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What are the six key elements of entrepreneurship and what is the importance of each?

Motivation & Commitment: Its important to get the basic ingredients of start-up right. People who are lending money look at the person first and foremost, so motivation is the most critical. You need to convince your bank manger you can make your business work because youve researched your market, youve costed out the business and you know where you want the business to be in 5 or 10 years time. A means of showing your commitment to the business would be to save and invest money. Abilities & skill: The second element is one of ability and skills. The individual has to have skills appropriate to the kind of business theyre proposing to run. And if they dont have them, they should have a reliable person who can. It could be that one person knows how to run a business from an operational and management perspective, whereas another person has the technical skills to develop the product or service. Resources: The third element is resources. Thats not purely about money and equipment; its also about intellectual capability. (The ability to persuade others is important. Many entrepreneurs have been able to negotiate very favourable deals against the odds, when establishing their business). Strategy & vision: The fourth element is strategy and vision in terms of thinking four or five years ahead and having some idea of where that business might be in the future and putting in place a plan to achieve that goal. Planning & organisation: The fifth element is planning and organisation. Without planning, organisation, coordination and administration, the product wont get to market nor will it satisfactorily meet demand. You need to think about systems, job roles, and quality issues, which if handed effectively, will ensure you, can satisfy the market by delivering on time and to the right place.

The idea in relation to the market: The sixth element is the idea and more specifically, the idea in relation to the market place. What we are trying to do is to make certain that we are customer focussed, ensuring that the individual is satisfied in their requirements. When we look at the six elements it becomes evident that you can have a bad product with a highly motivated individual, which will produce an acceptable business. But what you cannot have is a really good product with a de-motivated individual. The business will not succeed because the product will not reach the market at the right time, at the right place, or at the right price. Motivation & commitment 1. How does the motivation of an owner affect the business? The motivation of the entrepreneur is driven by their type, of which there are three. The craftsman entrepreneurs are focused on quality of life and are therefore seeking to satisfy themselves and to satisfy just one or two customers. The classical entrepreneur is driven by profit. Their main driving force is to maximise returns from the market place. The third area is one of a manager entrepreneur. They are strongly orientated and have a personal need to prove their worth through business success. They are likely to be in a mature market. A mature market is one where the customers know the product or service offering and do not need to be educated about. (where they can succeed.) 2. How do (push and pull) factors affect motivation to start a business? Motivations to start a business push or pull Be my own boss Control over my life/independence Better financial prospects Spotted a market opportunity To make a lot of money 6% 25% 17% 13% 14%

To have a more balanced lifestyle No real alternative To do what I enjoy Source: Barclays Bank Survey (1992)

5% 12% 5%

Push: factors are those that propel one into their own business, perhaps involuntarily at first e.g. redundancy. Pull: factors are positive factors in the marketplace and in an individuals character which makes them want to succeed e.g. market opportunity and the drive to succeed. There are both positive and negative features of setting up a business. On the positive side an individual has found an idea. From a negative perspective, an individual may have been made redundant or be unhappy in their current role. The most successful entrepreneur is more likely to be the person who is pulled into it by the market place. They recognise that they want to do something different and that they are more highly motivated in satisfying their own aspirations and also those of the market place. Those who are pushed are reluctant entrepreneurs who may be running their business as well as being employed. Alternatively, they feel they have no choice. 3. What can put an individual off starting? Reasons for not starting a business are often surrounded by elements of fear. The fear of failure, of not having enough cash to be able to continue their quality of life and what other people will think about them. In the UK we have a negative view of what its like to run a business. Even now when culture is changing it is still a different culture that exists compared to that of the American culture. In America, fear of failure, liquidation, and bankruptcy isnt seen as a major inhibitor in terms of starting a business. 4. What are the three main factors to consider when setting-up in business? There are three factors that have to come into play when offering advice to people setting up and running a business. Those of 1) risk, 2) reward and 3) timing.

