MIZAN AGRICULTURAL TVET COLLEGE

Entrepreneurship and Employability

skill
Department of Basic Science
 LO1; Understanding Entrepreneurship
Skills
Entrepreneurship;
The word “Entrepreneurship” is derived from the
French verb entreprendre which means “to undertake”.
The concept entrepreneurship refers
“The process of identifying opportunities in the market
place, arranging the resources required for pursuing
these opportunities and investing the resources to
exploit the opportunities for long term gains.
It involves creating wealth by bringing together
resources in new ways to start and operate an 2
 Elements (steps in the implementation) of Entrepreneurship

1.Observing the environment/identifying gaps,

2.Identifying opportunities,

3.Gathering the necessary resources

4.Implementing the activity and

5.Receiving rewards for engaging in the activity

3
 Entrepreneurial Functions in Business

1.Identify gaps in the market and turn these gaps into

business opportunities.
2.Finances and mobilizes resources for the business
3.Organize and manage the business.
4.Bear /tolerate/ the uncertainties and risks of the business.
5.Encourage competition
6.Self-employed and applying entrepreneurship 4
 Economic Principles of Entrepreneurship

1.Works best in an open market economy

2. Promotes private enterprise
3.Adds value to products and services (creates
wealth)
4.Providing needed products/service
5.Developing new markets 5
 Rewards for Being an
Entrepreneur
1.Self-actualization /personal fulfillment
2.Feeling of freedom and independence
3.Providing jobs and benefits to others (investors,
suppliers, bankers, subcontractors, work force, and
customers)
4.Economic goods (product/service, incomes for
workers, profits for shareholders/partners) 6
 Importance of entrepreneurship

The followings are the major benefits of entrepreneurship

1.Employment creation
2.Local resource utilization
3.Decentralization and diversification of business
4.Promotion of technology
5.Capital formation
6.Promotion of an entrepreneurial culture 7
 Meaning of Entrepreneur
• Entrepreneurs are individuals who undertake
an economic activity.
• On one extreme, an entrepreneur is a person
who brings change, possessing
characteristics found in only a very small
fraction of the population.
• On the other extreme of definition, anyone
who wants to work for him/her is considered
to be an entrepreneur 8
 Types of
entrepreneurs
1 Personal achiever
.

• Personal achievers are the classic

entrepreneurs.
• They are the types of people that we picture
when the term “entrepreneur” is used.
• They are the only types who must become
entrepreneurs to succeed in life.
9
 Conti….

2. Super-salesperson
• Generally, onlookers don’t view super sales people as
having the potential for entrepreneurial success.
• Their entrepreneurial strength is their approach to
selling.
• They truly cater to the needs of clients and customers,
thus placing a strong stress on service
3 Real manager
• Real managers exhibit some of the traits of established
entrepreneurs and some of the abilities of corporate
managers. 10
 Cont.….

4. Expert idea generators

• Expert idea generators are people who have
ideas for a business that can provide a real
competitive advantage.
• They become tremendously stimulated about
their ideas and spend a great deal of time
implementing them.
• Unlike personal achievers, who spend energy
on an overall venture, expert idea generators
tend to focus on the idea exclusively
11
 The relationship between entrepreneurship and
entrepreneur

12
 Entrepreneur and Intrapreneur
Intrapreneurs are individuals who notice opportunities and take initiative to mobilize resources; however they work in
large companies and contribute to the innovation of the firm.
Intrapreneurs often become entrepreneurs.

13
 Entrepreneur and manager
• A manager is a person who plans, organizes, directs and controls
the activities of an established business.
• It is the manager who leads the business to its targets and who
is responsible for the business's success or failure.
• However, unlike the entrepreneur, a manager is not necessarily
the owner or the founder of the business.
• Alternatively, the entrepreneur may or may not be the manager
of the business. Even though it is true that most entrepreneurs
are the managers of their businesses, an entrepreneur may hire
a manager to run her/his business
• A manager is an employed person while an entrepreneur
manages the enterprise for his/her personal gain.
• The role of the entrepreneur and the manager may, however,
overlap in many cases 14
 Point of
Entrepreneur Manager
Distinction
The main aim of a manager is
He starts a venture by setting
Goal to render his/her service in an
up a new enterprise for his
Management enterprise already set up by
personal satisfaction.
someone.
Entrepreneur is the
A manager is a servant in the
Status owner/founder of the
enterprise.
enterprise.
An entrepreneur bears all risk A manager does not bear any
Risk and uncertainty involved in risk involved in the
the enterprise. enterprise.
Entrepreneurs for his/her risk A manager receives salary as
bearing role he/she receives a reward for services
Rewards profits. The reward is not only rendered which is fixed and
uncertain and irregular but regular. It can never be 15
 Enterprise and Enterprising
• Enterprise means always finding a way to keep yourself actively working
towards your ambition.
Enterprise is two things. These are:
Creativity
The courage to be effective
 An enterprising person is one who sees opportunity in all areas of life.
 To be enterprising is to keep your eyes open and your mind active. It’s
to be skilled, confident, creative and disciplined to seize opportunities
that present them regardless of the economy.
16
 Conti….
Enterprising people always see the future in
the present.
Enterprising people always find a way to take
advantage of a situation, not be burdened by it.
Enterprising people aren’t lazy. They don’t wait
for opportunities to come to them, they go after
the opportunities. 17
 Conti…
ENTERPRISING

E: Energy R: Risk-taking
I: Innovation
N: Need to achieve
S: Skills
T: Task oriented I: Independence
E: Empathy N: Networking

R: Resourcefulness G: Goal oriented

•
P: Planning
18
 Developments of Entrepreneurial mindset

Success and failure begins in your mind and it starts today.” Robert
“

van der Wolk

•A mindset is the sum of your knowledge, including beliefs and

thoughts about the world and yourself in it.
•It is your filter for information you get in and put out. So it
determines how you receive and react to information. Mindset can
be:
I. fixed or
II. growth oriented 19
 cont.…..

• fixed mindset assumes your talents and abilities

are set, the growth mindset believes your talents
and abilities can be developed.

• It is pointed out that a mindset can change.

• Much of this occurs through developing a greater

awareness of your current mindset, and taking
steps to purposely start thinking and reacting in
new ways 20
 Conti……
Successful entrepreneurs need to develop a positive mindset
and observe their environment.

In order to do this, the process described below in sequential

order should be followed;

1.Attention (focus on something)

2.Retention (what observed must be retained)
3.Reproduction (behavior must be practiced again and again)
4.Motivation (learner must be motivated to learn from it)21
 Understanding Entrepreneurial Competencies &
Environment
•Competencies: are defined as a body of knowledge, a set of skills
and a cluster of traits.
• Knowledge: consists of a set or body of information stored, which
may be recalled at an appropriate time.
•Skill: is the ability to apply knowledge.

•Trait: is the total of peculiar qualities or characteristics that

constitutes personal individuality.
• Entrepreneurial competencies: refer to the key characteristics
that should be possessed by successful entrepreneurs in order to
perform entrepreneurial functions effectively 22
 Levels of competencies required by entrepreneurs

There are three levels of competencies, which all entrepreneurs

need:
1.Personal competencies: creativity, determination, integrity,
persistence, emotional balance and self-criticism.

