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TOPIC ONE
BASIC CONCEPTS OF ENTREPRENEURSHIP
1.1 Introduction
At the end of this Topic, the learners should be able to define the basic concepts of
entrepreneurship. These concepts are entrepreneurship, entrepreneur and enterprise.
The Topic likewise covers types and characteristics of entrepreneur; and rationale/need
of entrepreneurship in economic development.

1.2 Definitions of Concepts

1.2.1 Entrepreneurship
The term entrepreneurship is derived from a French word ‘Entreprendre’ which means ‘to
undertake’, ‘to pursue opportunities’, or ‘to fulfill needs and wants through innovation and
starring businesses’. The word first appeared in the French dictionary in 1723.
According to Arthur P. Cole (1959) entrepreneurship is the purposeful activity of an
individual or a group of associated individuals, undertaken to initiate, maintain or organise
a profit-oriented business unit for the production or distribution of economic goods and
services. Peter Drucker defines entrepreneurship as a systematic innovation, which
consists in the purposeful and organized search for changes and it is the systematic
analysis of the opportunities. Higgins further defines entrepreneurship as the
function of seeing investment and production opportunity, organizing an
enterprise to undertake a new production process, raising capital, hiring labour,
arranging for supply of raw materials and selecting top managers for day to day
operations of the enterprise. Entrepreneurship is a process of innovation (a creative
activity or it is an innovation function) which may be in the form of introduction of a
new product; use of a new method of production; opening of a new market; the
conquest of new source of supplying raw material; and a new form of organization
(Joseph A. Schumpeter, 1930). According to the Conference of Entrepreneurship in
U.S.A, entrepreneurship is the attempt to create value through recognition of business
opportunity, the management of risk-taking appropriate to the opportunity and
through the communicative and management skills to mobilise human, financial and
material resources necessary to bring a project to fruition. Entrepreneurship is that
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form of social decision making performed by economic innovators (Robert K. Lamb,

1952).
Generally, entrepreneurship is the process of developing, organizing, and running a
new business to generate profit while taking on financial risk. It is the process of
transforming the status quo by solving the most pressing problems and pain points in
our society, often by introducing an innovative product or service or creating new
markets. It is a natural phenomenon in business life. It is an autonomous discipline or
interdisciplinary. It is neither a science nor an art but practice which is a knowledge-
based. There are several definitions of entrepreneurship based on different sources and
types of entrepreneurship including entrepreneurial skills, innovations, management, etc.
Entrepreneurship is the purposeful activity of an individual or group of individuals to
create value (a profit-oriented business) through recognition of business opportunity
using systematic innovation and the management of risk-taking appropriate to the
opportunity (Joseph A. Schumpeter, 1930; Robert K. Lamb, 1952; Arthur P. Cole, 1959;
Peter Drucker; Conference of Entrepreneurship in U.S.A; Higgins)

