UNIVERSITY OF THE PHILIPPINES

INSTITUTE FOR SMALL-SCALE INDUSTRIES

e-START

YOUR OWN

BUSINESS
Module 1. Decoding the
Entrepreneurial DNA

entrepreneurship.org.ph
STNETNOC FO ELBAT
Module 1. Decoding the

Entrepreneurial DNA

1
Introduction

2 Who Is The Entrepreneur?

3 The Entrepreneur vs. The Employee

Personal Entrepreneurial
4 Competencies

Strengths And Weakness Of

7 Small Business

Mistakes Made By Small

9 Businesses

10
Summary

11
Special Points of Interest

12
Glossary

UNIVERSITY OF THE PHILIPPINES

INSTITUTE FOR SMALL-SCALE INDUSTRIES
 Module 1
Decoding the Entrepreneurial DNA

Resources Needed:
After studying this module, you will be able to: Computer
1. describe the qualities of a successful entrepreneur; Adobe Reader
2. assess your own entrepreneurial competencies; and Microsoft Office
3. avoid the common mistakes committed by new entrepreneurs. Internet Connection

So you have set your mind to becoming an entrepreneur. You want to be your own
the boss. That’s great! But do you know what you are getting yourself into? Do you
know what it takes to be an entrepreneur? Do you have what it takes to become a
successful entrepreneur?

The word entrepreneur is derived from the French "entre" (to enter) and "prendre"
(to take). An entrepreneur is someone who recognizes opportunities, organizes
resources to take advantage of an opportunity, and willingly accepts the financial
risks associated with the new business venture.

Entrepreneurs are known to possess certain qualities. In this module you will learn
more about entrepreneurs and their successful qualities. Do you possess the so-
called entrepreneurial traits? Find out by taking the Personal Entrepreneurial
Competencies (PECs) test.

It is unfortunate that not all entrepreneurs make it big. Many have failed. Avoid the
common pitfalls of starting a business and increase your chances of success by
learning from the mistakes of others.

Module 1: Decoding the Entrepreneurial DNA 1

Who is the Entrepreneur?

? ?
? ? ?

People tend to confuse an entrepreneur with just about any other businessperson. They
believe that whenever one engages in business, that person is engaged in entrepreneurship.

That’s a misconception. Although entrepreneurship is a business activity, not all business

activities may be considered enterprising or entrepreneurial activities. Entrepreneurship
necessarily involves innovation, that is, the systematic development of something new and
useful.

Take for instance a person who puts up the nth sari-sari or variety store in the neighborhood.
Although it is a business, it may not be considered an entrepreneurial activity because there is
no innovation. Even if the owner took some risk in putting up the store, it is not enough to
consider the business to be enterprising or entrepreneurial. Hence, the owner may not be
called an entrepreneur.

Who then is an entrepreneur?

According to BusinessAccent.com—a website that provides articles and insights on general

business, management, marketing, ethics, and self-improvement—a businessperson is similar
to an entrepreneur because an entrepreneur is a businessperson. An entrepreneur, however, is
not your usual businessperson. An entrepreneur is innovative, creative, and more concerned
with the product quality and the satisfaction of customers rather than mere profits.

2 Module 1: Decoding the Entrepreneurial DNA

The Entrepreneur vs The Employee

For generations the Philippine educational system has primed young Filipinos to become
employees after graduation. However, as jobs are getting harder and harder to find these days,
the Filipino youth of today should start considering an entrepreneurial career.

How different is an entrepreneur from an employee?

An entrepreneur and an employee think differently. Each has a mindset of his own. Although
the following list is far from comprehensive, the differences enumerated will give you some
insight into the characteristics of entrepreneurs and employees.

Entrepreneurs….. Employees…..

Are the boss Work for the boss

Create jobs Take on jobs
Value wealth over job security Value job security over wealth
Not dependent on monthly paycheck Highly dependent on monthly paycheck
Work long hours, especially during startup Work regular hours
Build their own assets Work to build someone else’s asset
Have a higher tolerance for risk Do not like to take risks
Pay taxes only on NET income Pay taxes on total income
Adapt quickly to change Often resist change
Attain wealth and financial security at a Will have to follow strict saving and
young age investment plan to reach financial security
Decide who to hire and who they work with by retirement
Have freedom to control direction of their Will not become financially secure while
company still young
Are able to use all of their skill sets Have little say over who they work with and
Make money even when the direction of the company they work for
they are asleep Make money only when they are working

