experience
in the branch of manufacture concerned, which need by no means be founded upon a
discovery scientifically new, and can also exist in a new way of handling a commodity
commercially.
3. The opening of a new market, that is a market into which the particular branch of
manufacture of the country in question has not previously entered, whether or not this
market has existed before.
4. The conquest of a new source of supply of raw materials or half-manufactured goods,
again irrespective of whether this source already exists or whether it has first to be
created.
 5. The carrying out of the new organisation of any industry, like the creation of a monopoly
position … or the breaking up of a monopoly position (Schumpeter, 1934, p. 66).

Another concept popularized by Schumpeter – in addition to the notion of new combinations –

was creative destruction. This was meant to indicate that the existing ways of doing things need
to be dismantled – to be destroyed – to enable a transformation through innovation to a new
way of doing things. Entrepreneurs use innovation to disrupt how things are done and to
establish a better way of doing those things.

Entrepreneurial Uniqueness

Efforts to teach entrepreneurship have included descriptions of entrepreneurial uniqueness

based on personality, behavioural, and cognitive traits (Chell, 2008; Duening, 2010).

 Personality characteristics
o Three personality characteristics of entrepreneurs that are often cited are:

 Need for achievement

 Internal locus of control (a belief by an individual that they are in control of their own
destiny)
 Risk-taking propensity
 Behavioural traits
 Cognitive skills of successful entrepreneurs

Past studies of personality characteristics and behavioural traits have not been overly
successful at identifying entrepreneurial uniqueness.

As it turned out, years of painstaking research along this line has not borne
significant fruit. It appears that there are simply not any personality
characteristics that are either essential to, or defining of, entrepreneurs that differ
systematically from non-entrepreneurs…. Again, investigators proposed a
number of behavioural candidates as emblematic of entrepreneurs.
Unfortunately, this line of research also resulted in a series of dead ends as
examples of successful entrepreneurial behaviours had equal counterparts
among samples of non-entrepreneurs. As with the personality characteristic
 school of thought before it, the behavioural trait school of thought became
increasingly difficult to support (Duening, 2010, p. 4-5).

This shed doubt on the value of trying to change personality characteristics or implant new
entrepreneurial behaviours through educational programs in an effort to promote
entrepreneurship.

New research, however, has resurrected the idea that there might be some value in revisiting
personality traits as a topic of study. Additionally, Duening (2010) and has suggested that an
important approach to teaching and learning about entrepreneurship is to focus on the
“cognitive skills that successful entrepreneurs seem uniquely to possess and deploy” (p. 2). In
the next sections we consider the new research on entrepreneurial personality traits and on
entrepreneurial cognitions.

Entrepreneurial Personality Traits

While acknowledging that research had yet to validate the value of considering personality and
behaviour traits as ways to distinguish entrepreneurs from non-entrepreneurs or unsuccessful
ones, Chell (2008) suggested that researchers turn their attention to new sets of traits including:
“the proactive personality, entrepreneurial self-efficacy, perseverance and intuitive decision-
making style. Other traits that require further work include social competence and the need for
independence” (p. 140).

In more recent years scholars have considered how the Big Five personality traits –
extraversion, agreeableness, conscientiousness, neuroticism (sometimes presented
as emotional stability), and openness to experience (sometimes referred to as intellect) – might
be used to better understand entrepreneurs. It appears that the Big Five traits might be of some
use in predicting entrepreneurial success. Research is ongoing in this area, but in one example,
Caliendo, Fossen, and Kritikos (2014) studied whether personality constructs might “influence
entrepreneurial decisions at different points in time” (p. 807), and found that “high values in
three factors of the Big Five approach—openness to experience, extraversion, and emotional
stability (the latter only when we do not control for further personality characteristics)—increase
the probability of entry into self-employment” (p. 807). They also found “that some specific
personality characteristics, namely risk tolerance, locus of control, and trust, have strong partial
effects on the entry decision” (p. 807). They also found that people who scored higher on
agreeableness were more likely to exit their businesses, possibly meaning that people with
lower agreeableness scores might prevail longer as entrepreneurs. When it came to specific
personality traits, their conclusions indicated that those with an external locus of control were
more likely to stop being self-employed after they had run their businesses for a while. There
are several implications for research like this, including the potential to better understand why
some entrepreneurs behave as they do based upon their personality types and the chance to
improve entrepreneurship education and support services.

Entrepreneurial Cognitions

It is only fairly recently that entrepreneurship scholars have focused on cognitive skills as a
primary factor that differentiates successful entrepreneurs from non-entrepreneurs and less
successful entrepreneurs. This approach deals with how entrepreneurs think differently than
non-entrepreneurs (Duening, 2010; Mitchell et al., 2007).

Entrepreneurial cognitions are the knowledge structures that people use to make
assessments, judgments or decisions involving opportunity evaluation and
venture creation and growth. In other words, research in entrepreneurial
cognition is about understanding how entrepreneurs use simplifying mental
models to piece together previously unconnected information that helps them to
identify and invent new products or services, and to assemble the necessary
resources to start and grow businesses (Mitchell, Busenitz, et al., 2002, p. 97).

Mitchell, Smith, et al. (2002) provided the example of how the decision to create a new venture
(dependent variable) was influenced by three sets of cognitions (independent variables). They
described these cognitions as follows:

Arrangements cognitions are the mental maps about the contacts, relationships,
resources, and assets necessary to engage in entrepreneurial activity;
willingness cognitions are the mental maps that support commitment to venturing
and receptivity to the idea of starting a venture; ability cognitions consist of the
knowledge structures or scripts (Glaser, 1984) that individuals have to support
the capabilities, skills, norms, and attitudes required to create a venture (Mitchell
et al., 2000). These variables draw on the idea that cognitions are structured in
the minds of individuals (Read, 1987), and that these knowledge structures act
 as “scripts” that are the antecedents of decision making (Leddo & Abelson, 1986,
p. 121; Mitchell, Smith, et al., 2002, p. 10)

Cognitive Perspective to Understanding Entrepreneurship

According to Baron (2004a), by taking a cognitive perspective, we might better understand

entrepreneurs and the role they play in the entrepreneurial process.

The cognitive perspective emphasizes the fact that everything we think, say, or
do is influenced by mental processes—the cognitive mechanisms through which
we acquire store, transform, and use information. It is suggested here that this
perspective can be highly useful to the field of entrepreneurship. Specifically, it
can assist the field in answering three basic questions it has long addressed: (1)
Why do some persons but not others choose to become entrepreneurs? (2) Why
do some persons but not others recognize opportunities for new products or
services that can be profitably exploited? And (3) Why are some entrepreneurs
so much more successful than others (Baron, 2004a, p. 221-222)?

Baron (2004a), illustrated how cognitive differences between people might explain why some
people end up pursuing entrepreneurial pursuits and others do not. For example, prospect
theory (Kahneman & Tversky, 1977) and other decision-making or behavioural theories might
be useful in this regard. Research into cognitive biases might also help explain why some
people become entrepreneurs.

Baron (2004a) also revealed ways in which cognitive concepts like signal detection theory,
regulation theory, and entrepreneurial might help explain why some people are better at
entrepreneurial opportunity recognition. He also illustrated how some cognitive models and
theories – like risk perception, counterfactual thinking, processing style, and susceptibility to
cognitive errors – might help explain why some entrepreneurs are more successful than others.

Cognitive Perspective and the Three Questions

 Why do some and not others choose to become entrepreneurs?
o Prospect Theory

o Cognitive Biases

 Why are some people better at recognizing entrepreneurial opportunities?

 o Signal Detection Theory

o Regulation Theory

o Entrepreneurial Alertness

 Why are some people more successful at entrepreneurship than others?

o Risk Perception

o Counterfactual Thinking

o Processing Style

o Susceptibility to Cognitive Errors

Entrepreneurial Scripts

 Why do some people, or groups of people, achieve high performance economic results
while others do not? Is there a relationship between the attainment of high performance
economic results and transaction cognitions (a type of economic thought pattern)?
o “Cognition has emerged as an important theoretical perspective for understanding and
explaining human behavior and action” (Dutta & Thornhill, 2008, p. 309).
o Cognitions are all processes by which sensory input is transformed, reduced,
elaborated, stored, recovered, and used (Neisser, 1976).
o Cognitions lead to the acquisition of knowledge, and involve human information
processing.
 Knowledge structure/script:
o Is a mental model, or information processing short-cut that can give information form and
meaning, and enable subsequent interpretation and action.
o The subsequent interpretation and actions can result in expert performance … they can
also result in thinking errors.
 Entrepreneurial scripting exercises are critical to giving learners an explicit
understanding of:
o the processes that transfer expertise, and

o the actual expertise itself.

 The structure of scripts (based upon Mitchell (2000)

 o Scripts are generally framed as a linear sequence of steps, usually with feedback loops,
that can explain how to achieve a particular task – perhaps like developing a business
plan.
o Sometimes scripts can be embedded within other scripts. For example, within a general
venturing script that outlines the sequences of activities that can lead to a successful
business launch, there will probably be sub-scripts describing how entrepreneurs can
search for ideas, screen those ideas until one is selected, plan how to launch a
sustainable business based upon that idea and including securing the needed financial
resources, setting up the business, starting it, effectively managing its ongoing
operations, and managing the venture such that that entrepreneur can extract the value
that they desire from the enterprise at the times and in the ways they want it.
o The most effective scripts include an indication of the norms that outline performance
standards and indicate how to determine when any step in the sequence has been
properly completed.

General Venturing Script

Generally, entrepreneurship is considered to consist of the following elements, or subscripts

(Brooks, 2009; Mitchell, 2000).

 Searching
 Idea Screening
 Planning and Financing
 Set-Up
 Start-Up
 Ongoing Operations
 Harvest

Searching (also called idea formulation or opportunity recognition)

 This script begins when a person decides they might be a potential entrepreneur (or
when an existing entrepreneur decides they need more ideas in their idea pool).
 This script ends when there are a sufficient number of ideas in the idea pool.
  The scripting process involves a logical flow of steps (including feedback loops, actions
which must occur in sequence, and actions which can be implemented at the same time
as other actions) designed to:
o overcome mental blockages to creativity which might hinder this person’s ability to
identify viable ideas;
o implement steps to identify a sufficient number of ideas (most likely 5 or more) which the
person is interested in investigating to determine whether they might be viable given
general criteria such as this person’s personal interests and capabilities;

Idea Screening (also called concept development)

 This script begins when the person with the idea pool is no longer focusing on adding
new ideas to it; but is instead taking steps to choose the best idea for them given a full
range of specific criteria.
 This script ends when one idea is chosen from among those in the idea pool.
 The scripting process involves a logical flow of steps to assess the current
situation and the trends in the following areas. The right tools must be used for each
level of analysis.
o Do the current societal-level factors indicate that a particular idea should be considered
for implementation? Do the trends in these societal-level factors indicate that the idea
will be viable and sustainable into the future?
 Evaluate the political, economic, social, technological, environmental, and legal climates
o Do the current industry/market-level factors indicate an idea is viable? Are the trends in
these factors supportive of the idea?
 Evaluate the degree of competitiveness in the industry, the threat of substitutes
emerging, the threat of new entrants to the industry, the degree of bargaining power of
buyers, and the degree of bargaining power of suppliers.
 Do a market profile analysis to assess the attractiveness of the position within the
industry that the potential venture will occupy.
o Do the current firm-level factors support the pursuit of the idea?