1.2.2 Entrepreneur
Cantillon defines an entrepreneur as the agent who buys means of production at
certain prices in order to combine them into a product that he going to sell at prices
that are uncertain at the moment at which he commits himself to his costs. The
emphasis here is the function of risk taking. Schumpeter (1965) defined
“entrepreneurs as individuals who exploit market opportunity through technical and/or
organizational innovation. Hisrich (1990) defined an entrepreneur as someone who
demonstrates initiative and creative thinking, is able to organize social and economic
mechanisms to turn resources and situations to practical account, and accepts risk and
failure. Jean Baptiste Say defines an entrepreneur as the economic agent who unites all
means/resources of production (labour force, land) and finds value of the
products/services as the results.
Generally, an entrepreneur is a person who is action oriented, highly motivated, takes
risks to achieve goals of making profits. S/he is someone who has an idea and who works
to create a product or service that people will buy, as well as an organization to support
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that effort i.e. an entrepreneur takes on most of the risk and initiative for their new
business, and is often seen as a visionary or innovator. The main things observed in the
above definitions are innovation, opportunity recognition, risk management, action,
use of resources and added value.
1.2.3 Enterprise
An enterprise is a business organization that is formed and which provides goods and
services, creates jobs, contributes to national income, imports, exports and above all,
sustainable economic development.
It is an undertaking that requires a lot of effort to develop. It can be social or business
enterprise. A social enterprise involves helping others without receiving a commercial
benefit in return. On the other hand, a business enterprise consists of producing goods
or services in exchange for commercial and financial benefits.
1.3 Types and Characteristics of Entrepreneur
1.3.1 Types of Entrepreneur
The choice of the right path in entrepreneurship needs knowledge on diverse types of
entrepreneurs from each type has its responsibilities, roles, and functions. In other words,
there are different criteria used to classify entrepreneurs: business type, technology,
ownership, gender, enterprise size and Clarence Danhof.
1.3.1.1 Business Type: trading entrepreneurs, manufacturing entrepreneurs,
agricultural entrepreneurs
1.3.1.2 Technology: technical entrepreneurs and non-technical entrepreneurs
1.3.1.3 Ownership: Private entrepreneurs, state entrepreneurs and joint
entrepreneurs
1.3.1.4 Gender: men entrepreneurs and women entrepreneurs
1.3.1.5 Enterprise Size: small-scale entrepreneurs (start-up), medium scale
entrepreneurs and large-scale entrepreneurs
1.3.1.6 Clarence Danhof: innovative entrepreneurs, imitative entrepreneurs, Fabian
entrepreneurs and drone entrepreneurs
1.3.1.7 Other types of entrepreneurs above from the above are solo operators, active
partners, inventors, challengers, buyers, researchers, life timers.
Apart from the types of entrepreneurs, the common ones are:
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1.3.1.8 Innovators: entrepreneurs who come up with completely new ideas and turn
them into viable businesses e.g. Steve Jobs, Larry Page of Google and
Microsoft founder Bill Gates
1.3.1.9 The Hustler Entrepreneur: entrepreneurs who focus on starting small with the
goal of becoming bigger in the future e.g. Mark Cuban, selling trash bags,
newspapers, postage stamps to finally creating a goldmine which was acquired
by internet giant Yahoo!
1.3.1.10 Imitators: entrepreneurs who copy certain business ideas and improve upon
them in making a particular product better to acquire an upper hand in the
market.
1.3.1.11 Researchers: entrepreneurs who after having an idea, take their time to gather
all the relevant information about it and usually believe in starting a business
that has high chances of succeeding because they have put in detailed work to
understand all aspects.
1.3.1.12 Buyers: entrepreneurs who have the money and specialize in buying
promising businesses by firstly identify a business and assess its viability,
proceed to acquire it and find the most suitable person to run and grow it.
1.3.1.13 Social Entrepreneur: a person who pursues novel applications that have the
potential to solve community-based problems. They are willing to take on the
risk and effort to create positive changes in society through their initiatives.
1.4 Characteristics of Entrepreneur
i. Pursuit of an opportunity: many entrepreneurs quickly see and grab an
opportunity
ii. Risk-bearing: many entrepreneurs undertake calculated risk which is high
enough to be exciting, but with a fairly reasonable chance to win
iii. Creativity and Innovation: many entrepreneurs constantly put their efforts to
introduce new products, new method of production, opening new markets and
reorganizing the enterprise and they become never satisfied with conventional
and routine way of doing things.
iv. Focus on profits: many entrepreneurs always look for profits hence they have
the profit margin in sight and they measure their business success by profits.
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v. Independence: many entrepreneurs enjoy being their own boss by doing

things on their own way.
vi. Resources’ mobilization: many entrepreneurs are able to marshal all the
resources/inputs (man, money, material, machinery, market and method) to
obtain the end product which plays the function of gap filling and input
completing.
vii. Leadership: many entrepreneurs possess the quality and the ability to exert
interpersonal influence by means of communication towards achievement of
goals.
viii. Locus of Control: many entrepreneurs believe in their own ability to control
the consequences of their endeavor by influencing their socio-economic
environment rather than leave everything to luck i.e. they strongly believe
towards governing and shaping their own destiny (McClelland‟s theory of need
for achievement)
ix. Need to Achieve: apart from keeping an eye on profit, many entrepreneurs
have strong desire to achieve higher goals i.e. high achievement/winning is
achievement
x. Ability to Accept Change: many entrepreneurs thrive on changes which
frequently occur in their business for growth by looking at many solutions to the
occurring problems.
xi. Make Stress Work for them: many entrepreneurs are capable of working for
long hours and solving different complexities at the same time in order to
achieve the planned goal.
xii. Hardworking: many entrepreneurs start out working long, hard, hours with little
play; work even when other people have stopped and they become very
persistent towards attainment of their goals.
xiii. Self-confidence: many entrepreneurs demonstrate extreme self-confidence in
order to cope with all the risks of operating their own business in achieving
realistic and challenging goals.

