ENTREPRENEURSHIP AND SELF- EMPLOYMENT

INTRODUCTION
As an entrepreneur one wants to make sure he /she gets what
he/she wants and deserves. He must exploit his full potential
in order to realize economic benefits and personal
satisfaction.
He must do this by organizing, operating his own small
business from which he will deprive the following benefits:
Engaging in self- employment- employment is normally
associated with hiring out one’s services for wage
employment. In wage employment one sells his labor to an
employer. The employer pays wages or salaries for the labor
provided. Such a person therefore depends on employer for
his or her income and means of earning a livelihood .Such
employer is referred to as “other employment”
Self- employment on the other hand refers to a situation
where a person creates his/her own employment by starting an
income generating activity (enterprise). Such a person works
for himself/herself. He/she depends on his self- created
income/ income generating activity (I.G.A) for income and
livelihood. This person is literally employed by the enterprise
he has created and thus self-employed.
Implications of self-employment
  You own the IGA i.e the enterprise and therefore you
will bear all the risks and provide the finance to be
invested.
 You must be ready to manage the enterprise. You will be
the owner manager.
 You will depend on the business for your income and
means of livelihood. The business is your employer
Advantages of being self-employed
 One becomes independent and no longer depends on another
person called the employer
 One gets a chance to try one’s own ideas
 Financial rewards are no longer limited by another person.
However, what one gets depends on:
-the business opportunity/how good the choice of
business is
-one’s own hard work and effort
-success of the business/how well the business is
managed
 Recognition and prestige especially if the business
succeeds
 One can create business network without being
accountable to anybody else
 Self- image and self- worth may be boosted
Disadvantages
 Increases responsibilities being the owner manager
  One may need to work long and irregular hours
 Income may not be guaranteed
 One takes all the risks of failure

PREPARING FOR START-UP OF A BUSINESS

GENERATION OF BUSINESS IDEAS
A good business idea is a prerequisite for successful
business venture. Good ideas do not just appear but are as a
result of hard work, effort and creativity.
Finding a good idea is the first step in transforming the
entrepreneur’s desires and creativity into a business
opportunity. The following approaches can be used

Creative Problem Solving,

The various creativity oriented problem solving & idea
generating techniques are as
follows –
1. Brainstorming – A small group of min 6 to maximum 12
people sit together and exchange their ideas freely without any
reservations. No criticism is allowed. A senior person moderates
the discussions.
2. Reverse Brainstorming – This is basically the evaluation
stage. After the brainstorming, the group sits together to find
what is wrong with each idea. In a way, it is a method of
selection by elimination.
3. Synectics –is a problem solving tool that stimulates thought
processes which would normally not occur to the person. This
method, developed by William Gordon, has as its central
principle:
"Trust things that are alien, and alienate things that are
trusted."
What it means simply is that don’t take anything for granted
while seeking solution to your problems. Don’t limit yourself to
your trusted old methods nor should you disregard an old failed
method. It is thus possible for new and surprising solutions to
emerge.
4. Gordon Method – Unlike most other methods, this method
starts by not disclosing to the members the nature of problem.
Only general concept associated with problem is outlined and
then members discuss all the aspects of problem. This method
ensures that thought process of members is not clouded or
channeled by problem.
5. Checklist method/ Free Association – developing a new idea
through a list of related issues through chains of associated
words
8. Collective Notebook Method – members of the group
regularly record ideas
9. Attribute listing method – entrepreneur lists the negative and
positive attributes of the products
10. big-dream approach – developing new idea by thinking
without any constraints

