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1.5.2 Entrepreneurial Motive and Characteristics - Coggle Diagram
1.5.2 Entrepreneurial Motive and Characteristics
Key Terms
Profit Maximisation - An attempt to make as much profit as possible in a given time period
Profit Satisficing - Making enough profit to satisfy the needs of the business owners
Characteristics of Entrepreneurs
Self-confidence
Successful entrepreneurs who believe they are going to succeed
They can persuade other people to buy the product or help finance the business
Self-determination
Successful entrepreneurs think they can take control of events going around them
They can influence those events and turn them into something which will benefit their business
Being a self-starter
Entrepreneurs can work independently and can take decisions
They have their own ideas about how things should be done and they ae able to develop those ideas
Judgement
A successful entrepreneur is one who takes in information and listens to advice
They are able to see where the business might go in the future and what they want out of the business
This helps them to make judgements and decisions
Commitment
Successful entrepreneurs are ones who are committed to what they do
Perseverance
Successful entrepreneurs have to show perseverance and get through bad times and the setbacks
Initiative
Successful entrepreneurs are able to take the initiative in situations
They don't allow events to overwhelm them by doing nothing
They are able to change and be proactive
Reasons Why People Set Up Businesses
Financial Motives
Profit maximisation
These entrepreneurs are motivated by money and their key focus is financial return on their efforts
It may be argued that entrepreneurs who try to maximise profits are likely to take bigger risks - This is due to the direct relationship between risk and reward
If production levels cannot be raised sufficiently to cover the cost of the machine, the financial burden might cause extreme cash-flow difficulties
Entrepreneurs that aim to maximise profits are more likely to marginalise the needs of other stakeholders
Profit satisficing
Some entrepreneurs make enough profit to maintain their interest in the business
They may not want to take on the extra responsibility of expanding their business - which is often required to make more profit
Some entrepreneurs run 'lifestyle' businesses - meaning that the business generates enough provide the flexibility needed to sustain a particular lifestyle
Non-Financial Motives
Ethical stance
A minority of people set up a business in support of a moral belief they possess
E.g. Enviromentalism, vegetarianism
Social enterprise
These are organisations that trade with the aim of improving human and environmental well-being
They have clear social and/or environmental missions and generate most of their income through trade or donations
Independence
A lot of people want to be 'their own boss'
These entrepreneurs are driven by the desire to be independent
Nearly 90% of respondents to a poll by Startups.co.uk said it was very important to be able to make your own decisions in a business
Home working
Quite a number of entrepreneurs set up their businesses from
The time and expense spent travelling to and from work is eliminated
They can also enjoy more flexibility
Skills Required by Entrepreneurs
Organising
Entrepreneurs play and important organisational role
They have to organise and coordinate a wide range of resources in order to get the business up and running
If things go wrong, they will be 'fire-fighting', which is conflict resolution and dealing with business issues
Financial management
This is an important skill which can lead to the demise of the business if neglected
The aim is to ensure that the business has enough money whenever it is needed
Communication
Entrepreneurs will need to interact with a wide range of stakeholders, such as clients, employees, suppliers etc.
They will need to develop effective face-to-face communication skills to deal directly with people
If entrepreneurs have good communication skills, their businesses are likely to perform better
Decision making
Most decisions are about low-level, day-to-day issues such as what materials or stock to order
In contrast, a small number of decisions are strategic, which are important and can have long-term effects on the business
Decision making and problem solving requires entrepreneurs to process, analyse and evaluate information
Negotiating
This means agreeing the terms of a contract, such as agreeing a price for undertaking some work or completing an order for a customer
Entrapreneurs need to be able to get their points across in a calm and assertive manner , develop arguments with reasoning, knowing when to compromise
IT skills
Setting up filing systems for documents and other information
Using spreadsheets and documents
Using social media to raise the profile of the business and direct potential customers to the business website