The Scope And Definition Of Entrepreneurship
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Entrepreneurship is itself a process through which the entrepreneur allocate the resources available to the business in a way or in other words in a systematic manner that the entrepreneur can meet the requisites of the business and achieve the objectives of the business as well as of his own. Now a days businesses are being done on large scale or more businesses are being run in one organization therefore, the executive management or the entrepreneurs has to adopt the ways and system through which they can not even secure their time but to save their resources from drain. Entrepreneurship could also be defined as:
Entrepreneurship is the process of innovation that reallocates resources to new opportunities, often creating new opportunities through unusual combination of resources and skills of risk taking.
The entrepreneurs some time has to face the problems because they prepare their plans personally and create innovations and believe that they are doing the best and when the problem in the market has to be faced by them, then they suffer losses and face the rejection of their self developed ideas, innovations, inventions or creations on the basis of incomplete information and evaluation of the factors because they personally believe in strategies and plans. The success is behind the criticism because when the entrepreneur of such kind prepare plans for business before going to other persons, he himself cities his ideas, innovations, creations and plans which he develop and get the answer to check his satisfaction. The entrepreneurs of successful type take and evaluate constructive and realistic criticism of their business on the basis of past and previous plan/strategies being adopted by them and others and before adoptions to any of them constructively consider the positive and negative possibility of such adoptions.
How to choose best business location for a new business?
One of the most important things before starting business is to choose the best place the business is to be started because in the first step or question before starting a new business is 'Where to start the business' because the finance is required when the plan of the business got final. Prior starting a new business, the proprietor or entrepreneur has to satisfy himself in lieu of the following questions:
What would be the name of the business?
What business would be started?
Where the business would be started?
How much finance would be required?
What are the skills and competitive advantages available with him?
What is the charm of the business?
How the business will be run?
How much funds or capital is available with him?
Many other questions of his own have to be satisfied by him.
Following are the tips and factors which needs to be satisfied by the person going to start a new business and is in the process of choosing the best location:
1. Nature of the Business
Before choosing a location for a new business the owner has to understand the nature of the business and then he should choose the area that whether the community of the vicinity is of need of the products which are the product line of the business and whether any other such business is started in such locality and if so then evaluate the progress and conditions of such business.
2. Trend of Customers
Where the trend of community of the locality? This is the utmost important aspect before choosing a best business location that the proposed locality's peoples trend. Whether the people of such locality go somewhere other to purchase such commodities or not. If the answer is yes then check how many other competitors are running their business in the locality.
3. Value of the Locality
The most huge expense in the business are two one is the value of the building and the other is the value of the machinery but in business other than the manufacturing concerns the most huge and first one expense is the value of the locality or building being chosen for the business. Such place should be on good location and the same should be attractable for the customers that customers attention should be upon the business place when the enter into the market. In other words the business place should be conveniently accessible.
4. Assessment of Costs
While choosing the business location the owner is to consider whether the cost of the product will be in range because if the location is far away from the market then much expenses will incurred upon the transportation of the product which directly increased the cost of the owner and indirectly increased the prices of the products which is not a good thing for a new business because a new business is when started it has to compete the other competitors in the vicinity, if the cost of the product will go rise then the competition is more difficult and tantamount to impossible.
5. Transportation Accessibility
The most important factor for a new business and business location is whether the customers for which the business is tending to start can easily access to it and whether the requisite transportation means are available or not because if the business is started at somewhere where the customer can not easily access then he purpose of the business finished.
6. Assessment of Value of Rental if the business building is on rental basis
Value of rental is also to be determining if the business location and building is propose to be acquired on rental basis because high monthly rental will increase the costs and expenditures of the business which also directly and indirectly affect the business costs. It is a general rule if you choose good, attractive and furnished location then you has to pay a lot as its consideration. Therefore, before choosing any location it should be considered by the entrepreneur that the furnished location is the requirement or not.
7. Assessment Regarding Competition
The interest of the business is the completion of the business which directly hit the mentality of the competitors because if the competitors are running concern in more furnished and sophisticated location then the other one will definitely effort to defeat the competitors. Competition in the business create interest between the competitors that how to defeat the other by avoiding any sort of loss as of pecuniary as well as of any other kind. It is also needed to be consider that the location of the competitor is how far or near because it also effect the psychology of the customer because if the competitor is far away then the customer will hesitate to go or if he is near of the shop then before purchasing he will be urged to visit him. Therefore, assessment in all respect of the competitor is necessary.
