ENTREPRENUERSHIP

Entrepreneurship is derived from the French words meaning ‘between’ and ‘to take’.
Entrepreneurship is a human creative act that builds something of value from practically
nothing. An entrepreneur is one who takes a position between the supplier and customer
i.e. the one who takes risks. It can as well be defined as the one who shifts economic
resources out of one area of a lower to an area of higher productivity and greater yield. It
is creating and building a vision from practically nothing. It is a fundamental creative
human act. Animal and trees can also be creative. It is an application of energy to initiate
and build a business. It is challenging unknown. It is a symbol of business achievements.
It is talking risk beyond security. It is pushing an idea through the reality. It is seeking
opportunity. It is the expertise of sensing an opportunity where others seek. It is the
willingness to take calculated risks both financial and personal. it is reducing chances for
failure. It is building on a mastermind.

ROLE OF AN ENTREPRENEUR.
- To create jobs
- To maintain free enterprises
- To promote health competition
- Too generate wealth
- To spread prosperity
- To enhance wealth stability
- It is a sure innovation and creativity.
- To encourage grass root development.
- To facilitate social process
- To provide goods and services
- To pay taxes to the government
- To have /provide money for spending
- To encourage a saving culture
- To invest in productive assets or resources
- To pay wages and salaries to employees
- To promote the national well being in terms of technology, commercial etc
- To develop human capacities.
TYPES OF ENTREPRENEURIAL ACTIVITIES

1. New concept/new business

The classic entrepreneur is one who develops a new product or a new idea and builds the
business around a new concept. Examples include; Steven Jobs, the founder of Apple
computers and Next, Bill Gates the founder of Microsoft.

2. Existing concept/ New business

These are also individuals who start new business based on an old concept. FOR
Example if someone opens a convenient food store, the idea is not new and the founder

1
may not be described as innovative, but the business still represents a financial risk to the
owner and the person is developing something where nothing previously existed.
3. Existing concept/existing business
Even less innovative is a person who buys an existing business without many plans to
change the company operations. There is little need for creativity or innovativeness but
the individual is still taking a personal and financial risk. Therefore, many people
describe this person as an entrepreneur

BENEFITS OF ENTREPRENEURS
- Independence
- Profits
- Inspire other
- Employment
- An opportunity to make a difference
- They are always in contact with customers
- They are final decision makers
- They take pride in their decision and they are in control
- They have opportunity to utilize and use the potential
- The opportunity to ripe unlimited profits
- They have an opportunity to contribute to the society. They are respected in the
society and are trusted.
- They have an opportunity to recognize their profits and other people see them as
heroes
- They also recognize their effort.
- They have an opportunity to do what they enjoy to do.
- They enjoy ease entry and exit. They enter and leave the business freely
- They have ability to control their destiny
- They improve their quality of life
MYTHS ABOUT ENTREPRENEURS
- They are doers but not thinkers
- They are born but not made
- They are always inventors (people who make new things)
- They are academic misfits
- They have special characteristics
- They desperately need money
- They thieve on luck
- They suffer from over planning which lead them into problems
- They are success seekers who fail miserably
- They are seen as extreme risk takers

2
WHY DO BUSINESS FAIL
- Management incompetence, failure to make decision, incapability, lack of
capacity to operate, lack of leadership ability, lack of necessary knowledge.
- Lack of experience. An experienced entrepreneur knows what to do while or less
experienced entrepreneur lacks some knowledge.
- Poor financial control. No control system in business, lack of income statements.
- Lack of strategic management. This is where making a business plan comes in.
- Uncontrolled growth. As you open the business, you will see more opportunities
for business and finally the business will fail.
- Inappropriate location. Availability of space may not mean appropriate business
location
- Lack of inventory. Having too much Inventory or too low inventory will chase
out customers.
- Failure to make a transition. The business is supposed to fail within three years
- Lack of specialization. Depending on people outside the businesses
- Risk of funds. If you borrow and you fail to pay back
- High levels of stress e.g. if customers fail to pay, loss of security, uncommitted
and too demanding children. Also uncompromising spouses are source of stress
- Improper use of time. Do your work in appropriate time .
- Poor health i.e. poor nutrition ,laziness
- Involvement in other numerous things out side the business. you have to limit
your involvement
- Natural calamities. Any natural disasters will wipe out the business and you will
go back to zero. As an entrepreneur plan for natural calamites.

AVOIDING FAILURE IN BUSINESS

- Know your business in depth
- Prepare business plan
- Manage the resource
- Have good understanding of financial statements
- Learn to manage people effectively
- Set your business apart from competition
- Keep in tune with your self. Have self knowledge, physical health ,energy giving
relationship.
- Have passion for the business
- Manage the risks
- Consistently persistent despite of several times of failure
- Self-determination

3
 - Changes are opportunities
- Initiative and need for achievement
- Detail orientation and perfectionism
- Creativity

FACTORS THAT DETERMINE THE EMERGENCY OF AN ENTREPRENUER

These factors are put into six categories.
1. Personality factors
2. Upbringing factors
3. Employment history
4. Environmental factors
5. Migration factors
6. Growth of the service sector.

Personality factors
 Desire to achieve; an internal drive to achieve, an internal desire to excel. It is a
person who will peruse and attain challenging goals. Determining what one wants
and then takes moderate risks in order to achieve it. There is also taking full
responsibility and having unknowledgeable results as well as being responsible.

