IRD 305

ENTREPRENEURSHIP FOR SMALL BUSINESSES

• Learners should be able to:
 Define entrepreneurship and entrepreneur and apply the concepts to the practice of
entrepreneurship
 Operationalize concepts used in the field of entrepreneurship

Introduction
The concept of entrepreneurship was first established in the 1700s and its meaning has since
evolved. Entrepreneurship is multidimensional in nature. On one extreme it talks about an
entrepreneur (a person of very high aptitude who pioneers change and who posses characteristics
found in only a small fraction of the population. on the other extreme it refers to a person who
wants to work for self.

At its roots, the word “entrepreneurship” derives from the French word meaning “to undertake”.
Jean-Baptiste Say, a French economists who lived at the time of the French Revolution, invented
the term “entrepreneur” to describe someone who unlocks capital tied up in land and redirects it
to ‘change the future’. Say is one of the economists who introduced the idea of change and
uncertainty as something normal and even positive. He argued that entrepreneurs added value to
scarce resources.

Definitions
Entrepreneurship
 Entrepreneurship is the process of bearing the risk of buying at certain prices and selling
at uncertain prices,” (Richard Cantillon, 18th century)
 Entrepreneurship is a kind of behavior that includes initiative taking, the organizing and
reorganizing of social and economic mechanisms (Shapero, 1975)
 Entrepreneurship is the process of doing something new or different so as to create
wealth for one self and to add value to the society (Kao,1995)
 Entrepreneurship is the process of creating something new with value by devoting the
necessary time and effort, assuming the accompanying financial, psychic and social
risks, and receiving the resulting rewards of monetary, personal satisfaction and
independence (Hisrich, Peters and Shepherd, 2005).

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 THREE DIMENSIONS OF ENTREPRENEURSHIP
1. Processes undertaken by entrepreneurs
2. Behaviors’ required of entrepreneurs
3. Outcomes of entrepreneurship
1. Entrepreneurship as Process
This focus in the first instance on the process of entrepreneurship – what is involved and why it
matters to individuals, organizations and society as a whole.
For example:
 Entrepreneurship is ‘the process of creating something new of value by devoting the
necessary time and effort, assuming the accompanying financial, psychic and social risks,
and receiving the resulting rewards of monetary and personal satisfaction and
independence’ (Hisrich and Peters, 2005).
 Entrepreneurship is ‘the process by which individuals – either on their own or inside
organizations – pursue opportunities without regard to the resources they currently
control’ (Stevenson and Jarillo, 1990).
The process dimension centers on the development of a new business or innovation strategy and
the writing of a business plan, activities that are sometimes viewed as surrogate for the
entrepreneurship process itself.

2. Entrepreneurship as Behaviors’
These definitions highlight the role of the entrepreneurs.
For example:
 Entrepreneurship is ‘the manifest ability and willingness of individuals, on their own,
in teams, within and outside existing organizations, to perceive and create new economic
opportunities (new products, new production methods, new organizational schemes and
new product–market combinations) and to introduce their ideas in the market, in the face
of uncertainty and other obstacles, by making decisions on location, form and the use of
resources and institutions’ (Wennekers and Thurik, 1999)
 Entrepreneurship is a way of thinking, reasoning and acting that is opportunity based,
holistic in approach and leadership balanced (Timmons and Sipinelli,2004).
 Entrepreneurs are specialists who use judgment to deal with novel and complex
problems (Cason, 1982).