2.Interpersonal competencies: communication, engagement,

delegation, respect.

3.Business competencies: business vision, resource

management, networking, negotiating skills. 23
 Conti..

• Personal Entrepreneurial Competencies (PECs)

are specific characteristics/ traits that can be
achieved through education, hard work, and
planning.

• There are ten most common Personal

Entrepreneurial Competencies, often called the
10 PECs, required by an entrepreneur; which
can be grouped into three clusters 24
No
Personal Entrepreneurial Competency Cluster

1
Opportunity seeking and
initiative
2
Persistence
3
Fulfilling commitments Achieveme
nt
4
Demand for efficiency and
quality
5
Taking calculated risks
6
Goal setting
7
Information seeking 25
 I. Achievement Cluster
1. Opportunity seeking and initiative

• An opportunity is a favorable set of

circumstances that creates a need for a
new product, service or business
• An entrepreneur always seeks out and
identifies opportunities.
• The opportunities may include access to
credit, working premises, education,
trainings 26
 2. Persistence

• True entrepreneurs face bureaucracy, make mistakes,

receive criticism, and deal with money, family, or stress
problems.
•But they still stick to their dreams of seeing the venture
succeed.

• It is the ability or the determination to takes action in the

face of significant obstacles and challenges.

•True entrepreneurs take personal responsibility for the

27
performance necessary to achieve goals and objectives.
 3. Fulfilling commitments

An entrepreneur makes a personal

sacrifice and extraordinary effort to
complete a job,
pitches in with employees,
takes their place if needed,
to get a job done and strives to keep
customers satisfied and places long-
term good will above short-term 28
 4. Demand for efficiency and quality
• Efficiency refers to the means of producing results with little
wasted effort while quality refers to the standard of something
as measured against other things of a similar kind; it is of
excellence of something.
•In pursuit of demand for efficiency and quality entrepreneurs
tend to:
find ways to do things better, faster and cheaper
Act to do things that meet or exceed standards of excellence
develop and uses procedures to ensure that work is completed
on time and that work meets agreed upon standards of quality.
29
 5. Taking calculated risks
• Businesses face risk.
• Successful entrepreneurs take risks in business
such as starting businesses which have an
equal chance of success or failure or resigning
from a secure job to start a business.
• Taking risks, however, does not mean going in
to business blindly and then expecting grate
result; Taking risks involves careful planning
and hard work. 30
 Cont.…
• Most entrepreneurs take calculated and moderate risks.
• Entrepreneurs avoid low-risk situations because there is
lack of challenge, but they also avoid high-risk situations
because they want to succeed.
• They set high goals and enjoy the excitement of a
challenge, but they do not gamble.
• Hence, low-risk situations and high-risk situations are
avoided because these risks do not satisfy the
entrepreneur.
• In short, the entrepreneur likes a difficult but achievable
challenge.
31
 II. Planning Cluster
6. Goal setting

• Goal setting is the process of deciding what

you want to accomplish and devising a plan
to achieve those desired result.
• Successful entrepreneurs have the ability to
set goals and objectives which are personally
meaningful and challenging and articulate
clear and specific long-term goals.
32
 7. Information seeking
• successful entrepreneurs do not rely on
guesswork and do not rely on others for
information.

• Instead, they spend time collecting

information about their customers,
competitors, suppliers, relevant
technology, markets and they also consults
experts for business or technical advice.
33
 8. Systematic planning and
monitoring

•Systematic planning is a planning process that is based

on the scientific method and includes concepts such as
objectivity of approach and acceptability of results;
while Monitoring is the systematic process of
collecting, analyzing and using information to track a
program's progress toward reaching its objectives and
to guide management decisions. 34
 Conti…
Successful entrepreneurs are good planners and monitors.
They:

 plan by breaking large tasks down into sub-tasks with clear

time-frame
 Revise plans in light of feedback on performance or changing
circumstances
 Keep financial records and uses them to make informed
decisions 35
 III. Power Cluster
9.Persuasion and networking
• Persuasion is a way of convincing someone to get
something or make a decision in your favor.
• It is inducing or taking a course of action or
embracing a point of view by means of argument,
reasoning, or appeal; to convince; to succeed in
causing a person to do or consent to something.
• Networking is a socioeconomic business activity by
which businesspeople and entrepreneurs meet to
form business relationships and to recognize, create,
or act upon business opportunities, share information and
seek potential partners for ventures 36
 Conti..

•Entrepreneurial networks are important for the

mobilization and acquisition of scarce resources that
are crucial to starting and developing a business.
•Successful entrepreneurs use deliberate strategies to
influence and persuade others, take action to develop
and maintain a network of business contacts and uses
key people as agents to achieve their objectives.
37
 10. Independence and self-confidence

• Self-confidence is the state of being certain

that a chosen course of action is the best or
most effective given the circumstances and
independence may refer to the ability to do
what one wants, when s/he wants and where.

• Entrepreneurs want to be their own boss this

is what we call independence.
38
 Conti….

•Entrepreneurs believe in themselves and the desire for control

and the ability to make decisions often makes it difficult for
them to work in a controlled environment.

Hence Entrepreneurs:
 Seeks autonomy from the rules and/or control of others
 Attributes the causes of successes and failures to oneself and
to one’s own conduct
 Expresses confidence in own ability to complete a difficult task
39
 Assessing Entrepreneurial potential
• Entrepreneurial potential is a set of attitudes, motives
and knowledge that enables entrepreneurial activity.
• Such a definition shows the place of entrepreneurial
potential in the whole process of becoming an
entrepreneur.
• A self-assessment (personal-assessment) is an
evaluation of your actions and attitudes.
• Self-assessments assist individuals get in touch with
what their core competencies are and how those may
overlap with what's needed to take on running a
business 40
 Entrepreneurial motivation and
Decision
• Generally, motivation is the set of forces that cause
people to do something.
• It is an inner state that energizes and directs
behavior toward goals.
• So, motivation is the set of intangible forces that
stimulate someone to take a desired course of action.
• Thus, we can say that entrepreneurial motivation is
the set of forces that energizes, directs and
encourages a person to take initiative and carry out
entrepreneurial activities.
41
 Motivating Factors:
I. Internal Factors:

1. Desire to do something new.

2. Become independent.
3. Achieve what one wants to have in life.
4. Be recognized for one’s contribution.
5. One’s educational background.
6. One’s occupational background and experience in the
relevant field 42
 Cont.…
II. External Factors:
1. Government assistance and support.
2. Availability of labor and raw material.
3. Encouragement from big business houses.
4. Promising demand for the product

43
 Decision-Making Process

1. Recognize the problem/the gap

2.Analyze the problem
3.Define possible solutions
4.Analyze all possible solutions
5.Select the best solution for the application
6.Implement the decision

44
 Lo2: Business Ideas, opportunities and
feasibility study
Business Ideas.
A business idea is a short and precise description
of the basic operation of an intended business.
Before you start a business, you need to have a
clear idea of the sort of business you want to
run.
A good business idea will be compatible with the
sustainable use of natural resources and will
protect the social and natural environment on
which it depends. 45
 Source of business idea
Mass Media (newspapers, Natural scarcities and
magazines, TV, Internet
Hobbies/Personal Interest
pollution
Personal Skills and
Changes in Society
Experience Brainstorming
Business Exhibitions Customer Complaints
Surveys

46
Steps in generating and screening the best
viable business idea

Step 1: Brain Storming

• Brainstorming is a creative idea generation
technique.
• It is also a problem solving technique.
• This technique provides free environment to
present individual ideas, without attracting
criticism from any one
• . Every generated idea is recorded and considered as
solution to a problem 47
 Conti..
• Brainstorming shows collective creative
power of a group of people
• It is group productivity.
• This is used to find out large number of
business ideas in shorter time
• This is accepted as one of the tool in
quality management.