 Desire for independence; desire to do things on his own ways, making a

difference
 Nurturing quality; this is reflected in the mothers attendance or taking care of the
child. The relationship between an entrepreneur and the business is equal to the
relationship between a mother and a child
 Hardworking; total commitment and perseverance as well as determination. Have
to be committed as he has to work for long hours.
 Reward oriented; Entrepreneurs want to be personally rewarded either items of
money or respect.
 Optimistic; Being confident and courageous against all the challenges. These are
the best times and anything is possible. a business or an entrepreneur that is not
being threatened has the basis to hope for the better. Giving up is no solution to
anything.
 Excellent oriented; this is a desire to achieve something which is outstanding that
you can be proud of. This is what we know as first class mentality. It means that
what ever you put your hands on is the very best that you can do. What good thing
will people remember you for?
 Being organizer. This means being good at bringing together all the competent of
the venture to make valve or to achieve goals. This is presented in three ways;
personal, physical presentation and daily expression.
Wherever an entrepreneur is, whatever he does, lf he is happy, let every one see
he happy. Be careful with your expression. The expression should much with the
situation. Unfinished work is not accepted because you are organized. Being

4
 organized can be learnt, it is not something that we are born with. A disorganized
entrepreneur will hardly become efficient and effective.

 Money oriented; the desire to get money and seeing profit as an indicator of
achievement and performance. Money oriented is associated with seeking
opportunity. Money lover will always be creative and look for all they ways
possible to get money.
 Human relations ability; this is a ability to persevere. To able to adjust to
different situations, sociability and feeling good about each person you see.
 Consideration for others; don’t be selfish. do share with everyone ,don’t do
things to annoy people. meet people in a manner that does not defect them
 Dealing the employees; employees are human beings like you and need to be
treated just like they way you would wish to be treated
 Being aware of the needs and motives of customers. These are your treasures
unless you have customers, your business will not service.
 Communication ability; Ability to communicate effectively using written, oral
and non verb and being away to physical values (use language which is
understandable).Grape vine which is a mixture of truth and false, so don’t
dismiss it know the type of media to use. e.g. telephone, letter etc. This helps
to guide and easy communication
 Creativity; Generation of ideas that are desired to improve efficiency and
effectiveness of the system. Also it is recognizing that people are resources
that can determine a situation that is goal oriented.
 Technical ability; to provide the quality of service and product that can be
acceptable by customers. It also means familiarizing oneself before engaging
in it personally.

Up bringing factors (social factors)

 Social status; the level at which an individual is viewed by society. It is said
that the first borns can make good entrepreneurs.
 Home Education; home education play, a major role in the entrepreneur’s
life. Such education it manifested in the entrepreneur’s life
 Personal values; the entrepreneurs values are not always differentiated from
those of other human beings. The values seems to be marked by the nature of
the environment and the opportunism.
 Individuality; doing thing alone. Personal values of an entrepreneur include
wining the image and creation of personal contacts, adaption of change in the
market, high caliber management.
 Honesty and ethics in business; practice discipline. An entrepreneur should
not do wrong things to make himself look a fool in the eyes of the people.
 Age; there is a difference between entrepreneurial age and the age of the i.e.
from 25 to 30, 35 & 40. Females tend to start businesses after 30yrs.

Employment History factors

5
 - The conditions of work can force a person to start his own businesses. These
conditions are due to lack of challenge, denied promotional opportunities etc.
- It could be frustration and boredom
- It could Intentional torture and undermining
- Frequent conflicts with the boss. These conflicts normally arise from
competition with a boss.
- Hatred from colleagues; This may be due to poor assessment of yourself
- Failure to fit in a group; when you fail to fit in a certain society
- Work experience; once you have achieved certain technical know how it is
easy for you to leave the employment and start your own business

Enviroment factors
 This is a network of family and friend which you know as a cheering scode .a
chearing scodo can help you to start the business. These are the people who will
help you to stand in difficult times. They play a big role in the business. Friends
are important because they provide honest advice, encouragement, assistance and
are avaliable when needed.
 Professional support net; this also provides council and advice throughout the
establishment of the venture. It comprises of business associates, other
entrepreneur trade association and person affiliation
 Establishment of the service; lf you start a business ,you conditionally provide
other services to the community
 Illiterates of the society; They also start the business survive. They are pushed by
push factors however there people can be seen is business people eg people
working in owino, kiyembe, kikubo etc
 Part time entrepreneurs; these are people who have jobs and want to do side
businesses, may be in evening
 Home based entrepreneur .these are people who locate their business at home
because there is an opportunity.
 Influstruture: Goods road and other mean of communication can encourage
people to become entrepreneur.
 General service like security and facilities; establishment of governmentt
headquarters will also encourage people to become entrepreneurs

Migration factors
When people come from one place to another, they come with a different need to satisfy

Growth of the service sector

Role models

6
Three key skills of an entrepreneur
1. Technical skills
They include
Business management
Monitoring the environment
Interpersonal skills
Listening
Oral communication –talking sense
Organizing especially your head
Networking
Management
Technology (use of modern machines)
Coaching (workers should know what to do)
Team prayer have to team prayer

2. Busainesss management skills

Creation of a mission
Decision making
Human relations
Accounting
Marketing
Finance

3. Personality skills & traits

Creativeness & Innovativeness
Commitment
Emotionless
Original reflective thinking
Opportunity seeking
Taking calculated risks
Political skills (right place right people right time &right purpose

RISKS OF THE ENTREPRENEUR

Financial risk; usually entrepreneurs use personal savings or borrowed money & the
business fails, the entrepreneur collapses.
Career risk; This is specifically for those who leave their jobs to start the business. They
leave their jobs because they have seen the opportunity. This deprives them the chance
to retain their career plans.
Retard risk; Family obligation & commitment suffers when one becomes an
entrepreneur. when you become an entrepreneur, you spend most of the time in the
business and you tend to neglect family and other related staff.

