15.1.

0 ENTREPRENEURSHIP EDUCATION

INTRODUCTON
This module unit is intended to equip the trainee with necessary knowledge,
skills, values and attitudes that will enable him/her to plan, start, operate and
manage a personal, group, private or public enterprise effectively. It is also
intended to instil in the trainee the drive necessary to venture into profit
making activities.

GENERAL OBJECTIVES
By the end of this module unit, the trainee should be able to;-
a) Appreciate the importance of entrepreneurship.
b) Acquire entrepreneurial competencies necessary for planning, starting and
managing a business
c) Demonstrate positive attitude towards self-employment.
d) Portray a desire to venture into business
e) Identify viable business opportunities
f) Demonstrate entrepreneurial behaviour in planning, starting and managing
a business enterprise.
g) Demonstrate creativity and innovation in their day to day business
activities
h) Appreciate the role of business planning
i) Appreciate the emerging issues and trends related to the business
environment.
Introduction to Entrepreneurship
Evolution of Entrepreneurship
The Entrepreneur
Creativity and Innovation
Entrepreneurial Culture
Entrepreneurial Opportunities
Entrepreneurial Motivation
Entrepreneurial Competencies
Starting a small Business
Business Enterprise Management
Financial Management
Marketing
Enterprise Social Responsibility
Business Plan
Information Communication Technology
Emerging issues and trends
INTRODUCTION TO ENTREPRENEURSHIP

Introduction
Small scale enterprises play a major role in the development of a country economy. Small enterprises create
many jobs, provide a variety of goods and services, contribute a lot of revenue and promote the use of locally
available resources.

This sub-module unit introduces the concept of entrepreneurship and its importance in the promotion of the
national development of a country.

Specific Objectives
By the end of the sub-module unit, the trainee should be able to:
a) define various terms used in entrepreneurship.
b) explain the differences between self and salaried employment
c) explain the contribution of employment towards national development

TASKS
Task 1: Terms used in entrepreneurship

1. Entrepreneurship
It is the process of scanning the environment in order to identify a business opportunity, gathering
resources with the aim of establishing a profit making enterprise, under conditions of risk. According
to (Hisrich, 2008). It is the process of creating something new with value by devoting the necessary
time and effort, assuming the personal or company, financial, psychic, and social risks, and receiving
the resulting rewards of monetary and personal satisfaction and independence.

2. Entrepreneur
This is a person who is able to identify a business opportunity within an environment, gather the
necessary resources and take reasonable risk to start a successful business enterprise.
An entrepreneur is also defined as an individual who establishes and manages a business for the
principal purpose of growth and development. The entrepreneur is characterized principally by
innovative behavior and will employ strategic management practices in a business

3. Enterprise
It is a business organisation that provides goods and services. It is a business concern whose purpose
is profit and has growth potential.

4. Business
It refers to any activity under taken by an individual or organisation for the purpose of production
and/or provision of goods and services to make profit.

5. Creativity
Creativity is the ability to bring something new into existence, often through imaginative skills. It
can also be defined as originality or progressiveness.

6. Innovation
It is the process of doing things in a new way. Having a new use for old things is also innovation.
To some people innovation refers to “an end product, idea, practice or product perceived as new by
the individual” (Rogers and Shoemaker, 1971)
Task 2: Contribution of entrepreneurship towards national
development

1. Importance of entrepreneurship in national development

Entrepreneurship contributes greatly to the economy of the country by providing an impetus for
economic growth. The following are some of the key contributions of entrepreneurship to national
development.

▪ Creation of employment: An entrepreneur does not only create employment for himself but also
for others. Most jobs in many economies come from the entrepreneurial activities.
▪ Utilisation of resources; These include proper and adequate utilisation of local labour
▪ Improvement of standard of living. Entrepreneurship raises the standards of living of the people
of a nation by providing goods and services. Similarly, it helps in provision of the basic needs of
society in areas which large firms cannot reach.
▪ Generation of government revenue – This is revenue for the government in form of licence fees,
taxes and through promotion of national productivity by contributing to the gross domestic product
(GDP). They do this by selling products and services thus reducing the expenditure for imports.
▪ Innovation of technological development – This is done through utilisation of technology which
is locally available.
▪ Conservation of foreign exchange: The use of foreign exchange can be minimised by offering
goods produced locally in place of imported goods.

Task 3: Differentiating between self-employment and salaried

employment

1. Self-employment

Self-employment is a situation in which a person starts and operates a business enterprise. Since
entrepreneurial skills drive people into self-employment, entrepreneurship training is therefore
expected to prepare trainees for starting and operating their enterprises effectively.

Self-employment does not only improve the standard of living of an entrepreneur, but also enables
him/her to become an active contributor to the social and economic activities a nation.

Self-employment is a situation in which individuals create and run/operate their own income
generating activities.

2. Advantages of Entrepreneurs in Self Employment

There are several benefits an entrepreneur may derive from self-employment. These include the
following:

▪ Personal satisfaction
Personal satisfaction is the feeling of accomplishment that one derives from self-employment

▪ Independence:
This means freedom from the control of others. One is able to use one’s knowledge, skills and
abilities. There are no external pressures, interference and orders, which one must follow. Self-
employed people have more freedom of action compared to employed people.
 ▪ Income
This is the amount of money left after all expenses have been paid. By being self employed,
one is able to generate an income for oneself.

▪ Job security
This is the assurance of continued employment and income. It does not have the mechanism of
separation such as laying off, firing or retiring.

▪ Status:
This is a person’s social rank or position in society. One earns recognition from members of the
society.

3. Disadvantages
▪ Possible loss of invested capital.
Invested capital refers to the entrepreneurs’ money used in starting and operating the enterprise.
If a business succeeds the profits are high, if it fails, the invested capital is lost.
▪ Uncertain income
Earnings from the business are unpredictable therefore there is no guaranteed amount of income
from the business.
▪ Long working hours
Entrepreneurs shoulder all the responsibilities of the business thus spending most of their time
attending to the business requirements.
▪ Competition
Entrepreneurs commonly operate small scale businesses that are unable to compete favourably
with large enterprises.
▪ Lack of skilled personnel
Small businesses are unable to employ and retain qualified personnel due to their limited income.

4. Salaried employment

Salaried employment is a process in which an individual is hired for a period of time, which may
range from a few months to a few years, and is paid a given amount of money as salary or wages
for the work done.

The merits and demerits of salaried employment are varied and largely depend on a person’s
qualification, experience and specialisation area. The merits and demerits are also determined by
the magnitude of growth, investment ability, profit and government support of a given organisation.

Defined working hours, guaranteed income, delegation of duties and specialisation are some of the
main advantages of being in salaried employment. However, salaried employment is affected
largely by organisational elements such as change of management, especially where new
management introduces new policies, rules, conditions of employment and other statutory
requirements to the organisation. Job security is not guaranteed and personal satisfaction and
motivation is not wholly experienced
 Suggested Learning Activities

1. Present various ways in which entrepreneurship contributes towards national development

2. Demonstrate various ways in which the employer and the employee benefit from entrepreneurship
development.
3. Identify different entrepreneurial activities within your locality and explain their benefits to the
community

EVOLUTION OF ENTREPRENEURSHIP

Specific Objectives
By the end of this sub-module unit, the trainee should be able to
a) describe the history of entrepreneurship
b) describe the myths associated with entrepreneurship
c) explain the theories of entrepreneurship
d) explain the importance of these theories
e) explain business, environmental, political and social factors affecting entrepreneurial development

TASKS
Task1: History of entrepreneurship globally and in Kenya
Entrepreneur is a French word meaning “between – taker” or “go-between”, or “under taker”.

The evolution of entrepreneurship is discussed in several stages:

1. Earliest period
Earliest definition was by Marco polo, he attempted to establish trade routes to the far East. As a go-
between, Marco polo would sign a contract with a money person to sell his goods. While the capitalist
was a passive risk bearer, the merchant adventurer took the active role in trading, bearing all the
physical and emotional risks. The profit would be divided between the two of them with the capitalist
taking 75% while the merchant – adventurer settled for the remaining 25%

2. Middle ages
As time went by the term entrepreneur changed to describe both an actor and a person who managed
large production projects. This individual did not take any risks but merely managed the project using
the resources provided, usually by the government of the country. A typical entrepreneur in the
middle ages was the person in charge of great architectural works.

3. 17th century
The person associated with this period is Richard Cantillion an economist. He development the early
theories of entrepreneurship and is regarded as the one who developed the term risk taker.
The emergent connection of risk with entrepreneurship developed in this century with an
entrepreneur being a person who entered into a contractual arrangement with the government to
perform a service or to supply stipulated products. Since the contract price was fixed, any resulting
profits or losses were the entrepreneurs.

4. 18th century
This is the period in which an entrepreneur was distinguished from the capital provider. One reason
for this differentiation was the industrialisation occurring throughout the world. Most inventions
developed during this time were reactions to the changing world.
 5. 19th and 20th century
In this era entrepreneurs were viewed as managers and mainly from an economic perspective. An
entrepreneur was seen as one who organises and operates an enterprise for personal gain. He
contributes his own initiative, skills, and ingenuity in planning, organising and administering the
enterprise. He also assumes the chance of loss and gain consequent to unforeseen and uncontrollable
circumstances.

In the 20th century, the understanding of entrepreneurship owes much to the work of the economist
Joseph Schumpeter .Schumpeter defines an entrepreneur as a person who is willing and able to
convert a new idea or invention into a successful innovation. Entrepreneurship employs what
Schumpeter called "the gale of creative destruction" to replace in whole or in part inferior innovations
across markets and industries, simultaneously creating new products including new business models.

In this era entrepreneurs were viewed as managers and mainly from an economic perspective. An
entrepreneur was seen as one who organises and operates an enterprise for personal gain.

For Schumpeter, entrepreneurship resulted not only to new industries but also to new combinations
of currently existing inputs. Schumpeter's initial example of this was the combination of a steam
engine and then current wagon making technologies to produce the horseless carriage. In this case,
the car innovation was transformational, but did not require the development of a new technology.
Different scholars have described entrepreneurs as, among other things, baring risk. For Schumpeter,
the entrepreneur did not bare risk: the capitalist did.
To him an entrepreneur is more of an innovator.

The ability to innovate can be observed throughout history from Egyptians who designed and built
great pyramids out of stone blocks, to laser surgery then wireless communication. Although the tools
have changed with advances in technology, the ability to innovate has been present in every
civilisation.