48
 cont.…..

Step 2: macro screening

Marketability
1.Availability of raw materials &other inputs
2.Ease of implementation
3.Financial ability of the entrepreneur
4.Consistency with government priorities 49
 Conti….

Step 3: Micro Screening

1 Marketing Viability
 Size and growth rate of target market
 The level of actual market demand and anticipated future
market potential
 Demand and supply situation, factors and trends
 Direct and indirect competition
 Marketing Practices 50
 Conti.
2. Technical Viability
 Technology & its source
 Machines and equipment’s
 Production process
 Raw Materials, power& other inputs
 Infrastructure and Facilities
 Location &layout of site, building & plan 51
 Conti….

3. Organizational and Management Viability

 Distribution system
 Abilities, competencies, skills,  Product requirements of project
experience, values and motivations  Sketch personnel requirements:
of management/key officers as per what people will be needed now,
the Good network with customers in a year, in the long term?
 Managerial experience  What skills and qualifications are

 Superior technology required and what financial

implication results?
52
 Conti…
4. Financial Viability

 Project startup capital  Profitability/Income

 Sources projections
of
 Break even analysis
financing/capital
(BEA)
 Balance sheet 
Expected return on
projections investment (ROI) & its
 Cash flow projections viability for the
53
 Conti….
5. Environmental Viability

 What are the types of effluents and emission

generated?
 What needs to be done for proper disposal of
effluents and treatment of emissions?
• Will the project be able to secure all
environmental clearance and comply with all
statuary requirements 54
 Conti…
6. Ecological Viability
 What is likely damaged caused by the
project to the environment?
 What is the cost of restoration measures
required to ensure that the damage to the
environment is contained within acceptable
limits?
55
 Conti…
Step 4: SWOT Analysis
• A SWOT analysis is a simple tool to help you work out
the internal and external factors affecting your business
• The S stand s for strengths, the W stands for
weaknesses, the O stands for opportunities and the T
stands for threats
• . It is one of the most commonly used business analysis
and decision-making tools. A SWOT analysis helps you to
build on strengths (S), minimize weakness (W), seize
opportunities (O) and counteract threats (T).
56
 Conti…
Strengths
• Strengths are within the control of the entrepreneur
and they occur at present. Strengths should be
capitalized and harnessed to reduce or eliminate
weaknesses.
• Examples of strengths may include technical
expertise, new improvements of product, good
network with customers, managerial
experience, superior technology, distribution
system, and product features (utility durability, etc.
57
 Conti….

Weaknesses
• Weaknesses are within the control of the
entrepreneur; they occur at present. They are
"lack of...", "missing...", or weak points. As much
as possible, weaknesses should be eliminated.
• Examples of weaknesses include weak selling
effort, lack of working capital, inexperienced
managers or employees, technological
obsolescence and poor design of product 58
 Conti..
Opportunities
• Opportunities are positive or favorable factors in the
environment which the entrepreneur. They are, however,
mostly beyond the control of the entrepreneur.
• They are different from strengths in the sense that strengths
are positive internal factors of the business.
• Examples of opportunities include few and weak competitors,
no such products in the market, rising income of target market
Scarcity of product in the locality, growing demand for the
product, favorable government policy/programs, availability of
technical assistance, low interest rate on loans, access to
cheap raw material and adequate training opportunities. 59
 Conti…

Threats
• Threats are negative or unfavorable external factors in the
environment and normally beyond the control of the
entrepreneur. They adversely affect the business, if not
eliminated or overcome.
• Threats differ from weaknesses in as much as they are
beyond the control of the entrepreneur.
• Both have a negative impact on the business.
• Examples of threats include hanging government
regulations, smuggling, Raw materials shortages, insufficient
power, corruption, poor infrastructure, rising costs of raw
materials, too much/Unhealthy competition, government 60
 Business opportunities
• A business opportunity is an attractive investment
idea or proposition that provides the possibility of a
return for the person taking the risk.
• Such opportunities are represented by customer
requirements and lead to the provision of a product or
service which creates or adds value for its buyer or
end-user.
• In other words, a business opportunity is a business
idea that has been researched upon, refined and
packaged into a promising venture that is ready to
launch. 61
 Conti…
An opportunity, in order to be a business opportunity, must fulfill the following criteria

 Be competitive
 It must have a high level of gross
 There should be a real demand
profit margins
 Return on investment  It must have the potential to start

 Availability of resources and generating profit within 12 months –

36 months
skills
 The startup capital investments must
• Meet objectives
be realistic and within the range of
• It must have a low level of
liability to risk what an entrepreneur can provide.
• It must have the potential to keep on
improving with time 62
 Feasibility study/analysis
• Feasibility study/analysis is the process
of determining if a business idea is viable.
• As a preliminary evaluation of a business
idea, a feasibility analysis is completed to
determining if an idea is worth pursuing
and to screen ideas before spending
resources on them.
• It comes before the development of a
business Plan 63
 Conti….
• A feasibility study precedes a business plan.
• Before writing a business plan, one needs to identify
how, where, and to whom they intend to sell a
service or product
• One also needs to assess the competition and to
figure out how much money they need to start the
business and to keep it running until it is established
where all of these are achieved through a feasibility
study.
• Feasibility studies address things like where and how the
business will operate 64
 Cont.….
• They provide in-depth details about the business to
determine if and how it can succeed. They serve as a
valuable tool for developing a winning business plan.

Components of a feasibility
study/analysis
• The components of a feasibility study/analysis
include all the things that should be considered
in conducting a feasibility study/analysis
65
 Conti.
1.Description of the Business
 The product or services to be offered and how they will be
delivered.
 How customers would use and buy the product or service
 Key components or raw materials that will be used in the
product, how the business will source these and how
available they are.
 Plans to test the product to ensure it works as planned and is
66
 Conti.
1.Market Feasibility study
 The industry in which the business operates. Include the size, growth rate,
etc
 Demand and supply factors and trends
 Target market for the products and clearly state why would customers buy
the produce
 The level of actual market demand and anticipated future market potential
 Direct and indirect competition (as it pertains to the target market only).
 Unique about the enterprise’s product compared to the competition?
 List all key barriers to entry
67
 Conti….