7
Physical Risk; this is failure to recover from defeat. Physiologically when the business
fails, you remember some many things you have done had you not involved yourself in
the business.

Relatives Risks; Relatives see the business as their own. Therefore there is a risk of
making the business a social entertainment. This will consist frequent visits, chatting
with them, when actually customers are suffering and you can not attend to them.

Environment Risks: for example Neema, the Kavera is not wanted and the government
can follow up and eliminate it. So the owner of kavera business will loose the business
Natural calamities; like hunger floods rains

WHAT CAUSES STRESS TO AN ENTERPRENEUR

o Loneliness; They work long hours which prevents them from comfort. They don’t
have time to spend with friends.
o Immersion with the business (being occupied with the business) every time you
are thinking about the business.
o People problem; entrepreneurs get frustration from on compromising customers,
uncommitted supplier etc. They can also engage in conflict because of desire to be
perfect.
o Desire to achieve; tendency to achieve so much within the shortest possible time.
Entrepreneur tends to achieve more than they can manage. Un satisfaction derived
from the work done even when the work is even good.

How can we manage the stress.

o Networking e.g. having a telephone, you call or they call you. you can after work
visit friends, work mates or visit nearby trading centre.

o Communicating with employees and others. Make stories with your employees
chat and visit each other.

o Find satisfaction outside the business. Exchange views with otherwise if you stay
in the business you may cause problems to it. But, don’t remain out of the
business.

o Delegate some of the routine job. Do not do all the work alone share it with
friends.

o Budget for relatives to avoid being an ostrich that has never benefited from
anything. Relatives can leave you without business.

ENTERPRENEUR TASKS
- To own an organization, to be an innovator, the manager and to the attract the
support of the donors.

8
 - Founder and be the initiators of new business organization, gaining resources
,having separated legal entity
- To busy an existing business, if you buy you have to make a change in all the
businesses
- Bringing innovations to the market. It could be service technology etc
- Identification of the opportunity to constantly watch for gap left by existing
players and even pursuing , exploiting the opportunity and creating something of
value.
- Application of his expertise, how well the scarce resources can be allocated.
- Provide leadership; they need the support of other
- Managing the business, this is where the manager demonstrates effectiveness and
efficiency

CREATIVITY
It is bringing something new into existence. It is also generating ideas that results into
improved efficiency or effectiveness of a system. It is seeing relationships among things
others have not seen. It is designing ways to solve problems in a goal oriented manner. It
is a flavor of something evolutionally i.e. lt is a distinct way of looking at the world as
logical. Creativity is the process that can be developed over time it is a variable resource
that can be nurtured. It is a human act. It is usually attributed by artists.

X-TICS OF CREATIVITY
 Being open to experience
 Seeing things in unusual ways
 t is being curious [wanting to know]
 Accepting and reconciling opposites i.e. reconcile hate and love. Make
things which don’t work, work
 Tolerance for ambiguity
 Independence for judgment, i.e. don’t need a lot of advices.
 Needing and assuming autonomy
 Less interruption especially in thinking
 Willingness take risks [calculated risks]
 Persistence in achieving one’s heart’s desire. If you want something don’t
give up. If this fails try another one.
 Flexibility, don’t be rigid
 Responsive to feelings. e.g. why is the customer annoyed
 Fluent ability to generate large numbers of ideas
 Motivation to pursue higher goals, thinking in images. e.g. lf one talks
about an artist, you should have a picture of in you mind
 Ability to concentrate. you can not be creative if you can not concentrate
 Freedom from fear or failure
 Openness to conscious ,what do their dreams say
 Providing and using your imagination i.e. imagine a lot good things.

9
Blocks to creativity
 Hesitancy to decision making; someone fails to make a decision in face of
uncertainty and ambiguity
 Security hunting stereo type. Refusing to minimize risks and learn from mistakes.
 Acting on the basis of a distorted picture of reality. Categorizing things and
people according to your imagination
 Probability thinking, this is the struggle to achieve security mean while distorting
reality

Blocks to creativity
 Practice taking small risks in personal life
 Taking small risks at work and relaying on your heart
 Keep the law of risks; keep a record of the risks faced and how they were solved.
This will help you to handle other related risks.
 Take a number of complex risks either work at home
 Notice how you react to ambiguity
 When ideas are brought to you. talk of the positive aspects of them and then the
negative aspects and the last stage look at the interesting aspects .
 Listen to people; suspected the ideas and judgments of people.
 Try to make decision in the present disregarding the domination of your personal
history or estimated about the future
 Avoid statements that discourage creativity like I cant ,we tried that sometime
back, I don’t see anything wrong with that, we have never done something like
that before, it doesn’t sound practical, where do you get all these words, you must
be telling lies.

Creativity Process and Innovation

Creating process

Evaluation and implementation

Knowledge
Accumulation

Incubation
Idea Expression

1. Knowledge accumulation

10
 These are ways to search for knowledge and they include:-
-- Reading from the variety of fields.
-- Joint professional groups and associations that will build you as a person
-- Attending meetings and seminars
-- Talking to people with knowledge about the subject.
-- Scanning the magazines, newspapers articles and any other publication.
-- Developing a subject library for future reference.
-- Carrying a note book to record any useful information.
-- Develop /devote time to satisfy natural curiosity.

2. Incubation
This allows the creative thinker to engage in thinking about the information
gathered. It also involves in engaging in activities that are totally of less concern.
You let the mind meander. Also engage in activities that lead to creative thinking
e.g. Clean the place around you, wash clothes, polish shoes etc. Involve your
children in the working process. Do exercises regularly, thinking about the
problem before you sleep. Sitting back and relax on a regular basis

3. Idea experience
This is the exciting moment when the ideas are found. The answer comes
immediately and surely the person starts implementing them.