 Formulate and evaluate potential strategies to leverage organizational strengths,

overcome/minimize weaknesses, take advantage of opportunities, and
overcome/minimize threats;
  Complete financial projections and analyze them to evaluate financial attractiveness;
 Assess the founder fit with the ideas;
 Evaluate the core competencies of the organization relative to the idea;
 Assess advice solicited from trusted advisers

Planning and Financing (also called resource determination and acquisition)

 This script begins when the idea screening script ends and when the person begins
making the plans to implement the single idea chosen from the idea pool, which is done
in concert with securing financing to implement the venture idea.
 This script ends when sufficient business planning has been done and when adequate
financing has been arranged.
 The scripting process involves a logical flow of steps to develop a business plan and
secure adequate financing to start the business.

Set-Up (also called launch)

 This script begins when the planning and financing script ends and when the person
begins implementing the plans needed to start the business.
 This script ends when the business is ready to start-up.
 The scripting process involves a logical flow of steps, including purchasing and installing
equipment, securing the venture location and finishing all the needed renovations,
recruiting and hiring any staff needed for start-up, and the many other steps needed to
prepare for start-up.
 Start-Up (also called launch)
 This script begins when the set-up script ends and when the business opens and begins
making sales.
 This script ends when the business has moved beyond the point where the entrepreneur
must continually fight for the business’s survival and persistence. It ends when the
entrepreneur can instead shift emphasis toward business growth or maintaining the
venture’s stability.
 The scripting process involves a logical flow of steps needed to establish a new venture.

Ongoing Operations (also called venture growth)

  This script begins when the start-up script ends and when the business has established
persistence and is implementing growth (or maintenance) strategies.
 This script ends when the entrepreneur chooses to harvest the value they generated
with the venture.
 The scripting process involves a logical flow of steps needed to grow (or maintain) a
venture.

Studying Entrepreneurship

The following quotations from two preeminent entrepreneurship and entrepreneurship education
researchers indicate the growing interest in studies in this field.

Entrepreneurship has emerged over the last two decades as arguably the most potent
economic force the world has ever experienced. With that expansion has come a similar
increase in the field of entrepreneurship education. The recent growth and development in the
curricula and programs devoted to entrepreneurship and new-venture creation have been
remarkable. The number of colleges and universities that offer courses related to
entrepreneurship has grown from a handful in the 1970s to over 1,600 in 2005 (Kuratko, 2005,
p. 577).

Interest in entrepreneurship has heightened in recent years, especially in business schools.

Much of this interest is driven by student demand for courses in entrepreneurship, either
because of genuine interest in the subject, or because students see entrepreneurship education
as a useful hedge given uncertain corporate careers (Venkataraman, 1997, p. 119).

Approaches to Studying Entrepreneurship

Entrepreneurship is a discipline, which means an individual can learn about it, and about how to
be an effective entrepreneur. It is a myth that people are born entrepreneurs and that others
cannot learn to become entrepreneurs (Drucker, 1985). Kuratko (2005) asserted that the belief
previously held by some that entrepreneurship cannot be taught has been debunked, and the
focus has shifted to what topics should be taught and how they should be covered.

Solomon (2007) summarized some of the research on what should be covered in

entrepreneurship courses, and how it should be taught. While the initial focus was on actions
like developing business plans and being exposed to real entrepreneurs, more recently this
approach has been supplemented by an emphasis on technical, industry, and personal
experience. “It requires critical thinking and ethical assessment and is based on the premise
that successful entrepreneurial activities are a function of human, venture and environmental
conditions” (p. 172). Another approach “calls for courses to be structured around a series of
strategic development challenges including opportunity identification and feasibility analysis;
new venture planning, financing and operating; new market development and expansion
strategies; and institutionalizing innovation” (p. 172). This involves having students interact with
entrepreneurs by interviewing them, having them act as mentors, and learning about their
experiences and approaches through class discussions.

Sources of Information for Studying Entrepreneurship

According to Kuratko (2005), “three major sources of information supply the data related to the
entrepreneurial process or perspective” (p. 579).

1. Publications (both research-based and those written for the general public)
1. Research-based publications:
1. Academic journals like Entrepreneurship Theory and Practice, Journal of Business
Venturing, and Journal of Small Business Management
2. Proceedings of conferences like Proceedings of the Academy of
Management and Proceedings of the Administrative Sciences Association of Canada
2. Publications written for practitioners and the general public
1. Textbooks on entrepreneurship
2. Books about entrepreneurship
3. Biographies or autobiographies of entrepreneurs
4. News periodicals like Canadian Business and Profit
5. Trade periodicals like Entrepreneur and Family Business
6. Government publications available through sources like the Enterprise
Saskatchewan and Canada-Saskatchewan Business Service Centre (CSBSC) websites
and through various government resource centers
2. Direct observation and interaction with practicing entrepreneurs
1. Data might be collected from entrepreneurs and about entrepreneurs through surveys,
interviews, or other methods applied by researchers.
3. Speeches and presentations by practicing entrepreneurs
Starting and running a successful business requires proper planning and execution of
effective business tactics and strategies.

You need to prepare many essential business documents when starting a business for
maximum success; the business plan is one such document.

When creating a business, you want to achieve business objectives and financial goals like
productivity, profitability, and business growth. You need an effective business plan to
help you get to your desired business destination.

Even if you are already running a business, the proper understanding and review of the key
elements of a business plan help you navigate potential crises and obstacles.

This article will teach you why the business document is at the core of any successful
business and its key elements you can not avoid.

Let’s get started.

WHY ARE BUSINESS PLANS IMPORTANT?

Business plans are practical steps or guidelines that usually outline what companies need to
do to reach their goals. They are essential documents for any business wanting to grow and
thrive in a highly-competitive business environment.

1. Proves Your Business Viability

A business plan gives companies an idea of how viable they are and what actions they need
to take to grow and reach their financial targets. With a well-written and clearly defined
business plan, your business is better positioned to meet its goals.

2. Guides You Throughout the Business Cycle

A business plan is not just important at the start of a business. As a business owner, you
must draw up a business plan to remain relevant throughout the business cycle.

During the starting phase of your business, a business plan helps bring your ideas into
reality. A solid business plan can secure funding from lenders and investors.

After successfully setting up your business, the next phase is management. Your business
plan still has a role to play in this phase, as it assists in communicating your business
vision to employees and external partners.

Essentially, your business plan needs to be flexible enough to adapt to changes in the needs
of your business.
3. Helps You Make Better Business Decisions

As a business owner, you are involved in an endless decision-making cycle. Your business
plan helps you find answers to your most crucial business decisions.

A robust business plan helps you settle your major business components before you launch
your product, such as your marketing and sales strategy and competitive advantage.

4. Eliminates Big Mistakes

Many small businesses fail within their first five years for several reasons: lack of
financing, stiff competition, low market need, inadequate teams, and inefficient pricing
strategy.

Creating an effective plan helps you eliminate these big mistakes that lead to businesses'
decline. Every business plan element is crucial for helping you avoid potential mistakes
before they happen.

5. Secures Financing and Attracts Top Talents

Having an effective plan increases your chances of securing business loans. One of the
essential requirements many lenders ask for to grant your loan request is your business
plan.

A business plan helps investors feel confident that your business can attract a significant
return on investments (ROI).

You can attract and retain top-quality talents with a clear business plan. It inspires your
employees and keeps them aligned to achieve your strategic business goals.

If you’ve ever jotted down a business idea on a napkin with a few tasks you need to accomplish,
you’ve written a business plan — or at least the very basic components of one.
The origin of formal business plans is murky. But they certainly go back centuries. And when
you consider that 20% of new businesses fail in year 1, and half fail within 5 years, the
importance of thorough planning and research should be clear.

But just what is a business plan? And what’s required to move from a series of ideas to a formal
plan? Here we’ll answer that question and explain why you need one to be a successful business
owner.

What is a business plan?

A business plan lays out a strategic roadmap for any new or growing business.
Any entrepreneur with a great idea for a business needs to conduct market research, analyze their
competitors, validate their idea by talking to potential customers, and define their unique value
proposition.

The business plan captures that opportunity you see for your company: it describes your product
or service and business model, and the target market you’ll serve.

It also includes details on how you’ll execute your plan: how you’ll price and market your
solution and your financial projections.

Reasons for writing a business plan

If you’re asking yourself, ‘Do I really need to write a business plan?’ consider this fact:

Companies that commit to planning grow 30% faster than those that don’t.

Creating a business plan is crucial for businesses of any size or stage. It helps you develop a
working business and avoid consequences that could stop you before you ever start.

If you plan to raise funds for your business through a traditional bank loan or SBA loan, none of
them will want to move forward without seeing your business plan. Venture capital firms may or
may not ask for one, but you’ll still need to do thorough planning to create a pitch that makes
them want to invest.

But it’s more than just a means of getting your business funded. The plan is also your roadmap to
identify and address potential risks.

It’s not a one-time document. Your business plan is a living guide to ensure your business stays
on course.

What research shows about business plans

Numerous studies have established that planning improves business performance:

 71% of fast-growing companies have business plans that include budgets, sales goals, and
marketing and sales strategies.
 Companies that clearly define their value proposition are more successful than those that
can’t.
 Companies or startups with a business plan are more likely to get funding than those
without one.
 Starting the business planning process before investing in marketing reduces the
likelihood of business failure.

The planning process significantly impacts business growth for existing companies and startups
alike.
Read More: Research-backed reasons why writing a business plan matters

When should you write a business plan?

No two business plans are alike.

Yet there are similar questions for anyone considering writing a plan to answer. One basic but
important question is when to start writing it.

A Harvard Business Review study found that the ideal time to write a business plan is between 6
and 12 months after deciding to start a business.

But the reality can be more nuanced – it depends on the stage a business is in, or the type of
business plan being written.