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xiv. Judgment: many entrepreneurs have the ability to think quickly and make a
wise decision i.e. they have a plan, they have an economic goal, they know
what they want and they know what they can do.
1.5 Rationale/Need of Entrepreneurship for Economic Development
i. Wealth Creation and Sharing/Distribution: entrepreneurship stimulates
equitable redistribution of wealth and income in the interest of the country to
more people and geographic areas, thus giving benefit to larger sections of the
society
ii. Create Jobs/Employment Opportunities: entrepreneurs are job creators, as
opposed to job seekers
iii. Promotes Balanced Regional Development: entrepreneurs help with
regional development by locating new businesses in less developed and
backward areas
iv. Increasing Gross National Product (GDP) and Per Capita Income: the
entrepreneurial activities provide employment which in turn accounts for the
country’s GDP
v. Standard of Living: entrepreneurs again play a key role in increasing the
standard of living in a community by creating jobs, developing and adopting
innovations
vi. Exports and Foreign Exchange/ Promotes Country's Export Trade: it
provides access to bigger markets, and leads to currency inflows and access
to the latest cutting-edge technologies and processes being used in more
developed foreign markets.
vii. Reduces Concentration of Economic Power: economic power is the natural
outcome of industrial and business activity. Industrial development normally
lead to concentration of economic power in the hands of a few individuals which
results in the growth of monopolies. In order to redress this problem, a large
number of entrepreneurs need to be developed, which will help reduce the
concentration of economic power amongst the population.

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TOPIC TWO
EMPLOYMENT STATUS
1.1 Introduction
At the end of this Topic, the learners should be able to distinguish between self-
employment and Wage/paid employment. In distinguishing the given terms, the topic
covers meaning of self-employment and paid/wage employment; advantages of self-
employment and paid employment; and disadvantages of self-employment and paid
employment.
Employment is an act or instance of employing someone or something. It is an
occupation by which a person earns a living; work; business.
U.S. organizations define employment status as the type of implied or written contract
between the employer and employee. It can be paid or self-employment in terms of full-
time employment, part-time employment, temporary or contract employment, or an
internship or apprenticeship.
Wage/Paid employment refers to employment whereby a person perform jobs of
someone else or a company or organization and holds a written or oral employment
contracts which give him/her a basic remuneration.
Self-employment is a state of working in which the individual works for oneself rather
than working for any specific employer and s/he earns money by working for oneself s
instead of for another person or company.
1.2 Advantages of Self-employment and Paid Employment
1.2.1 Self-employment
i. creates a sense of fulfillment and satisfaction (doing something that one wants in
his/her life)
ii. inculcates a sense of independence (freedom from control of others)
iii. receiving status (receive and enjoy attention, recognition, and pride in ownership)
iv. an opportunity for higher income and profit (a quick chance for gaining desired
income and profit)
v. Flexibility (options to start enterprises in all categories and sizes depending on
capabilities)
vi. Initiation and creativity (create to respond to market opportunities)
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1.2.2 Paid Employment

i. Protection of employees by labour laws
ii. Uniform payment of workers as long the organization is operating profitably
iii. Employees have potential for advancement
iv. Employees have other benefits (paid leave, pension, etc.)
v. Employees have regular/fixed working hours
vi. Employees have clear and specific responsibilities

1.3 Disadvantages of Self-employment and Paid Employment

1.3.1 Self-employment
i. Possibility of losing the invested capital
ii. Uncertain or low income
iii. Long, irregular working hours
iv. Multiple/broad responsibility
v. One bears all risks alone
vi. No continuity in case of e.g. illness, death, etc.

