SATA TECHNOLOGY AND BUSINESS COLLEGE

SATA TECHNOLOGY AND BUSINESS COLLEGE

Ethiopian TVET-System

Level I
Basic Clerical Works
Departmnts of HRM

Unit of Competence

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Develop understanding of
entrepreneurship

LO1 Concepts of Entrepreneurship

Entrepreneur –– An individual who bears the risk of operating business in the face of
uncertainty about the future conditions (New Encyclopedia Britannica).
Entrepreneurship – It is a philosophy or process through which an entrepreneur seeks
innovation and employment. Entrepreneurship is the process of creating something
different with value by devoting the necessary time and effort, assuming the
accompanying financial, psychic, social risks and receiving the resulting rewards of
monetary and personal satisfaction and independence.

Entrepreneur – Person, Entrepreneurship- Process or Philosophy, Enterprise- Object

1.1 Meaning and Scope of Enterprising

In the business sense, enterprising refers to the implementation of a business venture or
undertaking. Practically all undertakings can be referred to as enterprising, i.e. idea
identification, planning, implementation, successful completion of an activity and
receiving the rewards.
1.2 Characteristics of Enterprising people
E Energy
Working hard, but in a smart way, is key to being enterprising. Lots of mental and
physical energy is needed to provide solutions to issues and for the successful completion
of projects.
N Need to achieve

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You need to have the motivation to achieve success and accomplish all the activities you
engage in. Your positive attitude and perceptiveness will enable you to achieve
acceptable results whenever you do something.
T Task oriented
To gain satisfying rewards, tasks have to be well executed and completed on time.
Efficiency, effectiveness and time management are important aspects that enable you to
complete tasks. Focusing on results helps you to concentrate on whatever you set out to do .

E Empathy
You are able to mentally put yourself in the position of the people you intend to
influence. You try to feel what they are feeling. You are able to put yourself in their
shoes. In the case of owning a business enterprise you are able to imagine how a potential
customer would feel.
R Resourcefulness
Identification, mobilization and effective utilization of both the physical and the
nonphysical resources needed in undertaking a venture are very important in managing
the enterprise.
P Planning
To see the total picture of the enterprise, it is necessary to establish a written plan. This
will help clarify the situation and permit decisions regarding whether an enterprise should
be initiated or not. Through planning, judgments regarding profits or losses will be made.
R Risk-taking
The decision to go ahead and start the enterprise or undertake the activity must be made.
All enterprising men and women take risks only after they have conducted research, so
that they can achieve the desired results and receive the rewards. You will always have to
take this first step, as it marks the difference between enterprising and non-enterprising
men and women. Success begins with the decision to move in the desired direction.
I Innovation
The ability to apply new ideas that will enable you to undertake unique activities is
another hallmark of enterprising people. Through individual initiative, imagination,

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intuition and insight you will be able to devise new ways of doing things to accommodate
whatever new situation you may find yourself in. Gathering information is an important
input for being innovative.
S Skills
Enterprising men and women have the ability or know-how that enables them to
undertake and complete activities. Most men and women have a certain amount of
knowledge, attitudes and practical skills that can be useful when realizing an enterprise.

I Independence
Enterprising people are able to make their own decisions and are self reliant. They
exercise their own will without the control of others.
N Networking
Networking is important because through this activity, enterprising people obtain
information and learn from feedback they receive from others.
G Goal oriented
Enterprising people are result-oriented experts at setting their own goals. They have
personal control over their own activities. Their goals are usually challenging, but
attainable. These goals are a mix of long-term goals and short-term goals. These goals are
specific in the sense that they can be measurable.
1.2 Entrepreneurial Functions in Business
a) Entrepreneurs are the prime movers in the business or social sectors. Without
entrepreneurs, there would be no business or social development. They are the ones who
identify gaps in the market and then turn these gaps into business opportunities.
b) It is the entrepreneur who obtains finances for the business. After identifying a
business opportunity, the entrepreneur mobilizes then necessary resources to implement
the opportunity and becomes the financier of the enterprise. The entrepreneur does not of
course have to finance the business from personal savings alone. The necessary finances
and other resources could be borrowed. It is, therefore, a function of the entrepreneur to
provide financing for the business.