Task2: Myths associated with entrepreneurship in Kenya

The following are some of the myths associated with entrepreneurship:

1. Entrepreneurs take wild risks at the start of their business. Even though risk is an integral part of
business, the start of business is not considered the highest risk. An entrepreneur is more likely to face
bigger risks at the latter stage of the business.

2. Entrepreneurs introduce break-through inventions in their start-up business. It would be easy to

assume that entrepreneurs introduce new inventions, usually technological inventions. This is not true.
Innovation may be important, but what makes entrepreneurship successful is the ability to execute an
ordinary idea exceptionally.

3. Most successful entrepreneurs have years of experience in their chosen line of business. Bill Gates
was still a student when he started Microsoft with Paul Allen. This story of several inexperienced
entrepreneurs starting out a new business venture is replicated over and over again in the lives of
millions of other successful entrepreneurs.

4. One needs a lot of money to start a business. This is not so. Money is not always an important
prerequisite to be able to start a business. What sets the successful entrepreneur apart from the not-so-
successful is the ability to make do with what little he or she has. For instance, they look for other
sources of money such as borrowing to grow their business.
5. Start-ups use equity, not debt money. Entrepreneurs who put up equity coming from their own pocket
only comprise less than 50% of the total start-ups. The majority of the companies are financed by debt.
Task3: Theories of entrepreneurship
These refer to the various approaches, which have been advanced to give an explanation as to why
entrepreneurs behave the way they do. They are also known as the perspectives of
entrepreneurship.

The theories try to explain whether entrepreneurs are born or made. The born entrepreneurs inherit
the entrepreneurial behaviour from their parents and grandparents while made entrepreneurs
acquire entrepreneurial behaviour from the behaviour in which they live in.

The following are some of the entrepreneurial theories:

▪ Economic theory
The theory holds that entrepreneurial behaviour is determined by economic factors. Thus
entrepreneurs are greatly influenced by economic activities. From an economic point of view
an entrepreneur is a person who brings together the factors of production into a combination to
make their value greater than before.

According to Schumpeter, entrepreneurs are innovators who bring together the various
resources to produce a new product/service through new ways/methods of production, finding
new markets, finding new sources of materials to create a new business.

The economic theory provides basic data in the economic environment – activities for business
start-ups. Thus entrepreneurial activities take place where conditions are supportive/conducive
to investment. This theory revolves around an entrepreneur being an innovator, combining the
various resources/ factors of production to create new products/wealth.

▪ Psychological theory
The theory holds that entrepreneurs possess unique needs, values and attributes, which drive
them into entrepreneurial behaviour. It holds that people have personal traits and attributes,
mental desires to be independent.
The main proponent of this theory is McClelland who attributed entrepreneurial behaviour to
the high need for achievement. Entrepreneurs are characterised by high need for achievement,
which tends to give them high desire to take personal responsibility in risks. They have little
interest in routine activities, which are not challenging. According to this theory,
entrepreneurial behaviour is environmentally determined and is inherent during childhood,
where parents have certain high standards achievement.

▪ Sociological theory
The sociological theory maintains that environmental factors such as values and beliefs
influence entrepreneurial behaviour. (Max Weber, 1904) According to this theory, beliefs and
societal aspects such as social status and recognition influence entrepreneurial behaviour.

Task 4: Importance of Entrepreneurship theories

1. Entrepreneurship theories bring greater understanding of entrepreneurship behaviour exhibited by
different entrepreneurs.
2. They enable one to understand the need for entrepreneurship and why some people are more
entrepreneurial than others.
3. The theories bring out various approaches and perceptions held by entrepreneurs.
4. Show that the desire for entrepreneurship is innate as well as environmentally determined.
5. Helps us to understand the role played by role models through networks that provide support.
Evaluation
1. Discuss business environmental factors affecting entrepreneurship development.
2. Group discussions on historical evolution of entrepreneurship in Kenya
 THE ENTREPRENEUR

Introduction
Entrepreneurs are people who are able to identify opportunities where others are unable to.
Entrepreneurs possess unique characteristics that make them stand out as different from other business
people.
The sub-module unit focuses on the characteristics of entrepreneurs necessary for business success, and
their role in the development of an enterprise.

Specific Objectives
By the end of the sub-module unit the trainee should be able to:
a) describe types of entrepreneurs
b) describe the qualities of an entrepreneur
c) explain the role of an entrepreneur in an enterprise

TASKS
Task 1: Types of entrepreneurs
There are three main categories of entrepreneurs: craft, opportunistic and ego oriented
entrepreneurs

1. Craft Entrepreneur:
This is a person who exploits and utilises their personal skills to start a business without
thinking of growth or expansion. Craft entrepreneurs are not growth- oriented but try to
maximise on profits. A craft entrepreneur has skills, which they utilise to start and run a
business.

2. Opportunistic entrepreneur
This is a person who starts a business to maximise / expand to the maximum. He may not have
the skills but is able to start and maximise a business opportunity. He has the ability to see what
other people have not seen in terms of new ideas and starts a business with an objective of
growth. He employs his creativity and even employs or delegates to others to run the business
for him.
An opportunistic entrepreneur has the ability to organise others and resource to maximise
profits.

3. Ego oriented
These are entrepreneurs who are keen on achieving higher status, recognition and a feeling of
superiority. Their main focus is on business evaluation i.e. a shift to higher levels.

Task 2: Qualities of an entrepreneur

The following are some of the characteristics/ traits of an entrepreneur
1. High need to achieve: an entrepreneur always wants to excel in all he does and has strong desire
for success.
2. Risk – taking: Entrepreneurs like pursuing new and challenging tasks. They carefully make a
choice for success. They take moderate calculated risks which have high potential for success.
3. Independence: Entrepreneurs like doing things without consulting anybody. He does things in his
own ways in terms of which business to start, how to manage and improve it. They believe in their
own abilities to do things and succeed.
4. Creative and innovative: entrepreneurs have the ability to generate new ideas and implement
them ahead of others.
 5. Problem- solving ability: entrepreneurs have the ability to totally recognise and solve day to day
problems in business operation. They recognize the fact that they operate in an environment with
problems and are always ready to solve them to the advantage of their businesses.
6. Time Consciousness: an entrepreneur believes that time is money and that the available time must
be used effectively for business. H e manages his time well and does things at the right time.
7. High need to control: an entrepreneur always wants to control his destiny. He starts a business
and keeps at a level that he can easily control and manage based on his abilities.
8. Leadership ability: Entrepreneurs are pioneers in terms of visions and business ideas. They are
able to mobilise and make use of others to assist in achieving their business goals.
9. Positive Self- concept: Entrepreneurs have self- confidence and believe in what they do. They are
always optimistic and have positive attitude towards certain opportunities for success. They
approach opportunities with success in mind.

Task 3: Roles of an entrepreneur in an enterprise

The bearing of uncertainty is regarded as the primary function of an entrepreneur. This is the
willingness and ability to deal with uncertainty. Other functions relate to risk – taking and
management of the business. Therefore, as an entrepreneur, one is expected to perform the
following functions:
1. The entrepreneur is the prime mover in the business enterprise. He is the one who identifies gaps
in the market and turns the gaps into business opportunities. Thus an entrepreneur initiates the
business.
2. The entrepreneur finances the business. After identifying a business opportunity the entrepreneur
raises and mobilises the necessary resources to exploit the opportunity.
3. The entrepreneur manages the business. He can either do it himself or delegate to other people.
4. The entrepreneur bears the business uncertainties or risks of the business. This arises due to the
fact that he is the one who finances the business.

▪ Hence as a key figure and prime mover of the business, it is his responsibility to:
- Search for business opportunities
- Evaluate the business opportunities to assess their viability
- Mobilise resources needed to start and run the business.
- Manage the business
- Provide the necessary leadership for the people working for the business and,
- Bear the uncertainties or risk of the business
▪ This is the process of entrepreneurship which encompasses the activities undertaken by the
entrepreneur.

Evaluation
1. Relate entrepreneurial types and qualities to existing entrepreneurs
2. Role plays on the concept of the entrepreneur.
 CREATIVITY AND INNOVATION

Introduction
Since customers’ tastes and needs are continually changing, the entrepreneurs must think of new ideas and
better methods of running their businesses in order to satisfy the customer.

This sub-module unit will discuss the importance of creativity and innovation, the barriers to creativity
and innovation including managing barriers to creativity and innovation.

Specific objectives
By the end of the sub-module unit, the trainee should be able to:
a) define the terms creativity, innovation, discovery and invention.
b) explain the process of creativity and innovation
c) explain the importance of creativity and innovation.
d) explain barriers to creativity and innovation
e) explain ways of managing barriers to creativity.

TASKS
Task 1: Meaning of creativity and innovation
▪ Creativity: Creativity is the ability to bring something new into existence.
▪ Innovation: It is the ability to do existing things in a new way. Having a new use for old things is
also innovation.
▪ Discovery: It is making known that which has been in existence but whose uses have not been
perceived
▪ Invention: It means bringing something new into existence
Task 2: Process of creativity and innovation
Creativity as a process has several stages. These are:
1. Preparation. Getting the mind ready for creative thinking using methods such as
- Realizing that every situation is an opportunity to learn
- Reading on a variety of topics/subjects
- Creating a file of interesting articles
- Developing the ability to listen to and learn from others
- Attending professional/ trade association meetings, both to brainstorm with others having a
similar interest and to learn how others have solved a particular problem.
2. Investigation. Studying the problem and understanding its components
3. Transformation. Identifying the similarities and differences in the
information collected.
4. Incubation. The subconscious needs time to reflect on the information collected. Incubation can be
enhanced by
- Doing something totally unrelated to the problem/opportunity under investigation
- Taking time to reflect (freeing the mind from self imposed restrictions)
- Playing and relaxing
- Thinking about the issue before going to sleep so that the subconscious can work on it during
sleep
- Working on the problem or opportunity in a different environment.
5. Illumination. This occurs when all the previous stages start getting clear.
6. Verification. Involves testing if the idea will work, is practical to implement and is a better solution to
a particular problem or opportunity. Experiments, test marketing and piloting are some of the methods
that can be used.
 7. Implementation. Transforming the idea into reality by bringing it to the market. This is what
distinguishes the entrepreneur from the inventor.