SOURCES OF BUSINESS IDEAS

1. Unmet need in the community:
One can identify a need for a given product/service in the
community e.g a school, a health facility, a petro station,
etc, whereby people travel long distances to get that
facility.
2. Hobbies and interests:
Many people turn their hobbies to successful business
ideas.
3. Personal skills and experiences:
Having a certain skill can lead one to deciding to start so as
to utilize that skill or experience.
4. Mass media:
 These include newspapers, magazines, TV, internet, etc.
these are used to advertise business and so highlight
problems.
5. Shows and exhibitions:
One can look for new technologies that can be traded by
discussing with exhibitors.
6. Surveys/Research:
One can identify market needs not met by the existing
business, shortcomings or weaknesses of existing business
that give an opportunity to open a new business. This can
be by a way of attributive listening (keen listening, which is
able to identify problems from complaints very quickly).
7. Government policies, plans and priorities:
Some people develop ideas out of the pronounced
government policies, priorities and plans. E.g. policy on
fixing safety belts and speed governers on all public
vehicles, phasing out 14-seater matatus, etc.
8. Brainstorming:
It is a creative technique of solving problems as well as for
generating ideas. It facilitates creativity. Many ideas are thought
of and listed down. The list is then examined systematically and
finally one idea can be pursued which looks more profitable
IDENTIFYING A BUSINESS OPPORTUNITY
A good idea is not necessarily a good business
opportunity.
  A business opportunity is an attractive investment
idea or proposition that provides an entrepreneur
with the possibility of good return on the
investment.
 Not all business ideas turn into good business
opportunities.
 A business becomes a good opportunity when it is
viable, and feasible.
Viable means it can give the owner good/reasonable returns
and is able to expand/grow.
Feasible means it is able to start and is workable.
An idea is an opportunity only if it has a chance to success.
NB: Kenyan marketing environment is complex, turbulent
(changing constantly) and subject to rapid changes on
demographics, consumer attitudes, social values,
availability of raw materials, economic slumps (reduction)
and recessions caused by drought, clashes, changes in
exchange rates, inflation, technological change etc.

Trends, Implications And Business Opportunities

Trends- are occurrences in a place (eg increased accident
rates)

Implications- are based on trend. They could be positive or

negative outcomes(death)
 Business opportunities- are entrepreneurial activities
resulting due to these implications (sell of coffins, flowers,
transport/ hearse)
Partying /feasting

FACTORS TO CONSIDER WHEN IDENTIFYING

OPPORTUNITIES
1. Environment:
Assess the basic features and resources in the environment
e.g raw materials, infrastructure, population – size,
composition, occupation, socio – economic background.

2. Target customers:
Assess the people you intend to target as your customers in
great detail e.g. the children, youth, elderly, men, women,
farmers, learning institutions, health facilities etc.
Know their specific needs, expectations, income levels,
tastes, buying behavior etc.
3. Current business scene:
Assess the present pattern/trends in the area to understand
the needs, flow of commodities, local consumption etc.
Assess the emerging trends and patterns of trading and
business activities in terms of new demand,
products/services, competition, etc e.g growing need for
computer literacy information technology etc.
4. Technology change:
 Assess whether there are any changes or anticipated
changes in technology that may make some products
obsolete while creating new opportunities e.g. changing
from manual to computerized systems which indicates
more opportunities in the area of IT.
QUALITIES/CHARACTERISTICS OF GOOD
OPPORTUNITIES
A good opportunity occurs where there is:-
i. Real demand for the products/services i.e there are
people with need for the product, money and will to buy
them. Good market scope.
ii. Attractive returns on investments / sufficiently
profitable.
iii. The business is competitive – is able to compete
effectively and cope with the competition.
iv. The business meets the objectives of the entrepreneur
who is taking the risk.
v. There is availability of resources e.g raw materials,
equipment, premises.
vi. Income exceed the cost of production i.e it is profitable.
vii. The required infrastructure is available e.g water,
transport, electricity, security etc.
viii. Enough skilled people i.e. technical and managerial
skills.

FEASIBILITY STUDY/SCREENING PROCESS

Identifying the business opportunities requires that one
conduct a pre-feasibility and feasibility study.
Feasibility study is an examination, analysis and an
investigation of all the factors surrounding the following
aspects of business: production, marketing and financial.
It involves determining the risks and rewards/returns
reflecting on the following factors;
After generating business ideas, it is important that some
evaluation through a screening process be made. The
screening process is a systematic evaluation of ideas in
order to select the best idea. The screening process must
be done carefully, objectively, soberly and without any
emotions. It is required even when there is only one idea
to consider. The screening process must therefore
evaluate the following:
Personal Evaluation
i) The objective of going into the business
ii) Personal interest
iii) The degree of commitment to the business or others
eg family
Personal skills
The self SWOT analysis: strengths, weaknesses,
opportunities and threats.
Components of SWOT
Strength:
 Distinctive competence
  Adequate finance
 Access to economies of scale
 Good innovation ability
 Proven management capabilities
Weaknesses
 Lack of key skills
 Internal operations problems
 Low morale
 Poor track record
 Weak internal image
Opportunities:
 Potential customers
 Potential good will
 Health
 A favorable social economic climate
Threats
 Strong competition
 Adverse government policies
 Political instability
 Mismanaged economy
 Unfavorable legislation
Market evaluation
The aim is to create an assurance of adequate market. The main
components include:
 Consumer demand analysis
 Product, price, promotion and placement
 Number of competitors in the market
Analysis of availability of raw materials
 Adequacy
 Reliability
 Price
Analysis of providing technology in terms of:
 Appropriateness
 Affordability
Analysis of government policies
Importance of Screening Process
 In order to develop a strategic profile
 To provide a framework to assess the current and
future plans
 To act as control technique when contacted
periodically
 To get realization (reality) on activities
 a) Industry and market-
Environmental Trends Suggesting A Business Or Product
Opportunity.
1. Economic Forces:-
State of the economy level of disposable income, consumer
spending patterns
2. Social forces:-
Social and cultural, trends, demographic changes and what
people think is in fashion.
3. Technological advances;-
New technologies, emerging technologies, new uses of old
technologies
4. Political and regulatory changes;-
New changes in political arena, new laws and regulations