Characteristics of Successful Entrepreneurs
As we know the most important person for every business is the entrepreneur who develops the idea of the business, start it by using his resources of all kinds and run the business activities to achieve his personal objectives by achieving the organization objectives. Entrepreneurship is the such process which helps the entrepreneur in all respect of the business through which he can assess his plans possibilities and predict on the basis of collected information and plan for future if he possess the following characteristics;
1. Creative Mind
Creativity is the major characteristic of entrepreneur. He should have the ability to create more value for their product and services. The business opportunity, creative imagination is regarded a unique asset in the business world.
2. Confidence to Take Initiatives
The business world of today is moving at a very fast speed and require timely and more effective decisions, planning and controlling to overcome the sudden challenges therefore, an entrepreneur should have the ability to take initiatives by producing new things, new methods of marketing the product and service as per expectation of the target customer.
3. Ethical Standard
The ethical standard of the business is that there should not be cheating, fraud and other commercial bribery in business. A good entrepreneur has the social, moral, and religious responsibility to follow the ethical standard of the business to earn profit and stay long in the market.
4. Conceptual Skill
Effective entrepreneur are characterized by their conceptual skills. Conceptual skills are specific abilities to analyze a situation, decision making, determine the root of any problem or opportunities and devise an appropriate plan.
5. Versatile Knowledge
An entrepreneur should have a versatile knowledge of his business as well as adequate knowledge of trade, finance, marketing, legal management issues, technical management concern, and other business areas.
6. Knowledge of Market
An entrepreneur should have sufficient knowledge of market as well as finding new market for expand their business. He should know the geographic, demographic, psychographics and behavioral changes in the market. Entrepreneur should be honest in dealing with others. He should provide qualitative product and services to their customer. He doesn't make any anti-social practices such as black marketing, smuggling, overcharging to earn profit.
7. Energetic and Diligent
Entrepreneur should be energetic and diligent person. He should complete their work in time. He must believe in this phrase "don't put of till tomorrow what you can do today." He is hardworking person and complete their all task as soon as possible.
8. Responsive To Criticism and Suggestions
An entrepreneur should response to criticism intelligently. He should concentrate on customer criticism or complaints. He accepts criticism for their product and services and responds positively to overcome these complaints. An entrepreneur should have the aptitude for research and adaptability to apply scientific findings to complete and stay in business. He should be able to adopt the new technologies for producing the product or services and new method of marketing the product and services. Entrepreneur pays their attention toward suggestion from their co-workers, customer, suppliers, or venture distributes. If he collects any best idea from these resources, he should be carefully tried to implement these suggestion.
9. Eligible to Evaluate Risks
Although every business has some internal and external risk but entrepreneur carefully evaluate these risks and implement their plan. Although there is no guaranty for success but the chances of success are more due to calculated venture planning.
10. Self-Confident and Optimistic:
Effective entrepreneur are characterized by self-confident and optimism quality. He is confident about their plans for their venture. Sometime he may due to some critical situation in their venture but he faces these situations confidently. The major characteristics of the entrepreneur are the commitment toward organization goals. He is willing to do anything and respond positively to venture challenges. Demanding challenge motivate entrepreneurs to achieve results and developing their own managerial skills and capabilities. An entrepreneur maintains a professional relation with their staff. He believes that business activity is carried on by the workers. He should be aware of the temperament, aptitude and belief of the staff working with him. He should also know the limitation and feelings of the individual. He should have the ability to solve any misunderstanding or conflict between the staff.
When Further Capital is required to Entrepreneurs?
Business are primarily done for the sake to earn profit and secondly to satisfy the demand other customer, both the objective are reciprocal of each other because of the business does not fulfill the demands of the customer then it could never be able to earn profits and if it could be able to fulfill the demands of the customers then sometime positively the entrepreneur has to raise the capital in the business to med the market ends by fulfilling the demands and supplied of the market to balance the business activities but it is more difficult for the entrepreneur to raise capital at the eleventh hour, therefore, he has to evaluate the business position in all the respect and as well as the market conditions.