4. Evaluation and implementation

This is the most difficult stage that require great deal of courage, discipline and
perseverance. Put in place certain way of behavior. Also this is the time to
develop the idea on a solution fully through many attempts. This is when you find
out that the idea is taking this direction .there is also a need for testing and
modification.

Reasons /purpose/ importance of business plan

 It gives a sense of what we have to expect before we enter on the journey – to
prepare ourselves as much as we can
 It guides the owner in running the business and to be more focused
 It is a way of selling your self and your business to possible partners
 It shows that the business owner is organized and knows his or her business
 It provides information about the business and the market one is to operate in
 A well prepared business plan will increase your chances, of obtaining financial
assistance from financial institutions e.g. Banks
 To reassess every part of the venture
 To identify and conform the product or service or ideas as a peace of reality
 To develop an understanding of, and solution to numerous problems that will
be encountered.
 To test the assumptions that uncover a lot of things that would have been ignored.
 To discover more a lot about what is not known and what is known about the
venture.

11
  It helps the entrepreneur to predict expected conditions in the industry in relation
to current industry.
 To fore see whether there is up trend or down trend, market saturation, product
margin continuous supply of materials, extreme price cutting due to shift
competition, excessive government regulations, labor problems, level of sales or
trends of cash flow, current and failure needs of funds, favorableness of product
or service
 To craft an effective strategy through which he or she can avoid failure.
 To view this venture critically and objectives through research.
 To get funding since the plan shows the procedures through which operate and
use well its finances
 To communicate with external environment for financial sources
 To enjoy the opportunity to express his or her planning and managerial ability
 To use as a powerful funding tool
 To get quantifiable objectives and measurable bench marks for company and
actual results
 To get information pertaining activities to be carried out that require finance to
develop the new venture

Principle s of writing major parts

-perequistes
-prw-luminal assessment
-Executive summary
-Description of the businessz plan
-Marketing analysis
-Human resources
-Operations
-Financial analysis
-Major events
-Bolograph
Important questions to remember

 Does the business venture has chance to grow into a successful company?
 Is the product or service going to sale?
 Are there committed customers? Will the possible price be profitable? Is there a
good venture team put in place that will help the venture share well
 Will the venture bring in more profits to attract venture capitalists, bankers and
other expertise
 Have you accessed risk, rewards, commitments or tasks lying ahead with related
stakeholders?

Guidelines
 keep the plan respectably short
 Organize and package the plan appropriately
 Orient the plan towards the future, don’t write it in past.
 Avoid exaggeration, do research and get fact

12
  Highlight important risk and see how you can overcome them
 Given an evidence of an effective entrepreneur team
 Don’t over diversify
 Identify the target market clearly because this is where the business heart is
 Capture the leader interest. People who read the business.

Who reads the Business Plan?

1. Bankers
2. Suppliers
3. Customers
4. Investors
5. Employee

Sources for information /guidance when writing a business plan

- Publication: Provide a frame work to prepare a business plan
- Bankers offer advice and cancel
- lawyers provide competed legal advice and critical aspects of the venture
- accountants interpret the language of business, provide guidance on financial
statement
- Customers provide wealth of information e.g. pries upon which the product
should be sold, competition etc.
- Suppliers: supplies industry forecasts, lists of the available material, price cuts
and delivery schedule but at the same time some suppliers will require you to pay
a little fee to get information.
- Advertizing agencies: these will provide complete overview of the business
venture, product and services description of the target market.

Who should write a business plan

An entrepreneur should write a business plan and should contact many sources to write a
business plan.

Item/scale excellent good fair poor

Accounting
Planning
Fore casting
Multresearch
Sales
HRM
Product design
Legal issues
organizing

13
How to write a business plan.
Writing a business plan requires a write to be substance (material) in an appealing style.
A writer will have to search for right words which are the same like the search vision.
The writer must choose and use proper words that can make a difference between
something clear and obscure. The writer must communicate effectively explain concepts,
technologies and complexities developed in business. The writer must write well in an
understandable fashion because there is no chance for immediate feedback. There is no
body language for both the reader and the writer. The entrepreneur should not hire
someone else to write because the capitalist want to know the writer in person, you mind
what you venture is all about and your future plans, your explanation and how you can
defend it. Writing a business plan is a skill that has to be learnt

Rules to follow when writing a business plan

 Honesty rules: Reveal what you actually think and feel. At least it may be
significant and relevant to the business plan you have to tell the truth to get in
touch with your thought and feeling. Protect your credibility and make sure that
your words follow.
 Use words economically: There are words that you should not and should use.eg
use identical other than exactly identical. Exactly has no role to play. use full
rather than completely full, at the present other than now. Be kind enough i.e.
please, in view of the fact that, use a word though not exact as longer as it
satisfies the need.
 Use words that give a clear picture –here the writer should be clear to show
exactly e.g. termination of the rental contract will effective on 13th June this year.
Also, instead many out lets have examined our products, you can say, 75% have
examined other products.
 Choose the right nouns and verbs. Use the third person to avoid bias
 Avoid redundancies; avoid words that are irrelevant though have got the meaning
e.g. a distance of 10 yards, future prospects.
 Use transitional words. These are words that string together statements and
provide clarity e.g. in fact ,in addition, assuredly importantly, never the less,
because etc
 Avoid using big words when small ones can do the work better e.g. accompany
can use go with, desirably or desired but wanted is better.
 Avoid out dated expression, e.g. as a matter of fact ,at an early date, due to the
fact that, in accordance, as yet we have not heard from her
 Use positive expressions e.g. we close at 6.00. This negative expression. To be
positive, say we are opening until six. Do not hesitate to call us, instead use please
call us. Am not available until, why not use I will be available on Monday.

