MODULE II.

ENTREPRENEUR’S RESOURCES TO
TRANSFORM IDEAS AND PURSUIT OF KNOWLEDGE

An entrepreneur is an individual who accepts some sort of risk usually financially in the pursuit of new
ventures. The word can apply to any person organizing a new project or opportunity, though it is most often use

in a business context. A person in this role is often characterized as innovative, independent, optimistic,
creative and hardworking. In some circles, entrepreneurs are described as “creative destructionists” of products
and services. Although they may reinvigorate an existing industry by using new methods, whether production,
organization, or structure, they also work to tear down the existing companies and ways of doing business by
developing entirely new products or services that make older variations obsolete or irrelevant. An example of
this is the creation of the automobile, which slowly made most parts of the horse-drawn carriage industry
obsolete.

To the traditionally employed, the thought of entrepreneurship often conjures rather optimistic images of
what it’s like to work for you. The reality is that launching a business is hard work. Although the potential
rewards are substantial – the joy of seeing a dream come to life, the promise of building your own success
rather than an employer’s, potentially high earnings --- a number of elements must be in place as you embark on
the journey of becoming an entrepreneur. Many are fed up with the regular 9-5 grind and the thought of being
your own boss is definitely a tempting one. But being an entrepreneur comes without the security of a job or
any of the perks that a salaried employee takes for granted. It can be extremely scary since you only have
limited resources at your disposal; you do not know your idea can churn money; you are not sure if you can
convince potential employees to work on a low salary, the good old winning-over the investor game. Of course,
every now and then, you might have to dig into your savings. At the heart of any successful business is a great
idea.

The first element of entrepreneurship is having a great idea. The common approaches to developing
business ideas are to do what you know, emulate and improve on what someone else is doing successfully or
solve an unmet need in the marketplace. Understanding your market is a vital element to becoming an
entrepreneur because it’s the basis on which you’ll determine your ideas feasibility. You need to know who
your target customers are and how and why they buy. You also need to know who your competition is in order
to assess whether there’s room in the market for your business idea.
MODULE OUTLINE

1. Business Resources and Ideas for an Entrepreneur

2. Entrepreneurship Ideas in Action
3. Pursuit of Knowledge

LEARNING OBJECTIVES

1. Outline the business resources and ideas for an entrepreneur

2. Assess entrepreneurship ideas in action
3. Identify the pursuit of knowledge for entrepreneurs

2.1 BUSINESS RESOURCES AND IDEAS FOR AN ENTREPENEUR (LO1)

A successful entrepreneur has driven, passion, energy and stamina. But an entrepreneur needs one more
ingredient to go along with these key traits – a simple business idea that works. Select a business that excites
you, has low start-up costs, and a simple setup. You can always expand on the business later once you have a
client base and generate revenue regularly.

For example, you can put your talent and skill to work in a freelance business. Whether your skills lie in
the area of photography, writing, Web design, or some other field providing your expertise to clients on a
freelance basis offers freedom and flexibility while generating income. You will need to verify that demand
exists for your particular offering. Afterward, develop a portfolio of work to show potential clients. Utilize
various channels to announce the opening of your business, such as social media platforms, newspaper
announcements and website for your business. You should also network with others in the field by joining
professional organizations and attending community events.

Essential Entrepreneur Resources

When you’re starting a business, where do you go to get the help, advice and tools you need? There are plenty
of resources out there so many, in fact, that you might have trouble sorting through them all. We cut through
the clutter, selecting multiple essential resources for startup small-business owners.

 Department of Trade and Industry  Franchise Associations

 Securities and Exchange Commission  Bureau of Internal Revenue
 Facebook and other social media platforms  Business expos and conferences

Factors that Influence Entrepreneurship

Entrepreneurial efforts are like biological experiments in nature. Many variations are tried, but only a small
percentage of those go on to thrive. You, however, have an advantage over nature. As an entrepreneur, you can
set up your experiment with forethought. Entrepreneurs work under constraints of their environment and the
political economy. Five factors will be key to entrepreneurial success; creativity, tolerance for risk,
responsiveness to opportunities, leadership and the ability to take advantage of the rights afforded to you.

Creativity. Do not be dissuaded by the challenge to be creative. You need not be the original wheel
creator to improve upon a stone cylinder. By standing on the shoulders of giants, you can take existing
ideas and make small improvement upon them. Your best ideas may come to you as you are falling
asleep or while you are taking a shower. Recognize when you have a fresh idea and do not let them get
away from you. Write them down! Not every idea has to be a home run. By accumulating your ideas,
you will be able to distill the great ones from the rest and be ready to run with the best.