1.3.2 Paid Employment

i. Risk of losing the job by being laid off hence (frustration and poverty if the job is
the only source of income for the family)
ii. Fixed small income (the income fixed and small compared to what successful
entrepreneurs earn from their business)
iii. Lack of independence and freedom (i.e. the wage earner is under the
control/direction of his master)
iv. A wage earner lacks creativity and initiative (i.e. wage earner is always engaged
in the same kind of duty and has no much time to think)
v. Over reliance only job as the only source of income

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TOPIC THREE
BUSINESS IDEAS AND BUSINESS OPPORTUNITIES
3.1 Introduction
At the end of this Topic, the learners should be able to identify business ideas and
business opportunities. In such identification, the topic covers meaning of business ideas
and business opportunities; differences between business ideas and business
opportunities; sources of business ideas; and characteristics of good business
opportunities.

3.2 Meaning of Business Ideas and Business Opportunities

Business idea/concept is a thought that when implemented can lead to income
generation (Imoh Uford, 2020). It is a response of a person, group of persons or an
organisation to societal gaps with the view to solving an identified problem or meeting
perceived needs in an environment (market, community etc.). It is the thought that results
from a group discussion that can be materialized into a product or service and used by
the defined target user. The thought which have a value to the investor, customer and
capable of generating a revenue model for a business. It is a concept that can be used
for financial gain that is usually centered on a product or service that can be offered for
money.
Business Opportunity is the chance to take advantage of an occurrence in the market
for business gain (Aashish Pahwa, 2023). It is what makes some businesses succeed
while others fail. It is an idea, concept or information received or developed (in whatever
form) by you concerning any business, transaction or potential transaction that constitutes
or may constitute an opportunity for the entrepreneur to earn a fee or income.
3.3 Sources of Business Ideas
By reviewing the millions of entrepreneurs’ testimonies around the world, the following
are potential sources of business ideas:
a) Innate Characteristics and Acquired Skills of the Entrepreneur
These stress on the importance of innate factors i.e. in-born factors (Looi & Khoo-
Lattimore, 2015). These characteristics include talents and skills acquired. One is best

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in what s/he is talented in; and other personal skills acquired from training and personal
and/or job experience, add up to the development of ideas for a successful business.
b) Micro-environmental Sources
The micro-environmental sources include family economic status, family business
background, gender, and age. The economic status of every family has a way of
influencing its members. Family background can be a push or pull factor for
entrepreneurship. Male may generally have stronger entrepreneurial intentions than
females or otherwise. Rates of individuals with entrepreneurship skills generally are the
highest in the particular age (i.e. 25 to 34 years old).
c) Macro-environmental Sources
The macro-environmental sources include societal attitudes, economic climate, work
experience, and education. The beliefs, feelings, and action tendencies of the
society can cause the individual or group of individuals to generate business ideas of
filling up the existing gap. The economic climate include availability of accessible
funds, access to resources, demand of products and services, and economic
conditions abroad. The idea can grow out of listening to customer complaints (working
experiences). Particular education (entrepreneurship education) open up for business
ideas.
d) Task Induced Sources
These sources include hobbies, strengths of the individual, surveys, skills
developed from training and knowledge on-the-job, events, and media. Area of
interest of a person as a something interesting and comfortable doing every time
becomes the source of a business idea. The individual strengths drive passion in
business. People can check the market to come out with appropriate business ideas.
Training can equip individuals with necessary skills and knowledge from different skilled
organisations and other institutions of training. Business ideas can be generated by
attending events not necessarily business exhibitions in which new ideas are exchanged.
Reading magazines, newspapers and such published materials that contain business
related issues can help one generate an idea.