At Increasing the Volume of Sale and Production
When the sales and the production demands rise from the limits and volume of capital already invested in the business then the business require more capital to compete the market and production demands. This is a positive trend for the raising of business capital because in such trends the profits of the business increase.
By Launching a New Brand
According to Boston Consulting Group when an organization introduced a new product in the market at such a situation it has to be introduced in the market and the same should be familiar to the interested groups of the market, such product at this step is the question mark in the market because at such situation it has to gain the acceptance of the customers. This is the losing stage of new brand until it attain the acceptance of the market stakeholders and therefore, in such circumstances the organization or concern need capital for the proper launching, marketing and publicity of the brand that at an early stage as much as it could possibly be introduced to more and more stakeholders.
Commencing New Project
It is a good step for all the businesses when the business achieve its settled goals and objective and go for a new one but in the same time this is the situation when the same business is going to take a risk of new project whether such project is in connection to the last project or is new project according to the market situation and demands. At such a stage, the organization is of the need to plan and arrange funds to meet the requirements of the project, so that the project could be started in time and the objectives, so predicted could be achieved.
Sudden loss is the situation which some time complete ruin the business activities and sometimes require more capital to survive in the market. Such losses often happen in uncertainties or natural uncertainties such as earth quite, storms, economical crisis, death of the partner and etc.
In all the above referred situation a business require capital, sometime such demand is for prosperity and progress of the concern but on the other hand sometimes it is for to survive in the market, therefore, every business strategy when it is prepare it is prepared the prosperous happening but by neglecting uncertainties, that's why such loss are called sudden losses.
How capital could be raised for new ventures?
The main element which is the basic need of every business is the financial resources available with the entrepreneurs for the commencement of the business, with the passage of time and by the growing of the concern these requirements changed and increased consistently to the business situations. At the eleventh hours it is more difficult for the entrepreneur to obtain those resources therefore, the entrepreneur has to increase the capital if he posses the funds otherwise he has to raise funds as loans from friends or alternately has to secure loans and finances from the banks.
Managing of funds from Asset Management
When the business required capital then first of all the management of the business observe and evaluate the position of the business that how they can generate funds and the first step which the management take for the managing of the funds or raising the capital is asset management. It is a crucial process for the management of funds because it creates more liabilities and requires more calculation of the facts and availabilities with the organization.
Equity financing means the capital which the owner of the business invests in the business at starting stage. Equity is capital invested in a business by its owner and it is "at risk" on permanent basis. Equity finance does not require collateral and offers the investor some form of ownership position in the venture. All ventures have some equity, as all ventures are owned by some person or institution. Although the owner sometimes not be directly involved that is provided by the owner. The liabilities in respect of equity financing vary in lieu of the amount of equity as well as in regard of the size and nature of the concern. Generally capital or the equity may be fully invested by the entrepreneur such as educational institution or food places. Ventures of multiple levers require more than one entrepreneur which also include and consist on private stakeholders or venture equity introduced by the entrepreneurs. Equity is generally on debt financing basis which in consistency make the capital base of the venture.
Debt financing is also called asset-based financing. Dept financing is financing method involving an international bearing instrument, usually a loan Dept financing require the entrepreneur to pay back the amount of funds borrowed as well fee expressed in terms of the interest rate.
Short term debt (less than one year), the money is usually used to provide working capital to final inventory, account receivable, or the operation of the business. The funds are typically repaid from resulting sales and profits during the year.
Long term debt (lasting more than one year) is frequently used to purchase some asset such as machinery, land, building or vehicle. The entrepreneur needs to be careful that the debt is not so large that regular interest payment becoming difficult.
Small enterprises have fewer choices than large firms for obtaining debt financing. They are excluded from financial resources such as money raised through the sale of bonds, debenture and commercial paper.
There are two important ways to obtain debt financing,
Most commercial loan is made to small business. Commercial banks provide unsecured and secured loans. An unsecured loan is personal or signature loan that grant on the basis of business strength and reputation.
Unsecured loan are usually small loan but they can be quite useful for meeting emergency cash flow requirement such as paying wages or bills. Unsecured signature loan usually must be paid back with in year and they will have high interest charges.
Entrepreneur also establish personal "lines of credit" through their banks and these are treated in the same way as credit card account that must be paid down or cleared each month.