Risk tolerance. Rewards rarely come without risk. Your ability to take advantage of an opportunity
will depend, in part, on your tolerance for risk. As the founder of a start-up, investors will expect you to
have a vested interest in your business. If you will not bet on your idea, why should anybody else? If
you cannot afford the risk, financially and emotionally, then you might make decisions that are too tepid
to be successful. To do well an entrepreneur needs the strong sense of self-efficacy to believe the risk
will be surmountable.

Responsiveness. Opportunity can leave quickly. With the internet, the spread of information and ideas
has led to, deeper, faster competition to be the first mover. The ability to respond to the market and new
business opportunities can be the difference between a successful entrepreneur and a failed business
model to be responsive, an entrepreneur must have the flexibility of mind and resources necessary to see
and take advantage of new and upcoming possibilities. Learning from your mistakes and those of others
to implement change can keep businesses afloat. Calcifying rigidity, on the other hand, can turn a start-
up into dust.

Leadership. It is up to the entrepreneur to marshal assets. Leaders are challenged with taking
responsibilities and turning them into inspiring vision for others. You will inevitably have to sell either
your idea or you product to begin your entrepreneurship journey. It will be up to the entrepreneur to
take the idea and turn it into actions and products to capitalize on the opportunity. Leadership can come
in many forms, but it is nevertheless essential to entrepreneurship. You must take the lead for your ideas
to come to fruition.

Rights. Intellectual property laws can provide you with exclusive business rights to your ideas. Ifyou do
not protect your ideas, they may be copied cheaply. Once an idea is in the public domain it may no
longer be possible to use that idea as a competitive advantage. Society values ideas being shared. In
exchange for sharing ideas, governments provide limited monopolies that will allow you to capitalize on
them for a period, making up in part for the costs you have incurred in research and development.
Intellectual property professionals can aid you in seeking such rights.
Entrepreneurs Control Resources
Many entrepreneurs are short on cash. If lack of liquidity is one of your problems, there are ways
to leverage your resources to promote your business and sell more product. If you take a creative
approach to using the resources at your disposal, you may be surprised how much you can
accomplish.

The most basic way to leverage your resources is through your marketing. While
social media captures a lot of attention, do not neglect other resources. Determine what your
customers and prospects want and focus your marketing toward that end. Once you determine
what matters most to your customers, you can position yourself as the expert

Money may be tight if you work with small companies or cash-strapped customers. If
a customer or advertiser offers to pay you with his product or service, give it careful
consideration. What the other party is offering -- movie or event tickets, products that he
sells or free airtime, for example -- may be more valuable than what he is buying from you.
Even if the product is something that you cannot use, you may be able to leverage it to your
advantage. Perhaps you can raffle it off or use it for a give-away on a local radio station.
Maybe you can give it as a gift for a good customer or advertiser. Just be careful to keep
payment-in-kind under control-- you do need paying customers, too.

Social media – such as Facebook, Twitter, Pinterest and Google+ offers unparalleled
ways to reach your customers and prospects. If you have a blog, be sure to include links to
your other social media contacts. While you will want to post frequent updates to your various
accounts, also track how effective your posts are and how you can leverage your Internet
activities. You can learn who is listening and talking about your posts if you sign up with
social media listening sites like Trakur and Google Wildfire. These sites can give you
feedback which will help you promote your business more effectively.

Turn an Idea into a Startup: Begin with a Business Concept Statement

For entrepreneurs, it is often easier to come up with a variety of ideas for new businesses and
more difficult to actually implement those concepts. A business concept is a bridge between an
idea and a business plan. It focuses one’s thinking so that the entrepreneur can identify the
specifics of his/her proposed venture. Converting an idea into a business concept requires thinking
about how the product or service will be sold and who will buy it, the benefits of the product or
service, how it is differentiated from similar ones, and methods of delivery. Preparing a written
concept statement helps unearth critical components of a venture and begins research into key
factors that may be more thoroughly addressed in a business plan. As the business idea takes
form as a concept statement, the entrepreneur can evaluate the business more effectively for
potential challenges and pitfalls. A clear business concept also enables the founder to succinctly
describe the precise nature of the business to suppliers, customers, lenders, and resource team
members; an important skill for entrepreneurial success.

For example, it is not sufficient to say “I want to start a management consulting

company.” This tells the listener little. Instead, one might say, “I plan to start a management
 consulting company that provides strategic planning services to mid-sized businesses in the
Southeast. Each consulting team, tailored to meet the unique needs of the client, will provide
assessment and planning services to help clients improve efficiency and institute processes for
innovation and change, resulting in cost reductions and sales increases.”

This version tells the listener much more than the first statement and helps the potential
client visualize the business and its offerings.