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  Entrepreneurship consists of the competitive behavior’s that drive the market process
(Kirzner,1973).
 Entrepreneurs ‘carry out “new combinations” by such things as introducing new
products or processes, identifying new export markets or sources of supply, or creating
new types of organisation’ ( Schumpeter, 1934).
o to Schumpeter entrepreneurship is a behavior that involves introduction of “
New Combinations” through:
 introduction of new products or services
 introduction of new methods of production
 the opening of new markets
 the identification of new sources of supply
 the creation of new organizations of any industry

3. Entrepreneurship as Outcomes
These definitions focus on the results of entrepreneurship (as a process or set of behaviors).
Outcomes is understood in terms of new products and services, innovation, new ventures and/ or
the creation of value for society.
For example:
 Entrepreneurship is ‘the introduction of new economic activity that leads to change in
the market place’ (Simon in Sarasvathy, 1999).
 Entrepreneurship is ‘the creation of new organizations’ (Gartner, 1988).
 Entrepreneurship ‘results in the creation, enhancement, realization and renewal of value
not just for the owners but for all participants and stakeholders’ (Timmons and Spinelli,
2004)

PERSPECTIVES OF ENTREPRENEURSHIP
This reflects the above three (3) dimensions of entrepreneurship and includes
1. The functional perspective
-explains the activities and behaviors/characteristics of entrepreneurs.
-conceptualizes entrepreneurship in terms of an entrepreneur interaction with his or
her environment.
-looks at an entrepreneurs as agents of change- who change the existing way of
doing things in order to create new and novel items

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2. The personality perspective
-holds that certain individual possesses distinctive range of personality
characteristics or constellation of traits which predisposes them towards
entrepreneurial activities.
-The characteristics includes high need for achievement, internal locus of control,
risk taking propensity, and self-efficacy
3. The behavioral perspective
-emphasizes the process-based view of new venture creation.
-explains the functions, activities and actions associated with perceiving of
opportunities and the creation of an organization to pursue the opportunities.
-focuses on what entrepreneurs do endorsing the view that the most important drivers
of value creation is the enterprise, the creativity of individuals and the assets which
the individuals own.
4. The dynamic learning perspective
-considers the complex way in which entrepreneurs learn to adapt as their enterprises
grow.
5. New venture creation perspective
- associates entrepreneurship with setting up new businesses.
-New venture creation is an outcome of entrepreneurship.
-involves alertness and ability to make creative judgments that bring about the
preferred outcomes.
6. Opportunity identification, evaluation and exploitation perspective
- The perspective sees entrepreneurship as a mind-set for bringing about sustainable
change.
- This leads to new goods & services, new methods of doing things, and new
systems.
7. The Dynamic Learning Perspective
The dynamic learning perspective goes beyond the start-up phase to consider the
complex ways in which entrepreneurs learn to adapt as their enterprises grow

Key Features of Entrepreneurship Definition

1. The environment within which entrepreneurship occurs
2. The people engaged in entrepreneurship

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3. Entrepreneurial behavior’s displayed by entrepreneurs
4. The creation of organizations by entrepreneurs
5. Opportunities identified and exploited
6. Innovation, whether incremental, radical and /or transformative
7. Assuming risk, at personal, organizational and even societal levels
8. Adding value for the entrepreneur and society

Entrepreneur
 An entrepreneur is defined as “person in effective control of commercial
undertaking; one who undertakes a business or an enterprise”.
 An Entrepreneur is an innovative person who maximizes his profits by following
new strategies or venturing into new products or services.
 Entrepreneur One who creates a new enterprise in the face of risk and
uncertainty for the purpose of achieving gain and growth by identifying
significant opportunities and assembling the necessary resources to capitalize on
them

 “Entrepreneurs attempt to predict and act upon change within markets, taking the role in
bearing the uncertainty of market dynamics. Entrepreneurs are required to perform such
fundamental managerial functions as direction and control,” (Frank Knight, 1921); to
knight entrepreneurship is about risk taking and uncertainty bearing.

 “The entrepreneur is the innovator who implements change within markets through the
carrying out of new combinations. The role of entrepreneurship is to assemble and deploy
resources in new combinations that disrupt the otherwise static nature of the market,”
(Joseph Schumpter, 1934);
“Entrepreneurs innovate. Innovation is the specific instrument of entrepreneurship. It is
the act that endows resources with a new capacity to create wealth. Innovation, indeed,
creates a resource,” (Peter Drucker, 1985).

