Enterprise, business growth &

size
Enterprise & entrepreneurship
Who is an entrepreneur?
 Entrepreneur is a person who organizes, operates and
takes the risk of setting up a new business.
 For many entrepreneurs, starting up their own business
has led to great wealth and fame but for some, a huge
failure and miserable losses.
Benefits of being an entrepreneur
 Freedom – having the choice to decide how to spend time and
money
 Implementing personal ideas
 Potential for fame and success if the business grows
 Possibility of higher profits and income compared to being an
employee working in a company
 Making use of personal interests and skills is an option.
Disadvantages of being an entrepreneur

 Risk - Many new businesses started by entrepreneurs fail, especially

if there is poor planning.
 Capital - Entrepreneurs have to use their own money for the
business and might need to find more money from other places.
 Limited knowledge and experience in starting and running a
business.
 Opportunity cost – Giving up potential income by not being an
employee of another business.
Characteristics of successful entrepreneurs
 Hard working: Hard work is a common trait among successful entrepreneurs.
 Risk-taker: They accept the uncertainty that comes with business endeavors.
 Creative: Innovation is key, bringing fresh ideas to differentiate their business from others.
 Optimistic: Looking forward to a better future is essential.
 Self-confident: Confidence is necessary to convince others, including banks, lenders, and
customers, of the business's potential success.
 Independent: Entrepreneurs often work alone initially, requiring self-motivation and the
ability to work independently.
 Effective Communicator: Clear and confident communication with various customers &
agencies raises the profile of the new business.
Contents of a business plan and how it assist entrepreneurs?

 Banks usually want a plan from business owners before giving them
a loan. When you fill out this plan, it makes you think and plan
carefully for the first few years of your business.
 While business plans vary, they commonly include similar sections
outlining key aspects of the business including:
Contents of a business plan and how it assist entrepreneurs?

 Description of the Business:

 Brief history and summary of the business.
 Clear objectives of the business.
 Products and Services:
 Description of what the business sells or delivers.
 Strategy for current and future products/services.
 Details of product manufacturing and distribution.
 Market Analysis:
 Identification of the target market.
 Analysis of total market size and predicted growth.
 Competitor analysis.
 Predicted changes in the market.
 Forecasted sales revenue
Contents of a business plan and how it assist entrepreneurs?

 Business Location and Delivery:

 Description of the physical location (if applicable).
 Overview of sales channels (internet, mail order, etc.).
 Logistics for delivering products and services.
 Organization Structure and Management:
 Overview of the organizational structure.
 Details about management.
 Employee requirements in terms of number and skills.
 Financial Information:
 Projected future financial statements (income, balance sheet) for several years.
 Details about financial projections.
 Sources of capital, profits and loss statements, bank loans & other funding sources.
Why governments support business start-ups?

 Job Creation: Governments support startups to reduce unemployment.

 Competition Boost: Encouraging startups increases market competition,
providing consumers with more choices.
 Economic Growth: The economy benefits from increased output of goods
and services.
 Social Impact: Entrepreneurs may create social enterprises which offer
benefits to society other than jobs and profits.
 For Future Growth: Government supporting start-ups to help small
business evolve for further growth.
What are the methods for measuring business size?

 Businesses can be measured in a number of ways including:

 1) Number of people employed
 2) Value of output
 3) Value of sales
 4) Value of capital employed
What are the limitations of these methods?
 Number of people employed:
 Pros: This method is easy to calculate and compare with other businesses.
 Cons: Some businesses use smart machines and thereby need fewer
people. Also ambiguity arises in counting part-time workers.
 Value of output:
 Pros: Helpful for comparing businesses, especially in manufacturing.
 Cons: Producing high output doesn’t necessarily mean a large business. A
few employees producing expensive goods could have higher output than
a larger workforce producing cheaper goods.
What are the limitations of these methods?
 Value of Sales:
 Pros: Useful for comparing retail businesses.
 Cons: Inaccurate when comparing businesses selling vastly different products.
(Like comparing a candy stall with a shop selling fancy bags or perfumes.)

 Value of Capital Employed:

 Pros: Gives a perspective view of all the money invested in the business and
helps us to understand the overall financial health.
 Cons: Fails to describe how well the company is using that money to make
products efficiently.
Why the business owners may want to expand their
business?
 Expanding a business can offer various advantages:
 Higher Profits: Expansion increases the potential for higher profits,
benefiting the business owners.
 Status and Prestige: Owners and managers may enjoy increased
status and higher salaries, especially in larger businesses.
 Economies of Scale: Larger operations often lead to lower average
costs.
 Market Influence: A larger market share enhances the business's
influence with suppliers, distributors, and attracts consumers
What are the different ways in which businesses
grow?
 Businesses typically grow through internal growth,
where existing profits fund expansion, or external
growth, involving takeovers or mergers with other
businesses. Internal growth is often slower but easier to
manage, while external growth can provide rapid
expansion opportunities.
Limitations of business growth and the ways to
overcome
 Problem: Larger Business is Difficult to Control
 Solution: Operating the business in small units through decentralization, allowing
for more effective control over individual components.
 Problem: Larger Business Leads to Poor Communication
 Solution: Using the latest IT equipment and telecommunications to enhance
communication channels.
 Problem: Integrating with Another Business is Difficult
 Solution: Effective planning, communication, and possibly phased integration
can help overcome these difficulties.
Why some business remain small?
 Type of industry:
 Businesses in personal service industries (e.g., hairdressing, car repairs)
often remain small to maintain a personalized touch. Increased size can
hinder close customer interaction.
 Market Size:
 Businesses in small markets or offering niche products may stay small due
to limited customer bases, restricting potential growth.
 Owners' Preferences:
 Some owners prefer the control and personal connection of a small
business, choosing to avoid the stress associated with managing a larger
enterprise.
What are the different causes of a business failure?

 Lack of Management Skills:

 Inexperienced management often makes bad decisions.
 Poor choices like high-cost locations with low demand can harm the business.
 Family businesses may fail if founders' children aren't good managers or are
hesitant to hire professionals.
 Changes in the Business Environment:
 Neglecting to plan for change increases the risk and uncertainty.
 Factors like new technology, strong competitors, and economic shifts can
cause failures if not addressed effectively.
What are the different causes of a business failure?

 Poor Financial Management:

• Shortage of cash leads to unpaid debts to workers, suppliers,
landlords, and government.
• Failure to plan or forecast cash flows is a major cause of business
failures.
 Over-Expansion:
 Rapid business expansion can lead to management and financial
issues.
 If not addressed, these difficulties can force the entire business to
shut down.
Why new businesses are at a greater risk of failure?

 Many new businesses fail due to lack of finance and other

resources, poor planning and inadequate research.
 Also, the owners may lack the experience and decision-making
skills found in larger business managers.
 So, new businesses are more likely to fail compared to well-
established business.