Do you think you can make the shift from being an employee to an entrepreneur? This
transition takes a lot of work and planning. Below are videos from the Internet which provide
steps that you can take to ensure a successful transition. Just click on the following links:

How to Transition from Employee to Entrepreneur

https://www.youtube.com/watch?v=ZNHqtpm-GKU
When to go from employee to entrepreneur | CNBC Make It
https://www.youtube.com/watch?v=rmaeXiz2J8Y
Employee vs. Entrepreneur - 5 Mindset Shifts
https://www.youtube.com/watch?v=CXyTLCJw1Qc

Module 1: Decoding the Entrepreneurial DNA 3

Personal Entrepreneurial Competencies

Do you have what it takes to be an entrepreneur?

Every career draws on the competencies of an individual. Some of these competencies may be
general and some are specific to a chosen career. Empirical evidence suggests that the
competencies for entrepreneurial success are many and varied. The term "ENTREPRENEURIAL
COMPETENCIES" refers to the key characteristics possessed by successful entrepreneurs that
enable them to perform entrepreneurial functions effectively. These competencies were
identified by the Management Systems International (MSI) following the conduct of an
international study in the late eighties.

MSI grouped ten behavioral characteristics of successful entrepreneurs into three clusters: the
Achievement Cluster, Planning Cluster, and the Power Cluster.

These competencies are briefly defined and described by MSI on the next page:

ACHIEVEMENT CLUSTER PLANNING CLUSTER POWER CLUSTER

Opportunity Seeking Goal Setting Persuasion and

Persistence Information Seeking Networking
Commitment to the Systematic Self-
Work Contract Planning Confidence
Risk Taking and Monitoring
Demand for Efficiency
and Quality

4 Module 1: Decoding the Entrepreneurial DNA

Achievement Cluster

Opportunity Seeking
An entrepreneur sees and acts on new business opportunities.
He/she seizes unusual opportunities to obtain financing, equipment, land, work space,
or assistance.
Persistence
An entrepreneur takes repeated or different actions to overcome an obstacle.
He/she makes a personal sacrifice or uses extraordinary effort to complete a job.
He/she sticks with own judgment in the face of opposition or early lack of success.
Commitment to the Work Contract
An entrepreneur accepts full responsibility for problems in completing a job for
customers.
He/she pitches in with workers to get the job done.
He/she expresses a concern for satisfying the customer.
Risk Taking
An entrepreneur takes what he/she perceives to be moderate risks.
An entrepreneur states a preference for situations that involve moderate risk.
Demand for Efficiency and Quality
An entrepreneur acts to do things that meet or exceed existing standards of excellence
or improve on past performance.
He/she strives to do things better, faster, or cheaper.

Planning Cluster

Goal Setting
An entrepreneur sets clear and specific short-term objectives.
He/she sets clear long-term goals.
Information Seeking
An entrepreneur personally seeks information on clients, suppliers, and/or
competitors.
He/she consults experts for business or technical advice.
He/she uses contacts or information networks to obtain useful information.
Systematic Planning and Monitoring
An entrepreneur develops and uses logical, step-by-step plans to reach goals.
He/she evaluates alternatives.
He/she monitors progress and switches to alternative strategies when necessary to
achieve goals.

Module 1: Decoding the Entrepreneurial DNA 5

Power Cluster

Persuasion and Networking

An entrepreneur uses deliberate strategies to influence or persuade others.
He/she uses business and personal contacts to accomplish own objectives.
Self-Confidence
An entrepreneur has a strong belief in self and own abilities.
He/she expresses confidence in own ability to complete a difficult task or meet a
challenge.

For more information on the PECs, click on the link for Personal Entrepreneurial
Competencies.mp4 to view the presentation on PECs.

ACTIVITY 1

Directions: Take time to assess your entrepreneurial competencies. Refer to our virtual
learning environment (VLE) and click on PECs SRQ. Answer the self-rating questionnaire (SRQ)
as instructed. The individual SRQ profile will be posted in the VLE upon processing of
responses.

Don’t worry. There is no right or wrong answer in this activity. You only need to rate yourself
truthfully. Return to this section after you have completed the activity.

6 Module 1: Decoding the Entrepreneurial DNA

Strengths and Weaknesses of Small Businesses

So you are bent on starting your own business. Just exactly how big is the business you intend
to set up? See if the following definition on micro, small, medium, and large enterprises can
help you out.