Task 3: Importance of creativity and innovation

▪ It leads to increased productivity
▪ It helps in profit maximization
▪ It motivates employees to become more creative
▪ It leads to diversification of products and services
▪ A variety of goods and services is introduced

Task 4: Barriers to creativity and innovation

Creativity and innovation will be limited by:
▪ Cost of research and development is high
▪ Inability to protect invention through patents
▪ Searching for the one right answer
▪ Blindly following ‘the rules’
▪ Being over specialized
▪ Fearing to look foolish
▪ Fearing mistakes and failure
▪ Believing that you are not creative
▪ Viewing play as frivolous
▪ Focusing on being logical

Task 5: Managing barriers to creativity and innovation

Barriers to creativity and innovation can be overcome by:
▪ Budgeting for research and development
▪ Strengthening public institutions that process the patenting process
▪ Rewarding creativity
▪ Promoting creativity training
▪ Avoiding mental blocks
▪ Being systematic
▪ Being a problem solver
▪ Approaching issues from different angles
▪ Avoiding routine practices
▪ Concentrating on the end results rather than the means
▪ Avoiding looking for consensus

Evaluation Activity
Carry out a class exercise aimed at bringing out creativity in the learners e.g. joining 9 dots with straight
lines, discussing the various uses that an identified item can be put into.

Evaluation
1. Distinguish between creativity and innovation.
2. Explain the importance of creativity and innovation to an entrepreneur.
 ENTREPRENEURIAL CULTURE

Introduction
The culture of entrepreneurship plays a major role in creating entrepreneurs Where the cultures is rooted
there is evident of creativity thus many businesses being started.

This sub-module unit will address concepts of entrepreneurial culture and factors that promote and
hider the entrepreneurial culture development.

Specific Objectives
By the end of this topic the trainee should be able to:
a) explain the concept of entrepreneurial culture.
b) discuss habits that promote entrepreneurial development.
c) discuss factors inhibiting entrepreneurial development.

TASKS
Task 1: Concept of Entrepreneurial culture
Culture has been defined in many different ways. It may be defined as the unique way in which
different societies around the world cope with the environment in which they live. It generally
refers to common ways of thinking and behaving that are passed on from parents to children or
transmitted by social organisations, developed and then reinforced through social pressure. Culture
is learned behaviour and the identity of an individual and society.
Culture encompasses a wide variety of elements, including language, social situations, religion,
political philosophy, economic philosophy, education and manners and customs.

Task 2: Habits that promote entrepreneurial development

These include:
▪ Money orientation
▪ Future orientation
▪ Time consciousness
▪ Trust/honesty
▪ Hard work

Task 3: Factors inhibiting entrepreneurial development

They include:
3. Language

Language is sometimes thought of as the mirror of culture. It is composed of verbal and non verbal
components. Messages and ideas are transmitted by spoken words used, the voice tone and non
verbal actions such as body positions, eye contact, and gestures.
An entrepreneur must have command of the language in the country in which business is being
done.
Dealing with language almost always requires local assistance e.g. use of a local translator when
negotiating a business transaction.
Equally important to the verbal is the non verbal or hidden language of the culture e.g. space. How
much room exists between individuals when they talk. For instance the Germans prefer more space
than Americans who prefer to stand close when talking to people.
An entrepreneur is thus expected to know the local and the national language of the community
where he intends to have his business.
 4. Social structure
Social structure and institutions are also aspects of the culture facing the global entrepreneur.
Social stratification can be very strong in some cultures, significantly affecting the way people in
one social strata behave and purchase.
India, for example is known for its hierarchical and relatively rigid social class system.

5. Religion
Religion in a culture defines the ideas for life that are reflected in the values and attitudes of
individuals and the overall society. The impact of religion on entrepreneurship, consumption and
business in general will vary depending on the strengths of the dominant religious tenets.
For example, in some Arabian countries women are not expected to conduct business.

6. Education
Both formal and informal education affects the culture and, the way culture is passed on. A global
entrepreneur not only needs to be aware of the education level, as indicated by the literacy rate of a
culture, but also the degree of emphasis on particular skills or career paths.

The technology level of the firm’s products may be too sophisticated depending on the educational
level of the culture. This also influences whether customers are able to use the good or service
properly and whether they are able to understand the firm’s advertising or other promotional
messages.

▪ Ways of managing factors that inhibit development of entrepreneurial culture.

These include:
- Flexibility and the willingness to adjust to changes in a given business environment.
- Change of attitude – positive attitude and willingness to interact with the local community
creates a conducive environment for him/her to conduct business successfully.
- Readiness to take on new challenges and risks

Suggested Learning Activities

1. Group discussions on cultural habits that promote entrepreneurial development
2. Brainstorming on cultural habits inhibiting entrepreneurial development

ENTREPRENEURIAL OPPORTUNITIES

Introduction
Starting a business requires knowledge, skills, abilities and values. It is therefore important for
entrepreneurs to develop viable business ideas by identifying community needs for products and
services.

This sub-module unit focuses on business ideas and opportunities, methods of generating these ideas and
opportunities and finally assessing the viability of the generated opportunities.

Specific Objectives
By the end of the sub-module unit the trainee should be able to:
a) explain the meaning of business opportunity
b) explain ways of generating ideas for business opportunities
c) evaluation of business opportunities for viability
TASKS
Task 1: Meaning of business opportunity
1. A business opportunity is an attractive idea which provides the possibility of a return for the
entrepreneur taking the risk. Such opportunities are presented by customer requirements and leads to
the provision of a product or service which creates or adds value to the buyers.
▪ What is a Business Idea

- An opportunity in the environment which, can be translated into a business activity

- The existence of a situation in the environment which, can be advantageously turned into a
business activity.
- The existence of an opportunity which can be exploited for making money through the
operation of business activities.

▪ Why search and evaluate business ideas?

- There are so many business opportunities available at any one time and the requirements for
translating them into business activities differ between each of them.
- The need to develop a competitive edge by providing something new that has little or no
competition
- The success and profitability differ between various business opportunities, hence need to
pick one with profit and success potential.

Task 2: Ways of generating business ideas

There are various ways through which business ideas can be generated. These include:
1. Identifying a need in the community: people usually have many unsatisfied needs. By carrying
out a market survey on the location where you need to establish your business and talking to the
potential customer may reveal gaps in that market.
2. Market research: Conduct a market survey and try to identify business opportunities existing in
the market. People may be requiring new product/services or the ones existing could be having
several weaknesses. These are good opportunities for you.
3. Listening to complaints of customers so that you improve an existing business.
4. Brainstorming: This involves sitting in a group and trying to think of as many possible businesses
as possible using the ‘freewheel ’policy. Take time and digest all the suggested ideas as a basis
for making the final decision on the one most suitable for you.
5. Creativity – By looking at things in a new way and combining two or more ideas in a new way,
such as, one stop shopping spots for customers e.g. a restaurant and a salon combination.
6. Business ideas can also be generated through developing personal hobbies and discussions with
friends
▪ Guidelines for Business Idea Generation Process:
- Think of as many ideas as possible
- Go out, look and listen.
- Always analyse ideas carefully before finally selecting which ones to implement.
- Be simple
- Start small. “If you want to go somewhere start small” Schummacer

Task 3: Evaluation of business opportunities

A good business opportunity must fulfil or be capable of meeting the following:
1. Demand i.e. it should respond to unsatisfied needs or requirements of customers who have ability
to purchase and are willing to exercise that choice.
2. Return on investment – provide durable, timely and acceptable returns or rewards for the risk and
effort required.
 3. Competitive – Equal to or better – from the viewpoint of the customer – than other available
products or services.
4. Meet objectives – meet the goals and aspirations of the person taking the risk
5. Available resources and competencies – be within the reach of the entrepreneur in terms of
resource, competency, legal requirements etc.

Suggested Learning Activity

1. Identify different types of business opportunities and assess each for viability.

ENTREPRENEURIAL MOTIVATION

Introduction
This sub-module unit addresses the motivation factors the triggers an entrepreneur to venture in business
activities. The motivation factors include internal and external ones.

Specific Objectives
By the end of this sub-module unit, the trainee should be able to:
a) Define entrepreneurial motivation
b) Identify entrepreneurial motivation factors

TASKS
Task 1: Defining entrepreneurial motivation
A motive or a drive is a need that is sufficiently pressing to direct the person to seek satisfaction of
the need while a need becomes a motive when it is aroused to a sufficient level of intensity. For a
person to venture into entrepreneurship there must be the necessary motivations, the drives that will
enable him/ her to persist in their entrepreneurial practices.

Entrepreneurial motivation factors

Although the motivations for venturing out alone vary greatly, the following are some of the
reasons cited for motivating one to become an entrepreneur:

1. Internal motivations and drives include:

▪ Employment creation need: This arises in a situation where one fails to get any form of salaried
employment creating a need for being gainfully employed. This acts as motivation for a person to
become an entrepreneur, to start and run his own business.
▪ Self-reliance/ need for independence: A self employed person has greater flexibility in utilisation
of their time and have greater independence. This could act as a strong motivation to make one
desire to become an entrepreneur. A corollary to this need for independence could be the need for
power i.e. to exercise power over other, or to be a boss rather than to be bossed.
▪ Competition. “anything you can do, I can do better”: This may be in response to the
achievements of peers, friends, or family members who have already made it as an entrepreneurial
business person.
▪ Need for recognition: Human beings strive to get recognition about their achievements in life, by
their peers, family and society. This need for recognition could be a motivation for one to go into
self employment. Similarly, members of a certain family may have been in the past entrepreneurial
pillars in the community therefore acting as a motivation for other generations of the family.
▪ Need for adventure: In salaried employment, a person’s duties are well specified and the
boundaries well defined. Work may become routine posing no challenges and involving very few
responsibilities. This may create a feeling that one needs challenging activities, activities that carry
 responsibilities with them. This sort of scenario acts as a strong motivation for people to go into
business on their own.
2. External motivations and drives
These refer to motivations that are provided by others, especially the legal authorities and the
society in general. They provide a conducive climate for you to realise your internal motivations
through entrepreneurship. They include:
▪ Infrastructure: To operate efficiently any business requires the provision of certain basic
facilities. Such facilities include: power for production processes, water for basic hygiene
purposes, business premises and appropriate land depending on the nature of the business, services
of banks and post-offices among others.
The availability of these facilities plays a major role in encouraging entrepreneurs to start
businesses. The chances of success of a new business venture depend to a large extent,on the
availability and quality of such facilities.
However, the provision of such facilities, to a very large extent, is the responsibility of the
established authorities’ e.g. local authorities.
▪ Credit facilities:
All businesses require start-up capital and operating capital. Usually personal finances are not
adequate to take care of all the requirements of starting the business. Thus entrepreneurs
require financing from external sources such as government agencies, banks and non-bank
financial institutions. Although these sources are there, sometimes it is quite difficult to get the
financing you need from them. The requirement that are put by the financial institutions are at
times too strict.
▪ Some of the factors considered include:
- The amount that is required
- The period of the loan
- The viability of the proposed business
- The collateral( security) that is required
- The repayment term ( debt-servicing)

Suggested Learning Activities

1. Class discussion on motivational factors that have contributed to successful.
2. Discuss motivational factors that may lead them to venture into business.
ENTREPRENEURIAL COMPETENCIES

Introduction
This sub-module unit addresses the skills, knowledge and attitudes that are required to competently handle
a business enterprise

Specific Objectives
By the end of this sub-module unit, the trainee should be able to:
a) Define entrepreneurial competence in a business
b) Explain key entrepreneurial competencies in business

TASKS
Task 1: Definition of entrepreneurial competence in business
Entrepreneurial competencies refer to skills and abilities that an entrepreneur should have and
exhibit for entrepreneurial success.