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e) Market Related Sources

The market-related sources include market gaps (niche), shows and exhibitions,
merging existing businesses, listening to what business experts say, and
franchises. Spotting a gap in the market (some important business areas that are yet to
be occupied) can also form an idea. Find ideas for a business is to attend exhibitions and
trade fairs as it helps to meet sales representatives, manufacturers wholesalers,
distributors and franchisers. Saving a dying business name and/or idea through merging
can come with a new development towards achieving or getting more customers or for
provision of better services to customers. Experts’ consultations i.e. socialize with great
minds or such people who have tried out businesses or those who actually are in
businesses generate business ideas. The business idea can be generated through
offered the image, operating procedures and the name of an established business.
f) Brainstorming
Acquire business ideas through the process of generating huge number of solutions for
a specific problem through an idea/opportunities networking approach. Start by asking
a question as each idea leads to one or more additional ideas resulting in a good
number of possible marketable ideas.
3.4 Characteristics of Good Business Opportunities
i. Ready and Available for the Market: Before planning to start a business, make
sure that there is a significant market for the particular product or services i.e.
product should be on demand for customers’ need satisfaction
ii. Return of Investment: The selected business opportunity should have the
potential of bearing fruits within a set period of time and which can cover the capital
to be used in addition to bearing profits.
iii. Availability of Resource. - You should have all the resources needed to take
advantage of that particular business opportunity as well as a time frame for
implementing it lest someone else beats you to it. If a lot of money is required to
start a business either because costs are high or it will take a while to become
cash flow positive, resources will be required either from investors of founders. For
instance, you can lose some control over your business and you have to give up

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equity (and therefore upside). The more cash you need to start, when your
valuation is the lowest, the more equity you will have to give. (Mole, 2017)
iv. Adequate Skill - You need to have the experience required to tap into that
particular business opportunity. If the skills required to execute the business plays
to the strength of the team, execution risk should be less. For example, if you want
to start a bakery but don’t know a thing about baking them that is not a viable
business opportunity. An entrepreneur would start a business with a sales
distribution strategy of his or her knowledge. He or she would want to start a
business that requires skills that he or she has. One can learn, but it becomes an
extra cost, time constraint and extra risk. (Mole, 2017).
v. Scalability - Scalability basically refers to the growth of a business. Most of the
businesses start really small. Probably just you, your laptop and an idea. Overtime,
the business should be able to expand and increase revenue growth while
minimizing increases in operational costs to ensure maximum profit is attained.
Therefore, it is important to find out the probability of the business scaling after a
period of time before venturing into the business.
vi. No or Few Competition- Lack of competition in the market will enable you win
over your targeted persons in the market wholly. With this you will be able to gain
much profit. However, the more innovative the product or service you offer the
fewer the competitors you get and the higher the price you will be able to charge
hence more profit (Mole, 2017). In some cases it is possible to have no competitors
because the market is not viable.
vii. Effective Marketing Strategy – An entrepreneur needs to communicate a
persuasive message to his or her clients and build a loyal customer base. This is
done by first compelling a creative message about the business, then developing
technical expertise, coordinating the message and focusing on the branding of the
business. (Entrepreneurship Hub)
viii. Identifiable Risks- The future of a startup is always uncertain, therefore identifying
a risk is the first step to understanding how they can be monitored and then
mitigated. The more strategic options you have identified, the greater your chance
of success. (Entrepreneurship Hub)
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ix. Supportive Government Policies– Policies of a government can impact

businesses directly or indirectly and so when the government puts in place policies
that are favorable, for example low interest rates, low exchange rates and low
taxation, it encourages investment by making these business friendly decisions to
strengthen local businesses. (Mole, 2017).
x. Cultural and Ethnic Dynamics – The first main area of opportunity is the market
provided by an ethnic group’s own consumption patterns. This assumes of course
that there are sufficient openings in the labor market to create a large enough
demand for the provision of ethnic products and services for this to be a viable
form of business. It is also wise to create something that may also be attractive to
outsiders as this may spell the difference between survival and prosperity in
business. (Mole, 2017).