3. Technical Feasibility study

Here, there should be descriptions of the following issues:

 Details how you will deliver a product or service (i.e.,
materials,
 Labor, transportation, where your business will be located,
technology needed, etc.).
 additional or ongoing research and development needs
68
 Cont..
4. Financial Feasibility study
Here, there should be descriptions of the following issues:
 Projects how much start-up capital is needed and when? What sources
will provide the capital?
 balance sheet projections
 income projections
 cash flow projections
 When will the enterprise begin to turn a profit, Break even analysis
(BEA)?
 What is the expected return on investment (ROI)?
 Will the enterprise provide a viable return on investment (ROI) for the
69
 Cont.…

5. Organizational and production feasibility study

Defines the legal and corporate structure of the business (may also
include professional background information about the founders and
what skills they can contribute to the business
What physical premises are required? Give location, size, condition,
and capacity of planned production and warehouse facilities
How complex is the manufacturing process? Describe equipment
needed and costs.

Will space be owned or leased? Will renovations be required? At what

costs? 70
 Conti..

6. Management and personnel Feasibility study

 There should be descriptions of the following issues:
List the proposed key managers, titles, responsibilities,
relevant background, experience, skills, costs
Sketch personnel requirements: what people will be
needed now, in a year, in the long term? What skills and
qualifications are required and what financial implication
results? 71
 Lo3: Starting an Enterprise
Enterprise and Enterprising
An enterprise is a business-oriented organization formed
specifically so founders can pursue entrepreneurial endeavors for a
profit.
While enterprises have social elements, they are different from clubs or other
non-commercial organizations because of their entrepreneurial purposes.
The first step in organizing is to identify and enumerate the activities required
to achieve the objectives of the enterprise.

An enterprise is for the purpose of attracting customers, selling

goods and services and earning profit.
72
 Conti…
Enterprises are either formal or informal.
On a personal level, enterprising can be any identified idea
that a person can translate into a planned and satisfactorily
implemented activity
In the business sense, enterprising refers to the
implementation of a business venture or undertaking
By understanding the enterprising concept, one can
appreciate that all people have the potential to be enterprising
73
 Conti…
• Enterprising men and women are able to deal positively
with the challenges and problems they face in their daily
lives.
Practically all undertakings can be referred to as
enterprising it fulfills the followings.
Idea identification,
Planning,
Implementation,
Successful completion of an activity and
 Receiving the rewards 74
 Classification of Enterprise /Types of Business

1. Based on the nature and function of Business of operation

I. Service giving enterprise: - Business enterprises that render service to

customers.
II. Merchandise enterprise: - an enterprise that purchases goods for resale in
normal operation of the businesses.
III.Manufacturing enterprise: - is purchases raw materials and different
components and
convert it into end products. 75
2. Based on the size/scale of the operation

I. Micro enterprise
II.Small enterprise
III. Medium enterprise
IV. Large enterprise

3.Based on the nature of ownership

V. Proprietorship
VI. Partnership
VII.Corporation (Share Company)
VIII.Coooperativ
76
 Function of business operation based classifications of Enterprises
No Service giving enterprise Merchandising enterprise Manufacturing enterprise
1
Wholesale trade (durable
Cosmetic/beauty care service Food and kindred products
goods)
2
Educational services Wholesale trade( non-durable Furniture and fixtures ,
goods) Wood products (except furniture)
Measuring, analyzing and controlling
3
a dry cleaner, an accountant, or Building materials, hardware.
instruments (photographic, medical &
a car wash Garden supplies dealers
optical goods ;watches & clocks)
4 Repairing items General merchandizing stores Apparel and other finished products

5
Food stores, drug, or grocery Electrical and electronic machinery,
Postal (mail/courier) service
store equipment and supplies
6
Automotive dealers and petrol
Miscellaneous repair service Textile mill products
service stations
7
Hotel and lodging houses Paper and allied products
Apparel and accessory stores
Motion pictures
8
Health services Furniture, home furnishing and
Printing, publishing and allied industries
equipment stores
9
Eating and drinking Chemicals and allied products
Legal service
establishments
10
Miscellaneous retail
Mailing service/delivery service Petroleum refining and related industries

11
Motor vehicle repairs. Service Rubber and miscellaneous plastic
and garages products
12 Postal(mail/courier)service Leather and leather products
13
Amusement and recreation 77
Stone, clay, glass and concrete products
 Legal forms of business enterprises
The entrepreneur has to be sure of the administrative and legal issues involved
in the business project which is going to be selected.

These includes, choice of the form of the business ownership, registration and
clearness and approval from the authorities

Types of business ownership in Ethiopia

The concepts and legal forms of business enterprises in Ethiopia/ need

contextualized example.
Every small business must select a legal form of ownership.
The most common forms are sole proprietorship, partnership, and corporation
78
and cooperative
 Conti..
A. The sole proprietorship has only one owner.
B. partnership has two or more co-owners.
C. limited company is an association of stockholders or owners
chartered by the government.
It has the authority to transact business in same manner as one person.
D. Cooperative is a group of people operating a business through a
jointly owned and democratically run organization

79
 Sole proprietorship/Sole trader

• A sole proprietorship is a business that is owned and operated by one

person. The enterprise has no existence apart from its owner
Advantage of sole proprietorship Disadvantage of sole proprietorship
 Simplicity: it is very easy to establish and  Unlimited liability, Limited skills
dissolve the business., Quick decision
 No separation of tax return  Potential difficulty in borrowing money
 High secrecy, Low costs to start,  Lack of continuity/uncertain life: The
Minimum regulations, Low working capital business is terminated upon the death or
requirement incapacity of the owner.
 Direct control of business/ personal touch:  Difficulty in raising capital/limited financial
the owner can maintain personal contact sources
with his employees & clients.
 Tax advantages, Owner receives all profits/  The sole proprietor is responsible for all
direct motivation, Flexibility decisions 80
 2. Partnership
 It is formed through an agreement among two or more
persons to carry on jointly a legalized business as co-owners.
 Like the sole proprietorship, it is not a separate legal entity
from its owners.
• It is recommended that a partnership agreement, called the
Articles of Co-partnership or Memorandum of Association, be
prepared in writing by a competent attorney
81
 Conti.
• In case of Ethiopia, as per the commercial code of 1960 Article
211,”A partnership agreement is defined as a contract where by two
or more persons who intended to join together, make contribution for
the purpose of carrying out activities of an economic nature and of
participating in the profit and loses arising out there of it any”.