Ideal times to write a business plan include:

 When you have an idea for a business

 When you’re starting a business
 When you’re preparing to buy (or sell)
 When you’re trying to get funding
 When business conditions change
 When you’re growing or scaling your business

Read More: The best times to write or update your business plan

How often should you update your business plan?

As is often the case, how often a business plan should be updated depends on your
circumstances.

A business plan isn’t a homework assignment to complete and forget about. At the same time, no
one wants to get so bogged down in the details that they lose sight of day-to-day goals.

But it should cover new opportunities and threats that a business owner surfaces, and incorporate
feedback they get from customers. So it can’t be a static document.

Related Reading: 5 fundamental principles of business planning

For an entrepreneur at the ideation stage, writing and checking back on their business plan will
help them determine if they can turn that idea into a profitable business.

And for owners of up-and-running businesses, updating the plan (or rewriting it) will help them
respond to market shifts they wouldn’t be prepared for otherwise.
It also lets them compare their forecasts and budgets to actual financial results. This invaluable
process surfaces where a business might be out-performing expectations and where weak
performance may require a prompt strategy change.

The planning process is what uncovers those insights.

Related Reading: 10 prompts to help you write a business plan with AI

How long should your business plan be?

Thinking about a business plan strictly in terms of page length can risk overlooking more
important factors, like the level of detail or clarity in the plan.

Not all of the plan consists of writing – there are also financial tables, graphs, and product
illustrations to include.

But there are a few general rules to consider about a plan’s length:

 Your business plan shouldn’t take more than 15 minutes to skim.

 Business plans for internal use (not for a bank loan or outside investment) can be as short
as 5 to 10 pages.

A good practice is to write your business plan to match the expectations of your audience.

If you’re walking into a bank looking for a loan, your plan should match the formal, professional
style that a loan officer would expect. But if you’re writing it for stakeholders on your own team
—shorter and less formal (even just a few pages) could be the better way to go.

The length of your plan may also depend on the stage your business is in.

For instance, a startup plan won’t have nearly as much financial information to include as a plan
written for an established company will.

Read More: How long should your business plan be?

What information is included in a business plan?

The contents of a plan business plan will vary depending on the industry the business is in.

After all, someone opening a new restaurant will have different customers, inventory needs, and
marketing tactics to consider than someone bringing a new medical device to the market.

DIFFERENT TYPES OF BUSINESS PLANS

A business plan isn’t a one-size-fits-all document. There are numerous ways to create an
effective business plan that fits entrepreneurs’ or established business owners’ needs.
Here are a few of the most common types of business plans for small businesses:

 One-page plan: Outlining all of the most important information about a business into an
adaptable one-page plan.

 Growth plan: An ongoing business management plan that ensures business tactics and
strategies are aligned as a business scales up.

 Internal plan: A shorter version of a full business plan to be shared with internal
stakeholders – ideal for established companies considering strategic shifts.

BUSINESS PLAN VS. OPERATIONAL PLAN VS. STRATEGIC PLAN

 What questions are you trying to answer?

 Are you trying to lay out a plan for the actual running of your business?
 Is your focus on how you will meet short or long-term goals?

Since your objective will ultimately inform your plan, you need to know what you’re trying to
accomplish before you start writing.

While a business plan provides the foundation for a business, other types of plans support this
guiding document.

An operational plan sets short-term goals for the business by laying out where it plans to focus
energy and investments and when it plans to hit key milestones.

Then there is the strategic plan, which examines longer-range opportunities for the business, and
how to meet those larger goals over time.

Read More: How to use a business plan for strategic development and operations

BUSINESS PLAN VS. BUSINESS MODEL

If a business plan describes the tactics an entrepreneur will use to succeed in the market, then the
business model represents how they will make money.

The difference may seem subtle, but it’s important.

Think of a business plan as the roadmap for how to exploit market opportunities and reach a state
of sustainable growth. By contrast, the business model lays out how a business will operate and
what it will look like once it has reached that growth phase.

Learn More: The differences between a business model and business plan

Moving from idea to business plan

Now that you understand what a business plan is, the next step is to start writing your business
plan.

The best way to start is by reviewing examples and downloading a business plan template. These
resources will provide you with guidance and inspiration to help you write a plan.

We recommend starting with a simple one-page plan; it streamlines the planning process and
helps you organize your ideas. However, if one page doesn’t fit your needs, there are plenty
of other great templates available that will put you well on your way to writing a useful business
plan.

KEY ELEMENTS OF BUSINESS PLAN

Starting and running a successful business requires well-laid actions and supporting
documents that better position a company to achieve its business goals and maximize
success.

A business plan is a written document with relevant information detailing business

objectives and how it intends to achieve its goals.

With an effective business plan, investors, lenders, and potential partners understand your
organizational structure and goals, usually around profitability, productivity, and growth.

Every successful business plan is made up of key components that help solidify the
efficacy of the business plan in delivering on what it was created to do.

Here are some of the components of an effective business plan.

1. Executive Summary

One of the key elements of a business plan is the executive summary. Write the executive
summary as part of the concluding topics in the business plan. Creating an executive
summary with all the facts and information available is easier.

In the overall business plan document, the executive summary should be at the forefront of
the business plan. It helps set the tone for readers on what to expect from the business plan.

A well-written executive summary includes all vital information about the organization's
operations, making it easy for a reader to understand.

The key points that need to be acted upon are highlighted in the executive summary. They
should be well spelled out to make decisions easy for the management team.

A good and compelling executive summary points out a company's mission statement and a
brief description of its products and services.
An executive summary summarizes a business's expected value proposition to distinct
customer segments. It highlights the other key elements to be discussed during the rest of
the business plan.

Including your prior experiences as an entrepreneur is a good idea in drawing up an

executive summary for your business. A brief but detailed explanation of why you decided
to start the business in the first place is essential.

Adding your company's mission statement in your executive summary cannot be

overemphasized. It creates a culture that defines how employees and all individuals
associated with your company abide when carrying out its related processes and operations.

Your executive summary should be brief and detailed to catch readers' attention and
encourage them to learn more about your company.

Components of an Executive Summary

Here are some of the information that makes up an executive summary:

 The name and location of your company

 Products and services offered by your company

 Mission and vision statements

 Success factors of your business plan

2. BUSINESS DESCRIPTION

Your business description needs to be exciting and captivating as it is the formal

introduction a reader gets about your company.

What your company aims to provide, its products and services, goals and objectives, target
audience, and potential customers it plans to serve need to be highlighted in your business
description.

A company description helps point out notable qualities that make your company stand out
from other businesses in the industry. It details its unique strengths and the competitive
advantages that give it an edge to succeed over its direct and indirect competitors.

Spell out how your business aims to deliver on the particular needs and wants of identified
customers in your company description, as well as the particular industry and target market
of the particular focus of the company.
Include trends and significant competitors within your particular industry in your company
description. Your business description should contain what sets your company apart from
other businesses and provides it with the needed competitive advantage.

In essence, if there is any area in your business plan where you need to brag about your
business, your company description provides that unique opportunity as readers look to get
a high-level overview.

Components of a Business Description

Your business description needs to contain these categories of information.

 Business location

 The legal structure of your business

 Summary of your business’s short and long-term goals

3. MARKET ANALYSIS

The market analysis section should be solely based on analytical research as it details
trends particular to the market you want to penetrate.

Graphs, spreadsheets, and histograms are handy data and statistical tools you need to utilize
in your market analysis. They make it easy to understand the relationship between your
current ideas and the future goals you have for the business.

All details about the target customers you plan to sell products or services should be in the
market analysis section. It helps readers with a helpful overview of the market.

In your market analysis, you provide the needed data and statistics about industry and
market share, the identified strengths in your company description, and compare them
against other businesses in the same industry.

The market analysis section aims to define your target audience and estimate how your
product or service would fare with these identified audiences.

Market analysis helps visualize a target market by researching and identifying the primary
target audience of your company and detailing steps and plans based on your audience
location.

Obtaining this information through market research is essential as it helps shape how your
business achieves its short-term and long-term goals.
Market Analysis Factors

Here are some of the factors to be included in your market analysis.

 The geographical location of your target market

 Needs of your target market and how your products and services can meet those needs

 Demographics of your target audience

Components of the Market Analysis Section

Here is some of the information to be included in your market analysis.

 Industry description and statistics

 Demographics and profile of target customers

 Marketing data for your products and services

 Detailed evaluation of your competitors

4. MARKETING PLAN

A marketing plan defines how your business aims to reach its target customers, generate
sales leads, and, ultimately, make sales.

Promotion is at the center of any successful marketing plan. It is a series of steps to pitch a
product or service to a larger audience to generate engagement. Note that the marketing
strategy for a business should not be stagnant and must evolve depending on its outcome.

Include the budgetary requirement for successfully implementing your marketing plan in
this section to make it easy for readers to measure your marketing plan's impact in terms of
numbers.

The information to include in your marketing plan includes marketing and promotion
strategies, pricing plans and strategies, and sales proposals. You need to include how you
intend to get customers to return and make repeat purchases in your business plan.

5. SALES STRATEGY

Sales strategy defines how you intend to get your product or service to your target
customers and works hand in hand with your business marketing strategy.
Your sales strategy approach should not be complex. Break it down into simple and
understandable steps to promote your product or service to target customers.

Apart from the steps to promote your product or service, define the budget you need to
implement your sales strategies and the number of sales reps needed to help the business
assist in direct sales.

Your sales strategy should be specific on what you need and how you intend to deliver on
your sales targets, where numbers are reflected to make it easier for readers to understand
and relate better.

6. COMPETITIVE ANALYSIS

Providing transparent and honest information, even with direct and indirect competitors,
defines a good business plan. Provide the reader with a clear picture of your rank against
major competitors.

Identifying your competitors' weaknesses and strengths is useful in drawing up a market

analysis. It is one information investors look out for when assessing business plans.

The competitive analysis section clearly defines the notable differences between your
company and your competitors as measured against their strengths and weaknesses.

This section should define the following:

 Your competitors' identified advantages in the market

 How do you plan to set up your company to challenge your competitors’ advantage
and gain grounds from them?

 The standout qualities that distinguish you from other companies

 Potential bottlenecks you have identified that have plagued competitors in the same
industry and how you intend to overcome these bottlenecks

In your business plan, you need to prove your industry knowledge to anyone who reads
your business plan. The competitive analysis section is designed for that purpose.

7. MANAGEMENT AND ORGANIZATION

Management and organization are key components of a business plan. They define its
structure and how it is positioned to run.

Whether you intend to run a sole proprietorship, general or limited partnership, or

corporation, the legal structure of your business needs to be clearly defined in your
business plan.
Use an organizational chart that illustrates the hierarchy of operations of your company and
spells out separate departments and their roles and functions in this business plan section.