3.5 Fundamentals of Good Feasibility Study

Feasibility study helps to identify viable and feasible business opportunities. The given
viability is mainly addressed through fundamentals of good feasibility study. These
fundamentals include market/industry feasibility; technical feasibility; financial feasibility;
product/service feasibility; ecological feasibility; and legal/administrative feasibility. These
are also referred to as the four types of feasibility studies, though most feasibility studies
actually include a review of all four elements.
4.1 Technical feasibility
A technical feasibility study reviews the technical resources available for the business.
This study determines if an entrepreneur have the right technology in terms right
equipment, enough equipment, and the right technical knowledge to complete your
project objectives.
4.2 Financial Feasibility
A financial feasibility report includes a cost/benefit analysis of the business. It also
forecasts an expected return on investment (ROI), as well as outlines any financial risks.
The goal at the end of the financial feasibility study is to understand the economic benefits
the business opportunity an entrepreneur wants to pursue.

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4.3 Market feasibility

The market feasibility study is an evaluation of how the entrepreneur expects the
business’s deliverables to perform in the market. This part of the feasibility includes a
market analysis (customers, consuming behaviour, etc.), market competition breakdown,
and sales projections.
4.4 Product/service feasibility
This is an assessment of the overall appeal of the product or service being proposed for
the particular business opportunity. Although there are many important things to consider
when launching a new venture/business, nothing else matters if the product/service itself
doesn't sell. The product/service proposed should therefore be unique.
4.5 Ecological Feasibility
This is an environmental feasibility which assesses the viability of a proposed business
opportunity from an environmental and social perspective, identifying potential issues and
threats to the successful completion of the proposed business. The purpose of the
analysis is to evaluate potential risks and liabilities of the business opportunity with
regards to environmental and health and safety issues such as land contamination, before
pursuing the given business opportunity. This is vital as these risks may translate into
financial liabilities for the business opportunity to be exploited.
4.6 Legal/Administrative Feasibility
This assessment investigates whether any aspect of the proposed business opportunity
conflicts with legal requirements like zoning laws, data protection acts or social media
laws. It is process of checking an intended business opportunity for potential issues from
a legal perspective, and preparing a plan of implementation entailing a consolidated and
integrated tax and legal assessment.

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TOPIC FOUR
BUSINESS OWNERSHIP
5.1 Introduction
At the end of this Topic, the learners should be able to describe forms of business
ownership. The topic mainly covers forms of business ownership i.e. types of businesses
according to ownership. These forms of business are sole proprietorship, partnership,
company and cooperation.
Business ownership refers to legal control over a business. It is the possession,
proprietorship, tenure, title or rights of the enterprises. It gives the owner the legal right to
make certain business decisions. It is the degree of control over the business.

5.2 Sole Proprietorship

This is a business in which it is only one person or an individual owns, manages and
controls all the activities of the business. Examples: bakeries, hardware stores, boutiques,
barber shops, bookshops, grocery stores, beauty saloon, etc.
Advantages of Sole Proprietorship
i. It is easier to form compare to other forms of small businesses
ii. It is associated with quick decisions
iii. It contains high secrecy
iv. It has direct motivation as there relationship between efforts and rewards
v. It is experienced with flexibility due to the absence of external control e.g.
government
vi. Full control of all activities of the business due to proprietor’s personal contacts
vii. Easy dissolution as it has no co-owners or partners

Disadvantages of Sole Proprietorship

i. Limited funds due to limited scope for growth and not available economies of scale
ii. Unlimited liability hence can lead to loss proprietors’ private assets for pay off
creditors
iii. Uncertainty of continuity as it depends upon the life of the owner

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iv. Limited skills and managerial ability as it is one man who manages and one man
cannot be an expert in all areas
5.3 Partnership
This is a form of small business formed, managed, controlled and owned by two or
more people (preferably between 2- 20 people).

Advantages of Partnership
i. Easy formation as there is no complex legal formalities involved
ii. Larger financial resources as it is contributed by a number of persons or
partners
iii. Diverse skills and expertise due to combined abilities and judgments result
hence more efficient business management
iv. Flexibility of operations-the nature and place of business can be changed
whenever the partners desire
v. Protection of minority interest as no basic changes in the rights and
obligations of partners can be made without the unanimous consent of all the
partners
vi. Sharing of Losses-partners share in the business losses hence increases
motivation for improving the efficiency
vii. Capacity for survival-can continue after the death or insolvency of a partner if
the remaining partners so desire i.e. risk of loss is diffused among two or more
persons
viii. Better human and public relations due to number of partners in the business
possible tax advantage as most partnerships pay taxes as individuals