Task 2: Key entrepreneurial competencies in business

The following are some of the key competencies required for entrepreneurial success
1. Initiative – refers to acting out of choice rather than compulsion ; taking the lead rather than
waiting for others to start
2. Persistence – an entrepreneur should have a “never say die” attitude, not give up easily, and
strive to seek information continuously until success is achieved.
3. Integrity - the entrepreneur should have a clear sense of values and beliefs that underpin the
creative and business decisions that they make to influence the actions they take, particularly
when in difficult or challenging circumstances
4. Risk taking - an entrepreneur should understand that risk taking means trying something new,
and possibly better, in the sense of stretching beyond what has been done in the past; and that the
constant challenge is to learn how to assess choices responsibly, weighing the possible outcomes
against his/her values and responsibilities
5. Networking – entrepreneurs should understand that networking is a key business activity which
can provide access to information, expertise, collaboration and sales; and that careful planning
and preparation helps achieve desired results
6. Decisiveness - the entrepreneur should have skills to resolve issues as they arise and should
respond in a flexible manner to deal with changing priorities

7. Concern for high quality of work – attention to details and observance of established standards
and norms.
8. Concern for employee welfare – Believing in employee well being as the key to
9. Competitiveness and success in initiating programmes of employee welfare

Task 3: Ways of matching entrepreneurial competencies with business

opportunities
This involves identifying individual competencies the analysing the competencies with the business

Task 4: Identifying and assessing the viability of business ideas and

translating them into business opportunities
1. Ideas and opportunities need to be screened and assessed for viability once they have been
identified or generated. This is not an easy task though important because it makes the difference
between success and failure.
2. The exercise certainly helps in minimising the risks and thus the odds of failure.
3. Identifying and assessing business opportunities involves determining risks and rewards/ returns
reflecting the following factors.
▪ Personal goals and competencies of an entrepreneur.
It is important for an entrepreneur to possess competencies, knowledge, skills and abilities
before starting a business where these competencies are lacking, it’s vital to develop or bring in
others/managers that compliment what is already available.
▪ Length of the ‘window of opportunity’.
Opportunities do not exist forever. The entrepreneur has to assess how long this window will
be opened in order to make an investment decision.
▪ Industry/market.
Is there a need for the product/service? It is also important to know the size of the market.
▪ Management skills.
Those businesses that require high level of capital injection require proper management skills
▪ Competition
Check out whether the business has a competitive edge over other competitors e.g. potential
constraints and if the industry faces existing entry barriers.
▪ Resources
Availability and access of these resources determines whether certain opportunities can be
pursued.
▪ Environment
This refers to political, economic, geographical, legal, regulatory and also physical environment
within which a business operates

Suggested Learning Activity

1. Discuss competences observed during the field visit

STARTING A SMALL BUSINESS

Introduction
When starting a business the entrepreneur must comply with certain requirements and regulations.
This sub-module unit looks at the procedure to be followed in starting a business, factors to be considered in
starting a business including support services required and available for the entrepreneur.

Specific Objectives
By the end of the sub-module unit, the trainee should be able to:
a) Describe the procedure of starting a business enterprise
b) Explain the factors to be considered when starting a small enterprise
c) Describe the different forms of business ownership
d) Explain challenges that are faced when starting a small enterprise
e) Describe business life cycle
f) Discuss business support services available to small businesses

TASKS
Task 1: Procedure for starting a Small enterprise
1. Approach to starting a business enterprise
To increase chances of success there should be a systematic approach to starting a business
enterprise. One such approach is outlined below:
▪ Idea generation.
▪ Market survey.
▪ Selection of location.
▪ Resource mobilization.
▪ Business registration.
▪ Licensing.

Task 2: Factors to consider when starting a small enterprise

Below are some of the factors to consider when starting a business:
1. Legal requirements
2. Knowledge and skills for operating the business.
3. The cost of starting and operating the business.
4. The level of competition.
5. The business location
6. The rules and regulations for operating the business.
7. The anticipated profit.
8. The machinery, tools and equipment required and their cost.
9. The source of supply of goods/raw materials.

Task 3: Forms of business ownership

The following are the types of business organisations:
1. Sole proprietorship –This is a business owned by one person.
▪ Advantages
- Ease of formation: this is the easiest form of business organization to establish. There are no
complex forms to complete and no documentation required between you and any other party.
It involves registering your choice of business with the registrar of companies by filling in a
simple form and paying a small registration fee.
- Easy to raise capital.
 - Owner makes independent decisions: the business owner has complete control over the
business is solely responsible for all decisions in the business.
- Owner has personal contact with employees and customers.
- Owner enjoys all the profits.
- Flexibility: the business owner is able to respond quickly to business needs in day-to-day
management decisions of the business. One can easily take advantage of an attractive
business opportunity.
▪ Disadvantages
- Bears all the losses.
- Capital base may be limited: This kind of business has less financing capacity. The amount
of funds a sole proprietor can raise is limited to their assets and their credit worthiness.
- Has unlimited liability: The business owner has little or no protection against personal
liability in the event of bankruptcy or adverse legal judgement. Personal assets such as the
owners house, land, car and investments are liable to be seized if necessary to pay
outstanding debts.
- Success of the business depends on the entrepreneur’s hard work.
- Business operations can be affected by death of the owner.

2. Partnerships
A partnership is an association of two or more persons who come together to carry on a
business with a view to making profit. Although it is possible to establish a valid partnership
without a formal agreement, it is advisable to sign an agreement first. The agreement will state:
- The effective date of the partnership.
- The business name of the partnership.
- The contributions of capital by each partner
- How the business profits and losses will be shared.
- How a partner may withdraw from the partnership
- How the business assets and liabilities will be shared in the event of dissolution.
▪ Advantages
- Capacity for more capital; partners can raise more capital than a sole trader. The asset base is
much higher.
- Work is divided among partners.
- Better combination of skills and talents: for example, a mechanic and driver could
successfully combine resources and talents to start a driving school.
- Losses and liabilities are shared among partners.
- Business can easily expand.
- Formation of the business is simple: the registration and legal formalities are easy and
simple.
▪ Disadvantages
- The liability of partners is unlimited.
- Partners are likely to disagree on various matters affecting the business.
- If one partner makes a mistake, all other partners suffer the consequences.
- Some partners may work harder than others, yet the profits are shared. This may discourage a
hard working partner.
- If the business relies heavily on one partner and the partner leaves or dies, the firm can easily
collapse.

3. Private limited company

It is formed by a minimum of two shareholders and a maximum of fifty.
▪ Advantages
- Can raise more capital through sale of shares.
 - It has limited liability.
- Death of a shareholder does not affect its operations.
- They are managed by professionals.
▪ Disadvantages
- Shareholders can only transfer their shares with the consent of other shareholders.
- The company is not allowed to appeal to the public for extra capital, so it may find it difficult
to raise money for expansion.
- Accounts of the company must be filed annually with the registrar of companies.

4. Public limited company

It has a minimum of seven shareholders and no maximum number of shareholders
▪ Advantages
- Shareholders liability is limited to the amount contributed.
- It can raise more funds through sale of shares.
- There is no restriction on the transfer of shares.
- Public companies can easily expand due to large capital base.
▪ Disadvantages
- The procedure of forming the company is long and complicated.
- Raising capital can be expensive due to the cost involved.
- As the company grows it may be difficult to manage.
- Once established it has to comply with many regulations.
- The accounts of a public company must be published, so there is no secrecy or privacy about
its affairs.
- Owners exercise little control over the business

5. Co-operative
It is formed by people with a common interest such as those in the same trade or dealing in similar
commodities

Task 4: Challenges faced when starting a small enterprise

1. Limited markets: small enterprises do not have adequate markets for their products and
services. They have little or no access to market information and lack the necessary resources and
expertise to conduct any market research.
2. Inaccessibility to modern and advanced technology; small business do not have the necessary
capital to purchase and gain from the benefits of modern technology, thus they cannot compete
favorably in the market.
3. Poor access to capital: Very few banks have special credit facilities to small scale
entrepreneurs and the few that have established such facilities emphasize on high collateral
requirements and high interest rates which make the credit unavailable to many.
4. Poor managerial skills: most small-scale entrepreneurs lack the necessary managerial skills
required for successful operation of their enterprises.
5. Inability to recruit highly qualified employees they usually pay only minimum wages, have few
fringe benefits, offer low job security and therefore cannot attract high calibre employees
6. Other challenges include; unfair competition from well established big enterprises, and lack of
coherent policy guidelines among others.

Task 5: Business life cycle

There are seven stages of a business life cycle
Stage 1: Seed
This is the stage when your business is just a thought or an idea. It refers to the conception or birth
of a new business idea. At this stage the company will have to overcome the challenge of market
acceptance. The main focus is on matching the business opportunity with your skills, experience
and passions. Other focal points include: deciding on a business ownership structure, finding
professional advisors, and business planning.
Early in the business life cycle with no proven market or customers the business will rely on cash
from owners, friends and family. Other potential sources include suppliers, customers, government
grants and banks.

Stage 2: Start-Up
At this stage the business is born and exists legally. Products or services are in production and you
have your first customers. In the start-up life cycle stage, it is likely you have overestimated money
needs and the time to market. Start-ups require establishing a customer base and market presence
along with tracking and conserving cash flow. Money Sources: Owner, friends, family, suppliers,
customers, grants, and banks.

