An Entrepreneur is a person who organises and coordinates a business.

Characteristics of successful entrepreneurs

  • Hardworking: long hours and short holidays to make their business successful
  • Risk taker: making decisions to produce goods or services that people might but is potentially risky
  • Innovative: coming up with a product or service that is different.
  • Creative: coming up with new designs and ideas.
  • Self confident: this is very necessary to convince people of your skills, banks to lend money for business growth.
  • Independent: Entrepreneurs will often have to work on their own before they can afford to employ others.

A Business Plan is a document containing business objectives and important details about the operations, finance and owners of the business.

Business plan is needed to

  • Apply for bank loans
  • Plan business to reduce risk of failure

Business plan includes 

  • Products and services that you will sell
  • Costs of your business
  • Location of the business
  • What do I need to operate my business e.g. Machines, employees
Why government support business start-ups
  • To reduce unemployment: new business will create jobs to help reduce unemployment.
  • Increase competition: new business gives consumers more options to choose from. it can also lead to reduced prices of goods.
  • Increased Output: the economy would also benefit as new business would increase the output produced within the economy.
  • Benefit the society: new business may create social enterprises which offer benefits to their immediate community other than jobs and profit.

Government supports new businesses by

  • Loans at low interest rates
  • Land to set up businesses at low costs
  • Grants (money) to train employees
  • Use research facilities at public universities
  • Business advice from experts

Measuring business size

  • Number of employees: This shows the total number people who work for the business. it shows the extent to which the business can operate.
  • Value of output: Often known as sales or turnover informs us of the value of the goods or services sold. This shows how much the business is producing and how much people are willing to pay for these products.
  • Market Share: This is the total amount of sales a business has as a percentage of the total sales in the market. This gives a useful comparison against businesses in the same industry.
  • Capital Employed: The amount of money invested in the business. this gives a value for the business that reflects what it has invested and what it would be worth if sold. On the contrary, it is difficult to value assets accurately most especially when it comes to labour.

Why do businesses grow?

Businesses have different objectives. These objectives are influenced by the owner’s vision and goals. Some owners might be content with the small size of their business, whereas there will be business owners who may want to expand the business. Let us explore the reasons:

  1. Possibility of higher profits: As businesses expand ,sales turnover improves, which means more profit for the business and more returns for the owners.
  2. More stability: Big businesses are more stable and less vulnerable to market adversities. Bigger businesses usually operate across markets and even if one market is not performing well they can rely on other markets to average returns.
  3. Attract the best talent: Bigger businesses usually offer better salaries/perks to their staff. Better salaries attract the best talent in the industry. This leads to better efficiency for the business and thus more profits for owners.
  4. Economies of scale: Higher sales results demands higher production levels. As production increases, it brings in advantages related with economies of scale for the business.

Ways businesses can grow

  • Internal Growth: This occurs when the business opens new outlet or factories or witnesses an expansion in premises.
  • External Growth: Also known as Integration occurs when a business integrates with another business either through a merger or takeover.

Merger is the coming together of two or more firms to become one large business while a takeover or acquisition is a process of buying out another business from its original owners.

Types of Integration are highlighted below:

Horizontal integration: Firms in the same industry at the same stage of production merges or being acquired. e.g. Two secondary schools coming together to form a big school.

Vertical integration: Business expands by merging with another business in another stage of production. There are 2 types of vertical integration.

  • Backward vertical integration is when a business merges with another business in the previous stage of production for example, A secondary school integrating with a primary school.
  • Forward is when a business merges with a business in the next stage of production e.g. A secondary school integrating with a High school or University.

Conglomerate merger: This involves two or more firms from completely different industries integrates. It can also be said to be Lateral Integration. for example a phone company buying a car company.

Problems of business growth

  • Large businesses are difficult to control. Solution: Operate in business in small parts.
  • Costs of expansion are high. Solution: Expand slowly
  • There can be poor communication in large businesses. Solution: use technology to communicate e.g. email. Operate the business in small parts.

Why do some businesses remain small?

  • Type of industry e.g. hair salons stay small because of the connection with their customers, if they grow too large they won’t be able to offer personal service to their regular customers.
  • Market size Some businesses such as stores in small towns are likely to remain small due to the limited amount of customers. Businesses that produce specialised goods such as brand name clothing or luxury cars are also likely to remain small.
  • Owner’s objective Some owners want to keep their businesses small to keep full control and know all their employees and customers. Running a large business can become stressful.

Why businesses fail

  • Lack of experience: New business owners frequently lack relevant business and management expertise in areas such as finance, purchasing, selling, production, and hiring and managing employees.
  • Failure to plan for change – The business environment is constantly changing, Businesses need to change to keep up with technology.
  • Poor financial management – Shortage of money means that the businesses cannot be operated. Businesses needs to always make sure they have enough money
  • Over expansion – Some businesses expand too quickly and not have enough money to operate.
  • Startup risk – Starting up a new business is always risky, entrepreneurs may lack experience and not be able to compete with larger businesses.
  • Poor Location: Whereas a good business location may enable a struggling business to ultimately survive and thrive, a bad location could spell disaster to even the best-managed enterprise.