82
 Characteristics of Partnership

Association of two or more persons, Contractual relationship/ mutual

agreement
Existence of lawful business, Sharing of profit and loss
Mutual agency among partners: Each partner is responsible and liable
for the faults and wrongful acts of a co-partners with regard to business
obligations.
No separate legal entity of the business, Unlimited liability
Restriction on transfer of interest, Utmost good faith 83
 Advantage of partnership Disadvantage of partnership

Easy to form , Low costs to start, Larger/added Unlimited liability, Lack of continuity, Lack of
capital sources harmony

Business secrecy as compare to corporation business

Difficulty in finding suitable partners
type

Protection of minority interest: each partner has an

Risk of implied agency, Shared authority, Non-
equal role in management of firm’s affair. , Shared
transferability of interest
management/specialization

Difficulty in raising additional capital/limited financial

Tax advantages as compare to corporation business type
sources 84
 Classification of partnership
i. General partnership: A partnership in which all partners have mutual agency and
unlimited liability for partnership debt
ii. Limited partnership: A partnership that has two classes of partners:
•a) Limited partners
•b) General partners

 Limited partners: A partners who have no personal liability for debts of

partnership beyond the amount they have invested in the partnership.
 General partner: a partner who assume unlimited liability for the debt of the
partnership.
Hence, general partner in the limited partnership are responsible for its management.
85
 3. Share Company (Corporation)
• It is an association of stockholders that has been established to
allow a group of entrepreneurs to act as one.
 The officials of the share company must file a special document,
called the Articles of Incorporation/Charter.
 It is essentially an "artificial person" created and operated with the
permission of the state where it is incorporated.
• It's a person like you, but only "on paper 86
 Conti…
Characteristics of Share Company
 Artificial personality: separate legal personality distinct from owners., Limited
liability
 Continuity: it has a separate and continuous life of its own, and does not
dissolve if a stockholder dies or the stock is sold to another person.
 Double taxation/taxed twice: first there is tax on the amount of the business
profits. Then the owners are also taxed on any dividends they may receive.
• Managed by professional managers
87
 Advantages of share company Disadvantages of share company
 Closely regulated by state,
Limited liability, Management
Most expensive form to
can specialize, Transferable of
organize (cost, time and
ownership
paperwork)
Easier to raise capita,  Double taxation (company and
Separation of ownership and
stockholders)
management

Continuous existence/perpetuity,  Red-tape , Charter restrictions,

Separate legal entity, Potential Extensive record keeping
tax advantages required 88
 4. Cooperative

It is a group of ten or more people operating a

business through a jointly owned and democratically
run organization.
The cost of registering a cooperative is usually lower
than the cost for registering a share company
A written cooperative agreement is required and must
be filed with the appropriate government authorities
The management of a cooperative is elected by the
members of the cooperative. 89
 Principle of Cooperative

Registered and have limited liability for its members

Members have an equal vote in decisions
Membership is open to everyone who fulfils specified conditions
Assets controlled and usually owned jointly by members
Profit shared equally b/n members with limited interest payable on
loans made by members
Share capital remains at its original value
90

 Advantage and Disadvantage of Cooperative

Advantages Disadvantages
Means to empower poor women, Hard to keep qualified members,
disabled persons and other Members contributing to
groups who often lack a voice cooperative unequally

Joint self-help, Organizational Shared authority, Gender issues,

structure helps all members Governance challenges

Shared risk-taking, Easier to

raise capital, Combines
individual skills 91
 Micro and Small Enterprises in Ethiopia
Small and medium enterprises (SMEs) cover a wider
spectrum of industries and play an important role in
both developed and developing economies.
Ethiopia is no exception and SMEs occupy a prominent
position in the development of the Ethiopian economy
MSEs are the natural home of Entrepreneurship

92
 Conti…
•The sector is also an important force to stimulate economic development by:
Generate employment , Equitable income distribution , Activate competition
Exploit niche markets , Enhance productivity and technical change

•The government’s recent industrial development strategy identifies MSEs as key

priority
• No single definition for MSEs
• The definitions vary from country to country and mainly depend on
its purposes

93
 Size Based Classifications of Enterprises

Level of Enterprise Economic Sector No. of Employees Total Asset in ETB Total Asset in
USD
Industry < 10 employees < 250,000 <7,500
Micro
Service &
Agriculture < 10 employees < 200,000 < 6,000
11 – 50 250,001 – 4
Industry employees Million 7,500 – 115,000
Small
Service & 11 – 50 200,001 – 2.5
Agriculture employees Million 6,000 – 75,000

Industry 51- 100 4,000,001 - 45 115,000 – 1.5

employees Million Million
Medium
Service & 51- 100 3,000,001 - 25 75,000 –
Agriculture employees Million 750,000

Industry >100 employees >50 Million > 1.5 million

Large
Service &
Agriculture >100 employees >25 Million > 750,000
94
 Conti….

There are two main approaches to define MSEs. These are

1) By some measure of Size/Quantitative Approach :

•Size refers to the scale of operations.

•Some criteria are applicable to all industrial areas, while others are
relevant only to certain types of business.
2.Using an economic/Control definition/ Qualitative Approach
•Size does not always reflect the true nature of an enterprise.
•In addition, qualitative characteristics may be used to differentiate small
business from other business. 95
 Conti…..
The economic/control definition covers:
Market share: The characteristic of a small firm’s share of the market is
that it is not large enough to enable it to influence the prices of national
quantities of goods sold to any significant extent.
Independence: Independence means that the owner has control of the
business himself. It, therefore, rules out those small subsidiaries which
though in many ways fairly autonomous, nevertheless have to refer to
major decisions (e.g., on capital investment) to a higher level of authority,
96
 Conti….
Personalized Management: It is the most characteristics factor of all.
It implies that the owner actively participates in all aspects of the management
of the business, and in all major decision-making process.
Technology: Small business is generally labour intensive.
Only few are technology intensive.
Geographical area of operation: The area of operation of a small firm is often
local.
Generally, small business is a business that is privately owned and operated,
with a small number of employees and relatively low volume of sales

97
 Economic ,social & political contributions of small business enterprise

Equitable distribution of wealth and decentralization of

economic power
More Employment creation capacity
Removing Regional Imbalance
Ancillary Function ­- (supply parts and accessories to bigger
enterprises)
Export Promotion
98
 Characteristic of small business

1) Closely held
 Mostly managed by single person/one man show
 All activities are usually carried out by the owner
2) Personal Character
o The owner his/her self is generally the manager of small scale industries.
o Owners actively participates in all aspects of business decision making
such as: purchasing, production, Labour, Sale of product
99
 Conti..