VALIDATING THE BUSINESS OPPORTUNITY

The first step in selecting business opportunities is to do
some screening. In screening ask yourself the following
questions:
 What are the benefits and how large are they?
 What are the assumptions?
 What are the likely problems?
 Do you like and understand the customers?
 Do you have any experience in this area?
  Do you have relevant skills and resources?

ENCOURAGING AND PROTECTING NEW IDEAS

In many firms, idea generation is an haphazard process.
However, entrepreneurial ventures can take certain
concrete steps to build an organization that encourages and
protects new ideas.
The following are some of the steps to be followed to
encourage and protect new ideas.
1. Establish a focal point for ideas:-
Some firms meet the challenge of encouraging, collecting,
and evaluating ideas by designating a specific person to
screen and tract them. (if it is everybody’s job, it may be
nobody’s responsibility.)
2. Establishing an idea bank (or vault).
This could be a physical or digital repository (storage
store/library) for storing ideas.
3. Encouraging creativity at the firm level:
Innovation refers to the successful introduction of new
outcomes by a firm. In contrast, creativity is the process of
generating a novel or useful idea but does not require
implementation. Creativity is the raw material that goes
into innovation.
4. Protecting ideas from being stolen:-
Intellectual property right is a body that protects human
intellect that is intangible but has value in the market place.
 It can be protected through patents, trademarks, copyrights
and trade secrets.

SMALL ENTERPRISE MANAGEMENT

Managing Small Business
a) Marketing Aspects
Before starting any venture the entrepreneur require to prepare a
marketing plan. The marketing plan starts with industry analysis.
Key areas of industry analysis include competitor analysis.
Competitors are mainly analyzed on the following basis,
o product and service strategies
o Pricing strategies
o Distribution strategies
o Promotion strategies
For each of these, establish strength and weaknesses
For the entrepreneur to establish these strategies of the
competitors, marketing research must be done. The following
simple steps for marketing research can be followed;

1. Identify and define the problem.

Identify the key issues to be able to solve eg what types
 of customers, products, product appeal, buying power etc
.
2. Develop the approach.
Establish a budget, understand influencing factors such
as the environment or economy, decide on samples to be
used, the design to be used and formulate hypotheses.
3. Research design.
-Designing a survey or questionnaire is considered the
most important step in any survey process. Question
design takes a lot of thought and time. -If the questions
are bad, the data will be bad as well. During the survey
research design, keep in mind sampling methods and
data analysis factors you intend to use.
4. Collect the data.
This may include questionnaire, interviews, observation
etc, with the help of an
5. Analyze the Data.
-Analysis can be performed using survey analysis tools
like Excel, or more advanced programs such as SPSS -
the complexity of the questions will determine this.
 6. Report, Present, Take Action.
Summarize survey research findings and draw
conclusions. Design action plan to be undertaken.

After market research is done, based on the market research

findings, a marketing plan should be drawn.

Marketing Plan

Marketing plan has the following outlays,

1. Critically examine present and future market situation eg

how has similar product performed in the past? What are
the general consumer characteristics?
2. Define target markets/opportunities and threats – describe
your segmentation, targeting and positioning strategies
3. Establish marketing goals and objectives eg 10% market
penetration, acquire 15% distribution channels. These goals
must realistic and achievable.
 4. Define marketing strategies and action programs eg
consider pricing methods, promotion techniques,
distribution channels, service levels, margins on sales,
5. Resources – eg budgeting, human, technical etc
6. Implementation of marketing plan – consider time frame.
Some market opportunities are time bound. Decision to go
it alone or in partnerships, alliances
Monitoring and evaluating the progress of marketing action –
this involves use sales data, number of sales rep, cost per unit of
sale, sales turn overs, etc