 When describing his/her business idea, the entrepreneur should answer the following
questions:
 What is my product/service?
 What does my product/service do?
 How is it different or better than other products/services?
 Who will buy the product/service?
 Why will they buy the product/service?
 How will the product/service be promoted and sold/offered?
 Who are my competitors?

Often the business concept statement changes during feasibility testing and business
planning as the founder learns more about the market and potential profitability of the
business. Eventually, however, the entrepreneur should be able to accurately, clearly and
succinctly describe the essence of the business to others in two or three sentences. In some
cases, a single sentence may do. Once the business concept statement is clearly defined, the
more detailed work of business planning and implementation may begin.

Requirement of Entrepreneur Network

An entrepreneur network describes a group of entrepreneurs, who have come together to share
resources and generally support one another. The internet has provided a new way for
entrepreneurs to connect to one another through blogs and forums, where they can ask other
experienced business people advice and ideas for solving problems. These networks are also a
great source of client referrals, and can help the struggling entrepreneur struggling outsource
some of the services that are holding him or her back.

The internet has revolutionized the entrepreneur network, and networking in general,
for that matter. Networking has been around much longer than the internet, but it used to be
 much more difficult to connect to a new group of people. Now it is as simple as an internet
search, and dozens of entrepreneur forums, blogs, and podcasts are a mouse click away.

One great aspect of an entrepreneur network is that they usually consist of many
different experience levels. New entrepreneurs are not the only people who can benefit
from the wealth of knowledge provided by a network of entrepreneurs. Due to the large
number of people in any given network, one is bound to find someone who has come
across a similar problem that he or she is currently facing. The benefits of networking
come down to the age old saying that two heads are better than one, but with the help of
modern technology, the knowledge and experience of hundreds of heads are at one’s
disposal.

Another highly valuable aspect of the entrepreneur network is the potential for client
referrals. Most entrepreneurs are constantly looking for new clients to grow their business,
and word of mouth has stood the test of time as the most valuable and reliable client
referral method. As a part of a network, an entrepreneur is adding dozens, if not more,
possibilities for referral. An entrepreneur could actually meet several new clients within
the network when it is not business type specific.

Just as an entrepreneur network can be used to find new clients, it can also be used
to find new services. First time entrepreneurs often try to handle every aspect of their
business, which can sometimes significantly slow down its growth. Everyone has unique
strengths and weaknesses, and sometimes the smart thing an entrepreneur can do is admit
when he or she needs help. Entrepreneur networks are a great place to discuss these
setbacks and find people who can help.

Develop Economic Idea for Business

Entrepreneurs often begin a career by launching a small business. In major and developed
economies, small business is a significant driver of economic activity. Subsequently,
entrepreneurship and economic development go hand-in-hand in many ways. Economic
development is somewhat reliant on entrepreneurs because any lack of development for
small business has the potential to slow an economy. Meanwhile, new business owners
depend on a growing and stable economy to provide employment and generate sales.

Local and national governments devote large sums of money to the expansion of
small businesses in a region. Government agencies extend loans and sometimes grants to
qualifying entrepreneurs and possibly specific minority groups, including women. This is
because of the heightened awareness that government officials share surrounding the fact
that entrepreneurship and economic development are linked.

A government may be needed to set the stage for new business by first creating a
community that is favorable to commerce. This could be through infrastructure
development in addition to any financial incentives or motivations that might be provided.
In doing this, policymakers are making it possible for entrepreneurship and economic
development to occur. Once the conditions are ripe, new business owners can begin hiring
employees, conducting commerce in an area, and supporting the development of a local or
national economy.
 Private corporations also become involved with supporting entrepreneurship and
economic development. Large investment banks maintain lending divisions that are
meant to suit the financing needs of entrepreneurs. In addition to financing, lending
institutions may also provide some level of training or support to new business owners to
increase the chances for success. The role of venture capitalists is to provide equity to
new businesses in exchange for a share of the eventual profits. As a result of private
funding, entrepreneurs can develop new technologies and contribute to productivity,
which can benefit local, national, or global economies.

Developed countries are not the only nations in which entrepreneurship and
economic development are needed. In third- world countries where poverty has taken a hold
on communities, the extension of small amounts of funding can help entrepreneurs to begin
new businesses. The ramifications of this process, an activity known as micro lending, are
significant. Not only does facilitating new business in poor parts of the world help the
entrepreneur to explore new opportunities, but it also gives poverty-stricken citizens greater
access to goods and services. Subsequently, an entrepreneurship inspires economic
development and creates better standards of living throughout the region.