3.Limited scale of operation

 It has lesser gestation period, It has limited share of a given market
 Its size in the industry is small
•4) Indigenous resources
 They can easily located anywhere subject to availability of raw materials, labour,
finance, etc..
 They use local resources
5) Labour intensive
 The capital investment is limited due to the use of simple technology 100
 Conti…
6) Local area of Operation
 Except marketing activities, all operation of MSEs industry are
local/domestic
7) Simple Organization
 MSE unit has few or no layers of management

101
 Some Specific causes of failure

1) Incompetence - The owners simply do not know how to run the enterprise
2) Unbalanced experience - This means owners do not have well-rounded experience in the
major activities of the business, such as finance, purchasing, selling, and production
3) Lack of managerial experience - The owners simply do not know how to manage people.
4) Lack of experience in the business line (field) - The owner has entered a business field
in which he/she has very little knowledge
5) Others such as neglect, fraud, and disaster, (mischance, Bad luck, tragedy, accident

102
 Challenges and Opportunities of Ethiopian MSEs

Challenges
Most MSEs face critical constraints, at both operation and start up level.
Some of the constraints include:
Lack of access to finance, Lack of access to premise, Lack of infrastructure,
Lack of training in entrepreneurial and management skills, Social and cultural facts,
Lack of information on business opportunities, Deficient entrepreneurial culture
Excessive corruption, Technology, Market problem
103
 Opportunity

Some favourable factors for entrepreneurial activities in Ethiopia

include:
Liberalization of policies, Exemption from paying import duties and
various taxes,
Availability of untouched natural resources, Availability of labour
forces,
Favourable physical environment 104
 Reasons for Interest in Small Business

Small business operators constitute a large political pressure group whose voice and
concerns cannot be ignored.
There are large numbers of people involved in small enterprise.
Employees and sometimes owners of small enterprises tend to be underprivileged.
Small enterprises offer many job opportunities.
Small enterprises reduce poverty and contribute to development.
Self-employment may appeal to many women and men, especially some persons
with disabilities or for those who have family responsibilities.
105
 Establishing an enterprise

1. Buying an existing business

• If someone has never owned a business, buying and operating
an existing business offers many advantages :

• such as established customers and business procedures,

trained employees, inventory and premises which are in place
and a business which already has a name in the market.

106
 Advantage and disadvantage of buying existed business
Advantages Disadvantages

Less risk legality Product or service may be in a declining market

Significant personal freedom Limited growth potential
Cash flow already being generated Debts or stock may be too high
Relationships have been established
Merchandise may be obsolete{outdated]
with suppliers and banks

An established service or product, with

Seller may have hidden reasons for selling: the
customers, a method of operation, staff
business may have been declining for years
and a name

The business may have a bad reputation in the

Location may be excellent 107
neighbor hood. Location may be poor
 Conti…

2. Starting a new business

 Most people who want to be entrepreneurs think that the best
approach is to start their own new business and not to buy one
that already exists
 This approach gives the potential owner a great deal of
satisfaction.
 It also means taking a relatively high risk compared to buying an
established business.
 Starting a new business means allocating a great deal of time
to planning and investigating the potential market for the 108
 Conti….
3.Becoming a franchisee
 Franchising is a system where a franchiser has developed and
implemented a business that he offers for replication to a
franchisee.
 The franchisee opens a business by using the business idea of
the franchiser against a fee.
 In return, the franchisee gets training, the marketing concept, the
brand name and the product or service’.
 . Franchising lowers the risk as the product is usually well
known in the market. 109
 Advantage and disadvantage of becoming franchisee

Advantages Disadvantages
Less entrepreneurial decision-making
Lower risk for the start-up
power
Start-up investment cost well
Franchising fees would decrease profits
known
Good market introduction of the No possibility of introducing a new product
product or service from other suppliers
Proven marketing concept Strong dependency on the franchiser

If the franchiser’s business loses the

Training assured by the franchiser
market, your business loses the market 110
 Basic Concepts of Marketing
 Marketing is the art of creating genuine customer value.
 It is the art of helping your customers become better off.
 The marketer’s mottos are quality, service, and value.”
 Broadly marketing is defined, as social and managerial
process by which individuals and organizations obtain what
they need and want through creating and exchanging value
with others
 In a narrower business context, marketing involves building
profitable, value laden exchange relationships with customers.
111
 Understanding the Market place and Customer Needs

Marketing is all about creating value for customers.

Marketers need to understand customer needs and wants
and the marketplace in which they operate.
 We examine five core customer and marketplace
concepts:
1) needs, wants, and demands; 2) market offerings
(products, services, and experiences); 3) value and
satisfaction; 4) exchanges and relationships; and 5) markets.
112
 1.Customer Needs, Wants, and Demands
Need: Human needs are states of felt deprivation.
• They include basic physical needs for food, clothing, warmth, and safety;
social needs for belonging and affection; and individual needs for
knowledge and self-expression.
• Marketers did not create these needs; they are a basic part of the human
makeup.
Wants: wants are the form human needs take as they are shaped by culture
and individual personality.
Example a person in Ethiopia needs food but wants Burger.
Wants are shaped by one’s society and are described in terms of objects
that will satisfy those needs. 113
 Conti…
Demand:
when backed by buying power, wants become
demands. Given their wants and resources, people
demand products and services with benefits that add up
to the most value and satisfaction.
Outstanding marketing companies go to great lengths to
learn about and understand their customers’ needs,
wants, and demands.
114
 Conti…
2. Market Offerings—Products, Services, and Experiences
 Consumers’ needs and wants are fulfilled through market offerings—
some combination of products, services, information, or experiences
offered to a market to satisfy a need or a want.
 Market offerings are not limited to physical products.
 They also include services—activities or benefits offered for sale that
are essentially intangible and do not result in the ownership of
anything.
Examples include banking, airline, hotel, retailing, and home repair
services 115
 3.Customer Value and Satisfaction

Always give the customer quality, value, selection, and

service”( Fred G. Meyer)
In terms of marketing, the product or offering will be
successful if it delivers value and satisfaction to the target
buyer.
The buyer chooses between different offerings on the basis of
which is perceived to deliver the most value
We define value as a ratio between what the customer gets and
what we gives 116
 Conti..

 Customer satisfaction depends on a product‘s perceived

performance in delivering value relative to a buyer‘s expectations.
 If the product‘s performance falls short of the customer‘s
expectations, the buyer is dissatisfied. If performance matches
expectations, the buyer is satisfied.
 If performance exceeds expectations, the buyer is delighted. Smart
companies aim to delight customers by promising only what they
can deliver, then delivering more than they promise.

117
 What should entrepreneurs know about potential customers?

Know the customers:

Know what different customer groups wants
Know where the customer buys
Know when the customer buys
 Know how the customer buys

118
 Conti…

4. Exchanges and Relationships

Exchange is the act of obtaining a desired object from someone by offering
something in return.
Marketing consists of actions taken to create, maintain, and grow desirable exchange
relationships with target audiences involving a product, service, idea, or other object.
exchange relationships with target audiences involving a product, service, idea, or
other object.
Two parties are engaged in exchange if they are negotiating-trying to arrive at
mutually agreeable terms.
When an agreement is reached, we say that a transaction takes place
Relationship marketing aims to build long-term mutually satisfying relations with
key parties
119
 Conti…

5. Markets
The term market ‘has traditionally been used to describe a place where buyers
and sellers gather to exchange goods and services (for example, a fruit and
vegetable market or a stock market).
A market is the set of actual and potential buyers of a product or service.
These buyers share a particular need or want that can be satisfied through
exchange relationship

120
 What is utility ?
 Utility is the level of satisfaction that is obtained by consuming a commodity or undertaking an activity.