Other concepts include

 Corporate Entrepreneurship: Behaviour orientation exhibited by established
firms with an entrepreneurial emphasis that is proactive, innovative, and risk

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 taking
• Entrepreneurial spirit is a mindset. It's an attitude and approach to thinking that
actively seeks out change, rather than waiting to adapt to change. It's a mindset
that embraces critical questioning, innovation, service and continuous
improvement
• Entrepreneurial Process: The process through which a new venture is created by
an entrepreneur
• Innovator: An individual developing something unique
• Intrapreneur: People who notice opportunities and take initiative to mobilize
resources, however they work in large companies and contribute to the innovation
of the firm

Entrepreneurship as a discipline and a field of study

-Entrepreneurship as an emerging enquiry is interrogated and the rationale for engaging in
entrepreneurial studies discussed through several consolidated findings.
-entrepreneurship has its own body of theories, principles that guide it and its research leads to
creation of new knowledge

As an emerging discipline
 its field of academic inquiry has grown to feature substantive curricula filled with
rigorous courses that have been refined over years
 it has incorporated the best teaching practices and even PhD programmes are being
offered on the field
 it has a solid foundation deeply rooted in entrepreneurship education
 it is benefiting from an improved educational infrastructure consisting of an increased
educational centers and innovation hubs
 it has a body in charge of research work eg journal of entrepreneurship and innovation
 there is increase in the number of institutions and organizations engaged in delivering
meaningful entrepreneurial outcomes in different contexts

Entrepreneurship courses
 Most universities and colleges now teach entrepreneurship courses

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  Most courses offered in universities tend to address the objectives for a course in
entrepreneurship
 Most middle colleges and even primary and secondary schools in Kenya offer
entrepreneurship courses

Objectives for a course in Entrepreneurship

 Understand the role of new and small firms in the economy
 Understand the relative strengths and weaknesses of different types of enterprises
 Know the general characteristics of an entrepreneurial process
 Assess the students own entrepreneurial skills
 Understand the entrepreneurial process and the product planning and development
process
 Know the alternative methods for identifying and evaluating business opportunities and
factors that support and inhibit creativity
 Develop an ability to form, organize and work in interdisciplinary teams
 Know the general correlates of success and failure in innovation and new ventures
creation
 Know the generic entry strategies for new venture creation
 Understand the aspects of creating and presenting a new venture business plan
 Know how to identify, evaluate, and obtain resources
 Know the essentials of;
o Marketing planning
o Financial planning
o Operating planning
o Organization planning
o Venture launch planning
 Know the managerial challenges and demands of a new venture launch
 Understand the role of entrepreneurship in existing organizations

Rational for engaging in entrepreneurial studies

1. universities as facilitators of an entrepreneurial culture
A strong focus on entrepreneurship will spill-over to even non business students and help
foster an entrepreneurial culture. This is relevant where students with a core set of skill in
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 different disciplines like engineering, art, design and tourism etc are now able to
appreciate entrepreneurial opportunities within their domain of expertise
2. universities as mediators of skills
Students pursuing an entrepreneurship are equipped with a set of skills that will help
them identify viable business ideas and provide them with practical approach to
entrepreneurship
3. entrepreneurial course
Courses in entrepreneurship may compliment general education for a broad range of
students or serve as a specialist course for group of entrepreneurship students
4. universities as Locomotives of regional business development
Strong focuses on entrepreneurship will likely boost university relations with other
stakeholders in the entrepreneurial field and facilitate creation of regional policies and
favorable entrepreneurship infrastructure

The factors that indicate the evolution of the field of entrepreneurship and help establish an
infrastructure of a discipline include:
(1) Social networking mechanism creating a social structure facilitating connections between
researchers and reward systems that establish internal validity of the discipline
(2) Levels of publication opportunities that determine what studies, inquiry and research areas
experts are exploiting
(3) Training and mentoring opportunities in the field of entrepreneurship to assess how
knowledge is transferred has moved to a collective rather than individual apprentice model