Stage 3: Growth
At this stage revenues and customers are increasing with many new opportunities and issues.
Profits are strong, but competition is surfacing. The biggest challenge growth companies face is
dealing with the constant range of issues bidding for more time and money. Effective management
is required and a possible new business plan. The main focus is on running the business to deal
with the increased sales and customers. Better accounting and management systems should be set-
up. New employees will have to be hired to deal with the influx of business. Money Sources:
Banks, profits, partnerships, grants and leasing options.

Stage 4: Established
At this stage the business has now matured into a thriving company with a place in the market and
loyal customers. Sales growth is not explosive but manageable. The main focus is on improvement
and productivity. Money Sources: Profits, banks, investors and government.

Stage 5: Expansion
The expansion stage is characterized by a new period of growth into new markets and distribution
channels. This stage is often the choice of the business owner to gain a larger market share and find
new revenue and profit channels.

Moving into new markets requires the planning and research of a seed or start-up stage business.
Focus should be on businesses that complement your existing experience and capabilities. Add new
products or services to existing markets or expand existing business into new markets and customer
types.
Money Sources: Joint ventures, banks, licensing, new investors and partners.

Stage 6: Mature

Businesses in the mature stage of the life cycle will be challenged with dropping sales, profits, and
negative cash flow. Search for new opportunities and business ventures. Cutting costs and finding
ways to sustain cash flow are vital for the mature stage.
Money Sources: Suppliers, customers, owners, and banks.
 Stage 7: Exit

This is the big opportunity for your business to cash out on all the effort and years of hard work. Or
it can mean shutting down the business.
Selling a business requires your realistic valuation. It may have been years of hard work to build
the company, but what is its real value in the current market place. If you decide to close your
business, the challenge is to deal with the financial and psychological aspects of a business loss.
Get a proper valuation on your company. Look at your business operations, management and
competitive barriers to make the company worth more to the buyer.
Money Sources: Find a business valuation partner. Consult with your accountant and financial
advisors for the best tax strategy to sell or close-out down business.

Task 6: Business support services available for small businesses

1. Business support is classified into three broad categories.

▪ Business start-up
Provides initial pre- start advice and basic business training to ensure that new businesses are
better prepared to cope with the businesses early months of trading
New start up businesses is vulnerable to failure, but start – up support can have dramatic effects
on improving survival rates.

▪ After care support

Is designed to provide a one-to-one advisory support structure of the early trading months of
the business

▪ General business development support.

Small firms do not have the resources to employ specialists and general business development
support, may be defined to meet specific short term needs of companies e.g. Finance and IT.
It could be long term or short term; it could involve business advisors operating in a facilitation
role, which recognises that a company’s needs change overtime.
▪ Examples of support services available for small enterprises include:
- Training services
- Marketing services
- Banking services
- Insurance services
- Postal services
- Management – business mentors
- Technology provision
- Business incubators
2. Business incubators
Business incubation centers provide the necessary facilities and support services for business success
at reasonable cost.
▪ The facilities include:
- Premises
- Machines
- Equipment
- Tools
▪ The services include:
- Internet services.
- Business training.
- Business counseling.
- Book-keeping and accounting services.
- Marketing assistance.
- Networking.
▪ Examples of incubators in Kenya include:
- Export Processing Zones (E.P.Z’s)
- Kenya Industrial Estates
- Kenya Industrial Research Development Institute (KIRDI)
- Agricultural Technology Centers, among others.
- Kenya Kountry Business Incubator. (KeKoBI)

NB: The Business Incubation Association of Kenya (BIAK) is the umbrella organization of
incubators in the country.

Suggested Learning Activities

1. Choose appropriate legal forms of business ownership for identified businesses
2. Identify relevant regulations that affect business
3. Discuss benefits derived from business incubators
BUSINESS ENTERPRISE MANAGEMENT

Introduction
Any business large or small must apply managerial skills in order to come up with decisions that are
practical. These decisions involve the utilisation of business resources so as to achieve organisational goals.
This chapter will introduce to the trainees the basic functions of management such as planning, organising
and controlling for effective and efficient utilisation of business resources.

Specific Objectives
By the end of this sub-module unit, the trainee should be able to:
a) Define the term management
b) Explain the functions of management in an enterprise
c) Explain the methods of inventory management
d) Explain the various methods of managing business resources

TASKS

Task 1: Definition of the term management

Management is the process of accomplishing tasks through the efforts of other people.
Management is therefore broadly defined as a set of activities applied to achieve business
objectives by using its resources effectively and efficiently in a changing environment.
Effectiveness is the ability to obtain the intended results while efficiency is accomplishing the
objectives by utilising minimum resources.

Task 2: Functions of management in an enterprise

Management is the process of solving problems in a creative and innovative way. Management
functions involve planning, organizing, leading, controlling and directing business activities to
achieve their goals. Management is necessary because factors such as employees, technology,
competition and costs keep changing.

1. Planning
Planning as a function of management means deciding in advance what actions to take, when and
how to take them
Planning is necessary for committing and allocating the organization’s limited resources towards
achieving its objectives in the most effective way.
Planning is also a process of determining what the business wants to accomplish (goals) and
deciding which activities can be applied to achieve them

2. Organizing
Organising refers to the formal grouping of people and activities in a manner that facilitates
achievement of organisation’s objectives

3. Directing
Directing is influencing other people towards achieving organisation goals. It involves
coordinating, delegating and motivating others to achieve the set objectives.

4. Controlling.

Controlling involves checking the progress of the activities and correcting deviations that may
occur along the way
Task 3: Inventory management

1. In any business, there is need to keep sufficient stocks of raw materials, and finished products in
order to meet the production and sales target. This is called inventory management. Inventory control
ensures the inventory items in a business are not overstocked or under stocked.

2. Overstocking leads to tying of capital unnecessarily while under stocking may lead to stock outs due
to sudden increases in sales (demand) or lead to slowing down of production if it involves raw
materials.

3. An entrepreneur should be able to know:

- When to order and re-order level.
- How often to order
- How much to order

4. When to order and re-order level

An entrepreneur needs to know how long it takes between sending an order and delivery, (lead
time). One needs to estimate how many units they expect to sell during that time (reserve stock or
reorder level) e.g. lead time in days = 30 days average usage per day=100 units reorder level = 30*
100 = 3000 units. A safety margin should be provided in case some delays are anticipated. It is
advisable to provide 50% of the reorder level

▪ In the above example = (100+50) x 30 = 4500 units

5. How often to order

This is determined by the sales behaviour of each item. Orders can be made as frequently as it is
necessary to avoid stock outs.

6. How much to order

An entrepreneur should order as much as they will sell in time until another order is made.
Generally, goods are cheaper when purchased in large quantities because of quantity discounts and
bargains.

Task 4: Managing of the enterprise resources

Entrepreneurship involves managing business resources for profit. Management of enterprise

resources involves management of the factors of production namely, land, labour and capital to
achieve the desired business objectives.

1. Land
Land is important for purposes of location. Land is also a source of other resources such as
minerals, trees, and soil which become inputs in the production process.
Several factors are examined in deciding the location of the business. They include:
- Availability and reliability of transport
- Distance from the source of raw materials
- Availability of affordable and skilled labour
- Power and water availability
- The characteristics of land available in terms of cost, physical outlook, availability for
extension.
2. Capital
Sourcing and effective management of financial resources is one of the critical aspects of
managing an enterprise successfully. Capital is required to establish the business, pay rent, and
purchase stock and pay water and electricity bills.
Managing of business financial resources entail s maintaining proper business records (book
keeping and accountancy) to avoid mismanagement of the business funds. Basic accounting
books and documents include purchase journals, cash books, and balance sheets.

3. Labour
Labour refers to human factor as a business resource. The management of human factor in a
business is called human resource management.

Human resource management involves matching the jobs in an organisation with qualified and
capable individuals. It is the process by which the business positions are filed with the right
people at the right time.

The process involves manpower planning, recruitment and selection, training and development
of personnel to suit the needs of the business and provision of services related to the welfare of
the personnel.

Human resource management also deals with handling grievances and the resolution of
conflicts of personnel in their performance of duties.

Suggested Learning Activities

1. Discuss the ways in which various resources in a business may be managed.
2. Role play management functions
 FINANCIAL MANAGEMENT

Specific objectives
a) Explain the meaning of financial management
b) Identify the various sources of business finance
c) Identify types of business records
d) Record business transactions in the books of accounts
e) Prepare financial statements
f) Interpret financial statements for business decisions
g) Explain the importance of budgeting to a business

TASKS
Task 1: Meaning of financial management
This is the process of controlling the financial resources within a business enterprise. To achieve
this objective, the entrepreneur must come up with formal plans called budgets and cash flow
statements.

1. Sources of business finance

Business finance refers to the funds necessary to start, run and expand a business.

When looking for business finance it is important to realize that some sources of finance may be
appropriate while others may not. There are various sources of business funds available to the
entrepreneur some of which are:
Personal finance- personal savings are a major source of capital during the start-up stage. The personal
savings may be obtained from former employment, money saved in savings/ fixed deposit accounts,
sale of personal assets such as land.

▪ Advantages of this source are:

- It is the least expensive since no interest is paid.
- It does not involve legal process of acquiring
- It allows for flexibility on the use of funds

▪ Disadvantages:
- It may be inadequate for business needs.
- May be used without proper planning.
- May take too long to raise adequate capital.

2. Family and friends contributions

The family may provide funds and/or free without necessarily taking up a share of the business.
Sometimes, it is possible to ask for financial assistance from friends. If they do not require to be paid
back, then this would be a form of equity capital
▪ Advantages
- Funds can be made available to the entrepreneur without conditions.
- The funds may carry little or no risk to the business
- Re-payment period may not be fixed.
- Family and friends may contribute to the management of the business.
▪ Disadvantages
- They might interfere in the business management.
- They might claim part of the profits.
- It may result in differences which may lead to serious consequences.
3. Venture capital
Venture capital is a type of private funding mainly provided for start-ups with a high potential for
profitability and growth. Venture capital typically comes from institutional investors and high-net
worth individuals.

The following are some of the advantages and disadvantages of venture capital:

▪ Advantages:
- Entrepreneurs can enjoy value addition activities that come with the capital e.g. mentoring,
business alliances, management assistance.
- Entrepreneurs planning to source venture capital must embrace creativity and innovation.
▪ Disadvantage:
- Venture capital ties the borrower to the lenders condition thus limiting the entrepreneur from
making certain personal decision.

4. Government Grants
These are grants that the government has put in place from time to time for onward borrowing by
entrepreneurs through intermediaries such as financial institutions. In the past these have included the
youth enterprise fund, the disability fund, women enterprise fund, fresh graduate funds and so on.