The management and organization section includes profiles of advisors, board of directors,
and executive team members and their roles and responsibilities in guaranteeing the
company's success.

Apparent factors that influence your company's corporate culture, such as human resources
requirements and legal structure, should be well defined in the management and
organization section.

Defining the business's chain of command if you are not a sole proprietor is necessary. It
leaves room for little or no confusion about who is in charge or responsible during business
operations.

This section provides relevant information on how the management team intends to help
employees maximize their strengths and address their identified weaknesses to help all
quarters improve for the business's success.

8. PRODUCTS AND SERVICES

This business plan section describes what a company has to offer regarding products and
services to the maximum benefit and satisfaction of its target market.

Boldly spell out pending patents or copyright products and intellectual property in this
section alongside costs, expected sales revenue, research and development, and
competitors' advantage as an overview.

At this stage of your business plan, the reader needs to know what your business plans to
produce and sell and the benefits these products offer in meeting customers' needs.

The supply network of your business product, production costs, and how you intend to sell
the products are crucial components of the products and services section.

Investors are always keen on this information to help them reach a balanced assessment of
if investing in your business is risky or offer benefits to them.

You need to create a link in this section on how your products or services are designed to
meet the market's needs and how you intend to keep those customers and carve out a
market share for your company.

Repeat purchases are the backing that a successful business relies on and measure how
much customers are into what your company is offering.

This section is more like an expansion of the executive summary section. You need to
analyze each product or service under the business.
9. OPERATING PLAN

An operations plan describes how you plan to carry out your business operations and
processes.

The operating plan for your business should include:

 Information about how your company plans to carry out its operations.

 The base location from which your company intends to operate.

 The number of employees to be utilized and other information about your company's
operations.

 Key business processes.

This section should highlight how your organization is set up to run. You can also
introduce your company's management team in this section, alongside their skills, roles,
and responsibilities in the company.

The best way to introduce the company team is by drawing up an organizational chart that
effectively maps out an organization's rank and chain of command.

What should be spelled out to readers when they come across this business plan section is
how the business plans to operate day-in and day-out successfully.

10. FINANCIAL PROJECTIONS AND ASSUMPTIONS

Bringing your great business ideas into reality is why business plans are important. They
help create a sustainable and viable business.

The financial section of your business plan offers significant value. A business uses a
financial plan to solve all its financial concerns, which usually involves startup costs, labor
expenses, financial projections, and funding and investor pitches.

All key assumptions about the business finances need to be listed alongside the business
financial projection, and changes to be made on the assumptions side until it balances with
the projection for the business.

The financial plan should also include how the business plans to generate income and the
capital expenditure budgets that tend to eat into the budget to arrive at an accurate cash
flow projection for the business.

Base your financial goals and expectations on extensive market research backed with
relevant financial statements for the relevant period.
Examples of financial statements you can include in the financial projections and
assumptions section of your business plan include:

 Projected income statements

 Cash flow statements

 Balance sheets

 Income statements

Revealing the financial goals and potentials of the business is what the financial projection
and assumption section of your business plan is all about. It needs to be purely based on
facts that can be measurable and attainable.

11. REQUEST FOR FUNDING

The request for funding section focuses on the amount of money needed to set up your
business and underlying plans for raising the money required. This section includes plans
for utilizing the funds for your business's operational and manufacturing processes.

When seeking funding, a reasonable timeline is required alongside it. If the need arises for
additional funding to complete other business-related projects, you are not left scampering
and desperate for funds.

If you do not have the funds to start up your business, then you should devote a whole
section of your business plan to explaining the amount of money you need and how you
plan to utilize every penny of the funds. You need to explain it in detail for a future
funding request.

When an investor picks up your business plan to analyze it, with all your plans for the
funds well spelled out, they are motivated to invest as they have gotten a backing guarantee
from your funding request section.

Include timelines and plans for how you intend to repay the loans received in your funding
request section. This addition keeps investors assured that they could recoup their
investment in the business.

12. EXHIBITS AND APPENDICES

Exhibits and appendices comprise the final section of your business plan and contain all
supporting documents for other sections of the business plan.

Some of the documents that comprise the exhibits and appendices section includes:
  Legal documents

 Licenses and permits

 Credit histories

 Customer lists

The choice of what additional document to include in your business plan to support your
statements depends mainly on the intended audience of your business plan. Hence, it is
better to play it safe and not leave anything out when drawing up the appendix and exhibit
section.

Supporting documentation is particularly helpful when you need funding or support for
your business. This section provides investors with a clearer understanding of the research
that backs the claims made in your business plan.

There are key points to include in the appendix and exhibits section of your business plan.

 The management team and other stakeholders resume

 Marketing research

 Permits and relevant legal documents

 Financial documents
WHAT IS BUSINESS DEVELOPMENT?

Business development is the process of planning for future growth by identifying new
opportunities, forming partnerships, and adding value to a company. It involves understanding
the target audience, market opportunities, and effective outreach channels to drive success.

Business development may involve objectives around sales growth, business expansion,
strategic partnerships, and increased profitability. The process impacts every department,
including sales, marketing, manufacturing, human resources, accounting, finance, product
development, and vendor management.

BENEFITS OF A SMALL BUSINESS

Small businesses can benefit their owners in a range of ways. The business is likely to be less
bureaucratic than a large company, allowing its owner or owners a greater degree of autonomy.
If the business is profitable, its owners also stand to benefit more directly than they would as
employees of a larger enterprise.

Owning a business can also entitle a person to a long list of tax deductions for which might not
otherwise be eligible. For example, if they work from home and maintain an office there, they
may be able to write off a portion of their housing costs.

CHALLENGES FACING SMALL BUSINESSES

Running a small business isn’t for everyone. Just as owners stand to profit more if the business
succeeds, they may suffer more financially if it fails. Many times, they will have put their life
savings on the line.

Small businesses can face other challenges based on their size. They may find it harder to raise
capital for expansion or other purposes. They may also have more trouble hiring employees in a
tight labor market if they’re unable to offer wage and benefit packages that are competitive with
their larger counterparts.

However, many small businesses manage to overcome the obstacles. Looking at the pre-COVID
years of 1994 to 2000, the SBA reports that an average of 67.7% of new businesses survived at
least two years. In other words, about a third of new businesses failed, but two-thirds made it
that far. The five-year survival rate for that period was 48.9%.21

10 Types of Business Ownerships (With Pros and Cons)

Owning a business is an important undertaking that offers immense benefits as well as a fair
share of challenges. Among the many decisions you'll make when starting a business is choosing
the type of business structure you'll use. Understanding the different types of structures available
can help you make this important decision.
In this article, we explore 10 different forms of business ownership structures and the advantages
and disadvantages of each.

Here are 10 forms of business ownership and their main advantages and disadvantages:

1. Sole proprietorship

A sole proprietorship is owned and operated by one individual. The owner of a sole
proprietorship doesn't need the approval of a board or partner to make daily business decisions.
They also get to keep and determine what to do with the business' profits.

Here are the advantages and disadvantages of a sole proprietorship:

Advantages

They're simpler to form than other businesses because it doesn't require a lot of paperwork.

The owner has sole control of all processes and decision-making.

Filing taxes for this type of business is easier than for other types of businesses.

Disadvantages

The owner accepts all responsibility for business losses.

The owner is responsible for raising capital for startup costs.

It may be harder to sell the business.

2. Partnership

A partnership is a form of ownership that involves two or more owners controlling a business.
The joint owners may run the day-to-day activities by themselves or through appointed
representatives. In a partnership, the owners sign a formal agreement that clearly states a
partner's rights, shares and responsibilities.

Business leaders typically divide partnerships into limited liability partnerships and unlimited
liability partnerships. Here's how these types of partnerships work:
Limited liability partnership: In a limited liability partnership, individual partners don't accept
losses caused by another, meaning no legal entity can seize or sell one partner's possessions to
pay for the other partner's debts.

Unlimited liability partnership: In an unlimited liability partnership, both partners are responsible
for the business. If one partner is directly responsible for a loss, all other partners pay for the
debt, even if they aren't directly responsible for the losses.

Here are the advantages and disadvantages of partnerships:

Advantages

They provide the potential to gain wider access to knowledge and expertise from partners.

The infusion of capital is easier than it is in other business structures.

This business type offers the ability to share the burden of startup costs and capital expenditure.

The division of labor among partners creates a better work-life balance.

Disadvantages

Partners carry the burden of liabilities, regardless of the partner who is responsible for the debt.

There's a potential loss of autonomy as all partners deliberate on key decisions.

There can be more potential for conflict between partners.

Selling complications can arise if one partner disagrees with the plan to sell the business.

Related: Partnership vs. Sole Proprietorship: 3 Inherent Differences

3. Limited liability company

In a limited liability company, the owner's assets, like their car, house and personal accounts,
have protection if their business goes bankrupt. This ownership option is a good choice for small
business owners looking to start a new business. Here are some advantages and disadvantages of
a limited liability company:

Advantages

Flexibility to adopt different tax structures

Potential to earn tax deductions for business losses

Responsibility for business liabilities doesn't belong to shareholders

Ability to restructure without seeking regulator approval

Disadvantages

It can be challenging to raise capital for this type of business.

This can be more expensive to form than other structures.

The salary and profits are often subject to self-employment taxes.

4. Private corporation

A private corporation involves individuals forming a group to manage a business. This kind of
ownership separates assets and liabilities from the owners. In case of loss, the owners only lose
the amount they invested. Those starting a corporation submit a document called the articles of
incorporation in the state where their business is located.

Private corporations allow individuals to buy stock from the corporation, giving the business
more capital to grow the business or invest in better technology or tools. Individuals who buy
stock become part-owners of the corporation. Some advantages and disadvantages of a private
corporation include:

Advantages

No obligation to reveal financial results to the public

Limited or no shareholder pressure for short-term results

Limited liability exposure for owners

Disadvantages

Restricted access to capital markets

More stringent regulations than a partnership or sole proprietorship

Potential for higher administrative costs

Less control of the business with more shareholders

Related: What Is a Privately Owned Business?

5. Cooperative

A cooperative is an enterprise that is privately owned by the same people who benefit from it.
The owners of a cooperative, who are also the shareholders, are involved in the decision-making
process. There is no limit to the number of shareholders in a cooperative, which means there is
no limit to the number of owners.