Guidelines to remember
Use good board quality paper or use any paper which is white that will allow
characters to stand out. if you are to make copies, use a good photocopier
Incase of binding leaves two inches of left and right margin
Also avoid legible too destructive scripts and fancy lines

14
 Get your readers attentions by using italic bold and different colours without
rubbing
After binding, make sure that you leave one inch all around the paper
Organize appropriately

Parts of the business plan

1. Preliquisite: It consists of a cover page. it has an address, name of the business
log and person who designed the plan.
-Letter of transmitter: is the letter requesting/asking the bank or any financial
institution to give you a loan
-Disclaimer is the statement to show the reader that the letter or business plan is
yours and your original work.
2. Preliminary of assessment: it is development as the new vision which requires
you to have and you have information.
3. Executive summary: it highlights the major aspects of the business plan.
Description of the business
Marketing
Operation
HRM
Financial analysis
Major reports
Bibliography

Letter of transmittal
It officially represents the business plan to the reader. in the letter, explain your reasons
for the business plan. Refer to the title and explain major feature. In your closing
remarks, show your willingness to provide extra information if necessary

How to write the letter of transmittal

Before you write the letter,
- Know what you want to write and note it down before you start
- Explain the reason for the business plan. Spell the name or the names of investors
correctly, others you can loose you chances
- Tell what your letter is all about in the first paragraph
- Do not keep you reader guessing
- Write the letter from the readers point of view
- Be honesty and keep it short, Be specific, make it neat and pleasing on a white
clean paper
- Topographical letters are not allowed, repetitions are out of questions and also
sports of some ink are not allowed.
- Make sure the last paragraph tells the reader what you want e.g. may I have an
appointment with you.
- Table of contents; you have to list the headings & sub headings of the business
plan neatly to help the reader meet the locations easily.
- After typing fold it nicely before you put it in an envelop.

15
Few tips for an entrepreneur
 Realistic plan is one of the best way to avoid mistakes – costly mistakes
 Try to be critical toward your own plan – realistic and professional
 Mention the risk and problems – and how you are going to solve them
 Then revalue, re-estimate, find new ways and keep on going!
The summary of the Business plan
Executive Summary
A business plan should have an executive summary. It sumarises the key elements of the
business plan and is often the area that captures the readers attention at a glance. It is
usually 1-2 pages but should be clearly written so that the readers are inspired to
complete their reading.

It is a sensitive and a difficult part of the business plan. It defines and highlights the
business plan. It stresses well founded of the opportunity, ability of management
credibility and profit. It entices the lender to give you more money. It consists about 13
main sub headings.

Elements of Executive Summary.

The Executive Summary consists of the name and address of the business.
Type of business; it state the objective of the new business i.e. if you are to rare chicken,
state major x-tics of the product if they are shoes, they are open or closed shoes. Indicate
specialization, its use and importance where applicable. Then the product x-tics, explain
the type and size, the make, the colour and any other specification of the products.

Market x-tics; explain the segmentation e.g. customers may u low earners medium earner,
age, sex etc.
Operations; describe the production process that you are going to undertake, measuring
means, packaging, area of operation and any other necessary information about your
production means

Management team; give their full names, brief history, qualifications, position and
others, address, Telephone, E-mail. etc

Competition in the business; Indicate any direct competitors direct, competition should
look at quality service durability, size and packaging.

Capital request; State clearly under available resources of capital i.e. personal saving,
contribution by NGOs, Association etc.

State the loan requested in the letter of transmittal, show how you are going to use the
capital. How have you partitioned the funds e.g. item and the amount used?

16
Collateral loan; a brief explanation on how the loan is going to be paid e.g. are there any
people owning shares. What have you put in place incase the loan is not paid.

Financial protection state whether other business people can easily leave or enter the
industry. Determine expected sales and expenditure per year up to five year. Determine
the net income expected for about 2 years. Show the financial statements namely cash
flow income statement, balance sheet, ratios etc.
The name of the business. The name of the business can be formed in many ways. You
can combine may be letters from the names of the owner, or other names can catch the
attention of the customer e.g. FIDODIDO, you can also use words that are unique like
miracle center. There are words that are catchy but meaning less e.g. the wishy and wishy
a head of time etc. You can also use words that have hidden meaning, like amazing, busy
bee, Sanyu. You can also use words which have direct meaning like man’s wear corner,
lady’s corner, coffee shop. You can also use abbreviations. The name of the business
should be free of legal restrictions.

Describe the business (product or service you are going to provide show a variety of
products or services.

Specify each type for particular market segment e.g saucepans for school, knives for
kitchen etc. State the problems envisioned, what the problems could be in for example
schools offers target.

Indicate management and structure of the business say something as an owner and
manager of the business and how you are fit for this business and do this by recalling
experience. Explain in good terms the information gathered using SWOT analysis etc.

History of the business

The history of the business is particulars for bayout and franchisee.
Narrate the history of the business among the owners, its objectives, operations, the
nature of the products, competitors, pricing policies sources of funds, financial position,
the technicalities of ownership eg is it all yours.

Reason for selling; why is a seller selling? Specify and explain services that are provided
by the franchisors for example, services that are in areas of management training
personnel, distribution channels and other arrangement.