In the Philippines, two basic criteria are used in defining and classifying enterprises: number of
employees and asset size. The RA 9501 (Magna Carta for Micro, Small and Medium Enterprises)
categorizes businesses as follows:

Asset Size
No. of Employees (exclusive of value of land)

Micro Enterprise 1-9 Not more than P 3.0 Million

Small Enterprise 10-99 P 3,000,001 – P 15.0 Million

Medium Enterprise 100-199 P15,000,001 – P100.0 Million

Large Enterprise 200 and above Over P 100.0 Million

So, how big a business are you planning to put up?

Did you know that a small enterprise––including micro enterprises––has inherent strengths?
Below is a brief description of these strengths.

1. Flexibility. The organizational structure of a small firm is simple and relatively flat. In
the absence of an organizational bureaucracy, a small firm can react faster to sudden
changes in the business environment. For instance, in the event of an abnormal
economic situation such as global economic crisis or a recession, a small firm can reduce
its prices and still make profits because of its low overhead costs.

2. Fast decision-making. A small entrepreneur can readily make decisions and implement
them because he/she is the sole decision-making authority in the enterprise.

3. Quick response to growth opportunities. Unlike a large firm, a small enterprise can
rapidly meet changing product patterns demanded by customers. A small entrepreneur
is able to identify opportunities which often lead to the development of new products
with good potentials for growth.

Module 1: Decoding the Entrepreneurial DNA 7

 4. More customer-focused. A small entrepreneur can give prompt attention to special
customer requests (e.g., special delivery, more customize services).

5. Closer management control/personal contact. Running a relatively small organization

allows the small entrepreneur to maintain close contact with workers and employees,
customers, suppliers, creditors, and business partners. The management style of an
entrepreneur is described as paternalistic i.e., a personal relationship like father to son.

6. Competitiveness in the production of certain goods. A small enterprise generally has

the edge in producing goods in small volumes; products that call for high precision and
narrow tolerances; and products made on light equipment or by relatively simple assembly
operations.

Despite their strengths, small businesses are disadvantaged too, by their size. Size-related
weaknesses of small enterprises include:

1. Limited access to credit and capital resources. Small enterprises––especially

startups––do not have easy access to formal sources of capital. This is primarily because
banks and other financial institutions are reluctant to lend to small business clients
because small credit loans result to greater transaction costs and higher credit risks.

2. Lack of bargaining strength. A small entrepreneur has no bargaining strength when it

comes to sourcing inputs and selling its products. Because of its sheer size, a small firm
cannot influence market prices.

3. Inability to produce in economies of scale. Due to its limited resources, a small

enterprise cannot take advantage of producing in large quantities.

4. Slower technological advancement. Owing to limited finances and unfamiliarity with

research and development efforts of science and technology agencies, small
entrepreneurs are usually unable to invest in sophisticated equipment and hire highly-
skilled labor. Hence, small enterprises have to make do with manual or semi-
mechanized production methods.

8 Module 1: Decoding the Entrepreneurial DNA

Mistakes Made By New Businesses

Many have attempted to start a business but very few have sustained it. Fortunately for you,
those who did not quite make it have come forward to share their experiences and identify the
pitfalls that led their business to fail. Learn from their mistakes and wrong decisions and avoid
doing them. Some of the more common mistakes are enumerated below.

1. Joining the bandwagon. Don’t be carried away by bandwagon business ideas (e.g.,
roast chicken, pearl shake, and shawarma businesses) that easily fizzle out. Think of a
business that is sure to last.

2. Lack of planning. Perhaps one of the most common mistakes committed by new
businesses is the lack of planning. Often budding entrepreneurs are preoccupied with
the day-to-day activities of their firms that they forget to look ahead and anticipate
changes in the market.

3. Jumping in unprepared. People sometimes engage in business ventures without

understanding first how the business works. It is important to learn the ins and outs of a
business before striking out on your own.

4. Being undercapitalized. Without enough capital to finance the initial months of

business operations, one is doomed to fail.

5. Skipping the business plan. Many overenthusiastic entrepreneurs jump the gun and
skip that all too important phase of starting a business––that is, business planning.
Without a business plan, you run the risk of losing money on something that wasn’t
worth it in the first place.