▪ Advantages of government grants:

- Lending conditions are friendlier compared to commercial lenders?
- Minimal interest rates are charged.
- Business Development Services( e.g. training, mentoring, incubation) are provided to
borrowers
▪ Disadvantages:
- There is high competition for the funds.
- Bureaucratic processing procedures leading to red tapes.
- Political patronage may interfere with the lending process.
- The amounts of credit available are limited.

5. Banks and non- bank financial institutions

A bank is a financial institution that accepts deposits, gives loans and other financial services. Non-
bank financial institutions provide banking services without meeting the legal requirements of a
bank. These institutions provide both short term and long term credit at their prescribed conditions.

▪ Advantages of such institutions are:

- Entrepreneurs can borrow large amounts of money to start or even expand a business.
- An entrepreneur can get different types of loans from these institutions
- The entrepreneur may receive non-financial services e.g. networking, marketing
information, business best practices, training etc.
▪ Disadvantages:
- The entrepreneur must have collateral to borrow any funds.
- High interest rates are charged.
- There are some hidden loan charges.

6. Borrowed funds (loans)

The government, micro finance institutions and commercial banks offer funds to small and medium
businesses. Some loans require security (collateral) while others do not. Interest rates on loans vary
from one lender to another. Such funds are available from the following institutions;
 7. Micro-finance Institutions/ lending Non-governmental Organizations (NGO’s)
Such institutions include: Kenya women Finance Trust, Faulu Kenya, K-Rep, World Vision, Plan
International and Strengthening Informal Sector Training (SITE).
▪ Advantages of these institutions are:
- Available at grass root level.
- Provide training in managerial skills.
- They lend to groups and individuals.
- Flexible lending rates
- Collateral may not involve physical property.
- May offer marketing assistance
▪ Disadvantages:
- May not operate in all regions of the country
- May limit the entrepreneur to operate as a group.
- Some of the institutions may target specific groups e.g. women/men/orphans/the challenged.
- There is a limit to the funds they lend.
- Regulations of getting funds are rigid.

8. Other sources of business finance:

There are other borrowing opportunities open to small businesses such as Merry-go-rounds:
These are informal groups the entrepreneur may belong to.
▪ Advantages of such groups are:
- No securities are necessary.
- It is simple to obtain a loan.

9. Commercial banks:
▪ Advantages of commercial bank loans are as follows:
- Can lend out large amounts of money.
- Repayment periods can be re-negotiated.
- They also offer non-financial advice on business operations.
▪ Disadvantages:
- The collateral required is higher in value than the borrowed amount.
- High interest rates are charged.
- The amount to be borrowed is restricted to the ability to repay.
- Some costs on the borrowed loan may be hidden.
- Some loan conditions are ambiguous.
Task 3: Types of business records
Business records are essential for survival of any business. Records are important for various reasons
such as taxation, decision making among others.

The following are some of the basic records that an entrepreneur should use:

1. The cash book.

The cash book is a record in which cash received and paid are recorded. It is divided into two sides.
The left side is used for recording cash received while the right side is used for recording cash
payments.

▪ Format of a cash book

 2. Purchases journal.
This is a diary in which all stock bought on credit is recorded on a daily basis. It has three columns
which include the date, detail, and amount.
- The date column records the date when the goods were purchased.
- The details column records the person or organization that sold the goods on credit.
- The amounts column records the value of goods purchased.
▪ Format of a purchases journal

Date Particul Foli Cas Ban Date Particul Foli Cas Ban
ars o h k ars o h k

Date Details Amount

3. Sales journal.
This is a diary in which all goods sold on credit are recorded on a daily basis.
Like a purchase journal it has three columns: the date, details and amount column. The details
column records the names of persons to whom goods were sold on credit.

▪ Format of a sales journal

Date Details Amount

4. Recording business transactions in the books of accounts

▪ Book Keeping
This involves recording all the transactions, which can be expressed in money, arising from the
business activities as they occur and entering them in the appropriate books.
 ▪ Systems of bookkeeping
There are two systems: the single entry and the double entry. The double entry is most
commonly used in industry and commerce.
The double entry system is based on two principles.
- The principle that every transaction has two parts, therefore two entries are made in the
books of account in respect of each transaction.
➢ One entry to record the item coming into the business
➢ One entry to record the item leaving the business
- The principle that the value of the item(s) coming in is equal to the value of item(s) going
out.
Value coming in = Value going out
Thus, a transaction involves an exchange of items and the items exchanged have the same
value i.e., Assets = liabilities and owner’s funds.

5. Debits and credits

The terms debit and credit are used to describe an increase or decrease in the categories of the
accounting equation (assets, liabilities and capital) and incurred expenses.
The following are the rules of double entry system

Type of Debit Credit

account
Assets To increase To decrease
Expenses To increase To decrease
Liabilities To decrease To increase
Income To decrease To increase

The rules provide that

- Debits are recorded on the left side of the ledger
- Credits are recorded on the right side of the ledger

Task 5: Preparation and interpretation of financial statements

Interpreting Financial Records

1. Financial Statements
Understanding financial statements is important to an entrepreneur in determining financial health
of his business.
Entrepreneurs need to be able to:
- Prepare simple statements.
- Interpret and analyse the information contained in the statements
- Identify strengths and weakness in the financial conditions of the business based on the
statements
- Identify strengths and weakness in the financial conditions of the business based on
the statements
- Make changes in business operations to improve the financial conditions of the business.
▪ The two most important statements an entrepreneur requires for sound financial decisions are :
- Profit and loss account
- Balance sheet
2. Profit and loss statement

A profit and loss statement helps to determine whether a business is operating at a profit or a loss
for a given period of time e.g., one year.
There are five steps to calculating the profit and loss statements:
- Determining sales- including sales for credit and cash.
- Cost of goods sold- this refers to the price paid by the business for goods merchandise sold.
It can be compared by adding the value of the goods purchased during the period to the initial
stock.
- Gross profit- This is determined by subtracting the cost of goods sold from sales.
- Expenses- These include labour cost and other cost of operating the business.
- Net profit- This is the amount remaining when the expenses are deducted from the gross
profit.
▪ An example of a profit and loss account is shown below:

Koske’s Profit and Loss Account for the Year Ending 31st December 2009-10-15

Purchases Sales
150,000 200,000

Expenses: Gross profit

Rates 50,000
1,500
Rent
5,000
Wages
5,000
Electricity
3,500
Water
800
Advertisement
4,500 _____
Transport
6,000 50,000
Total expenses
25,300
Net profit
24,700

50,000

Therefore, Koske’s net profit of Ksh 24,700 is the return on capital invested in the business. In
order to make his financial decisions he has to compare one year’s profit with those realised in
other years.
If Koske had invested Ksh. 100,000 in the business, he could calculate his profit turn-over as
follows;
 Net profit × 100 = 24,700 × 100 = 24.7%
Capital 100,000

This would guide Koske whether it is profitable to continue with the business or re-invest
elsewhere.

It is also important for koskei to calculate the net profit to gross profit.

▪ Balance Sheet
The balance sheet is a financial statement which indicates what the business owns and what it
owes on any day of the business life.
The financial figures on the balance sheet change from day to day because money is always
coming in and going out of the business.
The formula used to prepare a balance sheet is
Assets = liabilities + capital (Net worth)

▪ Assets
These refer to everything a business owns e.g. cash, buildings, equipment, stock. Assets can be
current or fixed.
▪ Liabilities
These refer to anything that the business owes e.g. loans, credit notes, taxes. Liabilities can be
current or long term.

▪ Net worth
This is what a business owes after subtracting liabilities. It represents the owners claim in the
business.

Task 7: Importance of budgeting to a business

A budget is a plan that outlines organizations financial or operational goals. It is an action plan. It
helps a business allocate resources, evaluate performance, and formulate plans. Understanding the
importance of budgeting is the first step in successful financial planning.
A regularly reviewed budget enables an entrepreneur to compare actual performance and quickly
identify losses and take remedial action.
Budgets are intended to provide a basis for evaluating expenditures that will impact the business for
more than one year.

Suggested Learning Activities

1. Carry out a field study to identify different sources of financing a business stating the
benefits and limitations of each source.
2. Discuss the kind of products offered by financial institutions which are beneficial to local
businesses.
3. Select a business enterprise within your locality and highlight some appropriate and
inappropriate management practice by the enterprise.
 MARKETING

Introduction
For any business to grow there must be an exchange process. This exchange process is realised when
business owners are able to sell their goods/services to the customers.
This sub-module unit will deal with definition of the terms market and marketing, components of
marketing and methods of gathering market information

Specific Objectives
By the end of this sub-module unit, the trainee should be able to:
a) Define the terms market and marketing.
b) Outline the components of marketing
c) Describe the process of Marketing

TASKS
Task 1: Definition of terms
1. Market.
A market is any place where sellers exhibit or show their goods for the buyers to see and
purchase/ buy. A market can also be defined as the existing and potential customers who are
willing and able to buy a product/service.

2. Marketing.
Marketing is the process of making known what products/ services an entrepreneur is selling or
wants to sell.
Task 2: Components of marketing
There are components of marketing generally referred to as the marketing mix or the 4Ps of
marketing as outlined below:
1. Product
This is the good/item or service the entrepreneur intends to sell in order to satisfy customer’s
needs.

2. Place
This is the location where the product is to be sold. The product must be in the right location
or site, at the right time for the customers. Place also refers to the channels used for the
product to reach the consumer.

3. Price:
This is the monetary value of a product. The price should be able to cover the cost incurred and
earn some profits.

4. Promotion:
This is the process of communicating with customers to influence them towards buying
the product.
 Figure 2: showing the marketing mix elements

MARKETING MIX

PRICE PRODUCTS PEOPLE PLACE PROMOTION

>Product variety >Income >Channels >Advertising
>List price
>Quality >Employment >Coverage >Personal selling
>Discounts >Age >Assortments
>Design >Sales promotion
>Allowances >Features >Tastes and >Locations >Publicity
>Payment >Brand name Preferences >Inventory
period >Packaging >Population >Transport
>Credit >Sizes density
terms >Services
>Warranties

TARGET MARKET

Task 3: The marketing process

1. The marketing concept involves the following stages:

- Determining the needs of the organisations customers (market research)
- Analysing their competitive advantage(market strategy)
- Selecting specific markets to serve( target market)
- Determining how to satisfy those needs (marketing mix)

2. Market research involves obtaining information about the market. This is necessary in order to
manage the marketing functions successfully. A market research programme based on a
questionnaire can disclose problems and areas of dissatisfaction that can be remedied or new
products and services that could be offered successfully.

