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1.5 - Entrepreneur to Leader - Coggle Diagram
1.5 - Entrepreneur to Leader
1.5.1 - Role of an entrepreneur
Create and set up a business
1) Generating a business idea
2) Spotting an opportunity
3) Managing a start-up
4) Researching a business idea
Running a business
1) Objective assess business performance
2) Eye for detail
3) Think strategically
4) Love what your doing
Successful expansion
1) Anticipates demand
2) Ensures finance is in a place
3) Ensures people are in place
4) Ensures resources are in place
Sources of business ideas
Business experience
- good way of getting insights into what works and a more realistic business plan, less need for market research
Personal experience
- day to day activities, interests and hobbies, bad experience or frustration
Observations
- watching closely what happens to customers, look for poor customer service
Intrapreneurship - involves people within a business creating or discovering new business opportunities which lead to the creation of new parts of the business
Ways to encourage intrapreneurship
Look out for entrepreneurial activity
Give employees ownership of projects
Make risk taking and failure acceptable
Train employees innovation
1.5.2 - Entrepreneurial motives and characteristics
Characteristics of a successful entrepreneur
Passionate and visionary
Energetic, driven and resilient
Self starting and decisive
Calculated risk taker
Focused
Results orientated
Financial motives
Profit maximisation
- desire to earn a substantial amount of profits
Profit satisficing
- earn a satisfactory way of living
Non-financial motives
More control over working life, flexible hours
You are your own boss
Barriers to being an entrepreneur
Loneliness or isolation
Cant blame others for mistakes within the business
Financial pressure or stress
Have to multi-task and attend to all aspects of the business
1.5.3 - Business objectives
Business objectives
- the strategically intended outcomes of business strategy, the anticipated end results of a programme of activities, targets which the business adopts in order to achieve its primary aims.
Factors that can influence business decision
Age and size of business
Ownership and views of owners/managers
Market and economic conditions
Competition
Risk and attitudes toward political and social factors
S
pecific
M
easurable
A
chievable
R
elevant
T
ime
Mission
- a qualitative statement of the businesses aims, overriding goal of the business and the reason for its existence, businesses will turn it into a motivational statement to exite staff and customers alike.
:red_cross:Often vague and stating the obvious
:red_cross:Seen as PR exercise or cynical by staff
:red_cross:Not a true reflection of the reality and truth of the business.
Aim - a long term plan from which business objectives are derived
1.5.4 - Forms of business
Unincorporated
- the owner of the business have no legal difference, unlimited liability
Incorporated
- legal differences between the business and owners, limited liability
Unlimited liability
- if anything happens to the business the owner is personally responsible with their own assets
Sole trader
- The most common form of business, you're responsible for all business decisions and responsibilities. All business assets are owned by the sole trader as well as all business debts.
:check:Quick and easy to set up and shut down
:check:Simple to fun due to one person in control
:red_cross:Full responsibility
:red_cross:Harder to raise finance
Partnership
- When a business is started and owned by more than one person and the legal agreement sets out how it is run.
:check:Simple to run with minimal paperwork
:check:Expertise and skill from more than one owner
:check:Greater potential to raise finance
:red_cross:Partners may disagree and make bad decisions
:red_cross:Complicated to sell or close
Limited liability
- the business/company is responsible if something happens and owners will not be chased for paying back the money
Private limited company (LTD)
- Private means the shares of the company are not publicly traded on the stock market, they tend to have only family and friends are shareholders
Public limited company (PLC)
- This usually happens when a private limited company expands so much they are able to publicly sell their shares on the stock market meaning anyone can buy them. This increases their share capital and all their accounts become public.
Private sector
- business operated and owned by individuals and companies, generally run for profit to earn returns for the business owners
Public sector
- run by the state or government, not run for profit but to better the lives of the public using their funding.
Franchising - when a franchisor grants a licence to another business (franchisee) to allow it to trade using the brand/business format.
Franchisee - bought the rights to the business
:check:Established audience
:check:Lowers risk of failure
:check:Easier to raise finance
:red_cross:Not cheap with restrictions of actions
:red_cross:Problems selling the business on
Franchisor
- selling the rights for its business
:check:Classic growth strategy for a proven business model
:check:Enables rapid geographical growth for minimal investment
:check:Above normal profits
Lifestyle businesses
- not necessarily a form of business but its business that generates a ‘living’ for the owner but no more, business objects aren't as important
1.5.6 - Moving from entrepreneur to leader
Overtrading - the situation where a business expands at a rate that cannot be sustained by its capital base. A sudden surge in orders may tempt firms to buy additional stock on credit, however if customers are slow to pay the business may run into liquidity problems. Inadequate funding is one of the most common reasons why apparently successful businesses end up failing.
:red_cross:Success means additional workload making the entrepreneur work harder, they may need to appoint more staff and a manager with real decision making power
:red_cross:Staff could find it hard to accept a new manager because it the bosses business
:red_cross:Delegation, the manager may need to make sure the right management structure is in place to ensure a smooth running of the business
:red_cross:Motivation, will the staff be as hungry when part of a big team compared to when they were smaller.
1.5.5 - Business choices
Opportunity cost
- the cost of a choice made that would affect another area of a business that also needs finance
Work-leisure choices - the opportunity cost of deciding not to work an extra ten hours a week is the lost wages given up
Government spending priorities - the opportunity cost of the government spending an extra £10 billion on investment in the NHS might be that £10 million less is available for spending on education or defence equipment
Investing today for consumption tomorrow - the opportunity cost of an economy investing resource in the new capital goods is the production of consumer goods given up for today
Use of scarce farming land - the opportunity cost of using farmland to grow wheat for biofuel means that there is less wheat available for food production, causing food prices to rise.
Trade off
- having more of one thing which could potentially result in having less of another
When deciding between business start-up opportunities certain factors are critical;
Estimating the potential sales that can be achieved by each idea
Considering carefully the cash requirements of each idea
Deciding whether the time is right
Deciding whether the skills needed, are skills you have