Theoretical and conceptual base of entrepreneurship

-To understand the nature of entrepreneurship and its importance, it is important to consider
some of its theory development.
-Theory development is what drives a field of study and enables us to appreciate a particular
discipline eg entrepreneurship.
-A theory is a supposition or system of ideas explaining something.
-A theory of entrepreneurship is a verifiable and logical coherent formulation of relationships, or
underlying principles that either;
 explain entrepreneurship
 predict entrepreneurial activity

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  provide guidance on entrepreneurship
THEORETICAL BASE APPROACH
Scholars have developed various theories on entrepreneurship and popularized the concept
among the common people. The theories propounded by them can be categorized as under-
 Sociological theories
 Economic theories
 Cultural theories.

SOCIOLOGICAL THEORIES
Two theories explain how sociological factors accelerate the growth of entrepreneurs:
1-Theory of religious beliefs
2- Theory of social change
1. Theory of religious beliefs
Max Weber propounded the theory of religious belief. According to him, entrepreneurism is a
function of religious beliefs and impact of religion shapes the entrepreneurial culture. He
emphasized that entrepreneurial energies are supplied by means of religious beliefs.
The important elements of Weber’s theory are:
 Spirit of Capitalism
Capitalism is an economic system in which economic freedom and private enterprise are
glorified, so also the entrepreneurial culture.
 Adventurous Spirit
Weber also made a distinction between spirit of capitalism and adventurous spirit. According to
him, the former is influenced by the strict discipline whereas the latter is affected by free force of
impulse. Entrepreneurship culture is influenced by both these factors.
 Protestant ethic
According to Max Weber the spirit of capitalism can be grown only when the mental attitude in
the society is favorable to capitalism
 Inducement of profit
Weber introduced the new business man into the picture of tranquil routine. The spirit of
capitalism intertwined with the motive of profit resulted in creation of greater number of
business enterprises.
 This theory suited the British rulers, who desired to encourage European entrepreneurship

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2.Theory of Social Change
Everett E. Hagen, in his theory of social change propounded how a traditional society becomes
one in which continuing technical progress takes place.
The theory exhorts the following feature that presumes the entrepreneur’s creativity as the key
element of social transformation and economic growth.
i. Presentation of general model of the society-
The theory reveals a general model of the society, which considers interrelationship among
physical environment, social structure, personality and culture.
ii. Economic Growth :
Economic growth is the Product of social change and political change: According to Hagen,
most of the economic theories of underdevelopment are inadequate.
iii. Rejection of followers syndrome :
Hagen rejected the idea that the solution to economic development lies in imitating western
technology. So the follower’s syndrome on the part of the entrepreneur is discouraged.
iv. Historic shift as a factor of initiating change-
Hagen in his book, How Economic Growth Begins, depicts historic shift as the crucial force that
has brought about social change and technological progress thereby leading to the emergence of
entrepreneurial class from different castes and communities.
v.Withdrawal of status respects as the mechanism for rigorous entrepreneurial activity-
It is the social groups that experience status withdrawal or withdrawal of status respects that
plunges into rigorous entrepreneurism.
Hence, Hagen’s creative personality is the admixture of Schumpeter's innovation and
McClelland high need for achievement. Hagen’s analysis identifies status withdrawal as the
causal factor in the emergence of creative personality.

ECONOMIC THEORIES
 Entrepreneurship and economic development are interdependent. Economic development
takes place when a country' real national income increases overall period of time wherein
the role of entrepreneurs is an integral part.
 Schumpeter’s Theory
 Schumpeter’s Theory of entrepreneurship is a pioneering work of economic
development. Development in his sense, implies that carrying out of new combination of
entrepreneurship is basically a creative activity.