3. Marketing Strategy includes identifying customers groups (target markets) which a small
business can serve well than its competitors. The strategy should try and address customer needs
which are currently not being met in the market place.

4. Target market/market segmentation

▪ Market target is the style of marketing where the seller distinguishes between different segments
to focus on and develop on market offers tailored to meet the needs and demand of each target e.g.
an organisation could develop an airline system designed to meet the needs of affluent( rich)
persons, for a clean and comfortable flight, at a higher price.
 ▪ Market segment involves dividing the heterogeneous market into several submarket or segments.
The major ways to segment a market are:
- Geographical segmentation – involves specialising in serving customers in a particular
geographical area.
- Customer segmentation e.g. identifying groups of people who are likely to buy the product or
services i.e. securing heavy users before trying to secure new users.
- Demographical segmentation e.g. age , occupation, religion , lifestyle or income
- Psychographic e.g. social class, lifestyle or personality

Suggested Learning Activities

1. Choose a product and explain how to market it based on the 5Ps.
2. Discuss the marketing styles used by local entrepreneurs.

ENTERPRISE SOCIAL RESPONSIBILITIES

Specific Objectives
By the end of this topic, the trainee should be able to:
a) Define the terms social responsibilities and business ethics
b) Explain the meaning of enterprise social responsibility
c) Identify types of enterprise social responsibility
d) Explain the importance of enterprise social responsibility
e) Explain ethical behaviour in a business enterprise

TASKS
Task 1: Definition of terms

Business ethics refers to the study of behaviour and morals in a business situation. It involves
investigation of business practices in light of human values.
Business ethics (also known as Corporate ethics) examines ethical principles and moral or ethical
problems that arise in a business environment. It applies to all aspects of business conduct and is
relevant to the conduct of individuals and business organizations as a whole.

Task 2: Meaning of enterprise social responsibility

Social responsibility consists of those obligations a business has to society. The small business has
certain social obligations, responsibilities and responsiveness to society. This regards the intensity
or to what extent the small business should be involved to society issues.

Social responsibility in enterprise development may be viewed as a contribution that the

community gets from the established enterprise. This includes areas relative to society’s goodwill
towards the enterprise, waste management within the environment and governments effort in
supporting development.

However, an enterprise also has social concerns that should be recognised. These include:
protection of the environment to avoid creating health hazards to the people, provision of goods
and services coupled with equitable distribution of resources, gender sensitivity issues, and
coverage of ethical business practices to promote economic development of a country.

Some businesses simply react to social issues through obedience of the laws, others make a more
active response, taking, and accepting responsibility for various programmes. Others are more
proactive and are even willing to be evaluated by the public for various activities.
Task 3: Types of enterprise social responsibility

Generally, small businesses have a social duty and obligation to develop and enhance the quality of
the society in which they operate

The nature of social responsibility for small businesses includes:

1. The environment such as pollution control, protection, and conservation of natural resources.
2. Community involvement such as donations, sponsorship of public health projects, support of
education and arts, and community recreation programmes.
3. Human resources such as promotion of employment, health and safety, employee training and
development, counselling programmes, career guidance, and employee physical fitness.
4. Fair business practices such as employment and advancement of women and minorities,
employment and advancement of disadvantaged e.g. the disabled, good and fair prices, quality
products and true information about products.
.
Task 4: Importance of enterprise social responsibility

Enterprise social responsibility forces people to be responsible for their actions and makes it
difficult for them to “exploit” other people for either selfish or unselfish reasons. Consequently it
allows a business to use its resources and engage in activities designed to increase its profits with
the laid rules and regulations thus engage in open and free competition without deception or fraud.
It also helps in improving the living conditions of citizens.

It provides for increased competitive advantage of an enterprise and nation in general through good
performance of “Corporate Social Responsibility” (commitment by the enterprise to make
contributions to sustainable economic development, co-operation with the community and society
to improve their lives for the mutual benefit of the employees.)

▪ Enterprise social responsibility offers several benefits to the organisation;

- To protect their trademark and is not criticized by the society;
- To promote sustainably their reputation; expand the market and price advantages;
- To be engaged in investment programs and plans for the purpose of social responsibility
 BUSINESS PLAN

Introduction
A business plan is an important document for an entrepreneur because it acts as a guide and reference
point in regard to overall business management.
This sub-module unit outlines the major components of a business plan and how to write it.

Specific Objectives
By the end of this sub-module unit the trainee should be able to
a) Define the term business plan
b) Describe components of a business plan
c) Explain the uses of a business plan
d) Prepare a business plan

TASKS
Task 1: Definition of business plan
This is a written document justifying the business and gives a step-by-step explanation of how the
business will achieve its goals. It summarises the operational and financial objectives of a business
and contains the details, plans and budgets showing how the objectives will be achieved.
A business plan shows a clear picture of what the business is, where it is going and how the
entrepreneur proposes to get there.

Task 2: Components of the business plan

A business plan should be comprehensive enough to give any potential user a complete picture and
understanding of the venture and will help the entrepreneur clarify his or her thinking about the
business.
Although there is no generally accepted format of a business plan a typical format would possess
the following:
1. Cover page:
It contains the name of the business, its owner(s), nature of the business, and the organization to
which the business plan is to be presented.

2. Executive summary:
Contains a brief summary of the main contents of the business plan. It is prepared after the entire
plan is written. It summarizes every chapter of the page.

3. Business description:
Contains a comprehensive description of the business and what it intends to accomplish
Example of information contained includes:-
- Name of the business and its contact
- Vision and mission of the business.
- Location.
- Form of ownership.
- Major activity of the business.
- Major customers.
- Justification statements/viability
- The goals of the business

4. Marketing plan:
The marketing plan outlines the specific action the entrepreneur intends to carry out to attract
potential customers. The marketing segment is divided into two major parts:
 - Research and Analysis: describes the target market i.e. who the customers are, the size and its
trends, the existing and possible competition.
- Marketing strategy: This part describes the methods that will be used to market the product,
price the product, make sales, advertise and promote the product and also the distribution
channels that will be used.

5. Organization/ management plan.

This is the section that describes the key management personnel required, their qualifications,
duties, salaries and incentives. The organization structure is also defined
- It also identifies other employees needed, their duties, pay, training needs.
- Other support services required are highlighted in this section e.g. banking services, legal
services, management consultancy Etc.
- Any licenses, permits or regulations affecting the business are discussed here.

6. Operational plan/Production plan.

This section describes the processes, activities, and requirements involved in realizing the
operational goals of the business and required raw materials.

7. Financial plan
This section outlines the financial needs of the business and sources of raising the finances and
also gives the projections of income and expenditure through such key statements as:
- Cash flow statement
- Income statements (trading, profit and loss account statements) among others.

Task 3: Uses of a business plan

A business plan is important for a business because it can be used to:
- Obtain finances
- Hire staff
- Attract partners -
- To expand the business
- Guide the business in its operations

Task 4: Writing a business plan

COVER PAGE
Name of business:
........................................................................................................................................................................
................................................................................................................................................
Address and telephone:
........................................................................................................................................................................
................................................................................................................................................
Name of owner:
........................................................................................................................................................................
................................................................................................................................................
Date:
........................................................................................................................................................................
................................................................................................................................................
Signature:
........................................................................................................................................................................
................................................................................................................................................
EXECUTIVE SUMMARY
Summarised statement on:
i) Business description
ii) Opportunity and entity
iii) Target market
iv) Management team
v) Financial plan
vi) Critical risks and problems and solutions

BUSINESS DESCRIPTION
i) Owner Details
Name:.............................................................................................................................................................
................................................................................................................................................
Age:................................................................................................................................................................
................................................................................................................................................
Address:..........................................................................................................................................................
...............................................................................................................................................
Occupation:....................................................................................................................................................
................................................................................................................................................
Education/Professional Qualifications:
........................................................................................................................................................................
................................................................................................................................................
Business Experience:
........................................................................................................................................................................
................................................................................................................................................
ii) The Business Venture
Name of business:
........................................................................................................................................................................
................................................................................................................................................
Location of business:
........................................................................................................................................................................
................................................................................................................................................
Legal form of business:
........................................................................................................................................................................
................................................................................................................................................
Major activity of business:
........................................................................................................................................................................
................................................................................................................................................
Principal customers
........................................................................................................................................................................
................................................................................................................................................
Location of customers:
........................................................................................................................................................................
................................................................................................................................................
Amount to be invested by owners
........................................................................................................................................................................
................................................................................................................................................
Amount to be borrowed:
........................................................................................................................................................................
................................................................................................................................................
Total amount needed for the venture:
........................................................................................................................................................................
................................................................................................................................................
iii) The Product/Service.
Name of product/service:
...........................................................................................................................................................
Features of product/service:
...........................................................................................................................................................
Benefits obtained from product/service:
...........................................................................................................................................................
Unique features of product/service:
............................................................................................................................................................
iv) Entry Plan
Competitive advantage of the business:
........................................................................................................................................................................
................................................................................................................................................
Weakness of competition:
........................................................................................................................................................................
................................................................................................................................................
Pricing plan:
........................................................................................................................................................................
................................................................................................................................................
Plans to attract customers:
........................................................................................................................................................................
................................................................................................................................................
v) Growth plan
Trends which signal business growth:
........................................................................................................................................................................
................................................................................................................................................

Opportunities arising from this trend:

........................................................................................................................................................................
................................................................................................................................................
Plans to take advantage of the opportunities:
........................................................................................................................................................................
................................................................................................................................................
MARKETING PLAN
i) Potential Customers
Type of customers (individuals, institutions):
........................................................................................................................................................................
................................................................................................................................................
Total target market population:
........................................................................................................................................................................
................................................................................................................................................
Number of customers who can buy product/ service:
........................................................................................................................................................................
................................................................................................................................................
ii) Competition.
Names of the key competitors:
........................................................................................................................................................................
................................................................................................................................................
Location in relation to your business:
........................................................................................................................................................................
................................................................................................................................................
Size of the competitors:
........................................................................................................................................................................
................................................................................................................................................
Comparisons between your product(s) or service(s) and those of the competitors:
........................................................................................................................................................................
................................................................................................................................................