Owners receive a share of the profits from the cooperative's investments, depending on their
shareholdings. The owners of a cooperative elect a board who manages the business. Here are
some advantages and disadvantages of a cooperative:

Advantages

Grants equal rights to members during the decision-making process

Brings members together for a common cause

Provides access to diverse and unique funding opportunities

Disadvantages

Fewer incentives for angel investors and venture capitalists

Slower decision-making among owners

6. Nonprofit corporation

A nonprofit corporation operates to benefit a community or providing a social service. For

someone to operate this form of ownership, they're required to prove to a government entity that
their services benefit society. These corporations are typically charitable organizations in the
fields of science, criminal justice, education and humanitarian affairs.

Nonprofit organizations that choose to incorporate and file a certificate of formation with their
Secretary of State's Office become nonprofit corporations. Many, but not all, nonprofit
organizations choose to incorporate to take advantage of the many available benefits. Here are
some advantages and disadvantages of becoming a nonprofit corporation:
Advantages

There is limited liability protection for owners' assets.

You are eligible for tax exemption.

You are eligible to receive grants.

You have diverse fundraising opportunities.

Donations are tax-exempt.

Disadvantages

There are high startup costs.

The approval of tax exemption status may take a long time.

You are not always eligible for tax exemption.

There might be excessive public scrutiny of how you use funds and donations.

7. Benefit corporation

Sometimes called B corps, benefit corporations aim to benefit the public while also making a
profit. Certified B corporations are benefit corporations that have received a third-party
certification from the nonprofit B Lab. Certified B corps must achieve a minimum verified score
on the B Impact Assessment and are required to gain recertification every three years.

Both benefit corporations and certified B corps are legally required to consider the impact of
their decisions on their workers, customers, suppliers, community and the environment. Most
government entities require B corporations to submit regular reports that indicate the public
benefit stemming from their business. Some advantages and disadvantages of a B corporation
and a certified B corps include:

Advantages

It allows instant networking with like-minded corporations.

It may benefit from tax exemptions.

It attracts investors seeking to make a social impact.

Disadvantages

There are more expansive reporting requirements for both B corps and certified B corps.

There are stringent standards to maintain status as a certified B corps.

The B Lab certification fees range from $500 to $50,000 per year.

8. Close corporation

A close corporation, also known as a privately held company, private company or family
corporation, is a business whose ownership consists of a limited number of shareholders who
have close associations with the business. Owners of this type of business can't offer it for public
trading, which means if someone wants to sell their shares, they can only sell them to co-owners.

Here are a few advantages and disadvantages of a close corporation:

Advantages

There are fewer formalities besides filing incorporation documents.

There is greater control in the daily running of the business.

There are strong liability protection options for personal assets.

There is freedom in financial structuring.

There is no outside pressure for performance from public shareholders.

Disadvantages

Exit options may have limitations.

Some jurisdictions may not recognize close corporations.

Shareholders may have increased responsibilities.

You may not make a public offering of stock.

Related: 5 Types of Business Structures (Plus Tips for Choosing One)

9. C corporation
A C corporation is a privately owned business that can have an unlimited number of
shareholders. Most major companies treat themselves as C corporations for federal income tax
purposes. The shareholders in a C corporation pay taxes separately from the business, hence they
have double taxation at the corporate and personal levels. Corporations pay taxes on profits
before distributing the remaining to the owners as dividends. Here are some advantages and
disadvantages of C corporations:

Advantages

The legal obligations of the corporation cannot become the debt of any individual associated
with the business.

They can raise money by selling stock.

Disadvantages

They may have more extensive reporting, record-keeping and operational processes.

They pay income tax on profits and the government may tax them twice.

10. S Corporation

An S corporation gets its name from Subchapter S of the Internal Revenue Code. This type of
corporation is a common choice for small business owners. To qualify as an S corporation, a
business must meet specific requirements, which include:

Must be incorporated in the U.S.

Must only have one class of stock

Must have no more than 100 shareholders

Must have shareholders that are either individuals, specific trusts or tax-exempt organizations

Here are some advantages and disadvantages of S corporations:

Advantages

They get the benefits of incorporation while enjoying the tax-exempt privileges of a partnership.

They may not face some types of corporate penalties.

They make transferring ownership simple.

They don't face double taxation.

Disadvantages

They must meet certain requirements.

They must allow shareholders to vote on major decisions.

They can only issue common stock, which could impact their ability to raise capital.
INNOVATION SKILLS

Innovation is the ability to generate ideas that create value and improve processes, from
inventing a machine to finding a faster route to work. Having innovation skills is an asset in the
workplace because they enable you to solve problems and advance knowledge in your field.
Investing in your own innovation skills can help you become a competitive applicant for top
positions and promote your career success.

What are innovation skills?

Innovation skills are the knowledge and abilities you use to create and adapt to change. They
allow you to use your existing knowledge to discover original ideas that benefit you and your
team. Being innovative requires you to envision situations from multiple perspectives and think
critically about the best approach to a problem. Having strong innovation skills at work means
you have the personal characteristics, interpersonal intelligence and technical expertise to drive
progress in your job.

Examples of innovation skills

Here are some of the top innovation skills and how you can use them in the workplace:

Imagination

Innovators are forward-thinking individuals who can use their imagination to envision better
ways to accomplish tasks. Having strong imagination skills gives you the ability to predict the
outcome of your ideas and consider creative ways to achieve your goals. Your imagination can
inspire you and your team during brainstorming sessions, contribute to new inventions and drive
progress in your field.

Problem-solving

Innovative people see problems and challenges as opportunities to develop better practices or
create a new product. Part of being innovative is understanding how to identify common
problems and finding the best way to address them. In the workplace, you can use problem-
solving skills to save money, improve efficiency and troubleshoot issues for customers.

Design
Innovation requires you to think of creative concepts and determine realistic specifications for
implementing those plans. Designing products and processes is the way you turn innovative
ideas into reality. You can use technical design skills like product development and engineering
to develop functional prototypes.

Critical thinking

To improve how your workplace functions, you need to think critically about the reasoning
behind company processes. Critical thinking enables you to analyze a situation and identify areas
for improvement. You can use critical thinking in the workplace to be proactive about making
improvements and maintain a growth-oriented mindset.

Flexibility

When you're comfortable being flexible and adapting to your surroundings, you can discover
innovative applications for your skills. Flexibility gives you the ability to challenge yourself,
help others and apply your existing knowledge to unique scenarios. Being flexible can also help
you adjust to changing trends in your industry and achieve success regardless of the
circumstances.

Persuasion

Innovation requires teamwork, so you need to use persuasion to convince others to implement
your ideas/ By explaining the logic of your ideas and appealing to others' goals, you can
persuade others to take risks on innovative methods. Convincing others to invest in your ideas
can speed up the innovation process and give you more opportunities to test the impact of your
innovations.

Entrepreneurship

Entrepreneurship is the ability to find business opportunities and use your ideas to create value.
Having an entrepreneurial mindset makes it easy to innovate based on customer demand. In the
workplace, you use entrepreneurship to start new projects and initiatives that can increase profit
for you and your team while providing a needed service or product to the public.

HOW TO IMPROVE INNOVATION SKILLS

Use these steps as a guide to develop your innovation skills:

1. Take risks

Being innovative involves taking risks and learning through trial and error. Educate yourself
about the pros and cons of each choice you make and take risks that could positively transform
your workplace.

2. Look for new opportunities

Constantly search for new projects where you can grow your skills and challenge your abilities.
Volunteer to help with new initiatives so that you can learn from others and apply your talents to
diverse environments.

3. Challenge the norm

Question the reason behind workplace processes to find areas for innovation. Ask yourself if
there are better ways to accomplish the same tasks and take initiative to make improvements.

4. Set ambitious goals

Think about who you want to help with your innovations and set goals to achieve that outcome.
Imagine how your ideas could benefit you, your workplace or your clients, then search for ways
to apply them.

5. Ask for feedback

When developing a new idea, ask others for input, such as friends, family, peers or coworkers.
Getting feedback from other perspectives can help you consider different factors and make your
ideas more realistic.

6. Be resilient

Being innovative involves being able to recover from failures and learn from mistakes. Practice
resilience by reflecting on what changes you can implement to make your next project more
successful.

INNOVATION SKILLS IN THE WORKPLACE

Use these tips to apply your innovation skills to the workplace and promote innovation in your
field:

Contribute during meetings. Speak up when you have an idea about how to improve a project.
Voicing your opinion during meetings develops your confidence and gives you the opportunity
to implement your creative ideas.

Research industry trends. Stay informed about developments in your field by reading journals
and attending conferences. Learning about other innovations in your field can help you predict
upcoming trends and adopt new technology in your work.

Experiment with new ideas. When you have a new idea, find ways to test it and measure the
outcome. Conducting experiments and trial runs can help you refine your ideas before large-scale
implementation.

Change your work environment. Adjusting your surroundings can encourage your creativity.
Alternate where you work or make modifications to your workspace to inspire new ways of
thinking.

Collaborate with colleagues. Working together with others can improve productivity during
brainstorming sessions. Find collaborators who can share feedback about your ideas and develop
a creative environment.

Collect data. Gather information about current workplace processes and track how changes in the
workplace impact productivity. Understanding the results of different techniques can help you
recognize patterns and select the best methods for future projects.

WHY ARE INNOVATION SKILLS ESSENTIAL?

In your professional life, skills play a vital role.

They help you position yourself in the hierarchy of the job designations as well as promise good
results.

Innovation skills help you stay relevant and carve a unique niche for yourself.
The spark of innovation can bring a fresh breath of air to the monotony of work you might be
experiencing.

Your new ideas can earn you better returns from the job. They might be in the form of
promotion, an increase in salary or bonus earnings.

Since the returns of the use of innovation skills are so attractive and glorious, it is a highly
sought after skill.

In addition to all this, innovation skills are quite significant for personal life as well because it
opens new ways of thinking that enhances your creative thinking skills most constructively and
productively.

13 WAYS TO IMPROVE INNOVATION SKILLS

Innovation skill is a way to enhance your prospects of going up the spiral of success. There have
been various researches and studies conducted to devise steps and tips to improve innovation
skills. Some of them are given below.

1. Thinking out of the box

Innovation means something new. To grab that newness, you need more original ways of
thinking. Hence, thinking out of the box, breaking the regular chain of thoughts and initiating a
new one is essential. For improving your innovation skills, you need to think something different
from the rest of the people associated with similar sorts of tasks. When you think out of the box,
you let yourself delve into a new type of idea for doing the same task, which will ultimately
enhance your innovative thinking patterns.

2. Creative thinking

Many times, creativity is a way of innovation. Creative thinking is a way of thinking by applying
the techniques used to create something new. Once you gain the ability to think with the idea of
creating something new, you can approach innovation. Creative thinking is one of the essential
skills that reside upon the base of every innovation. With creative thinking, you will crave for a
new innovative way of doing something which will empower you to innovate something new.
This will effectively enhance your innovation skills.
3. Think like a system

Every system tries to fulfill the client requirements or the task requirements to the maximum
best. If you think this way, you can find newer ways to fulfill the requirements. These more
unique ways are called innovation. When you analyze the working of a system, you will notice
that systems work to accomplish a task in the least possible time with absolute accuracy and
optimized productivity.