Disadvantages of Partnership
i. Unlimited liability (general partnership) as every partner is liable for the entire
debts of the business
ii. Risk of implied agency as the acts of a partner are bound to the firm as well as
to other partners

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iii. Danger of disagreements between the partners as the success of partnership

depends upon mutual understanding and cooperation among the partners
iv. Limited life of firm as the duration of the partnership is always uncertain due to
death, injuries, withdraws, sell of shares, new partners etc.
v. Profit Sharing as the gained profit is distributed to the partners
5.4 Company/Corporation
It is a form of business in which the business is legally a separate body from the
persons (shareholders) who own it.

Advantages of the Company

i. The owners’ liability towards the creditors is limited to their investment in the
company
ii. It is a legal person with continuous existence
iii. Easy raising of additional capital through stock markets
iv. Easy transfer of ownership-ownership is represented by the number of share
certificates held by a person

Disadvantages of the Company

i. It has complex process of establishment as it requires:
ii. registration with the central regulatory authority
iii. fulfillment of certain requirements e.g. amount of capital, number of directors,
etc.
iv. it is supervised and subject to rules and regulations of the country
v. it experience double taxation i.e. corporate income and tax to the dividends
paid

5.5 Cooperative Societies

These are associations of persons who have voluntarily joined together for the
purpose of achieving a common need through formation of a democratically
controlled organization, who make equitable contributions to the capital required for

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the formation of such organization, who accept the risks, and the benefits of the
undertaking in which they actively participate.

Advantages of the Cooperatives

i. ease of formation as it is a voluntary association (i.e. 10/more adult persons
can voluntarily form)
ii. no complicated and costly legal formalities involved
iii. Limited liability: The liability of every member is limited to the extent of his
capital contribution.
iv. Continuity or stability: Being a separate legal entity, a co-operative
organization enjoys a perpetual existence which is not affected by the death,
insolvency, conviction, retirement, etc. of members.
v. Democratic management: The office-bearers of a co-operative are elected by
the members on the basis of ‘one-member one-vote’.

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TOPIC FIVE
COMPONENTS OF A BUSINESS PLAN
5.1 Introduction
At the end of this Topic, the learners should be able to assess the components of business
plan. The topic mainly covers meaning, essence and needs of the business plan, and
basic components of the business plan.
A business plan refers to the written document that entails how a business is going to
achieve its goal. It explains where the entrepreneur is now, where does s/he wants to go
and how to go there (strategies). In other words, it provides information which
demonstrate a clear picture of what that venture is, where it is projected to go, and how
the entrepreneur proposes it will get there.

5.2 Essence and Needs of the Business Plan

a. To help in making critical decisions. Building a business plan allows you to
determine the answer to some of the most critical business decisions ahead of
time.
b. It helps an entrepreneur steer his/her business as s/he start and grow: A
good business plan guides the entrepreneur through each stage of starting and
managing his/her business
c. It can help you get funding. It helps the entrepreneur get funding or bring on
new business partners by making investors feel confident that they will see a
return on their investment before decision making i.e. attract investors
d. To better understand business details-competitors, market/customers,
financial status, employees and management

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e. To reduce the risk of pursuing the wrong opportunity: it helps to minimize

opportunity costs; and assessing the attractiveness of this particular
opportunity, versus other opportunities for the best decisions making.