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c) Another function of the entrepreneur is to manage the business. This is also a function
that he/she can delegate to other people. Even where other people are employed to
manage the business, the ultimate responsibility for management remains with the
entrepreneur. Management functions involve a wide range of activities such as
organizing, coordinating, leading, recruiting, rewarding and evaluating employees. The
entrepreneur manages production, marketing, personnel and all other aspects of the
business.

d) The entrepreneur also has the function of bearing the uncertainties and risks of the
business. Entrepreneurs try to avoid risk situations whenever possible. Entrepreneurs take
only calculated risks; before taking a risk, they know the costs and the benefits of the risk
situation.
e) Through the entrepreneurial function, many jobs are created in the economy. In
addition, wealth is made available to the individual, the community and society through
the actions of entrepreneurs.
Entrepreneurs encourage competition, which is critical in sustaining a free market
system and promotes economic growth, social progress and the spread of prosperity
among a country’s population. Entrepreneurship is an effective mechanism for ensuring
innovation and creativity as well as achieving economic development at the grassroots
level.
1.3 Importance of Entrepreneurship
1. EMPLOYMENT CREATION: Entrepreneurs create employment for themselves and
other people. They are employers, and hence assist in solving the unemployment
problem.
2. LOCAL RESOURCES: When entrepreneurs utilize local resources, the value of these
resources increases.
3. DECENTRALIZATION AND DIVERSIFICATION OF BUSINESS: Entrepreneurs
are able to identify business opportunities, and locate these businesses in suitable areas,
including rural areas.
4. PROMOTION OF TECHNOLOGY: By being creative, entrepreneurs are able to
contribute to the utilization and development of technology.

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5. CAPITAL FORMATION: Entrepreneurship increases capital formation and

investment.
6. PROMOTION OF AN ENTREPRENEURIAL CULTURE: By projecting successful
images, entrepreneurs become models that can be copied by young people.

LO2 Small businesses

2.1 Meaning of Small Business

A. Elements constituting the meaning of small business:

 Independent management
 Owner supplied capital
 Mainly local area of operation
 Relatively small size within an industry
B. Definitions of small businesses
“A business is small if the owner has direct lines of communication with the operating
managers and has personal contact with a large proportion of the work force, including
key personnel.” It the business owned & operated by individual person.
2.2 Identifying Business Opportunities
Seeing, seeking and acting on opportunities is one of the characteristics of successful
entrepreneurs. It is also the basis for starting and maintaining successful ventures. It
involves not only generating ideas and recognizing opportunities, but also screening and
evaluating them to determine the most viable, attractive propositions to be pursued.
What is a business opportunity?

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A business opportunity may be defined simply as an attractive idea or proposition that

provides the possibility of a return for the investor or the person taking the risk. Such
opportunities are determined by customer requirements and lead to the provision of a
product or service which creates or adds value for its buyers or end-users.
However, a good idea is not necessarily a good business opportunity. For example, you
may have invented a brilliant product from a technical point of view and yet the market
may not be ready for it. Surely, to the inventors (and their backers) the idea seemed a
good one, yet clearly it could not withstand the test of the market.
What turns an idea into a business opportunity? A simplified answer is when income
exceeds costs and generates a profit.

2.3 Business Idea

A business idea is the response of a person or an organization to solving an identified
problem or to meeting perceived needs in the local environment (markets, community,
etc.). Finding a good idea is the first step in transforming the entrepreneur’s desire and
creativity into a business opportunity.
Two things should however be noted:
(a) although it is a prerequisite, a business idea is only a tool;
(b) An idea by itself, however good, is not sufficient for
success.
In other words, notwithstanding its importance, an idea is only a tool that needs to be
developed and transformed into a viable business opportunity.

 Sources of Business Ideas

There are millions of entrepreneurs throughout the world and their testimonies suggest
that there are many potential sources of business ideas. Some of the more useful ones are
outlined below.
 Hobbies/Interests

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A hobby is a favorite leisure-time activity or occupation. Many people, in pursuit of their

hobbies or interests, have founded businesses. If, for example, you enjoy playing with
computers, cooking, music, traveling, sport or performing (to name but a few), you may
be able to develop this hobby/interest into a business. To illustrate this, if you enjoy
traveling, performing and/or hospitality, you may consider going into tourism, which is
one of the biggest industries in the world.
 Personal Skills and Experience
Over half of the ideas for successful businesses come from experiences in the work place.
For example, a mechanic with experience in working for a large garage who eventually
sets up his/her own car repair or used car business. Thus, the background of potential
entrepreneurs can play a crucial role in the decision to go into business as well as the type
of venture to be created.

 Mass Media
The mass media is a great source of information, ideas and often opportunity.
Newspapers, magazines, television, and the Internet are all examples of mass media.
Take a careful look, for example, at the commercial advertisements in a newspaper or
magazine and you may well find businesses for sale. One way to become an entrepreneur
is to buy an existing business.