2.2 ENTREPRENEURSHIP IDEAS IN ACTION (LO2)

Aspiring entrepreneurs are faced with the challenge of coming up with a unique vision that sets
their company apart from the rest. Although hatching a creative idea for a potential business is
no easy feat, transforming that same idea into a product i s even more difficult. To find out how
entrepreneurs can develop and refine their ideas for possible future businesses, we asked a few
experts what they learned from launching a startup.

Pursue the Passions and Interests. Discover what you’re truly passionate about. It will
sustain you during challenging periods that will inevitably test your commitment. Whether
you are driven by financial gain or creative growth, you have to find satisfaction in the
work you do as an entrepreneur

Build Positive Relationships and Reach Out When Necessary. Develop strong, positive
relationships with your colleagues and clients. Your business is built on your reputation. And
don’t be afraid to seek advice from other professionals in your field.

Think About What Needs Improvement in Your Industry. When anyone first got into the
startup world, they didn’t have a developer, and they didn’t know where to go for help.
They didn’t understand how difficult it was at the time, but they now know what obstacles
are met when starting a new company.

Keep an Open Mind. The most important thing is to be flexible and willing to learn because if
you have a closed mind, you will miss a lot of opportunities. People will be willing to help
if you’re open. Be able to receive feedback and use it for future improvement.

Have Capacity for Growth. In the early stages of a new venture, and particularly for first-time
entrepreneurs, you need to test your capacity for growth. Set the bar high and keep raising it—
it’s how you will learn. Test assumptions, and know when to stop and shift gears. You
should always be thinking strategically, as far as three to five years out.
 Draw Inspiration from Brands and Companies You Respect. Build a community of loyal
followers. Differentiate yourself, your brand, and your company. Your personal brand and
integrity should be as strong as your company’s brand. Pull from elements of brands and
companies that you respect.

Avoid Perpetual Planning. You can theorize a cake for as long as you want, but you’ll never
know how it tastes until you bake one. The same thing goes for starting a business. You can
refine an idea a million times before you actually work on it, but you reach a point where
you start doing more harm than good. You get paralyzed and stuck in a circle of thinking
instead of doing.

Don’t Let the Fear of Failure Hold You Back. You won’t know what mistakes you’ll make
until you make them. Ask yourself if your desire to do something is greater than your fear of
attempting it. Then go make something wonderful.

Although taking the initial steps toward launching a new company might seem difficult,
keeping these strategies in mind will help smooth the transition from developing a creative
vision to building future businesses.

Becoming an Entrepreneur

The benefits of being an entrepreneur are being one’s own boss and having the freedom and
flexibility to directly handle problems and be creative. While the realities of being an entrepreneur
are often glorified, there is some truth to the stereotype. Reporting to no one but clients, having the
freedom to adopt pet projects, and being able to drop the task at hand for something more
important are benefits people around the world strive for. These benefits are usually acquired by
becoming an entrepreneur or at least thinking outside the box like one.

Being one’s own boss is a major benefit of being an entrepreneur. In fact, many say they
cannot imagine working the standard nine-to- five job. Becoming self-employed means having
a lot of freedom and flexibility, but it is also a practice in self-discipline. It is common to hear
business owner’s state that they put in a full-time job’s worth of hours for months or even
 years before their businesses began to thrive, usually for little income. People who lack the
drive to work hard often fail at starting or maintaining the business.

To many people, the primary benefit of being an entrepreneur is freedom and

creativity. Sometimes large corporation are stifling with inefficient policies and restrictions
that hinder employees on a daily basis. Entrepreneurs are often free to do whatever might
benefit their business, provided it does not break local laws. For example, an entrepreneur does
not have to complain to a human resources department about a client who is too friendly;
he or she can simply no longer work with that person. The freedom to immediately and
directly act on a problem or try out a new pet project is what some entrepreneur’s value
most.

The flexibility of being self-employed is also prized, especially among those who
used to work for inflexible employers. Entrepreneurship generally means a person can
set his or her own schedule to a certain degree; for example, he or she can pause work for
a last-minute dinner party or more everyday tasks like picking up the kids from school. If
the work is performed primarily on a computer, he or she can take a laptop to work in
exotic or calming locations. Even when bound by the demands of customers, affiliates, or
other obligations, an entrepreneur often has more flexibility than most workers. After a
certain point, a successful entrepreneur might need to hire his or her own employees, lest he
or she lose the benefits of being an entrepreneur by an overwhelming amount of work.

Develop a Business Plan

Business plan is an integral part of the management of a financial institution. It should build the
institution’s aims and objectives. It is a documented conclusion of how the business will create its
resources to achieve its goals and how the institution will evaluate progress.