5.3 Basic Components of the Business Plan

a. Cover Page
It presents the first impression by giving quick information which help the
reader to decide whether to read the complete document or not. It includes
name and address of the business, name and address(es) of entrepreneurs,
nature of business, business logo (if any), name and designation of the
contact person (if apply), statement of financial needed, statement of
confidentiality of report/plan.
b. Table of Contents
It provides a sequential listing of the sections of the plan, with page numbers.
c. Executive Summary
It summarizes the key points of the business plan. It gives a brief overview of
what, how, why, where, etc. It usually takes 1-2 pages maximum.
d. The industry, the business and its Model/design
It describes the business in details. The description is based on the name of
the business, vision, mission, goals and objectives, products, location, form,
size, competitive advantage/information from feasibility study, etc.
e. Financial Plans
f. Marketing Analysis/plan
It is the description of customers’ characteristics, market size and trends,
competitive analysis, demand analysis, distribution analysis, promotion
analysis, sales forecast, marketing strategies, customer care, marketing mix,
etc.
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g. Operations Plan
It describes location, facilities, space requirements, capital equipment, and
labour force that are required to provide the company’s product or service.
h. Organization and Management (O & M) Plan
It describes key staffing positions of the business, and their qualities, how
they will be obtained, their roles and responsibilities, reporting relationships,
how they will be compensated, motivated and disciplined

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TOPIC SIX
INVENTORY MANAGEMENT
7.1 Introduction
At the end of this Topic, the learners should be able to discuss the principles of stock
control; outline the elements of storekeeping and stocktaking; and understand the
objectives and principles of stock recording. Therefore, this topic covers meaning of
inventory management, concepts of inventory management; and principles of good
inventory management.

7.2 Meaning of Inventory Management

Inventory management refers to the process of ordering, storing, using, and selling a
company's inventory. This includes the management of raw materials, components, and
finished products, as well as warehousing and processing of such items. Inventory
management is the entire process of managing inventories from raw materials to finished
products. Inventory management tries to efficiently streamline inventories to avoid both
gluts (surpluses, excesses) and shortages.
Four major inventory management methods include just-in-time management (JIT),
materials requirement planning (MRP), economic order quantity (EOQ) and day’s sales
of inventory (DSI). Each type has its pros and cons, depending on a company’s needs.

7.3 Concepts of Inventory Management

Inventory or stock is a complete list of items such as property, goods in stock, or the
contents of a building. It means the goods and materials that a business holds for the
ultimate goal of resale, production or utilisation.

Stock control
Stock control, otherwise known as inventory control, is used to show how much stock
you have at any one time, and how you keep track of it. It applies to every item you use
to produce a product or service, from raw materials to finished goods. It covers stock at
every stage of the production process, from purchase and delivery to using and re-
ordering the stock. Efficient stock control allows you to have the right amount of stock in
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the right place at the right time. It ensures that capital is not tied up unnecessarily, and
protects production if problems arise with the supply chain.
Storekeeping
In the process of material control, after any purchased materials are received and
checked, the next step is the storage of materials, also known as storekeeping. Store
keeping is the task of maintaining safe custody of all items of supplies, raw materials,
finished parts, purchased parts, and other items. These items are held in a storeroom for
which a storekeeper acts as a trustee. As such, storekeeping can be defined as process
of receiving and distributing stores or supplies.

Stocktaking
Stocktaking (or stock counting) is when you manually check and record all the inventory
that your business currently has on hand. It’s a vital part of your inventory control, but
will also affect your purchasing, production and sales. Much like any aspect of
inventory, the process of stocktaking will vary hugely from company to company.

7.4 Principles of Inventory Management

a. Demand Forecasting
Inventory demand forecasting is the process of predicting customer demand for an
inventory item over a defined period of time. Accurate inventory demand forecasting
enables a company to hold the right amount of stock, without over or under-stocking,
for optimum inventory control.
b. Warehouse Flow
A visual chart or diagram that shows the main activities of your warehouse. It's a
subcomponent of warehouse organization. A process flow illustrates how goods are
received, the process they go through, how they are shipped, and any stages in
between.
c. Inventory turns/stock rotation
The concept of an inventory turnover provides a number that symbolizes a measure
of units sold compared to units on hand, or how well a company is managing

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inventory and generating sales from that inventory. It's an important component of
effective supply chain management.
d. Cycle Counting
Cycle counting is a method of checks and balances by which companies confirm
physical inventory counts match their inventory records. This method involves
performing a regular count and recording the adjustment of specific products. Over
time, they have counted all their goods.
e. Process auditing/Inventory Auditing
An inventory audit is a process where a business cross-checks its financial records
against its inventory records. It is a vital part of inventory management process. It is
done to ensure all records are accurate and uncover any discrepancies in inventory
count or financial records.

CRN, 2024