Incorporating this approach in your behavior will compel you to think of new ways to complete a
task in the least possible time without compromising the accuracy and efficiency, so
productivity, along with profits increase. This way of thinking will enable you to come up with a
new innovative idea, and hence your creative skills will get improved.

4. Improve reasoning skills

Reasoning skills form the ability to think about a particular way to work in a sensible and result-
oriented manner. You can implement reasoning for innovative ideas and enhance them further.

Reasoning skills are instrumental in enabling you to be more productive with your decision
making as well as creative skills. You will also be able to come up with the ideas that have
higher chances to become result-driven. Hence, reasoning skills are considered as the backbone
of rock-solid innovative skills.

5. Be a good listener

You should listen to others and try to think about their ideas and concepts. Be open to absorbing
other points of view. Also, adaptability enhances innovation. It would help if you tried adopting
newer versions of solutions for the betterment of your company. Being a good listener will help
you in having the skills to analyze different versions while thinking of some news of resolving
any issue.

6. Have an unapologetically fierce imagination power

Everything you imagine is not going to turn right. But if some ideas do turn true, they can be
miraculous. So, don’t ever be scared of imagining even the most impossible things. Be
unapologetic about it. With the right kind of imagination power, you will have the power of
visualization that will give you the ability to think innovative ways for doing any task.
Imagination opens the wings of innovation that guide an individual in a path of new ideas of
doing the same things more effectively and efficiently.

7. Prototype your imaginations | Innovation Skills

Prototyping means creating a small model that represents a more extensive system to
demonstrate its features and working. Try and put your fantasies on paper. If you successfully
create an efficient design, that will stand as your innovation. Prototyping is essential for
sharpening your innovation skills because just imagining things may let you visualize something
unrealistic. Prototyping your imagination will enable you in coming up with ideas that are
realistic and functional. Hence, to improve your innovation skills, you should prototype your
imaginations.

8. Actively participate in team activities

A team is a body that functions the best in togetherness. Team activities like brainstorming
sessions are conducted to enhance the team spirit and develop the thinking skills of the team
members. You will get to know about different other forms of ideas and possibilities. Such
activities will improve the innovation skills.

9. Have clear communication

Sharing of ideas and concepts helps have better communication. You can devise a plan based on
someone else’s ideas and vice-versa. This is called healthy teamwork. You can innovate together
and succeed together. With clear communication, you will be able to share your ideas in a more
proper fashion, which will, in turn, offer you better chances of getting the right feedback about
the effectiveness of your thoughts.

10. Make decisions based on judgments | Innovation Skills

From the inferences of team activities or other tasks, you can make judgments about the current
situations. Decisions based on these judgments are supposed to be realistic and relevant. These
will help in innovation.
When you make your decisions based upon the judgments, you will have better chances of
successful conversions of your innovative ideas. Innovative ideas must be functional, and
decisions based on judgments help in ensuring this.

11. Trust your instincts and intuitions

Intuitions and instincts never lie. If you instinctively feel potential in some idea, give it a try.The
biggest of inventions and discoveries were once considered absurd. So, try it and prove it that
innovation skills exist in you. For having effective innovation skills, it is the very first step to
trust upon your instincts and intuitions, as this will only help you in believing in creativity.

12. Develop problem-solving skills

Problems are faced at every point, and every problem has a solution. So, if you develop the
desire to solve every problem by a strategic plan, you will aim to find an optimal solution that is
new and innovative. With problem-solving skills, you will always crave for new and effective
ways to solve a problem in lesser time. This will play the most critical role in improving your
innovation skills.

13. Have a futuristic vision | Innovation Skills

The future holds wonders for those who prepare for it today! If you can envisage the conditions
and situations that will take place years later, you can develop ideas based on them. This way,
innovation can be fuelled by futuristic vision. With a futuristic vision, many scientists and
entrepreneurs have come up with new technology and system that we are using these days.

In the same way, when you will have a futuristic vision, you will also be able to think of
innovative ideas that can make the future more convenient and blissful. This approach will, for
sure guide you on the path of innovation skills.

Final Thoughts about Innovation Skills!

Innovation leads to invention. Invention leads to progress. Hence, innovation is a crucial aspect
of enhancing your lives. In professional and personal lives, you can bring about a wave of
change through innovation. These changes are instrumental in increasing the value of your
solutions. Hence, innovation as a skill should be developed and enhanced for a better living.

However, with your innovation skills, your ideas must be relevant, and you don’t settle for
anything less. Here, staying suitable means keeping up with times. The market conditions and
requirements are fast changing.
What Is An Entrepreneurial Consultant?

Ever found yourself intrigued by the dynamic world of entrepreneurship and consulting? Well,
you’re in for a treat because today we’re diving into the fascinating realm of an entrepreneurial
consultant. So, what is an entrepreneurial consultant, you ask? Buckle up as we unravel the
layers of this intriguing profession that seamlessly combines the spirit of entrepreneurship with
the strategic insight of a consultant.

Get ready to explore how these professionals navigate the ever-evolving business landscape,
offering a unique blend of innovation, problem-solving, and business acumen. Welcome to the
world of entrepreneurial consulting – where creativity meets strategy, and challenges transform
into opportunities. What is an entrepreneurial consultant? Let’s find out!

WHAT IS AN ENTREPRENEURIAL CONSULTANT?

An entrepreneurial consultant is a professional who provides advice, guidance, and support to

individuals or businesses looking to start, grow, or improve their entrepreneurial ventures. These
consultants typically have expertise in various aspects of business, such as strategy, marketing,
finance, operations, and management.

Entrepreneurial consultants work closely with their clients to understand their goals, challenges,
and opportunities. They then offer tailored advice and solutions to help clients achieve success in
their entrepreneurial endeavors. The specific services provided by entrepreneurial
consultants can vary widely and may include:

Business Planning: Assisting in the development of comprehensive business plans, including

market analysis, financial projections, and strategic planning.

Market Research: Conducting research to identify target markets, analyze competitors, and
assess industry trends to inform business decisions.

Financial Management: Helping entrepreneurs manage their finances, including budgeting,

financial forecasting, and identifying funding sources.
Marketing and Sales: Providing guidance on marketing strategies, branding, and sales
techniques to effectively reach and engage customers.

Operational Efficiency: Advising on improving operational processes and efficiency to enhance

overall business performance.

Risk Management: Identifying and mitigating potential risks to the business, ensuring a more
sustainable and resilient operation.

Networking and Relationship Building: Facilitating connections with other professionals,

mentors, investors, or potential business partners to expand the entrepreneur’s network.

Technology Integration: Advising on the use of technology to streamline processes, improve

productivity, and stay competitive in the market.

Entrepreneurial consultants may work independently or as part of consulting firms. They often
leverage their experience and knowledge to guide clients through the complexities of
entrepreneurship and help them make informed decisions. The ultimate goal is to contribute to
the success and sustainability of the entrepreneurial ventures they support.

HOW DO THEY DIFFER FROM TRADITIONAL CONSULTANTS?

Entrepreneurial consultants and traditional consultants share many similarities, but there are
some key differences in their focus, approach, and the types of clients they typically work with.
Here are some distinctions between the two:

Client Base:

Entrepreneurial Consultants: Primarily work with startups, small businesses, and

individual entrepreneurs who are in the early stages of business development or seeking
to launch a new venture.

Traditional Consultants: Often work with larger, established companies, corporations,

and organizations that may be facing challenges related to growth, efficiency, or strategic
direction.
Scope of Work:

Entrepreneurial Consultants: Tend to have a broader scope of work, covering various

aspects of starting and growing a business, including business planning, market entry
strategy, and early-stage operations.

Traditional Consultants: Often specialize in specific areas such as management,

finance, operations, or technology, and their projects may be more focused on solving
particular business challenges.

Risk Tolerance and Adaptability:

Entrepreneurial Consultants: Need to be comfortable with ambiguity, risk, and rapid

change, as startups and entrepreneurs often operate in dynamic and uncertain
environments. They may need to adapt quickly to changing circumstances.

Traditional Consultants: Typically work with more stable and established

organizations, where the focus is often on improving existing processes rather than
navigating the uncertainties associated with starting a new business.

Long-Term vs. Short-Term Engagements:

Entrepreneurial Consultants: Engagements may be shorter-term and project-based,

especially when helping with specific aspects of business launch or early-stage growth.

Traditional Consultants: Engagements may be longer-term and involve ongoing

relationships with clients, addressing sustained challenges and providing ongoing
support.

Mindset and Approach:

Entrepreneurial Consultants: Often possess an entrepreneurial mindset themselves,

understanding the challenges and opportunities unique to startups. They may focus on
fostering innovation and creativity.

Traditional Consultants: Tend to have a more structured and analytical approach,

drawing on established frameworks and best practices to address business problems.

Resource Constraints:
 Entrepreneurial Consultants: Work with clients who may have limited resources,
requiring creative and cost-effective solutions. This may involve finding ways to achieve
goals with constrained budgets.

Traditional Consultants: May work with clients who have more substantial resources
and are willing to invest in comprehensive consulting services.

While these distinctions can help differentiate between entrepreneurial consultants and
traditional consultants, it’s important to note that the consulting industry is diverse, and
individual consultants may blur these lines based on their expertise and the specific needs of
their clients.

Additionally, some consultants may transition between working with startups and more
established businesses at different points in their careers.

WHAT SKILLS DEFINE A SUCCESSFUL ENTREPRENEURIAL CONSULTANT?

Successful entrepreneurial consultants possess a combination of skills that enable them to

navigate the dynamic and challenging landscape of startups and small businesses.

Here are key skills that define a successful entrepreneurial consultant:

Entrepreneurial Mindset: A successful entrepreneurial consultant thinks like an entrepreneur,

demonstrating a high level of creativity, adaptability, and a willingness to take calculated risks.
They understand the challenges and uncertainties associated with starting and growing a
business.

Strategic Thinking: The ability to think strategically is crucial. Successful consultants can
analyze complex situations, identify opportunities, and develop actionable strategies to help
clients achieve their business goals.

Communication Skills: Clear and effective communication is essential for conveying complex
ideas and recommendations to clients. Successful consultants can articulate their thoughts,
actively listen to clients, and adapt their communication style to various audiences.
Problem Solving: Entrepreneurial consultants excel at problem-solving. They can quickly
analyze challenges, identify root causes, and develop innovative solutions that align with the
client’s objectives and constraints.