It should practically predict market demand, customer base, and competition,

ecological and economic conditions. The plan must mirror sound banking standards and
illustrate practical assessment of risk with respect to economic and competitive conditions in
the market to be served.
Sources of Product
The motto of sourcing a product might seem exciting to a new entrepreneur, but it’s really very
simple and easy. It simply means searching for products at an average price that can easily resell
at a retail price.

While establishing a new enterprise like some e-commerce site or a physical retail
business, an entrepreneur needs a stable, flexible and reliable source of inventory.
Otherwise, the entrepreneur ends up disappointing the customers through absence of
product variety, back orders and many more.

Pre-feasibility Study
A feasibility study provisions as a filter, cleaning and screening of ideas with absence of
potential for building a successful entrepreneurship. An entrepreneur promises the required
resources for constructing a business plan. On the other hand, business planning is a “planning
tool or machinery used for converting an idea into reality.

It constructs on laying a base of the feasibility study but ensures a more comprehensive
examination of the business. It is very important to motivate feasibility study whenever
necessary by entrepreneurs as they target the workability and profitability of a business
venture. It regulates if the business plan is viable or not, so that the client’s money, time,
effort, and resources for an entrepreneurship could be saved.

Criteria for Selection of Product

Mostly, it is preferred to select a bunch of criteria depending on which selection of the product could
depend on. Ranks or costs or weights are allocated to each criteria to achieve an objective
examination.

There are three basic stages or steps in selection of products or services. These are −

 Idea Generation − Ideas or investment opening come from different sources, like business or
economical newspapers, institutes for researches, consultation firms, natural resources,
universities, competitors and many more. Idea generation begins from a simple examination
of the business’s strengths and weakness. Ideas are also spawned through brainstorming, desk
research and different types of management consensus procedures.
 Evaluation − Screening or filtering of the product ideas is the initial stage of evaluation.
They mark the potential value of a product, time, money and tools required, fitting of potential
product into the business’s long range sales plan and availability of skilled people to monitor
its marketability. Every product or asset that is identified should be modestly examined. A
pre-feasibility study is expected at this stage in order to get a clear picture for different
 associated aspects like cost and benefit of the product market, technical and financial
aspect, etc.
 Choice − A product that is commercially viable, technically feasible and economically
desirable is chosen and relevant machineries are set in motion.

Ownership
Owning a business is the first decision to be made in constructing a business. The main reasons to
own a business are −

 Being the sole owner

 Being a partner
 Being a shareholder or stakeholder

Sole ownership means all decisions are to be made by self and profits can be owned.
However, the sole trader needs to monitor lots of responsibilities and duties and needs to
work extremely hard.

Establishing a partnership makes it possible to distribute the workload, but profits have
to be shared and there may be conflicts between partners. Establishing a private company,
makes it possible to increase extra capital for the business by selling shares. In contrast,
building up a company needs time and paper work. Shareholders take a portion of the
profits. When the business is expanded across the nation, it is declared as a public company
and its shares are traded on the stock exchange.

Capital
In terms of entrepreneurship, capital can be described as a region’s funding with factors
conducive to the construction of new entrepreneurship and it creates a positive impact on the
region’s economic output.
Higher level of entrepreneurship capital regions express higher levels of output and productivity,
in contrast to those lacking entrepreneurship capital that tend to produce lower levels of output
and productivity. The result of entrepreneurship capital is powerful than that of knowledge
capital.

 Social capital − It is a quality acquired from the structure of an individual’s network

relationships. It is not an intrinsic feature of an individual. The network is owned by the
members of the network and is not solely the property of the individual. Social capital
ensures the relationships by which an entrepreneur receives opportunities to utilize human
and financial capital.
 Human capital − It indicates attributes possessed by individuals like personality,
education, intelligence, and job experience. Creating value by the acquisition of human
capital, specifically building a management team tends to be the biggest challenge for seed
stage founders and investors of new ventures. A start-up with an experienced management
team will receive a higher valuation by investors.
 Financial capital − It is any economic resource scaled with respect to money used by
entrepreneurs and businesses to purchase what they need to make their products, or to
facilitate their services to the sector of the economy upon which their operation is based,
like retail, corporate, investment banking, etc.

Identify and Meet to Market Need

Entrepreneurs with exciting new ideas are sometimes so focused on their products or services
that they forget about the customer. Coming up with a good idea for a business is not enough to
guarantee success. Customers are the people or organizations who buy the products and services
companies offer. Before establishing your new enterprise, you will have to determine who your
primary customers are and whether these customers will be willing to buy your product or
service. Market research is the key to finding out this information. Understanding people’s
wants and needs will allow you to identify business opportunities. The more you know about
your customers, the better you will be at giving them what they need and want.