 Exhibitions
Another way to find ideas for a business is to attend exhibitions and trade fairs. These are
usually advertised on the radio or in newspapers. By visiting such events regularly, you
will not only discover new products and services, but you will also meet sales
representatives, manufacturers, wholesalers, and distributors. These are often excellent
sources of business ideas, information and help you in getting your business started.
Some of them may also be looking for someone just like you to be a business partner.

 Surveys

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The focal point for a new business idea should be the customer. The needs and wants of
the customer, which provide the rationale for a new product or service, can be ascertained
through a survey.
 Complaints
Complaints and frustrations on the part of customers have led to many new products or
services. The idea could be to set up a rival firm offering a better product or service, or it
might be a new product or service which could be sold to the firm in question and/or to
others.
 Change
The world is constantly changing. Change can be a threat; however, most entrepreneurs
consider change as a challenge and opportunity to trigger new needs for products and
services. An innovative entrepreneur always responds to changes in a positive manner.
 Brainstorming
Brainstorming is a technique for creative problem-solving as well as for generating ideas.
The objective is to come up with as many ideas as possible.
2.4 Characteristics of a good business opportunity
To be a good business opportunity, it must fulfill, or be capable of meeting, the following
criteria:
• Real demand: responds to unsatisfied needs or requirements of customers who have the
ability to purchase and who are willing to buy
• Return on investment, provides acceptable returns or rewards for the risk and effort
required
• Be competitive: be equal to or better (from the viewpoint of the customer) than other
available products or services
• Meet objectives: meet the goals and aspirations of the person or organization taking the
risk
• Availability of resources and skills: the entrepreneur is able to obtain the necessary
resources.
2.4 Business environment
The environment within which the business operates has a great influence on the
attractiveness of any opportunity. By business environment, we are referring not only to

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the physical environment, which is important and increasingly so, but also the political,
economic, geographical, legal and regulatory contexts. Political instability, for example,
renders business opportunities unattractive in many countries, especially for those
ventures requiring high investment with a long payback period. Similarly, inflation and
exchange rate fluctuations, or a weak judiciary system, are not a good environment to
start a business, even if the potential returns are high. The lack of infrastructure and
services (such as roads, electricity, water supply, telecommunications, transportation, and
even schools and hospitals) also affect the attractiveness of an opportunity in a given
environment.

3 sources of money needed to start an enterprise

Types of financing advantage Disadvantage

EQUITY FINANCING
A. Using 1. All of the profit kept.
personal 2. Reduces amount of debt. 1. Chance of loss.
savings 3. Risk of loss provides motivation 2. May force personal
to succeed. sacrifices.
4. Shows good faith to any 3. Loss of return from use
potential lenders. of savings in other
investments.
B. Involving 1. Brings in more cash.
friends and 2. May be possible to borrow 1. Part of profits given up.
family more. 2. Part of the ownership
3. Financial risks shared. given up
C. Forming a 1. Easy source of cash. 1. Risk of destroying
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partnership personal relations

2. Less pressure and restrictions. 2. May encourage
3. Informal arrangements unwanted involvement in
business
D. Forming a 1. Larger amount of cash raised. 1. Part of profits given up.
limited company 2. Financial risks shared. 2. Share of control and
3. Legal liability reduced. ownership given up.
4. Tax savings.

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E. Forming a 1. Poor people are able to combine 1. Profits shared.

cooperative financial resources. 2. Financial decision-
2. Financial risks shared making shared.
F. Working with 1. Set up to help small businesses. 1. Favors expanding
financial 2. Provides loans businesses
institutions
DEBT FINANCING
All forms of 1. Relatively easy to obtain. 1. High interest costs.
borrowing 2. Control and ownership of the 2. Risk that future profits
business maintained. will not cover repayment.
3. Can be repaid at more 3. Easy to abuse and
advantageous time. overuse.
4. May save money. 4. Financial and
5. Costs may be tax deductible. confidential information
6. Inflation allows repayment with must be maintained
cheaper money 5. Lender may impose
limitations or restrictions
on borrower.