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  According to Schumpeter, an entrepreneur is one who perceives the opportunities to
innovate, i.e. to carry out new combinations or enterprise.
 In his views, the concept of new combination leading to innovation covers the following
five cases;
1) The introduction of new goods that is the one with which consumers are not yet
familiar, of a new quality.
2) The introduction of new method of production
3) The opening of new market
4) The conquest of new source of supply of raw material
5) The carrying out of new organization
Schumpeterian theory of entrepreneurship has the following features-
1) Distinction between invention and innovation
Schumpeter makes a distinction between innovation and invention. Invention means creation of
new things and innovation means application of new things onto practical use
2) Emphasis on entrepreneurial function-
Schumpeter has given emphasis on the role of entrepreneurial functions in economic
development. In his views; development means basic transformation of the economy that is
brought about by entrepreneurial functions.
3) Presentation of disequilibrium situation through entrepreneurial activity
The entrepreneurial activity represents a disequilibrium situation, a dynamic phenomenon and a
break from the routine or tendency towards equilibrium.
4) Entrepreneurialism dream and the will to find a private kingdom
The motives of creating things and applying these things into practice inspire the entrepreneur to
undertake innovation.

CULTURAL THEORIES
Advocates of cultural theories point out that entrepreneurship is the product of culture.
Entrepreneurial talents come from cultural values and cultural system embedded into the cultural
environment.
Hoselitz’s Theory
The theory explains that the supply of entrepreneurship is governed by cultural factors, and
culturally minority groups are the spark-plugs of entrepreneurial and economic development.

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The theory holds that entrepreneurs emerge from a particular socio-economic class. He
emphasized the role of culturally marginally groups in promoting economic development.

Psychological Theories
Psychological theories center's around the psychological characteristic so the individual in a
society. Psychological characteristics affect the supply of entrepreneurs in the society.

SCHOOLS OF THOUGHT BASE APPROACH

THE GREAT SCHOOL PERSON
- Sees an entrepreneur as an extraordinary being, an individual endowed with a 6th sense,
an intuitive capacity to undertake and accomplish spectacular deeds.
- Describes a successful entrepreneur as one having a strong drive for independence and
success; with high levels of vigor, persistence and self-esteem.
- This great person has exceptional belief in him/her self and his/her abilities, they are
famous, achievers, wealthy, goal setters and go getters, leaders, and are powerful.

THE PSYCHOLOGICAL SCHOOL

- Focuses on personality factors and believe that entrepreneurs have unique values,
behaviors and attitudes towards work life that propel them to behave in e certain way.
- Lays emphasis on personal characteristics and traits that distinguish entrepreneurs
from non-entrepreneurs.
- Holds that people with psychological traits and inclinations such as :-need for
achievement, Propensity for risk taking, and Self confidence will be driven into
engaging in successful entrepreneurial activities.

Distinct personality characteristics/traits

1. Personal value system of honesty, duty responsibility and ethical behaviour that is
dependable and conscientious
2. Propensity to take moderate , calculated and controllable risks be it psychic, financial etc
3. High need for achievement – setting goals strategies and working for the attainment of
the goal
4. High self-esteem with high internal locus of control exhibiting initiative commitment and
perseverance with a high tolerance for ambiguity

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 5. Visionary: Entrepreneurs see opportunity everywhere.
6. Flexible: Being able to adapt to changes and challenges is crucial for any business
7. Resilience, “Success is the ability to go from one failure to another with no loss of
enthusiasm.” As an entrepreneur, you’re going to fail. That’s just an unfortunate fact.
Instead of giving up, an entrepreneur will learn from their failures

THE CLASSICAL SCHOOL

-It postulates that an entrepreneur’s main role is to innovate and introduce new combinations
of production factors in a given environment (Schumpeter, 1934), and that creativity and
discovery are the key components of the entrepreneurial phenomenon.
-The school represents the early thinking on how economic production is initiated and carried
out. It is viewed as responsible for opportunity recognition, creation and seizure
-The hallmark of entrepreneurship therefore is creativity and innovation that are used to
recognize and create opportunity