1) Risk: The risk may be too great in a volatile, changing market place, where the product requires constant changes and updates and where ownership of intellectual property rights (IPR) may cause problems. If you dont have the resources in place to cover these problems, you risk will be higher. 2) Reward: Whilst the risk might be acceptable, the return or reward might not be adequate. The individual should be looking for a reasonable return for efforts in running that business. 3) Timing: Timing is crucial to the success of a business. Never enter a saturated market unless you have powerful point of difference or unique selling point. Early entrance to market should be the most successful strategy; satisfying initial demand and getting established as a recognised provider for future demand. Timing applies equally to resources. If you set up a market proposition but cannot produce the goods in time you will rapidly lose credibility and hence market share. Abilities and skills Can anyone set up in business or do you have any special skills and characteristics? The requirement for specialist skills and characteristics will depend on the industry. Some, not all, businesses require technical skills. Management skills are critical to all business. Negotiating skills, selling skills, administrative skills, along with the ability to be able to identify target markets and customers are all required when setting up and running a business. One way to work out whether you have the appropriate skills or attributes to set up and run a business is to undertake a quiz. The quiz will identify individual strengths and weaknesses, together with areas for development. The idea in relation to the market How do you choose a profit making idea? The business idea is key to success. The idea itself might come about by friends and so forth. To validate the idea it is a good idea to check with people who know about that particular industry. Do they think there is a gap on the marketplace and that the product could be serviced?

It is also a good idea to use the internet, to see if the idea has been done anywhere else in the world before. Following discovery and validation of the idea, you must consider profitability. Can the product be sold at a profit and therefore generate the income stream that is required to run a successful business. Resources 1. How do you identify your resources and which is the most important one? What is my starting point? Contacts- who do you know? In what way might they help you? Money- cash and realisable assets Equipment- car? Computer? Spare room? Etc Other resources- land? Hobbies? Spare time? Family & friends? Ohp 2/1/8

If you have got the motivation, the skill, the idea and the market place, resources is the next issue. You need to think through how that business is going to operate, to walk yourself through the business. By doing this you will identify the type of people you require, the jobs that are going to be undertaken, the equipment, the finance, the customers and other resources particular to your business. The resources have to be used in the most effective manner to be able to maximise the returns from the business. You need to develop the networks and the contacts which enable access to the appropriate resources at the right time. In this way you will continually add value to the business.

Planning and Organisation 1. What kind of planning and organisation is required when setting-up and running a business? When you are planning and organising the business its like painting a house; its 80% preparation and 20% application. There is never enough time when you are running a business to be able to plan and organise that particular business, so you must do your preparation, your plan, at the beginning. What kind of business are you going to run? Is the organisation going to be a sole trader, a partnership or is it going to be a limited company? How many people are going to be needed? At what stages will these individuals come into place? What systems will be required? Equally as important as the form of the business is the type of tax structure the individual is proposing to have. For instance, will the business need to be registered for VAT? A whole series of developments are now taking place. How is the individual going to be able cope with the suppliers? How will the negotiation with the suppliers be done? What are the legal requirements behind that when it comes to the customers? What are the payment dates and terms? How has the businesss bank account been organised? The planning and organisation related to the setting up and running of the business is crucial. If it hasnt been thought through in advance then the business will start in a mess and it may never recover.

How should one plan? The Classic Planning Cycle Define problem/issue Measure results Collect relevant data

Implement chosen solution

Develop alternative solutions

Select optimum solution

Assess consequences

The Non-Planning Cycle

No time

Unpredictable consequences

S T R E S S

Unplanned development

Fire fighting

The classical planning cycle is a logical flow of information from defining the problem or issue, collecting information, developing, selecting and implementing the solution through to measuring outputs. Stress is the direct result of a lack of business planning. If an individual is unclear where he or she is going, that person will end up fighting and fending off problems rather than making meaningful responses. Strategy and vision What is the importance of strategy and vision, when starting a business? You should be able to envisage what the business will look like in3, 5 and 10 years time. Equally you should be able to anticipate how you are likely to retain that position. It is through: Developing the existing market or product New products or markets Developing a particular aim of the business, e.g. interests overseas