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4. Ways of getting into business

4.1 Hiring and Orienting New Employees
A. The Hiring Process
Hiring a new employee is as important to the entrepreneur as it is to the person hired. It
can either be the beginning of a mutually rewarding relationship, or the beginning of a
long series of mistakes.
Two of the major influences on high employee turnover are the recruiting and selection
procedures used. The way entrepreneurs advertise a position, handle applications,
conduct interviews, and select and introduce a new worker to a job are all elements in the
effort to cut down on employee turnover.
1. Sources of Potential Employees
 Within the business
 Employment agencies
 Educational institutions
 Former employees
 Current employees
2. Recruitment & selection Procedures
 Advertisement
 Handling applications
 Testing interviewing
 Selection
 Introduction
 Developing & maintaining

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4.2 Managing Time and Resources

Managing human resources
To be successful, all entrepreneurs must be good managers. People are the most
important resource in a business. It is important for entrepreneurs to hire the best
qualified people. All employees are really members of a team and for the business to
succeed the team members must cooperate with each other in their work.
Managing financial resources
In addition to managing people, managing money is also a critical function in operating a
business. Entrepreneurs need to balance the financial needs of operating a business with
the financial resources within the business. Money coming into the business through
sales, and money going out of the business, requires the entrepreneur to keep accurate
written financial records because accurate financial records will provide a more realistic
financial picture of the business.
Time Management Techniques
Time management is similar to having good work habits. Making the best use of time
simply means achieving the maximum output in the time available. There are several
ways in which this can be done.
 Identify specific daily goals. Make sure you understand what you want to
accomplish each day. Before arriving, or as soon as you get to work, list your
work goals in order of importance.
 Self motivation. Entrepreneurs are usually highly motivated individuals who
seem to enjoy work regardless of what they do. Most people are able to
accomplish goals which are similar to what they want to do. However,
entrepreneurs are able to motivate themselves to produce high output in the work
they have to do.
 Establish deadlines. More work can be done if you set specific deadlines to
achieve certain tasks. But make sure that the deadlines are realistic. Once they are
set, you should do everything possible to meet the deadlines.

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 Use the telephone. The telephone/cell phone is the main communication link
between you and your working world. Letters are sometimes necessary, but keep
them to a minimum. Problems can be solved more quickly by using the
telephone/cell phone. A letter provides only one-way communication while a
telephone conversation is two-way communication.
 Be action-oriented. Once you have decided to solve a problem, outline your
specific course of action and then begin. Once you have begun, try to complete as
much as you can. This action orientation should help you to stop worrying about a
problem.
 Be reflective. Reflective thinking is the act of learning from one’s past, present
and potential future activities.
 Plan in detail for tomorrow. At the end of each day’s work, prepare a time
schedule for the following day’s activities.

 Characteristics of good sales person (sales management):

1. Result Oriented
2. Highly Motivated
3. Self-Confident
4. Professional Appearance
5. Honest
6. Dependable
7. Knowledge of Products
8. Good Listener
9. Enthusiastic
10. Pleasing Personality
11. Communicator
12. Sociable
13. Courteous

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Selling Requires Communication

When selling, you communicate to prospective clients something about yourself and the
product or service you are selling. This process can be viewed as a series of steps, and
each step involves a higher level of communication.
Step 1: approach the prospective customer and introduce yourself and your company
Step 2: specify your reason for approaching the prospective customer
Step 3: show or describe the product/service you are selling
Step 4: demonstrate how the product/service will benefit the prospective customer
Step 5: negotiate terms and conditions of the sale
Step 6: ask the prospective customer to make a decision regarding the purchase of the
product/service.
Step 7: once customers do start to buy your product or service, develop strategies to help
you to keep your customers.
Like effective communication, selling is a two-way process. Selling is more of an art than
a skill. You have to be good at asking questions and being an active listener to understand
customer needs and interests. You have to adapt your message and communication style
to the personality and buying motives of the prospective customer. Through effective
communication, you build a relationship with the customer based on trust and
confidence; this forms the foundation for the present sale transaction and for future sales
as well.

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5. Using technology in small business

5.1 Technology for Small Enterprises

Technology is constantly changing the demands of consumers. Businesses use new
technologies to produce new products and services. Entrepreneurs should realize that new
technological developments such as the internet and cell phones increase the exchange of
information and may have an effect on the operations of their business. Entrepreneurs
may not be aware of the nature and effects of all new technologies, yet, they must try to
determine technical developments which are likely to have the greatest impact on their
business operations.

5.2 Characteristics of Appropriate Technologies

The appropriateness of technology for use in a small business is determined by a number
of characteristics. Some of them are:

1. SIMPLE: For technology to be considered appropriate, it must be simple to operate.

The user of such technology must be able to apply it without encountering problems.
2. EFFECTIVENESS: Effectiveness of technology is judged by how well it fits in with
the objectives of the user.
3. AVAILABILITY: Some technology may be appropriate for certain purposes but not
available locally. Information technology, for example, may be the most appropriate for
certain tasks, but it may not be readily available locally.
4. FLEXIBILITY: As time changes so do the requirements of technology. Appropriate
technology must be flexible enough to adapt to changing times in the future.
5. DURABLE: Technology that is durable requires less maintenance and repairs.
6. EFFICIENT: Technology should be efficient in its utilization of local resources.
7. COST EFFECTIVE: The cost of technology should be justified by the benefits
achieved. The overall benefits should be greater than the cost of the technology.