THE MANAGEMENT SCHOOL

-Suggests that an entrepreneur is a person who organizes or manages a business undertaking
assuming risks for the sake of profits
-focuses on the pursuit and realization of business opportunities and looks at the entrepreneur as
someone who perceives an opportunity and creates an organization to pursue the opportunity in
addition to seeing the entrepreneur as a coordinator of resources.
-since management is concerned with planning directing, co-coordinating and controlling the
activities of an organization, making decisions for action and solving problems, then,
entrepreneurship can be viewed as the management function in an enterprise. The entrepreneur
executes this function
- The entrepreneurial manager will be driven by perception of opportunity and a commitment to
opportunity seizure – achievement using rent resources by multistage episode commitment
relying on consultative and discernment and making decisions often based on information at
hand.

THE LEADERSHIP SCHOOL

-Suggests that entrepreneurs are leaders who rely on others to accomplish tasks.
-entrepreneurs are people who assign objectives and goals and lead their teams towards the
achievement of these goals. They motivate, manage and provide leadership.
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-The leader is one endowed with intellectual aptitude and facility of language to demonstrate
emotional and mental maturity and convince others with intriguing ideas and persuasion and
enormous drives for accomplishment
Leaders are intelligent, experienced, original charismatic, communicative, understanding
with boldness and a sense of justice and fair play
An entrepreneur must be able to define a vision and transform it into reality. Hence, in the
entrepreneurial context the entrepreneur leader would be:-
Charismatic
Visionary
A people manager
Skilled in empowering people through delegation

THE INTRAPRENEURSHIP SCHOOL

This evolved in response to lack of innovativeness within organizations. It introduced a
particular type of an entrepreneur within an existing organization known as an intrapreneur
Intrapreneurs need to be alert to opportunities a behaviour that provides the assists existing
organization to develop and diversify
Intrapreneurship is the application of entrepreneurship skills within an existing organization
Intensified global and domestic competition compels organisations to rejuvenate themselves by
finding sustainable new sources of growth
Deregulation worldwide and globalization are intensifying competition
Organisations that have experimented with Intrapreneurship have enjoyed net benefits and more
are joining the fray
Elements of intrapreneurship:
1. internal new venture creation,
2. innovation,
3. self renewal,
Intrapreneurship bring new ideas and profit streams into the organisations. These help revive
weak companies
Intrapreneurship also helps retain promising staff that would otherwise be hired away by
more promising careers
Intrapreneurship should be encouraged by creating an appropriate organizational culture and
fostering an entrepreneurial climate

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It is a team model where individuals within an organization work together as a team to solve
problems and create opportunities the focus being operational efficiency, product development
and strategic redirection.
Helps organizations to create competitive advantage by discovering new and better ways.

GENERAL CHARACTERISTICS OF AN ENTREPRENEUR

 J.B. Say described an entrepreneur as a person “who shifts economic resources out of an
area of lower and into an area of higher productivity and greater yield”, people who add
value to scarce resources. according to Say an entrepreneur is a coordinator and an
organizer of resources meant to design an enterprise
 Adam Smith described entrepreneurs as individuals who undertake the formation of an
organization for commercial purposes by recognizing the potential demand for goods and
services and thereby acts as an economic agent who transforms demand into supply

WHO IS AN ENTREPRENEUR?
An entrepreneur is one who creates a new business in the face of risk and uncertainty for the
purpose of achieving profit and growth by identifying opportunities and assembling the
necessary resources to capitalize on those opportunities.

Researchers have invested a great deal of time and effort over the last decade studying these
entrepreneurs and trying to paint a clear picture of the entrepreneurial personality. They have
come up with several CHARACTERISTICS ENTREPRENEURS tend to exhibit:

1. Desire and willingness to take initiative. Entrepreneurs feel a personal responsibility for the
outcome of the ventures they start. They prefer to be in control of their resources and to use those
resources to achieve self-determined goals. They are willing to step forward and build businesses
based on their creative ideas.
2. Preference for moderate risk. Entrepreneurs are not wild risk-takers but are instead
calculating risk-takers. They rarely gamble. Entrepreneurs often have a different perception of
the risk involved in a business situation. The goal may appear to be high, even impossible, from
others’ perspective, but entrepreneurs typically have thought through the situation and believe
that their goals are reasonable and attainable.