The product
Under the product, explain the unique characteristics of the product and service or its
specific advantages. These specific advantages should convince that the product is going
to make a profit.
- Describe the product you are serving e.g. bread. Look at unique characteristics of
bread. It should be different from all other brands.
- State the foreseeable existing chances of development of the product e.g. what are
the opportunities

17
 - State the possible weaknesses of the product and show how you are going to deal
with those weaknesses. Discloses major product lines if they are there.
- Look at the size of the product, service convince, easy of use, effectiveness
appearance, packaging, differentiation, adaptability and reliability.
- Describe the patent rights if there is any and copy nights, trademarks and attach
their sample.
- Talk about inventory management indicators e.g. perishability, life cycle of the
product, turn over ratios inventory evaluations method, LIFO FI FO or moving
average.
- State possibility of success and the affordability of customers. For example, are
you going to use discounts in order to attract customers?
- Explain the risks to be met such as wars, fire, accidents, theft etc. and show how
any of the risks will be handled.
- think you are going to succeed.
- Show what makes you feel outstand compared to your competitors.

Target market
- specify the target market
- determine who makes a decision to buy for your target market e.g. parents, youth
etc
- identify the localities in terms of population neighboring cities, statistics etc
- look at how decision makers are going to affect your business e.g. lawyers
teachers, doctors, politicians, business people, police, admistartors etc.
- Study the neighboring cities and determine the gaps left by competitors or
opportunities.

Market survey
- Verify whether the potential customers will afford the price.
- Show whether the target markets will buy the product
- Explain the results of the survey
Marketing position
There are few questions to answer
- Consider whether your business is going to be a technical leader. Are you going
to be a leader in your business?
- Determine whether your business will be aggressive and take risk or whether your
product will be highly priced but of high quality.
- Determine whether you are going to make adequate products that will capture
large share of the market at law price.

Distribution

18
What are some of the distribution channels available to you? For example are you dealing
sales agents, wholesalers, retailers etc? Are they going to be given commission? And
what are your expected sales from them.

Advertising
Determine the media you are going to use. Estimate the cost of the media that you are
going to use e.g. cost of telephones, adverts in papers and any other means of advertising.
Make sure that there is a continuous supply of product otherwise you will an gate in
shortage.

Pricing
- Determine the nature of your labour, material and overhead costs. Determine cost
report on the overhead to be sold.
- Make a schedule of people who are distributing items and the costs involved. Also
make a list of people you are distributing to and whether you gave them a
discount or not.
- Show manufacturing costs per unit, other costs per unit.
- Set pricing policy and compare it with the competitors
- Offer law price when there is intensive competition
Research and development plan
- State the development plan and the costs i.e. the plan and the time for that
plan
- Determine whether there is an addition need for testing.
- Testing packaging
- Consider whether there is need for packing etc
- Keep the information very well because it might of help in future.
Manufacturing
1. Production characteristics; it looks at the made of conversion. is it input-output.
Describe the process of production from the time if making to the time of using
the product e.g. local beer process of production. Determine whether there is any
health problem e.g. Manufacturing of mattress harmful to the life of people.

2. Labour force; describe the number of employees. State members who associated
with unions like UTODA. Describe the supply of labour. Where can you get more
labour and in what quantities.

3. Suppliers; Make a list of suppliers, items supplied, quantity, cost per unit and area
of proximity. Also show how good your relationship and commitment with
customers is, to avoid interruption, delays and inconsistency in production.

4. Equipment; state whether you are going to use machines and if you are, then state
which kind of machines. State the nature of machines e.g. computers, printers etc.
State the weather the machines are going to be used on continuous basis or they
are to be used in shifts e.g. In theaters, machines are used continuously when
there are patients &when patients are not there, they are not used.

19
 Determine the resale value of each machine

5. Property and facilities; describe the property that will be used for start. if it is
buyout & franchise, describe the exiting property. Give the location, and ensure
that the location is appropriate in terms of labour availability, wage rate proximity
to customers, proximity to suppliers.

6. Manufacturing data; This includes documented units e.g. total fixed cost variable
costs etc in other words, how much do you produce per day. It is the data
concerning whatever you want to manufacture.

Financial part of the business plan

 Prepare the cash flaw budget; it provides an overview of cash inflow and outflows
during the period.
 Identify the requirements time and likely problems i.e. cash sales, payments
received on account and loan process
 Proformal statement; income or profit and loss statement, net income calculated
from projected revenue minus expenses, balance sheet and summary of assets.
 Proformal cash flow projected cash flaw available including cash dispersement,
proformal sources and uses of funds, summaries all sources of funds available to
the venture and how it is going to be used
 Break even analysis; a point where the business makes a profit or loss.
 Financial ratios; i.e. working capital equity ratio, ratio an asset, net profit margin
inventory turnover ratio quick ratio, average collection period.

BUSINESS ENVIRONMENT

Introduction
This can be defined as the surrounding of a business. It includes all those things that lie
outside the business but which can greatly affect its operations. For example, the
consumers of your product lie outside your business but greatly affect your business. In
agricultural sector, changes in whether conditions can affect the final product. For
instance, if it rained continually for a given period, we would expect cotton farmers to get
poor yields

Imagine for a second if you were living in this world alone without having to talk to
anybody! This would present a very difficult situation for you. Am sure there would be
times when you would long to speak to someone about your plans or to get advice in one
way or another but this would not be possible. Our being surrounded by other people
creates opportunities for us to become better individuals because we learn from others.
However it is also possible that we can get into contact with certain people who pull us
down and therefore create challenges for us. So we should try to look out for those people
who will improve us and avoid those want to drug us down.

20
Just like people, a business can not operate alone. It is always surrounded by various
factors that lie outside it and affect its operations. For instance, competitors will always
be there as long as you continue operating your business, national governments will
continue setting new rules and regulations governing the way the business is done etc. So
it would be unwise for businessman not to try and understand the environment in which
she/he is operating because it keeps presenting opportunities and challenges, which can
either boost the business or make its operations difficult.
COMPONENTS OF BUSINESS ENVIRONMENT

Legal Environment
These are rules and regulations that govern doing business in a particular country. Most
of them are set by the national government. These rules may favorably or unfavorably
influence businesses within that country.