Strength and weakness of the competitors:

........................................................................................................................................................................
................................................................................................................................................
Plans to capitalize on the weakness of the competitors:
........................................................................................................................................................................
................................................................................................................................................
iii) Pricing.
Methods of calculating the selling price of your product/ service:
........................................................................................................................................................................
................................................................................................................................................
Factors which will influence your price setting e.g. competitors prices:
........................................................................................................................................................................
................................................................................................................................................
Actual selling price(s) of your product(s) or service(s):
........................................................................................................................................................................
................................................................................................................................................
Credit terms to be offered:
........................................................................................................................................................................
................................................................................................................................................
Discounts to be allowed:
........................................................................................................................................................................
................................................................................................................................................
Any after-sales service(s) and relevant costs:
........................................................................................................................................................................
................................................................................................................................................
iv) Sales Tactics.
Method of direct selling or personal selling:
........................................................................................................................................................................
................................................................................................................................................

Method of indirect selling:

........................................................................................................................................................................
................................................................................................................................................
Method of recruitment and retention of the sale force:
........................................................................................................................................................................
................................................................................................................................................
Utilization of distributors or agents:
........................................................................................................................................................................
................................................................................................................................................
Ways of selecting and motivating distributors or agents:
........................................................................................................................................................................
................................................................................................................................................
Geographical area you intend to serve:
........................................................................................................................................................................
................................................................................................................................................
v) Advertising and promotion.
Media to be used:
........................................................................................................................................................................
................................................................................................................................................
Product/service image to be portrayed:
........................................................................................................................................................................
................................................................................................................................................
Image to be projected regarding business:
........................................................................................................................................................................
................................................................................................................................................
Frequency of advertisements:
........................................................................................................................................................................
................................................................................................................................................
Cost per advertisement placement:
........................................................................................................................................................................
................................................................................................................................................
Measuring effectiveness of the advertisements:
........................................................................................................................................................................
................................................................................................................................................

Plans for initial promotional campaign:

........................................................................................................................................................................
................................................................................................................................................
Plans for regular promotional methods:
........................................................................................................................................................................
................................................................................................................................................
Cost of each promotional event:
........................................................................................................................................................................
................................................................................................................................................
Measuring effectiveness of promotional campaigns:
........................................................................................................................................................................
................................................................................................................................................
vi) Distribution
Channels to be utilized:
........................................................................................................................................................................
................................................................................................................................................
Means of transport you will use:
........................................................................................................................................................................
................................................................................................................................................
Transport cost per month:
........................................................................................................................................................................
................................................................................................................................................
Anticipated distribution problems:
........................................................................................................................................................................
................................................................................................................................................

Overcoming distribution problems:

........................................................................................................................................................................
................................................................................................................................................
ORGANISATION PLAN
i) Structure (draw)

ii) Key Personnel

Number of positions:
........................................................................................................................................................................
................................................................................................................................................
Title of positions:
........................................................................................................................................................................
................................................................................................................................................
Duties of positions:
........................................................................................................................................................................
................................................................................................................................................

Remuneration level:
........................................................................................................................................................................
................................................................................................................................................
Incentive package:
........................................................................................................................................................................
................................................................................................................................................
iii) Ordinary Employees.
Numbers required:
........................................................................................................................................................................
................................................................................................................................................
Titles and duties:
........................................................................................................................................................................
................................................................................................................................................
Remuneration:
........................................................................................................................................................................
................................................................................................................................................
Incentive package:
........................................................................................................................................................................
................................................................................................................................................
iv) Support Services.
Banking:
........................................................................................................................................................................
................................................................................................................................................
Book keeping:
........................................................................................................................................................................
................................................................................................................................................
Legal:
........................................................................................................................................................................
................................................................................................................................................

Postal:
........................................................................................................................................................................
................................................................................................................................................
Management advice:
........................................................................................................................................................................
................................................................................................................................................
Other:
........................................................................................................................................................................
................................................................................................................................................

PRODUCTION PLAN

h) Production and sales

No Item Total Quantity per Sales per Capacity/Utilisation

year year
ii) Machinery/equipment

No Item Unit Price Total Maintenance Costs

Value

Total:

iii) Raw Material Requirement

No Item Quantity Total Annual Requirement

Value Source

Total:

iv) Utilities / Infrastructure

No Item Annual Total Maintenance

Requirement Annual
Costs

Total:

v) Labour

No Particulars No. of Staff Annual Further Training

Wages/Salaries Required
Skilled
Semi-skilled
Unskilled
Owner’s
Salary

Total:
 vi) Administrative and Selling Costs

N Item Quantity Amount

o.

Total:
Summary of Production Cost

TYPE OF COST MONTHLY COST

Source of materials
Materials required
Transportation
Workers/labour
Overhead expenses
Cost per unit
TOTAL COST
FINANCIAL PLAN
i) Pre- operational Costs
ITEM COST
Transport
Market research
Plan properties
Meeting people
Photocopying
Installations
TOTAL COST

ii) Working Capital.

ITEM AMOUNT
Stock of raw materials
Work in progress
Stock if finished goods
Debtors
Cash
TOTAL WORKING CAPITAL

Suggested Learning Activities

1) Carry out a field study to identify different sources of financing a business stating the benefits
and limitations of each source.
2) Discuss the kind of products offered by financial institutions which are beneficial to local
businesses.
 INFORMATION COMMUNICATION TECHNOLOGY (ICT) IN A BUSINESS

Introduction
All businesses, small or large need information. Information is data that is relevant for a specific
purpose. Businesses require information on new products, technological changes and competitors to be
able to cope. The information must be communicated accurately and timely. It must also be complete
and relevant to meet the demands of today’s business environment.

Specific Objectives
By the end of this sub-module unit the trainee should be able to:
a) Define the term information communication Technology
b) Explain the benefits of ICT to a small enterprise
c) Identify uses of ICT equipment in business enterprise

TASKS
Task 1: Definition of Information Communication Technology (ICT)
Information and Communication Technology is an umbrella term that includes any communication
device or application. ICT describes a range of technologies for gathering, storing, retrieving,
processing, analysing and transmitting information.

Task 2: Benefits/Importance of ICT to a small business enterprise

A business can utilise ICT in pursuit of its objectives. ICT enables a business to access the relevant
information for efficient management of the business. This is in turn leads to;
- Increased profits,
- Improved time management,
- Increase in cost-effectiveness,
- Increase in sales,
- Higher market exposure
- Reduced work force among others.

Task 3: Uses of ICT equipment

The following are some of the benefits associated with the various ICT tools

1) The Phone
The phone is used to communicate verbally with customers and suppliers. This includes both
the fixed line and mobile phones Other than verbal communication, the mobile phone is also
used for sending and receiving messages, sending and receiving money e.g. MPesa.

▪ Benefits of a mobile phone

- It is affordable
- It is easy to use and any one can understand its functions
- It is portable and therefore can be used anywhere at any time
- It is efficient because feedback is immediate
- It can be used in extreme remote areas as long as the network coverage is available

2) Radio
- This is a very effective way to advertise a business
- It is quite inexpensive and can reach a wide audience
- Some communities have local radio service stations and the small business may use this
service to advertise its products or services where the entrepreneur may be
 interviewed during a programme. Examples of such radio service stations are; Inooro
FM, Murembe FM and Ramogi FM.
3) Television
A small business may use the television as a tool for sourcing technological information, new
products/services, market trends and general information that will assist the entrepreneur to run his
business.
4) Print Media
Examples of such are; newspapers, advertising papers/magazines and business directories.

▪ Newspapers e.g. the local dailies(The Nation) which the business enterprise can use to ;
- Advertise their products/services
- Get information on market trends
- Access information on new technology, new products/services
- Access information on political and economic trends in the country

▪ Advertising Magazines/Papers/Journals/Business directories

These are useful tools for advertising products/services/ location of the business enterprise

5) The Fax machine

This is short of “facsimile machine”. This is a machine that allows transferring a copy of a
document through the telephone line. Both the person sending and receiving it must have a fax
machine.

▪ Benefits of the fax machine to small business

- The message sent is received instantly
- If one is dealing with people far away, the fax can be a less expensive means of
communication
- The sent copy is like the original copy
- A message sent through a fax machine confirms in writing anything that has been
previously agreed on verbally

6) The Computer
This is one of the modern ways of communicating and advertising in use. It can be used in the
following ways;
- Word processing – writing letters or receipts
- Storing information – financial data, customers addresses, suppliers addresses
- Keeping track of records – purchases and sales
- Reminder messages – products or service delivery dates
- Generating advertising leaflets, posters or flyers
- Generating financial statements
- E-business – this is publicizing the business through the Internet

Task 4: Emerging issues and trends

1) Mobile phone money transfer: mobile phone payment service is used not only as a means of
sending and receiving money but also for selling goods/services, paying bills (electricity,
water, creditors), and also as a means of safe deposit/ banking.
2) Marketing: the mobile phone can be used as a tool of advertising a business product/service.

Suggested Learning Activities

1) Discuss how available ICT can be used in a small business appropriately.
2) Visit a small business which uses ICT equipment/tools and discuss how it contributes to
the business’ performance.
3) Discuss how an entrepreneur can use the current technological advancement for the benefit of
his/her business?
EMERGING ISSUES AND TRENDS IN ENTREPRENEURSHIP

Specific Objectives
By the end of this sub- module, the trainee should be able to:
a) Define of terms.
b) Identify the emerging issues and trends in entrepreneurship

TASKS
Task 1: Emerging issues and trends in entrepreneurship
Trends refer to long term movements in a certain direction. In society a trend describes a direction
in the tastes and desires of the general population. For entrepreneurs, trends present an incredible
world of opportunities. Once an entrepreneur identifies a specific trend then all their imagination
and creative ability can go into generating products and services to satisfy the demand that the
trend creates.

Due to the dynamic nature of the business environment, entrepreneurs are advised to scan the
environment for any new trends. New marketing methods and technologies for example, may
emerge thus creating the need to be inculcated within continuing business ventures.

Emerging trends in enterprise management can be classified as technological, global,

social/cultural, or economic issues. Technological trends equip an entrepreneur with knowledge
that is useful in the expansion and growth of the business. The use of new technology creates a
competitive advantage for the business by opening a potentially attractive market for an
entrepreneur.

Suggested Learning activity

1. Discuss impact of emerging issues and trends in entrepreneurship development

Suggested Learning Resources

1. Group discussion
2. Textbooks
3. Internet
4. Resource persons

REFERENCES
1. Hisrich R., Shepherd D. Entrepreneurship Development .Seventh Edition . McGraw –Hill.
2. Deakins D., Freel M. Entrepreneurship and small firms. Sixth Edition.McGraw-Hill.