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3. Confidence in their ability to succeed. Entrepreneurs typically have an abundance of
confidence in their ability to succeed, and they tend to be optimistic about their chances for
business success. Entrepreneurs face many barriers when starting and running their companies
and a healthy dose of optimism can be an important component in their ultimate success.
Entrepreneurs believe they can do anything.
4. Self-reliance. Entrepreneurs do not shy away from the responsibility for making their
businesses succeed. Perhaps that is why many entrepreneurs persist in building businesses even
when others ridicule their ideas as follies.
5. Perseverance. Even when things don’t work out as they planned, entrepreneurs don’t give
up. They simply keep trying. Real entrepreneurs follow the advice contained in the Japanese
proverb, “Fall seven times; stand up eight.
6. Desire for immediate feedback. Entrepreneurs like to know how they are doing and are
constantly looking for reinforcement. Nothing gives you feedback like your own business
7. High level of energy. Entrepreneurs are more energetic than the average person. That energy
may be a critical factor given the incredible effort required to launch a start-up company. Long
hours and hard work are the rule rather than the exception. Building a successful business
requires a great deal of stamina.
8. Competitiveness. Entrepreneurs tend to exhibit competitive behavior, often early in life. They
enjoy competitive games and sports and always want to keep score
9. Future orientation. Entrepreneurs tend to dream big and then formulate plans to transform
those dreams into reality. They have a well-defined sense of searching for opportunities. They
look ahead and are less concerned with what they accomplished yesterday than what they can do
tomorrow. Ever vigilant for new business opportunities, entrepreneurs observe the same events
other people do, but they see something different.
10. Skill at organizing. Building a company “from scratch” is much like piecing together a
giant jigsaw puzzle. Entrepreneurs know how to put the right people and resources together to
accomplish a task. Effectively combining people and jobs enables entrepreneurs to bring their
visions to reality, which is, building a company from scratch.
11. Value of achievement over money. One of the most common misconceptions about
entrepreneurs is that they are driven wholly by the desire to make money. To the contrary,
achievement seems to be the primary motivating force behind entrepreneurs; money is simply a
way of “keeping score” of accomplishments—a symbol of achievement. “Money is not the
driving motive of most entrepreneurs but just a very nice by-product of the process.”

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12. High degree of commitment. Launching a company successfully requires total commitment
from the entrepreneur. That commitment helps overcome business-threatening mistakes,
obstacles, and pessimism from naysayers. Entrepreneurs’ commitment to their ideas and the
businesses those ideas spawn determine how successful their companies ultimately become.
13. Tolerance for ambiguity. Entrepreneurs tend to have a high tolerance for ambiguous, ever-
changing situations—the environment in which they most often operate. This ability to handle
uncertainty is critical, because these business builders constantly make decisions using new,
sometimes conflicting, information gleaned from a variety of unfamiliar sources.
14. Flexibility. Entrepreneurs are able to adapt to the changing demands of their customers and
their businesses. Successful entrepreneurs are willing to allow their business models to evolve as
market conditions warrant
15. Tenacity. Obstacles, obstructions, and defeat typically do not dissuade entrepreneurs from
pursuing their visions. Successful entrepreneurs have the willpower to conquer the barriers that
stand in the way of their success.
16. Others. Creativity, mental ability, innovation, leadership, team building, problem solving etc