Issues to consider under legal environment

1. The law of ownership, for example who owns what type of a business in a given
country? This affects the type of business you will set up.
2. In developing countries especially, there may be rules requiring the local people
to own a certain percentage of a foreign business or its subsidiary.
3. Taxation laws may be used to encourage or discourage particular imports/ exports
activities, for example, if the amount of tax to be paid on agricultural exports is
reduced, you may be encouraged to sell your products in other countries.
4. Use of trade marks. A trademark is defined as the legal protection given to a
product. For example, you may want to prevent competitors from copying your
product and so it becomes important to know how trademarks are used so that you
can legally protect your product.
5. Determination of minimum technical standard, which the goods must meet, for
example, in agricultural, flowers should be fresh before the European countries
where they are exported can accept them.

Social Cultural Environment

This is the death rate, birth rate, age structures of the population, the different groups
within communities and the behavior of these groups. This type of environment affects
business operations because it influences demand for a given product.

The following issues can be considered under the social cultural environment;

A country’s population; it is important to study a country’s population because it creates

demand for goods and services. Besides, is a source of labour. This means that if the
population is big, you expect to get more people to buy your product. Also you can
expect to have a larger number available to work in your business.

Age structure and distribution; in most developing countries, a higher proportion of the
population is below the age of 30. This means that a smaller fraction of the population
has purchasing power. This in turn affects the number of people who will buy your
product.

21
Geographical distribution; where does the country’s population leave? Some parts of the
country may be over populated. For example, in developing countries, most people
migrate from rural areas to urban areas in search of better quality of life. This may reduce
the numbers available to till the land in the rural areas.

Background; people of different backgrounds will prefer to buy different products

partially due to their cultural exposure. For example, in Uganda, it would be a good idea
to put up a business dealing in milk in Mbarara or karamoja because people in this area
have a background of drinking large amount of milk. This may not be the case with other
areas in Uganda.

Sex; man and women have different buying roles in many societies, for example, men
usually pay school fees while women usually buy food and kitchen requirement. For your
business, it becomes necessary to identify who buys food in the house so that you can
speak to them directly, hoping to make a sale.

Extended families; in many developing countries, there is no welfare state and therefore
the head of the family usually assumes the burden of looking after the elderly. This may
reduce the amount of money available to spend on basic items.

Culture; the importance we attach to ownership of goods and use of services is

determined by the learning process we acquire through cultural and social education. We
learn to be consumers by interacting with others and observing their reactions. Religion is
a strong cultural element that influences human behavior, for example, because of
religion, the role of women varies from one culture to another, that ie,s, women may be
restricted as employees and as consumers. You may therefore have to think twice about
employing women in your business in some culture.

Political Environment
This is the nature of the political situation in the country where you are doing business or
where you intend to do business. It is important to understand the political environment
in which you are operating because it can present political risk to your business. This is
the possibility of civil wars and changes in government policy in the political
environment.

Issues to consider under the political environment

Stability of the government: It is important to know how stable the national government
is. Rapid changes or political unrest make it difficult to do business, for example, a rapid
change in political regime may prompt a coup d’etat which may make businessmen lose
their property. If you are operating business in such a country, you may restrict the
amount of investment until the situation clears so that you don’t expose your business to
too much risk.

22
International relations: Does the home government maintain good relations with other
foreign governments? For farmers, this becomes particularly important because it can
determine the ease with which they can export to other countries.
Government beauracracy: The government may be slow to facilitate the marketing of
your product. Long processes may be required for exporters, for example, the
requirement to fill in so many forms. This may actually discourage some of the potential
exporter.

National policies
These are the policies that are in place in the country where you are operating your
business. It is good practice to operate within the national policies because failure to do
so can attract a penalty from the relevant national authorities, for example, failure to pay
tax on time or failure to pay the full amount can attract a surcharge.

Issues to consider under the National Policies

Fiscal policies
These policies affect the amount of tax that a producer has to pay, either on the sale of his
or her goods or on the importation of machines to be used in the business. When the tax
to be paid increases, it has the direct effect of increasing the costs of production. You
may then increase the price of your produce with the aim of recovering the additional
costs. In the end, consumers may see your produce as much more expensive than that of
competitors and they will therefore buy less of it. This will affect you earnings in the end.
The opposite of this situation is also true.

Monetary Policies
These policies affect the amount of money available in the economy. You should ask
yourself the following questions:
1. How easy is it going to be to borrow money?
2. How much interest is charged on borrowed money?
3. How much money do people have to spend? This is important as it will influence
their desire to buy a given product and will also determine how much of that
money is spent on a given product?

Agricultural Policies
These policies affect ease with which one can practice agriculture in a given country. In
most developing countries, national governments try to put in place favorable agricultural
policies to promote agricultural produce because agriculture is the backbone of the
majority of these countries. For example, they can advise farmers to use certain pesticides
to destroy pests on their crops. They can also discourage them from using certain types of
pesticides because of the danger they pose to animals and people.

There are different agricultural policies for each product, for example, the vanilla crop
has been fetching high prices on the global market. To take advantage of this, national
governments in developing countries were availing farmers with high quality vanilla

23
seeds to control the quality of output so that it can be acceptable on the world market.
They were also helping them to market their produce on the international market which
motivated many more farmers to grow vanilla because of the anticipation of good
proceeds from the sale
.
Physical environment
This is the availability of resources that are required to run the business efficiently.
Resources may include such inputs as materials and services, land labour force, physical
plants and facilities. Every business uses these resources to get its work done. Sometimes,
money has to be borrowed from banks, microfinance institutions or other lenders to be
able to acquire these resources so that the business can continue with its operations.
Sometimes these resources become scarce in the environment making it hard for
businessmen to continue with their business operations normally.
In agriculture, land and labour are very important resources. Land is more easily
available in the rural areas then in the urban areas. So is cheap labour that is usually
required especially at the time of harvesting the crop. The physical environment affects
the efficiency and success of any business.