Industry Knowledge: Staying informed about industry trends, market dynamics, and emerging
technologies is vital. A successful entrepreneurial consultant has a solid understanding of the
industries in which their clients operate.

Networking Abilities: Building and maintaining a strong professional network is critical.

Successful consultants can connect their clients with relevant resources, mentors, investors, and
other professionals to help foster growth and success.

Financial Acumen: Understanding financial principles, budgeting, and financial forecasting is

essential. Successful consultants can help clients manage their finances effectively, make
informed investment decisions, and ensure sustainable business practices.

Project Management: Entrepreneurial consultants often work on projects with tight timelines
and multiple components. Effective project management skills, including planning, organization,
and execution, are crucial for delivering results on time and within budget.

Client Relationship Management: Building and maintaining strong relationships with clients is
vital for repeat business and positive referrals. Successful consultants understand client needs,
establish trust, and demonstrate value through their expertise and guidance.

Technology Proficiency: Familiarity with relevant technologies and tools is important.

Consultants should be able to advise clients on adopting and leveraging technology to enhance
their business operations and competitiveness.

Marketing and Sales Knowledge: A successful entrepreneurial consultant understands the

fundamentals of marketing and sales. They can help clients develop effective strategies to reach
their target audience, build a brand, and drive revenue.

Cultural Sensitivity: Working with diverse clients and teams requires cultural sensitivity and an
understanding of different business cultures. Successful consultants can adapt their approach to
work effectively in various environments.
Continuous Learning: The business landscape is dynamic, and successful consultants embrace
a mindset of continuous learning. They stay updated on industry trends, new methodologies, and
evolving best practices.

Combining these skills allows entrepreneurial consultants to provide comprehensive support to

their clients, helping them navigate challenges and seize opportunities for growth and success.

WHAT ROLE DOES RISK-TAKING PLAY IN THEIR WORK?

Risk-taking is a significant aspect of the work of entrepreneurial consultants, given the nature of
the startups and small businesses they often work with. Here’s how risk-taking plays a role in
their work:

Client’s Risk Profile Assessment:

Understanding Client Risk Tolerance: Entrepreneurial consultants must assess and

understand the risk tolerance of their clients. Some entrepreneurs may be more risk-
averse, while others may be willing to take calculated risks to pursue growth and
innovation.

Business Planning and Strategy:

Encouraging Strategic Risks: Successful consultants may encourage their clients to take
strategic risks that align with their business objectives. This could include entering new
markets, launching innovative products or services, or adopting unconventional
marketing strategies.

Innovation and Creativity:

Promoting Innovation: Consultants often encourage a culture of innovation and

creativity within the client’s organization. This involves taking risks in terms of
experimenting with new ideas, processes, and technologies to stay competitive and
relevant in the market.

Market Entry and Expansion:

 Assessing Market Risks: When assisting with market entry or expansion strategies,
consultants evaluate the risks associated with entering new territories, understanding
local regulations, and adapting products or services to meet diverse market demands.

Financial Decision-Making:

Capital Allocation: Consultants advise on financial decisions, including the allocation of

capital and investment strategies. This involves assessing the risks and potential returns
associated with different investment options.

Operational Efficiency and Process Improvement:

Identifying Operational Risks: Consultants help clients identify and mitigate

operational risks by improving processes and enhancing efficiency. This might involve
implementing new technologies or restructuring operations, which carries inherent risks.

Adaptability and Change Management:

Managing Change Risks: Consultants guide clients through periods of change, whether
it’s a restructuring, technology adoption, or a shift in business strategy. This requires
managing the risks associated with employee resistance, workflow disruptions, and
potential setbacks.

Scenario Planning:

Anticipating and Mitigating Risks: Consultants engage in scenario planning to help

clients anticipate potential risks and develop contingency plans. This proactive approach
enables businesses to respond effectively to unforeseen challenges.

Startups and Early-Stage Ventures:

Navigating Uncertainty: For startups, uncertainty is inherent. Entrepreneurial

consultants work with these businesses to navigate uncertainties, make informed
decisions, and take calculated risks to establish a foothold in the market.

Communication of Risks:
 Transparent Communication: Consultants communicate potential risks transparently to
clients, ensuring they are aware of the challenges associated with certain strategies. This
transparency allows for informed decision-making.

While risk-taking is essential in entrepreneurial consulting, it’s important to emphasize that this
doesn’t mean encouraging reckless decisions.

Successful consultants guide their clients in taking calculated risks, where potential benefits are
weighed against potential downsides, and strategies are developed to manage and mitigate risks
effectively. Balancing risk and reward is a key skill for both consultants and the entrepreneurs
they advise.

INDUSTRIES WITH HIGH DEMAND FOR ENTREPRENEURIAL CONSULTANTS

Entrepreneurial consultants are in demand across various industries, especially where there is a
need for strategic guidance, innovation, and support in navigating the complexities of starting
and growing a business. Some industries that typically have a high demand for entrepreneurial
consultants include:

Technology and Startups:

The technology sector, including software development, hardware, and emerging technologies,
often requires entrepreneurial consultants to guide startups through the challenges of product
development, market entry, and scaling.

Healthcare and Biotechnology:

The healthcare and biotech industries have seen increased demand for entrepreneurial
consultants as startups and innovative companies work on developing new treatments, medical
devices, and healthcare solutions.

E-commerce and Retail:

The rapidly evolving landscape of e-commerce and retail, driven by changing consumer
behaviors, requires consultants to help businesses adapt to digital transformation, optimize
supply chains, and enhance the customer experience.
Financial Services and Fintech:

Financial institutions and fintech startups seek entrepreneurial consultants to navigate regulatory
challenges, implement innovative financial technologies, and devise strategies for entering new
markets.

Energy and Renewable Resources:

The energy sector, including renewable energy, often involves startups and new ventures.
Entrepreneurial consultants can help these businesses with strategic planning, navigating
regulatory landscapes, and optimizing operations.

Hospitality and Tourism:

The hospitality industry, including hotels, restaurants, and travel services, may benefit from
entrepreneurial consultants to adapt to changing consumer preferences, implement digital
solutions, and enhance operational efficiency.

Manufacturing and Industry 4.0:

Manufacturing companies looking to embrace Industry 4.0 technologies, automation, and smart
manufacturing may seek guidance from entrepreneurial consultants to navigate the
transformation and remain competitive.

Education Technology (EdTech):

With the increasing integration of technology in education, EdTech startups often require
entrepreneurial consultants to develop business strategies, reach target markets, and enhance
their educational offerings.

Agriculture and Agribusiness:

The agriculture industry is evolving with technological advancements and sustainability

initiatives. Entrepreneurial consultants can assist with implementing new technologies,
improving supply chains, and addressing market challenges.

Consulting and Professional Services:

Consulting firms themselves may have a demand for entrepreneurial consultants to bring fresh
perspectives, innovative methodologies, and new service offerings to their clients.

Social Impact and Nonprofits:

Social enterprises and nonprofits focused on creating positive social or environmental impact
may seek entrepreneurial consultants to help develop sustainable business models and strategies
for growth.

Biomedical and Health Services:

Companies involved in biomedical research, healthcare services, and health-focused startups

often require entrepreneurial consultants to navigate complex regulatory environments, develop
business strategies, and bring innovative products to market.

These examples highlight the diversity of industries where entrepreneurial consultants can make
a significant impact. The demand for their services is often driven by the need for creative
problem-solving, strategic thinking, and adaptability, all of which are essential in the dynamic
landscape of entrepreneurship.

WHAT CHALLENGES DO ENTREPRENEURIAL CONSULTANTS COMMONLY

FACE?

Entrepreneurial consultants face a range of challenges in their work, given the dynamic and often
uncertain nature of the startup and small business environments. Here are some common
challenges and potential ways to address them:

Uncertainty and Rapid Change:

Challenge: The business landscape for startups is often characterized by uncertainty, and
conditions can change rapidly.

Solution: Embrace a flexible and adaptive approach. Regularly reassess strategies, stay informed
about industry trends, and be prepared to pivot when necessary.

Limited Resources:
Challenge: Many startups and small businesses operate with limited financial and human
resources.

Solution: Prioritize initiatives based on their potential impact, focus on cost-effective solutions,
and explore creative ways to leverage available resources. Additionally, help clients explore
funding options and partnerships.

Resistance to Change:

Challenge: Employees and stakeholders within a client’s organization may resist changes
recommended by consultants.

Solution: Facilitate effective change management by communicating the benefits of proposed

changes, involving key stakeholders in the decision-making process, and addressing concerns
through open dialogue. Build a culture that embraces innovation and continuous improvement.

Balancing Risk and Reward:

Challenge: Helping clients take calculated risks without encouraging reckless decision-making
can be challenging.

Solution: Provide a thorough risk analysis for each proposed strategy, weighing potential
benefits against possible downsides. Develop contingency plans and ensure clients understand
the rationale behind suggested actions.

Client Expectations:

Challenge: Managing client expectations, especially in situations where quick, transformative

results may be difficult to achieve.

Solution: Set realistic expectations from the beginning, communicate progress transparently, and
focus on achievable short-term goals while keeping the long-term vision in mind. Regularly
reassess and adjust expectations as the consulting engagement progresses.

Building Credibility:

Challenge: Establishing credibility, especially for consultants working independently or within

new ventures.
Solution: Showcase relevant experience, provide case studies or references from past successful
engagements, and continuously invest in professional development. Building a strong network
and obtaining certifications can also contribute to credibility.

Client Resistance to Advice:

Challenge: Some clients may resist or question the advice provided by consultants.

Solution: Foster a collaborative relationship with clients, actively listen to their concerns, and
tailor recommendations to align with their goals and values. Explain the reasoning behind
recommendations clearly and provide evidence-based support.

Staying Updated on Industry Trends:

Challenge: Keeping up with rapidly evolving industry trends and technologies.

Solution: Dedicate time to continuous learning, attend industry conferences, participate in

professional networks, and stay informed through relevant publications. Collaborate with experts
in specific domains to expand knowledge.

Client Acquisition and Retention:

Challenge: Acquiring new clients and retaining them for ongoing consulting engagements.

Solution: Build a strong online presence, leverage personal and professional networks, and
deliver exceptional results for current clients to generate positive word-of-mouth referrals. Invest
in marketing strategies that highlight expertise and success stories.

Maintaining Work-Life Balance:

Challenge: Balancing the demands of multiple clients and maintaining a healthy work-life
balance.

Solution: Set clear boundaries, prioritize tasks, and delegate when possible. Efficient time
management, periodic self-assessment, and occasional breaks contribute to maintaining a
sustainable work-life balance.