Regardless of its measurement the are two approach’s, this are

1. The Cardinal utility Approach:

 In this approach utility is measurable like weight, height, temperature and unit of measurement of satisfaction
called utils

utility can be quantitatively measured

2. The ordinal utility approaches:

 Ordinal utility approach, utility cannot be measured absolutely but different consumption bundles are ranked
according to preference
121
 st nd
 Types of utility
• There are four types of utilities of the product are created by marketing.

1. Form Utility: The processing function adds form utility to the product by changing the raw material
into a finished form.

Example: through processing, oilseeds are converted into oil, sugarcane into sugar, cotton into cloth.

2. Place Utility: The transportation function adds place utility to products by shifting them to a place of
need from the place of plenty.

3. Time Utility: The storage function adds time utility to the products by making them available at the
time when they are needed.

4. . Possession Utility: The marketing function of buying and selling helps in the transfer of ownership
from one person to another. 122
 Sales and customer service
Customer Service: means providing a quality product or
service that satisfies the needs/wants of a customer and keeps
them coming back
Good customer service means much more – it means
continued success, increased profits, higher job satisfaction,
improved company or organization morale, better teamwork,
and market expansion of services/products.
Customer Service Qualities:
Customer Service = Accountability + Delivery 123
 Conti..

Good customer service means accountability,

responsibility and taking action to satisfy the customer.
If your customer is unsatisfied (for just or unjust
reasons), you will have to use some of the many
techniques of the customer service professional to win
their support and continued loyalty.

124
 Conti…

When coming into contact with a customer, communicating with him/her,

or analyzing problems, do not forget to use the following methods or
qualities of the customer service professional:
Listen: It is of primary importance when dealing with an unsatisfied or
complaining customer to listen attentively to his/her complaint, gripe,
frustration or grievance.
Be patient, attentive, and friendly
Express you are sorry: better to say ‘We are sorry for this
mistake/problem.” “We are terribly sorry for this inconvenience.” “How
can we work to solve this problem together?” “I can imagine how
frustrated you are.”
Do not argue and do not interrupt: 125
 Conti…
•Do not lose your self-control: If you stay relaxed, customers
will calm down.
•Point out facts: Listen carefully – and write everything down.
• Admit the problem: If you can suggest a solution do it.
• If not tell the customer what actions you will take and what
actions will follow. Never make the mistake of promising
something you are not able to do.
126
 Conti…

• Involve the customer in problem solving: Suggest the customer

alternative solutions, if they exist.
• Customers appreciate the opportunity to choose the ways of problem
solving.
• Follow-up: Make sure that the promised measures are taken.
• If you do not fulfill what was promised and ignore the customer’s
complaint, the problem will grow.
• Give the customer a “way back”: Sometimes customers are wrong.
You should let them leave with dignity, without feeling embarrassed.
127
 Conti….

• Do not question the customer’s correctness: From the very beginning

you should believe that the customer may be right.
• Always be open minded toward the customer’s opinion, make them feel
they deserve to be listened
Sales
• Selling is important enough to be considered as a function of marketing in
its own right, even though it is not included separately as one of the ‘Four
Ps’ of the marketing mix.
• Selling contributes to the overall effectiveness of the marketing effort;
however, it also has a more fundamental role to play, in that the act of
selling is the end result of all marketing activity.
128
 Marketing Vs. Sales
Marketing Selling
It focus on customer needs It focus on sellers need
Customer enjoys supreme importance Product enjoys supreme importance
Converting customer’s needs into product. Converting product into cash.
Profits through customer satisfaction Profits through sales volume.
Emphasis is given on product planning and
Emphasis is placed on sale of products
development to match products with the
already produced
market
Integrated approach to marketing is Fragmented approach to selling is
practiced. practiced.
The principle of caveat vendor (let the seller The principle of caveat emptor (let the
beware) is followed. buyer beware) is followed. 129
 General Skills Every Salesperson Should Have

Listening Skills
Problem Solving Skills
Interpersonal Skills
Organization Skills
Self-Motivation Skills
Persuasion Skills
Customer Service Skills
Integrity
130
 Marketing Mix
Marketers use numerous tools to elicit the desired responses
from their target markets.
These tools constitute a marketing mix
Marketing mix is the set of marketing tools that the firm
uses to pursue its marketing objectives in the target market
These tools are classified into four broad groups that are
called the four Ps of marketing: product, price, place, and
promotion. Marketing-Mix decisions must be made to
influence the trade channels as well as the final consumers
131
 Principles of marketing

Product: -The first P in the marketing principles stands for the

product. This involves the services associated with the
product, the product design, an its use
Price-is the amount of money that a customer pays for a
product or service.
Place-is the means through which a product reaches its end
consumer. It refers to the ease of access customers have to a
service or product.
Promotion: - Sales promotion, advertising, and social media are
communication tools for an organization. These tools are used to
pass the organization’s message to the correct audience.
132
 Financing an Enterprise
Whether one is starting a new business or buying an existing
business, there is almost always the problem of having enough capital
to operate the business.
 Starting a new business is an easy task.
The entrepreneur can have a great and clear idea with ability to
translate it into a successful business.
However, it is difficult to start and run the business without the
money required at initial stag.
The financial concerns need to be considered when planning to start
a business.
133
 Conti…
The initial money required to start the business is referred to
as start-up capital which consists of initial investment capital
and working capital.

Investment capital refers to the fund to be spent on the

acquisition of equipment, furniture, building and other
properties and working capital is the money needed to cover
the operation of the business.

134
 Conti…
Raising finance for start-up capital requires careful planning.
The entrepreneur needs to decide:
How much finance is required?
When and how long the finance is needed for?
What security (if any) can be provided?
Whether the entrepreneur is prepared to give up some control
(ownership) of the start-up in return for investment?
135
 Conti…

The finance needs of a start-up should take account of these key areas:
Set-up costs (the costs that are incurred before the business starts to
trade)
Starting investment in capacity (the fixed assets that the business
needs before it can begin to trade)
Working capital (the stocks needed by the business –e.g. r raw materials +
allowance for amounts that will be owed by customers once sales begin) 136
 Sources of Finance
Generally, the source of finance for a start-up is divided into sources. These are internal source (equity
financing) and external source (debt financing

137
 1. Internal sources (Equity financing)

• The main sources of equity financing includes personal

investment, funds obtained from family members or
parents, partners, venture capital, angles among others.
A. Personal Sources - A large number of start-ups are 'self-
funded' through savings or existing sources of personal
borrowings

138
 Conti…

B. Venture Capital - Venture capital is obtained by large companies

who are interested to have ownership in exchange for capital.
This kind of financing is the best option for entrepreneurs who do
not have adequate collateral to get bank loan.
The benefit of venture capital is not only financial; the relationship
an entrepreneur establishes with the company can get knowledge,
clear direction and new skill to grow the business

139
 Conti…
C. Angels / Investors –
If entrepreneur are seeking an outside investor for entrepreneur business,
entrepreneur will typically seek 'business angels' who look for interesting
projects to invest in.
D. Families, Friends and Relatives
At times, loans from friends or relatives may be the only available source of
new financing. Such loans can often be obtained quickly.
This type of financing is based more on personal relations than on financial
analysis
E. Partner Financing –
This is a type of financing in which a partner who has interest in the
business raises some capital to finance the operation of the business 140
 2. Debt Financing( external source )

Debt financing is a financing method involving interest

payment
Debt financing requires the entrepreneurs to pay back
the amount of funds borrowed with an interest within
predetermined period of time.
Debt financing is asset based financing in that it
requires collateral of fixed asset (such as car, house,
plant, machine, or land
141
 Conti….
 The most common source of funding comes from commercial
banks and micro finances.
 There are prerequisites to get loan from financial institutions.
The common requirement include the following.
 Decision on the amount and installment plan
 convincing business plan
 collateral
 appraisal by the bank 142
 Conti…
1. Bank loan - Commercial Banks are sources of short-term
funds most frequently used by the entrepreneurs when collateral
are available.
• The funds provided are in the form of debt financing and
requires some tangible collateral.
• The collateral can fixed asset such as land, equipment, building,
car and other assets.