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6. Structure of a business plan

7.1 What Is a Business Plan?
A. A document which spells out the goals and objective of a business and clearly
outlines how and when they will be achieved.
B. A structured guideline to achieve a business goal.
C. A road map to owning and operating a business.
D. A proposal that describes a business opportunity for financing agencies or
investors.
E. A detailed action program outlining every conceivable aspect of the proposed
business venture.
7.2 Why Write a Business Plan?
A business plan is written to assist in:

 Keeping you focused on your goals and strategies

 Obtaining financing from outside sources
 Guiding the opening of a business
 Guiding the managing of a business
 Communicating clearly with interested parties
 Showing your business has chances of success
 Showing you have the ability to manage the business
 Showing there is a good market for your product or service
 Comparing how the actual business performance differs from the forecasted
performance
7.3 When Is a Business Plan Written?
 When thinking of going into business
 Before starting the business
 When updating the business is required
 When new information is obtained
 When new experiences are gain

7.4 How Is a Business Plan Written?

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 By identifying all the questions that might be asked relating to the business
 By determining what further information needs to be gathered to answer all the
questions
 By obtaining all the necessary information
 By comparing various alternatives
 By making a decision on each question
7.5 What Is Done With a Business Plan?
 The owner refers to it often to see whether actions and plans are consistent
 He/she takes it to the bank when discussing funding
 He/she discusses other sections of it with the relevant interest group
7.6 Lay out of a Business Plan
A. Cover page
B. Table of contents
C. Executive summary
D. Information about the owner or promoter of the business
E. Description of the business idea and market
F. Marketing plan
G. Legal form
H. Start-up capital and resources
I. Organization and staff
J. Business operation and costs
K. Financial plan
L. Appendices

7. Evaluating Factors in Starting an Enterprise

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The following questions will help to determine whether you are in a position to start a
business.
A. Personal Qualifications
1. Why do you think you are the type of person who can start and operate a business
successfully?
2. Will your family support your plans to start a business?
3. Have you worked in a business similar to the one you want to start?
4. Do you have supervisory or managerial experience necessary to be self
employed?
5. Have you had business training in the type of business you want to start?
B. Customers and Market
1. Have you prepared a marketing plan?
2. How will customers distinguish your business from that of your competitors?
3. Will you have a credit policy for customers?
4. What advertising techniques will be used to attract customers?
5. How will you determine what the customer wants?
C. Business Operators
1. How will you identify, select and train employees for the business?
2. How will you determine employee salary and benefits?
3. Is your business location accessible for customers (bus stops, parking, etc.)?
4. Does the business location have space for expansion?
5. Have you considered the positive and negative aspects of being a proprietor or
forming a partnership, limited company or cooperative?
6. Do you know what equipment, supplies and materials you will need and how
much they will cost?
D. Keeping Records
1. Do you have a record keeping system to keep track of income, expenses, credit
sales and credit purchases?
2. Are you able to prepare and analyse financial statements?
3. Do you know how good inventory control can lower business expenses?
4. Do you know how to keep payroll records and make tax reports and payments?

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5. Will you need assistance in keeping the financial records for your business?
E. Using Outside Assistance
1. Have you discussed the bookkeeping and other financial procedures with an
accountant?
2. Have you discussed the legal requirements and regulations of your business with a
lawyer?
3. Have you discussed the financial aspects of your business with a banker?
4. Has a consultant helped you to develop your business plan?
5. Have you discussed the challenges and opportunities of your business with other
business owners in the community?
F. Finances
2. Do you have enough money to start and operate the business for at least the first
six months?
3. Over the next four years, could you make more money working for someone else
rather than starting your own business?
4. Do you know which suppliers will give the best service, lowest prices and best
credit arrangements?
5. Based on accurate financial data, have you compared the cost of buying an
existing business with the cost of starting a new business?
6. Have you explored all possible sources of funding?

G. Choosing the Right Legal Form

1. What are the legal costs involved in starting a business?
2. How does the owner’s liability depend on the legal form?
3. How does the legal form influence the acquisition of capital?
4. What implications does the legal form have on taxation?
5. How does the continuation of the business depend on the legal form?

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