By proactively addressing these challenges, entrepreneurial consultants can enhance their

effectiveness and contribute more successfully to the growth and success of the startups and
small businesses they support. Adaptability, effective communication, and a commitment to
ongoing improvement are key elements in navigating these challenges.

CONCLUSION

On this page, we have all you need to know on the topic what is an entrepreneurial consultant.
Entrepreneurial consultants play a vital role in guiding startups and small businesses through the
dynamic and challenging landscape of entrepreneurship.

Armed with a combination of skills such as strategic thinking, risk management, and
adaptability, they assist clients in making informed decisions, navigating uncertainties, and
seizing opportunities for growth. By addressing challenges, fostering innovation, and providing
tailored solutions, entrepreneurial consultants contribute significantly to the success and
sustainability of the ventures they support across diverse industries
PROJECT IDENTIFICATION

DEFINITION

Project identification is a process to assess each project idea and select the project with the
highest priority. It is concerned with collection, compilation and analysis of economic data for
the eventual purpose of locating possible opportunities for investment.

STEPS

Step 1: Defining the goal of a project.

Step 2: Individual brainstorm – Identification of the involved

Step 3: Group brainstorm: Identification of the involved based on roles.

Step 4: Group brainstorm: Phasing the involvement.

PROJECT CLASSIFICATION

Classification of the project are as following:

1.Quantifiable and Non-quantifiable

Projects can be divided into two broader categories namely quantifiable and non-quantifiable.In
a quantifiable project, it is possible to measure the end benefits or outcomes of the end benefits
or outcomes of the project. Whereas in non-quantifiable end result cannot be calculated properly.

2 . Sector Project

The Planning Committee of India has classified projects for various sectors.

❖ Agriculture sector.

❖ Irrigation & Power.

❖ Transport & Communication.

❖ Social Services.

3. Techno-Economic Project

Here project is classified on the basis of technology & Economic Characteristics.

a) Factor intensity oriented classification

In this category, projects are either capital intensive or labor-intensive depending upon their size
& investment pattern. For eg: IT project or service rendering project is labor-intensive depending
on their size and investment pattern.

b) Cause-oriented

In this category, projects are based on either the availability of raw material or demand for that
project. For eg; Power project required, abundant water, steel plant required iron ore as raw
material.

c) Magnitude oriented classification

Here the size of an investment is considered depending on the investment. A project can be
classified as a tiny unit investment to 25 lakhs Small-scale unit investment up to 1 crore. medium
scale enterprise investment up to 5 crores or more.

PROJECT LIFE CYCLE

Although projects are unique and highly unpredictable, their standard framework consists of
same generic lifecycle structure, consisting of following phases:

The Initiation Phase: Starting of the project.

The Planning Phase: Organizing and Preparing.

The Execution Phase: Carrying out the project.

The Termination Phase: Closing the project.

CHARACTERISTICS OF THE PROJECT LIFE CYCLE

The Initiation Phase: The initiation phase aims to define and authorize the project. The project
manager takes the given information and creates a Project Charter. The Project Charter
authorizes the project and documents the primary requirements for the project. It includes
information such as:

i. Project’s purpose, vision, and mission.

ii. Measurable objectives and success criteria.

iii. Elaborated project description, conditions, and risks.

iv. Name and authority of the project sponsor.

v. Concerned stakeholders.

The Planning Phase: The purpose of this phase is to lay down a detailed strategy of how the
project has to be performed and how to make it a success.

Project Planning consists of two parts:

• Strategic Planning

• Implementation Planning

In strategic planning, the overall approach to the project is developed. In implementation

planning, the ways to apply those decisions are sought.

The Execution Phase: In this phase, the decisions and activities defined during the planning
phase are implemented. During this phase, the project manager has to supervise the project and
prevent any errors from taking place. This process is also termed as monitoring and controlling.
After satisfaction from the customer, sponsor, and stakeholder’s end, he takes the process to the
next step.

The Termination Phase: This is the last phase of any project, and it marks the official closure
of the project.

PROJECT REPORT

Meaning

Project Report is a written document relating to any investment. It contains data on the basis of
which the project has been appraised and found feasible. It consists of information on economic,
technical, financial, managerial and production aspects. It enables the entrepreneur to know the
inputs and helps him to obtain loans from banks or financial Institutions.

The project report contains detailed information about Land and buildings required,
Manufacturing Capacity per annum, Manufacturing Process, Machinery & equipment along with
their prices and specifications, Requirements of raw materials, Requirements of Power & Water,
Manpower needs, Marketing Cost of the project, production, financial analyses and economic
viability of the project.

Contents of a Project Report

Following are the contents of a project report.

1. General Information

A project report must provide information about the details of the industry to which the project
belongs to. It must give information about the past experience, present status, problems and
future prospects of the industry.

It must give information about the product to be manufactured and the reasons for selecting the
product if the proposed business is a manufacturing unit. It must spell out the demand for the
product in the local, national and the global market. It should clearly identify the alternatives of
business and should clarify the reasons for starting the business.

2. Executive Summary

A project report must state the objectives of the business and the methods through which the
business can attain success. The overall picture of the business with regard to capital, operations,
methods of functioning and execution of the business must be stated in the project report. It must
mention the assumptions and the risks generally involved in the business.

3. Organization Summary

The project report should indicate the organization structure and pattern proposed for the unit. It
must state whether the ownership is based on sole proprietorship, partnership or joint stock
company. It must provide information about the bio data of the promoters including financial
soundness. The name, address, age qualification and experience of the proprietors or promoters
of the proposed business must be stated in the project report.

4. Project Description

A brief description of the project must be stated and must give details about the following:

• Location of the site,

• Raw material requirements,

• Target of production,

• Area required for the workshed,

• Power requirements,

• Fuel requirements,

• Water requirements,

• Employment requirements of skilled and unskilled labour,

• Technology selected for the project,

• Production process,

• Projected production volumes, unit prices,

• Pollution treatment plants required.

• If the business is service oriented, then it must state the type of services rendered to customers.
It should state the method of providing service to customers in detail.

5. Marketing Plan

The project report must clearly state the total expected demand for the product. It must state the
price at which the product can be sold in the market. It must also mention the strategies to be
employed to capture the market. If any, after sale service is provided that must also be stated in
the project. It must describe the mode of distribution of the product from the production unit to
the market. Project report must state the following:

• Type of customers,

• Target markets,

• Nature of market,

• Market segmentation,

• Future prospects of the market,

• Sales objectives,

• Marketing Cost of the project,

• Market share of proposed venture,

• Demand for the product in the local, national and the global market,

• It must indicate potential users of products and distribution channels to be used for distributing
the product.

6. Capital Structure and operating cost

The project report must describe the total capital requirements of the project. It must state the
source of finance, it must also indicate the extent of owners funds and borrowed funds. Working
capital requirements must be stated and the source of supply should also be indicated in the
project. Estimate of total project cost, must be broken down into land, construction of buildings
and civil works, plant and machinery, miscellaneous fixed assets, preliminary and preoperative
expenses and working capital. Proposed financial structure of venture must indicate the expected
sources and terms of equity and debt financing. This section must also spell out the operating
cost

7. Management Plan

The project report should state the following.

• Business experience of the promoters of the business,

• Details about the management team,

• Duties and responsibilities of team members,

• Current personnel needs of the organization,

• Methods of managing the business,

• Plans for hiring and training personnel,

• Programmes and policies of the management.

8. Financial Aspects
In order to judge the profitability of the business a projected profit and loss account and balance
sheet must be presented in the project report. It must show the estimated sales revenue, cost of
production, gross profit and net profit likely to be earned by the proposed unit. In addition to the
above, a projected balance sheet, cash flow statement and funds flow statement must be prepared
every year and at least for a period of 3 to 5 years.

The income statement and cash flow projections should include a three-year summary, detail by
month for the first year, and detail by quarter for the second and third years. Break even point
and rate of return on investment must be stated in the project report. The accounting system and
the inventory control system will be used is generally addressed in this section of the project
report. The project report must state whether the business is financially and economically viable.

9. Technical Aspects

Project report provides information about the technology and technical aspects of a project. It
covers information on Technology selected for the project, Production process, capacity of
machinery, pollution control plants etc.

10. Project Implementation

Every proposed business unit must draw a time table for the project. It must indicate the time
within the activities involved in establishing the enterprise can be completed. Implementation
schemes show the timetable envisaged for project preparation and completion.

11. Social responsibility

The proposed units draws inputs from the society. Hence its contribution to the society in the
form of employment, income, exports and infrastructure. The output of the business must be
indicated in the project report.

PROJECT APPRAISAL

FEASIBILITY ANALYSIS

I. MARKET APPRAISAL

It is one of the major areas of introducing of any products in market. In that case, must be
considered this things before launching in a market.
• What would be the aggregate demand of the poposed product or service?

• What would be the market share of the market share of the project under appraisal?

• Past and current demand trends

• Past and current supply position

• Production possibilities and constraints

• Imports and exports

• Nature of competition

• Cost structure

• Elasiticity of demand

• Consumer behaviour:

1. motivation,

2. attitudes,

3. preferences, requirements.

• Distribution channels: marketing policies.

II. TECHNICAL APPRAISAL

• Whether prerequisites for the success of project considered?

• Good choices with regard to location, size, process, machines etc.

• Preliminary tests and studies

• Availability of raw materials, power and other inputs.

• Optimal sale of operations.

• Choice of suitable production process

• Choice of appropriate machines and equipment

• Effluents and waste disposal

• Proper layout of plant and buildings

• Realistic work schedules

• Socially acceptable technology

III. FINANCIAL APPRAISAL

• whether the project is financially viable?

✓ Servicing debt

✓ Meeting return expectations

✓ Investment and phasing of the total cost

✓ Means of financing

✓ Break even point

✓ Cash flows in the project

• Investment worthwhile?

✓ Netpresent value

✓ Internal rate of return

✓ Pay back period

✓ Level of risk

IV. ECONOMIC APPRAISAL

• Social cost-benefit analysis

• Impact on level of savings and investments in society

• Impact on fulfilment of national goals:

✓ Self suffiency

✓ Employment
 ✓ Social order.

V. MANGERIAL APPRAISAL

• Track record in earlier project

• Resourcefulness of the promoter

• Understanding of business

• Commitment to the project

• Integrity

VI. SOCIAL APPRAISAL

• Impact of project on quality of:

❖ Air

❖ Water

❖ Noise

❖ Vegetation

❖ Human life

• Major projects such as these cause environmental damage

❖ Power plants

❖ Irrigatin schemes

❖ Industries like leather processing, chemicals etc.

Likely damage & the cost of restoration.