6. Overspending. Often, entrepreneurs with more than enough funds or who are out to
impress are driven to spend unwisely. Some use expensive stationery, buy luxurious
office furniture, or rent the most expensive office spaces when such expenses do not
bring in customers.

7. Hiring the wrong people. Poor screening of employees can cost business time and
money. Never hire relatives for the wrong reasons.

8. Inadequate marketing. Many entrepreneurs do not know who their customers are and
how to attract them. They simply open their shops in the morning and hope that
customers will start coming in.

Module 1: Decoding the Entrepreneurial DNA 9

 9. Omitting market research and analysis. Right product selection requires careful
market research and analysis. A product concept that was already poor from the
very start is disaster to a small firm.10.

10. Keeping bad records. Keeping the right records will enable an entrepreneur to monitor
his/her operations and make the right business decisions.

11. Mixing personal and business funds. Many entrepreneurs mix their personal funds and
expenses with that of the business. Business funds and personal funds and expenses
should always be kept separate and distinct.

There are videos on the Internet on the mistakes commonly made by entrepreneurs. You
will find the short videos listed below informative. Simply click on the following links.

• Common Mistakes of Entrepreneurs

https://www.youtube.com/watch?v=c082vGbToB4

• Most Common Mistakes Made By Entrepreneurs + How To Avoid Them?

https://www.youtube.com/watch?v=OpYwLb-m9Vc

• Avoid the Most Common Mistakes by Entrepreneurs | 8 Biggest Entrepreneurial

Mistakes
https://www.youtube.com/watch?v=IM7Kg7s8ewQ

Summary

There are certain behavioral patterns that make for a successful entrepreneur. These
behavioral patterns can be learned, practiced, and developed.

The Management Systems International has come up with ten personal entrepreneurial
competencies (PECs) that suggests competencies for entrepreneurial success. These include:
opportunity seeking, persistence, commitment to work contract, risk-taking, demand for
efficiency and quality, goal setting, information seeking, systematic planning and monitoring,
persuasion and networking, and self-confidence.

10 Module 1: Decoding the Entrepreneurial DNA

Special points of interest

There are several interesting videos on the subject of what entrepreneurs are on the YouTube.
A few of them are listed below. Simply click on the links to watch the videos. While you are
browsing the Internet, you will find quite a number of interesting and stimulating articles on
entrepreneurs and entrepreneurship. Do make time for additional reading.

• Entrepreneurs–Agents of Change
https://www.youtube.com/watch?v=SiInoUa_c20&feature=related

• How to become an Entrepreneur in the Philippines by GoNegosyo

https://www.youtube.com/watch?v=ZrbFubX-1Po

• Qualities of Entrepreneurs
https://www.youtube.com/watch?v=s6cPmBSL-OQ

• Who Even Is An Entrepreneur?: Crash Course Business – Entrepreneurship #1

https://www.youtube.com/watch?v=aozlwC3XwfY

• 9 Signs You Were Born to be a Successful Entrepreneur

https://www.youtube.com/watch?v=Pblzq8zQq-s

• Personal Entrepreneurial Competencies.mp4

Copyright 2012, 2020 by UP ISSI

All Rights Reserved

Module 1: Decoding the Entrepreneurial DNA 11

GLOSSARY

Creativity The ability to bring something new into existence

Entrepreneur Someone who starts a new business, recognizes opportunities,

organizes resources to take advantage of the opportunity, creates
something new that will provide value to customers, and willingly
accepts the financial risks associated with the new business venture.

Entrepreneurial Refers to a set of behavioral patterns possessed by successful

Competencies entrepreneurs that allow them to perform entrepreneurial functions
effectively.

Entrepreneurship The process of creating incremental wealth through the efforts of

individuals who find new and useful ways to employ resources
that lead to the creation of new products, services, or technologies.

Innovation Systematic development of something new and useful.

Intrapreneurs Individuals who spot opportunities and take initiative to mobilize

resources. Unlike entrepreneurs, however, they work in large
companies and contribute to the innovation of the firm.
Mindset A set of beliefs or a way of thinking.

Small-scale A small enterprise is generally defined as one wherein the owner-

Enterprise manager is not actively engaged in the production operations
but performs the various leadership functions without the help of
specialized staff.

Strengths Positive factors inherent in a firm that can contribute to its success.

Weaknesses Negative factors inherent in a firm that can contribute to the failure of
the enterprise.

12 Module 1: Decoding the Entrepreneurial DNA