As an entrepreneur, you will need to estimate demand for your products or services
by identifying your target customers. The target market includes the individuals or
companies that are interested in a particular product or service and are willing and able to
pay for it. Identifying your target market helps you reach the people who desire your
products and services. Target customers are the customers you would most like to attract. A
car dealer selling moderately priced minivans would target middle-class families with children.
A car dealer offering expensive sports cars might target single people with higher incomes.

To identify the target market for your product or service, you will need to answer the
following questions:

 Who is my potential market? Are my customer’s individuals or companies?

 If my customers are individuals, how old are they? How much money do they earn? Where
do they live? How do they spend their time and money?
 If my customers are companies, what industries are they in? Where are those industries
located?
  What needs or wants will my product or service satisfy?
 How many potential customers live in the area in which I want to operate?
 What is the demand for my products or services?
 Where do these potential customers currently buy the products or services I want to sell
them?
 What price are they willing to pay for my products or services?
 What can I do for my customers that other companies are not already doing for them?

As an entrepreneur, you should put yourself in your customers’ shoes before you start
your business. Afterwards, you should think about your customers’ needs and viewpoints
every day. By continually evaluating your market, you will be ready to respond to changes
in communities, consumer tastes and buying habits, and competitors’ offerings.

Business courses such as Operations management and Human Resources management are
specialized disciplines that potential entrepreneurs need to study and apply to successfully create a
sustainable enterprise based on customer needs.

2.3 PURSUIT OF KNOWLEDGE (LO3)

` To understand how and why knowledge and entrepreneurship lead to actual growth, it is
necessary to explain the interrelations between them. It has been observed that neither knowledge
nor entrepreneurship alone is sufficient to drive economic growth. Investments in new knowledge
are only a necessary condition: new knowledge needs to be exploited and put into commercial use
such that it can lead to a higher level of competitiveness and economic growth. Empirical
evidence demonstrates that entrepreneurial activities not only stimulate the knowledge transfer
between different economic agents, clusters or industries, but also catalyze the transformation of new
knowledge into economic knowledge that constitutes a commercial opportunity. The
acknowledgement of the importance of entrepreneurship has led to theoretical developments and
empirical investigations into the interrelations between knowledge and entrepreneurship as well as
their effects on economic performance at different levels of analysis.

At the firm level, the interrelations between knowledge and entrepreneurship are
grounded in the context of small and medium- sized enterprises (SMEs). SMEs, as a
dimension of entrepreneurship, are found to make important contributions to innovation
and employment growth. The success of SMEs may have a significant impact on the
economic growth of a nation. Hence, it is essential to understand how SMEs foster
innovation and growth within their organization context, and in particular, the role of
knowledge in this process. Knowledge, which is embedded in individuals and organizations,
has been considered as an important asset of firms in the dominant management and
organization theories such as the resource-based view, the knowledge-based view and the
dynamic capabilities perspective. Knowledge is a key ingredient of a firm’s innovative
capacity.

Appropriate management of knowledge (including the management of human

resources) can help improve a firm’s overall capability to innovate. The management of
knowledge has been proven to be a key source of competitive advantage for the success of
firms. Due to the limited resources compared to their larger counterparts, SMEs are found
 to be more likely to depend on the quality of the knowledge assets (including human
resources) that are applied in their business processes. Knowledge and human resources thus
play a more crucial role in determining the competitiveness and success of SMEs.

Knowledge Required to Succeed as an Entrepreneur

Basic knowledge for Entrepreneurs are needed at initial stage of running an enterprise and also
later during the development stage. At the beginning, the management of the enterprise is carried
out by the sole founder/owner, who must perform all the actions needed with doing the
business. Crises occur when the enterprise is successfully expanding and the entrepreneur
(usually still the founder and owner) is not capable of running it due to lack of needed knowledge
and managerial skills. Initially entrepreneur devoted to the enterprise to much of own energy and
later on simply “runs out of breath”. With this attitude he/she cannot cover all areas of the
enterprise, i.e. due to the enterprise expansion. He/she lacks needed managerial knowledge
and skills of running and further developing the enterprise.