Mistakes in entrepreneurship
 Due to the limited resources, inexperienced management and lack of financial stability, small
businesses suffer a mortality rate significantly higher than that of larger established
businesses.
Mistakes in entrepreneurship
 Due to the limited resources, inexperienced management and lack of financial stability, small
businesses suffer a mortality rate significantly higher than that of larger established
businesses.
 Management mistakes: poor management cause business failure – lack of leadership ability,
sound judgment & knowledge to make business work.
 Lack of experience: small business managers need to have experience in the field that they
want to enter. They also lack of adequate technical ability, power to visualize, coordinate
and integrate the various operations of the business into a synergistic whole
 Poor financial control: Entrepreneurs and small business managers/ owner require proper
understanding of financial control so as to implement proper cash management techniques.
Maintaining adequate cash flow is very crucial. Poor financial controls results in Poor credit
screening, sloppy debt collection practices & undisciplined spending habits

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 Weak marketing efforts: to build a strong base of customers requires a sustained, creative
marketing effort. Keeping them coming back requires providing them with value, quality,
convenience, service and fun. Most enterprises lack creative marketing strategies and are not
able to identify the target market
 Failure to develop a strategic plan: many small business neglect the process of strategic
planning assuming that planning only benefit large companies.
 Uncontrolled growth: Expansion requires major changes in org structure, businesses
practices such as inventory & financial procedures, personnel assignments. As business
increase in size & complexity, problems increase & have to deal with it. Growth must be
planned and controlled. Business expansion should be financed by the profits or capital
contributions by owners.
 Poor location: Often business location selected with proper investigation. However, such is
done without proper study, investigation, and planning. The choice is at times based on
availability of a vacant building.
 Improper inventory control: insufficient inventory level result in shortages & stock outs –
causing customer leave. Sometimes there is too much inventory and of the wrong type. In
addition, there is lack of proper inventory tracking system
 Incorrect pricing. Establishing prices that will generate the necessary profits means that
business owner must understand how much it costs to make market and deliver their products
and services. Hence pricing becomes problem with under or over pricing
 Inability to make the "Entrepreneurial Transitions". After the start-up, growth usually
requires a radically different style of management, one that entrepreneurs are not necessarily
good at. There is usually radical change in management style after start-up resulting to
managerial ineffectiveness. Lack of ability to delegate and to relinquish hands-on control of
daily operations. Growth further pushes startups into areas where they are not capable, yet
they continue to make decisions rather than involve others

Avoiding small business failure

 Know Your Business in Depth
You need to have the right type of experience in the business through acquiring
education in your business area, look for information relating to the industry.
Personal contact with suppliers, customers, trade associations, and others in the same

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industry is another excellent way to get important knowledge.
 Prepare a Business Plan
A business plan is a crucial ingredient in business success. Without a sound business
plan, provides direction to an entrepreneur. A business plan can help you make
important decisions about your business.
 Manage Financial Resources
Developing proper financial information system to maintain control over your
business
Ensure you have adequate start-up capital. Establish good relationship early on with
at least one reliable lender who understands your business is a good way to gain
access to financing when a company needs capital for growth or expansion.
 Maintain a Positive Attitude
Achieving business success requires an entrepreneur to maintain a positive mental attitude
toward business and the discipline to stick with it. Successful entrepreneurs recognize that
their most valuable resource is their time, and they learn to manage it effectively to make
themselves and their companies more productive. Be passionate about your business.
 Learn to Manage People Effectively
Every business depends on a foundation of well-trained, motivated employees. No
entrepreneur can do everything alone. The people an entrepreneur hires ultimately determine
the heights to which the company can climb or the depths to which it can plunge. Attracting
and retaining quality employees is no easy task, however; it remains a challenge for every
small business owner. Therefore, treat your employees with respect, dignity, and compassion.
Successful entrepreneurs value their employees and constantly find ways to show it.
 Set Your Business Apart from the Competition
The formula for almost certain business failure involves becoming a “me-too business”—
merely copying whatever the competition is doing. Successful entrepreneurs find a way to
convince their customers that their companies are superior to their competitors even if they
sell similar products or services.

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