Competition
It is difficult to be in a business alone. Competitors will always be there to keep you on
your toes with better price, better quality products, more accessible premises etc. They
will always try to do their business better so that they can win over your customers.
Competitors should be looked at positively because they give every business man a
chance to continuously think of new ways of doing business better than yesterday .There
is also always something new to learn from competitors. It could the latest production
technique etc.

Economic environment
The nature of the economy of a given country affects the demand and ability to acquire
goods and services. Most developing countries have small economies which means that
the majority of the population may not have enough money to spend on luxuries, or even
spend on food which is the basic necessity.

Issues to consider under the Economic Environment.

The interest rate: If banks charge high interest rates, it discourages people from
borrowing. Besides in most developing countries, commercial banks do not want to lend
to farmers because they think they operate high risk business. This is partly because
agriculture is greatly affected by the weather conditions. In a very dry season, for
example, farmers realize poor yields and so those who would have borrowed from the
banks find it difficult to pay back the borrowed amounts.

Per Capita Income: Per Capita Income is defined as the average amount of money or
income that each person in a given country has available for spending every year.
Uganda’s per capita income is estimated at about US$1400(World Fact book, 2004). This
means that on average, each Ugandan has about US$1400to spend every year.

24
Under per capita income, it is important for farmers to know how much of this income
the population is willing to spend on food. In most developing countries, the majority do
not have enough money to spend on basics like food. They instead rely on handouts from
the government and the public.

Infrastructure availability: This encompasses variables like the availability of good road
networks, communication system, schools and hospitals to mention but a few.
Agriculture, for example, relies heavily on good road networks because of the nature of
the product. It has to get to the market as soon as possible before it perishes. However
many farmers in developing countries face excessive delays in transport because of the
poor road networks. As a result, some of the produce perishes before it gets to the
market. This is therefore means planning in advance to avoid any unforeseen
consequences.

In summary, it is important to always be mindful of the environment since it always

presents opportunities and threats which can affect the smooth running of your business
operations.

FORMS OF BUSINESS
The entrepreneur has choice when it comes to deciding the type of the business
organization he will operate his or her business.

Sole proprietorship
This is a business owned and controlled by one person. The individual may borrow
money and employ assistants but he or she alone is responsible for the results of the
business. When the business succeeds he or she receives all the profits and in case of
failure, he or she bears all the losses.

A sole proprietor is formed, financed, owned and managed by a single individual who
bears all the risks and receives all the gains. In summary, a sole proprietor has the
following indicators:
 Single ownership
 One man control
 Undivided risk
 The debts of the business become the debts of the owner without any limit
 The business and the owner are the same, they are not separate.

Sole proprietor as a form of business organization has the following advantages:

 It is easy to form
 The benefits are direct to the owner. This increases the morale of the owner
 Quick decision making
 The can easily change the business(it is very flexible)
 There is personal touch. Owner is in direct control and operation of the business
 Because of one man control, the owner enjoys a high level of business secrecy

Partnership

25
A partnership is an agreement among two or more persons to do business together and to
share profits from the business.
In summary, a partnership has the following key indicators:
 Two or more persons (maximum of 10 in a banking business and 20 in other
businesses)
 There must be an agreement. This agreement may be written or oral
 Sharing of business
 Business is carried by all or by one on behalf of all.
 The debts of the business become the debts of the owners without any limit.
 The business and the owner are the same, they are not separate

Joint stock company

These are limited companies.
A joint stock companies may be a private company or a public company.

Private company (Limited and Limited by shares)

A private company has some of the following indicators:
 The minimum number required to form a private company is 2
 It limits the number of its numbers to 50 (employees are not part of this number)

Public company
A public company has some of the following indicators:
 The minimum number required to form a public company is 7
 There is no maximum number of its numbers.

Cooperative societies
A cooperative society is an association of persons who join together on a voluntary basis
to promote their economic interests. In cooperative societies, profit is not the main
guiding force. They are mainly formed to achieve the following:
To safe guard them selves against abuse from profit maximizing operators
To promote cooperation not competition among members
Self help and unity

In summary, a cooperative society has the following guiding principles:

1. Voluntary association. Any person can join or leave
2. Capital of a cooperative society is raised from members
3. Control and management is by democracy. Members vote managers into office.
4. They have a “service motto”. A cooperative society is formed to give services to
its members
5. Surplus arising from a year working is given to members as a bonus
6. To register, a society must have a minimum of 10 members of sound mind
7. Members must have a common interest e.g. Locality, occupation, etc.

26
Common types of cooperatives
Type
Cooperative farming societies
Marketing cooperatives
Producers cooperatives
Consumer cooperatives
Credit cooperatives
Dairy cooperative, etc
Detail of business
 To achieve the benefits of large
scale farming
 Common where land is fragmented
 Where small holding do not benefit
owners.
 Independent producers come
together to arrange for the sale of
their out put
 They are useful to agriculture and
small producers.
 Formed by small producers.
 The society supplies its members
with low materials, tools
equipments in order to compete
with the large ones.
 Formed by ordinary people to
obtain day to day consumer goods.
 Members enjoy the benefits of
buying in bulk
 The society sells to members at
slightly lower prices.
 Extending short term finance to
members is moderate means
 Develops a habit of savings among
members.
 For milk producers.
27