Manager of the enterprise should be generalist and gain basic skills and knowledge in
managerial functions such as planning, organizing, leading and controlling. Manager also
should have an overview of finance, marketing and market development, competitions and so
on. If he/she does not pay enough attention to these issues, eventually he/she cannot
delegate responsibility for particular areas and will fail under the burden of undiscovered
and emerging problems. These areas become with the growth of enterprise more complex
and intricate and demand more attention. Baldwin summarized these areas, which should
be in attention for the small enterprises:

 Insufficient use of consultancy services

 Lack of quality
 Unwillingness to delegate responsibilities
 Key personnel leaving the enterprise
 Personal issues concerning the owner/manager
 These problems become more important factors causing failure of small enterprises, mainly
as the enterprise grew older. According to Baldwin’s research, enormous number of bankrupt
enterprises 71% answered that one most significant internal factor for bankruptcy was lack of
general and financial management knowledge. The inadequate level of management together
with the missing market for the product causes the failure of enterprise. Managers do not
have enough experience, knowledge or vision how to run the enterprise. Even though the
managers gain experience with the growth of the enterprise, knowledge and vision remain in
shortage and that causes the enterprise to fail.

Fundamental Management Knowledge for Entrepreneurs

Being manager is not an easy task due to the work with the people. From all production factors people
are the most intricate to manage. Not everybody feels at ease in managing people. Nonetheless, there
are certain personal abilities, which can predict the future efficiency and success of manager.

 Creativity – ability to search and find new solutions

 Intuition – be able to predict future development from own experience without analysis
 Goal-oriented – be able to set real goals and respect the goal’s hierarchy
 Responsibility – sense for achieving set goals and objectives
 Self-confidence – belief in own strength and ability to achieve goals
 Initiative – an effort to look for new possibilities and solutions for reaching set goals
 Independence – the courage to make decision based on own judgment
 Cautiousness – be able to make decision under stress and unsure conditions
 Scrupulosity - support social values and norms
 Discipline – self-control and regulation of own behavior
 Persistence – tenacity needed to overcome barrier when achieving goals
 Optimism – orientation towards positive goals and things in connection with faith in
success
 Fantasy – creation of visions and imaginations about future

Every man has hidden potential of certain kind inside. It is important how one can utilize
this potential. Manager needs to use and influence behavior of people around to reach the
goals of the enterprise. In doing so manager use the managerial functions planning,
organizing, leading and control; while “playing” the following roles in the enterprise.

 Interpersonal roles – Figurehead, Leader, Liaison

 Information roles – Monitor, Disseminator, Spokesperson
 Decision making role – Entrepreneur, Disturbance handler, Resource Allocator, Negotiator

In fulfilling their duties managers use managerial skills. These skills directly affect the
results of the manager, but they can be learned and gained by training. The criteria for
dividing the skills can vary but these are considered to be the basic managerial skills, which
are needed for an effective managerial work:

 Technical – ability of manager to use specific methods and techniques in doing the
managerial work. However these technical skills are not related to technology, such as skills of
 engineer. The technical skills for managers represent the usage of methods like break even
analysis in planning or ability to prepare for and conduct a structured interview.
 Interpersonal – people are most valuable resource of any enterprise and manager needs to
know how to lead people. Abilities include motivation of workers, solving work conflicts,
communication and working with people. Therefore interpersonal skills are essential on every
level of management.
 Conceptual – these skills are must for middle or top manager. This is the ability to “grasp
the whole picture”. See the organization as one whole intertwined with the surrounding
environment with the relevant priorities and important issues.
 Communication – manager needs information for decision making. Ability to disseminate
and receive information is thus important tools for manager. It is not only verbal
communication, but the manager should be able to distinguish nonverbal signals, mood and
feelings to filter the right information.

Technical/professional knowledge alone is certainly needed to make the “technical side”

of doing the business work, but is not sufficient for successful development of the enterprise.
The growth of small enterprise leads to new situation, which require managerial skills.
Acquiring of managerial skills is not a simple task, because it means to apply theoretical
knowledge into praxis. On one hand graduates from college miss the practical experience; on
the other hand, the hard workers with long-term praxis many times have not yet covered
new theoretical knowledge. Only by intersecting theoretical knowledge with experience
from praxis it is possible to gain managerial skills.

These are the basic sets of skills of a manager, which might be hard to translate into some
learning framework for small enterprises. At first it is necessary to point out that any attempt to
identify universal key skills needed for small enterprises cannot be complete and
straightforward due to following reasons:

 The population of SMES is vast and diverse (from small hot-dog stand to teenage
millionaires)
 In connection to the size emerges the level of “development stage” – the older the enterprise
gets, the more complex and sophisticated it becomes and there is need for a “better” skills set
 In connection to area of business – various types of industry have different needs for
intensity of knowledge (old industrial vs. New knowledge economy)

But at least it is possible to outline how the small entrepreneurs should educate as their
business grows in different phases of business development and point out the basic skills
every manager should possess.