Business and Entrepreneurship Environment

The role of various environment are ,
(a) Political – system, stability, leadership
(b) socio– cultural – culture, community, values, ethics, attitude
(c) Technological – education, absorption, competition,
innovation
(d) Legal – regulatory framework, consumer protection, concern
for
Environment, labour laws
(e) Economic – GDP, GNP, resources, fiscal, non– fiscal
policies, incentives
and subsidies
(f) Ecological – environmental protection, affluent discharges,
The entrepreneurial decision process
This is a process of becoming an entrepreneur by leaving a
present activity
1. Changes from present lifestyle to new enterprise means
disruption of the present occupation
2. Move to new lifestyle may have been motivated by socio-
cultural backgrounds of the entrepreneur
3. It may have been incentivized by the government policies
and or supports
4. Personal challenges
5. Experiences form successful ventures
6. Family backgrounds

Location Considerations,
Selection criteria
There are a host of factors that are required to be considered
before taking a final decision
on location. The most important among them are –
1. Proximity to Raw Material Source/Markets – This decision
will depend on nature
of product. In case of high cost products like specialist
machines, watches, etc,
where transport cost is a fraction of total cost, this factor loses
most of its relevance.
But for products like cement, where freight cost is a major
component in the total
cost, this factor assumes mighty significance since freight cost is
often directly
proportional to the distance.

2. Infrastructure – Good infrastructure brings down the capital

as well as operating
cost and therefore play a vital role in the location selection for
an industry. The
facilities includes transport & communication, power, water,
banking etc.
3. Government Policy – Many incentives in the form of tax
holidays/deferment, concessional land and amenities, in order to
promote industrial development enables entrepreneurial
locations
4. Availability of Skilled Man Power – availability and price are
both important
5. Local laws and Regulations – Local laws might prohibit
setting up of certain kind
of industries in particular areas for various reasons. Eg County
laws
6. Ecological & Environment Factors – proximity to dwelling
places, institutions etc
7. Competition – In case of some enterprises, like retail stores,
where the revenue of a
particular site depends on the degree of competition from the
other competitors in
the locality, it plays a crucial role in selecting the location of the
stores.

Management of Entrepreneurial Resources

1. Finance
An entrepreneur can finance its business from different funding
sources.
1. self - it has the benefit of long term, own equity and
controlling rights
2. Family and friends - informal and not structures. Not quite
reliable.
3. Suppliers and trade credit – short term and profit margin is
low
4. Commercial banks – banks can finance,
 inventory loans- based on the value of the stock
 equipment loans - based on valuable equipment
owned by the firm
 real estate loans – based on titles, plants
 long term loans - mortgages. Available to mature
firms only.
 instalment loans – overdrafts, LPO financing
5. government loans – YEDF, WEF (Kenya)
6. Venture capitalists - eg development financing, acquiring
financing, equity participation(taking ownership in a firm)

2. Human Resource
HR is one most expensive cost of starting a business
1. Prepare a forecast. - This is where you anticipate how
many employees you'll need in the future.
-Use business's history of similar business
-Industry experience
-consider the expected supply and demand of your product.

2. Develop an HR inventory. – based on key activity areas.

3. Develop a job analysis. - This could be the hardest part of

the process; you need to figure out what each person will do. JA
is important for responsibility fixing and future training needs

4. Prepare a comprehensive HR plan. - Most time consuming

and most critical. Helps in budgeting and wages payment

5. Human resource manual , - to detail recruitment , selection ,

T&D, maintenance, separations etc

Issues in Small Enterprise Management.

a) External problems

External problems includes,

i. state of the economy – slow growth, not organized,

 ii. the high cost of doing business - eg infrastructure, security,
channels
iii. taxes – high and confusing to young entrepreneurs
iv. red tape – corruption, delayed payment
v. health & safety – lack of know how to protect workers
especially in manufacturing
vi. Lack of bank lending – lack of trust from the banks.
vii. competition - from established firms eg government
contracts
viii. employee skills gaps - for specialized products and
services
ix. lack of supportive legal environment to boost growth of
small business eg subsidized taxes, information on
available businesses, protection from mature firms

Internal problems

Internal problems include,

i. Managing the cash flow – most start –ups suffer from cash
flows owing to its financial strength
ii. Lack of a clear plan – due to lack of experience
 iii. Ineffective leadership – small business owners concentrate
more on day-to-day running of the firm and forget leader
roles.
iv. Sales/marketing effectiveness - lacking in many startups.
v. Founder dependence – employees lack confidence to
operate in absences of the founder.
vi. Lack of management strategies – management strategies eg
performance measurements, reward systems, incentives
vii. Records keeping
viii. Social-cultural interferences from families