143
 Conti….
2. Loan from Micro-Finances - Microfinance is the provision of financial
services to low-income clients for personal consumption or investment.
• The beneficiaries of this loan are those who lack access to banking and
related services or are not able provide collateral for bank loan or those
who do not want to go through hectic bureaucratic process to get loan from
banks
• Usually microfinance provide finance to unemployed or low-income
people or groups.
• The loan can be given against small collateral or written guarantee.
• These institutions are operating in every corner of the country.
• Dire Microfinance, Addis Microfinance are some of the examples
144
 Conti…
3. Trade credit –
It is a credit obtained from suppliers who sell
goods and service on credit.
The credit is usually paid within 30-90 days.
It is a short term financing scheme

145
 Conti…

4. Lease Financing –

Lease financing is one of the important sources of medium and
long term financing here the owner of an asset gives another
person with a right to use it against periodic payment.
The owner of the asset is named as lesser and the user as lessee.
The periodic payment a lessee makes is referred to as lease rental.
The ownership title belongs to the leaser until the asset is returned
to the leaser on expiration of a lease contract.
There can be some arrangement to transfer the ownership to the
lessee through purchase or renew the lease agreement. 146
 Conti…..
Other Sources - Other sources of funding include grants (both
Government and private sector) - there are thousands of grants
available depending on entrepreneur industry and location.
Entrepreneur can also have the following alternative sources of finance. .
Crowd financing
Business Incubators
Hire Purchase

147
 Basics of Business Plan

 When an entrepreneur intends to start a business or to expand the

existing business, it is wise to prepare and use a business plan.
 In the preparation of a business plan, one can put into practice the
personal entrepreneurial competencies.
 A business plan is a written document prepared by the individual
entrepreneur or partners that describes the goals and objectives of the
business along with steps necessary to achieve those goals.
 A Business Plan sets objectives, defines budgets, engages partners, and
anticipates problems before they occur.
 The preparation of a business plan requires considerable investment of
148
time, effort, and energy
 Uses of the Business Plan

Once completed, there are many potential uses of a business plan for
entrepreneurs.
First, it is a powerful sales document for raising money.
A business plan is a prerequisite for talking to a venture capitalist, and/or
other investors.
If entrepreneurs want to borrow money, it is an impressive document to
convince bankers to consider a request for a loan
As a rule of thumb, the more entrepreneurs want to borrow, or the more
money entrepreneurs want to raise capital from investor, the more
thorough the business plan must be.
149
 Conti…
A second major use of a business plan is that it serves as an operational plan to
direct entrepreneur’s operations.
 Like a blueprint for a house, entrepreneur’s plan will tell what entrepreneur to
do and when to do it.
 Many entrepreneurs use their business plan for the critical start-up and
expansion periods of operation so that they will stay both on target and on
budget
•Generally, the business plan benefits the internal and external users
The plan helps the enterprise to develop a “road map” to follow in executing its strategies
and plans.
The plan introduces potential investors and other stakeholders the business opportunity the
firm is pursuing and how it plans to pursue it. 150
 Contents of the business plan
 There is no a general all-purpose business plans because each
venture has its own unique set of factors and conditions.
 It should be remembered that a business plan is not the same
as a financial proposal or “loan package”.
 A loan package may be extracted from a business plan since
a package is mostly comprised of the financial portion of the
business plan.
 Not all business plans are intended for financing however,
and some may be used only as an operational plan
151
152
 lo4 Employability skills
. Employability is:

•“a set of achievements skills, understandings and personal attributes that makes
graduates more likely to gain employment and be successful in their chosen
occupations, which benefits themselves, the workforce, the community and the
economy.”

•Every prospective TVET graduate should develop awareness and skill on how to
stand out from the crowd in the job market.
• Employability, therefore, is not just about getting a job; it is about a broader set of153skills
 Conti….
The ILO defines employability as relating to “portable
competencies and qualifications that enhance an individual’s
capacity to make use of the education and training
opportunities available in order to secure and retain decent
work, to progress within the enterprise and between jobs,
and to cope with changing technology and labor market
conditions.
Employability skills are defined as skills required not only
to gain employment, but also to progress within an enterprise
so as to achieve one’s potential and contribute successfully
to enterprise strategic directions. 154
 Core Employ ability Skills
Core skills refer to skills knowledge and competencies that enhance
workers ability to secure and retain a job, progress at work and cope
with changes.
The core skills are:
1. Basic/foundation skills
2. Vocational/technical skills
3. Professional/personal
4. Core work skills 155
 Type of skill Definition
The literacy and numeracy skills necessary for getting work that
can pay enough to meet day-to-day needs.
Basic/foundation These skills are also a prerequisite for continuing in education and
skills training, and for acquiring other vocational, professional and core
work skills that enhance the prospect of getting a good job

Vocational or Specialized skills, knowledge or know-how needed to perform

technical skills specific duties or tasks
Professional or Individual attributes relevant to work, such as honesty, integrity,
personal skills work ethic
The abilities to learn and adapt; to read, write and compute
competently; to listen and communicate effectively; to think
creatively; to solve problems independently; to manage oneself at
Core work skills work; to interact with co-workers; to work in teams or groups; to
handle basic technology; and to lead effectively, as well as follow
supervision 156
 Personal Attributes of Job Seekers
Prospective graduates of TVET programs are
expected to build the skills and confidence
that create impression in the job market.
Along with basic employability skills, the
following personal, attributes are important to
create attractive impression in the minds of
employers
157
 Conti…
 Loyalty
 Commonsense
 Commitment
 ‘honesty and integrity
 Positive self esteem
 Reliability  Sense of humor
 Personal presentation  Balanced attitude towards work
• Enthusiasm
 Motivation and home life
 adaptability  Ability to deal with pressure
158
 Why Employability Skills are Important

•These set of "job-readiness" skills are, in essence, behaviors that are necessary
for every job and are essential attitudes that allow you to grow in your career and
also efficiently let you:
Connect with co-workers
Solve problems
Be a part of and understand your role within the team
Make responsible choices for your job and your career
Be independent and take charge of your career 159
 YO U
AN K
TH

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