Education for Small Entrepereneurs

Good idea, hard work, enthusiasm, qualification and knowledge in certain field are necessary to
establish the new enterprise but not enough to run an enterprise. Gerber mentioned there should be
three types of positions needed for running an enterprise:
  Technician
 Manager
 Entrepreneur

And so, there is need for three types of knowledge and further education for small
entrepreneurs. If the person runs business on his own, he has to cover all areas –
technical/professional, managerial and entrepreneurial. Most of the time, the founder
educates his own just in the first one, to be professional in his field, to know the core of his
business, how to produce the product or services. But there is not necessity or even
possibility to cover all these positions by one person. The first very important topic to
learn is how to delegate. It is commonly known, that small entrepreneurs do not know
how to delegate. Delegation is the hardest thing for most of the small enterprises owners.
Sometimes is does not matter how the business grows and if new employees are hired, the
owner does not like to trust and delegate the responsibilities to others. He/she likes to run
all business on his/her own and carry all things by him/her self. But delegation is a
skill that is critical to business success and for a healthy work life balance. One person
cannot do everything that needs to be done; he/she will get so busy and work will take
over his/her personal life which causes personal unhappiness, stress and other problems.

Learn how to delegate should be priority if the owner wants to become a manager of
his/her enterprise. It is the way how to do less to achieve more.

Reasons to Become an Entrepreneur

For some, working at a typical nine-to-five job is a satisfying way to earn a living. But for others, an
innate entrepreneurial spirit may lead them down a path of self-employment or create the desire to
launch a business enterprise. There are a variety reasons that can result in someone becoming an
entrepreneur.

No Income Restrictions. If you have always worked for somebody else, you know that your
employer determines your income level. While a good job performance may earn you a
sizable raise, your employer still decides the actual amount. As an entrepreneur, there are
no limits placed on what you can earn. Instead, your income is determined by factors like
 the value of your business idea to others, how well you market, how skillful you are at
managing a business and how hard you work.

Leaving the Rat Race. For some people, getting up at the same time every day, fighting
rush hour traffic on the drive to and from the office, doing the same job at the same place
day after day and having little time to spend with family can become a grind. By becoming
an entrepreneur, you may have the luxury of creating a flexible work schedule that allows
you to attend your kids’ soccer games and dance recitals. If you choose a business venture
that allows you to work at home, you can avoid the work commute altogether.

Implementing an Idea. Perhaps you have come up with an idea for a product or service that
no one else has thought of and can make people’s lives easier. By putting your idea to work
by starting a business, your idea may help people, while giving you the chance to earn a
substantial income.

Escaping Dysfunctional Workplaces. You may work at a place where office politics prohibit
you from career advancement, or you experience an environment where workers don’t get
along. You may also experience difficulties in dealing with your supervisor. As an
entrepreneur, you won’t have to live with these dysfunctional workplaces any longer.

Pursuing a Passion. You may be a creative person who is working in a “non-creative”

career. For example, an accountant may be truly an artist or writer at heart. By becoming an
entrepreneur, you can pursue these types of careers on a freelance basis. If you prefer, you can
even pursue your passion part-time until you are able to generate a full-time income.

MODULE SUMMARY
 An entrepreneur is an individual who accepts some sort of risk usually financial in the pursuit of new
ventures. The word can apply to any person organizing a new project or opportunity, though it is most
often used in a business context.
 The first element of entrepreneurship is having a great idea. The common approaches to developing
business ideas are to do what you know, emulate and improve on what someone else is doing
successfully or solve an unmet need in the marketplace.
 A successful entrepreneur has driven, passion, energy and stamina. But an entrepreneur needs one more
ingredient to go along with these key traits – a simple business idea that works. Select a business that
excites you, has low start-up costs, and a simple setup. You can always expand on the business later
once you have a client base and generate revenue regularly.
 Entrepreneurs work under constraints of their environment and the political economy.
 Many entrepreneurs are short on cash. If lack of liquidity is one of your problems, there
are ways to leverage your resources to promote your business and sell more product. If
you take a creative approach to using the resources at your disposal, you may be surprised
how much you can accomplish.
 A business concept is a bridge between an idea and a business plan. It focuses one’s
thinking so that the entrepreneur can identify the specifics of his/her proposed venture.
 An entrepreneur network describes a group of entrepreneurs, who have come together to
share resources and generally support one another.
 Entrepreneurs often begin a career by launching a small business. In major and developed
economies, small business is a significant driver of economic activity.
 Entrepreneurs with exciting new ideas are sometimes so focused on their products or
services that they forget about the customer.
 Knowledge is a familiarity, awareness, or understanding of someone or something, such as
facts, information, descriptions, or skills, which is acquired through experience or
education by perceiving, discovering, or learning.

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