Secured loan are those with security pledge to the bank as assurance that the loan will be paid. There are to many types of security will consider, such as guarantor, another credit worthy person or company that agree to pay the loan in the vent the borrower default but the most security is in the form of tangible assets pledged as collateral.
Plan for Obtaining Loan from Commercial Bank for a Restaurant
Banks finance in the business because the basis purpose of banks is to aid the business community secondarily but to earn huge profits firstly as the same is the aim and objective of very business. The proposed business is a small restaurant in the well know city and area of London and the restaurant management if of the need to contract a new floor therefore, has need of funds to construct and furnish the restaurant building.
As the business of restaurant is not fallen in the negative category and is huge profit earning business and the building of the restaurant is in the ownership of the restaurant owner and all the goods and furniture available in the restaurant is newly purchased and of good quality.
Application and Proposal to Invite the Bank for Financing
An application for financing from the bank has been submitted in which the bankers are fully informed with the demands and requirements of the business/restaurant's need. As the restaurant has attain the acceptance of the customers and the customers like to eat the foods of cooking's of the restaurant therefore the restaurant has need of more capacity to arrange the arrangements for the more customers to be entertain at the same time. All the approved financial of the restaurant all attached with the application which clearly shows the progress and position of the restaurant. All the records are properly maintained. For what purpose the restaurant is requiring such financing and what are the sources available with the restaurant if it will fail to repay, what will be the position of the restaurant if the bank med and finance the requirement of the restaurant, how the restaurant will repay the loan amount an d in what period. The plan of the restaurant is one which completely will satisfy the bank official management because the earning of the restaurant will increase approximately double if the bank will invest in the restaurant because such construction will double the sitting, living and entertaining capacity of the restaurant.
Amount of Proposed Financing Requirement
As the construction of a new floor is required therefore, the bank has to finance 75% of the total requirement at settled profit rate which will be prevail in the time of financing. Bank is satisfied with the reputation of the restaurant and is ready to invest his financing at a low rate.
Tenure for Repayment
It is proposed to bank officials that an install mint of the repayment of loan should be not more that average sale of 10 days so that the restaurant wants to avail the long term finance for the period of 3 year to repay. It is also pertinent to mention here that it should also be mentioned in the agreement that if the restaurant management wants to repay the loan amount by paying extra amounts as per their savings then subsequently the advantages of early payment should be delivered to the restaurant in shape of discounts and concessions.
Payment of Agreed Amount
Bank will pay the payment in installments as per the projected plan and actual position of the restaurant construction work. Bank will firstly make the payment of 25% on work starting of construction, 2nd installment for payment of 25 % when prior to finishing of funds the restaurant management will contact to the bank officials and the last remaining payment of loan when the main work of furnishing of restaurant building will start.
Collectable of Loan
Restaurant management will surrender the document of the restaurant to the bank officials till the whole payment of loan is not repaid as collectable. If the restaurant management will fail to repay the bank loan amount then the bank will be at liberty to initiate legal proceedings against the restaurant management and shall also be at liberty to auction the restaurant building to recover its debt. All the charges that will incur upon such process shall be deducted and paid by the restaurant management or from the sale proceed or auction money of restaurant building.
It is concluded from the above submissions that the entrepreneurs are the person who are responsible of profits and losses of the business. These are the persons who develop ideas of the business, invest their saving in the business, fulfill the demands of the customers, helps the government in developing the economic stability or satisfying of economic crisis, paid taxes to the government and finally perform all sort of activities in lieu of their business primarily for earning profits and secondly to satisfy the demand so the customers.
Best places, building and locations for starting a new business could only be chosen if the entrepreneur or promoter of such business first of all understand the nature of the business and then locate the trend of the business is in which location, whether all the transportation means are easily available to provide access to the customers, evaluate the competition in such place, assess the trend of the community is whether in such product which is the product line of the concern and the relevant important assessment must be assessed and evaluated.
A business could be facilitate with bank financing in different way as has been mentioned in detail hereinabove by applying in local commercial bank with the propose plan of finance, what amount is required, what is the business present situation, what will be the position of the concern if the bank invest in the proposed project, how the concern will repay the loan? If an organization succeeds to satisfy the bank officials with these questions then the organization can get the finance facility from any bank.
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