2.

2 The importance of self-employment

To analyze means to interpret and explain in detail the importance of self-employment
based on business procedures and strategies. The importance includes:
i. Being your own boss
One is control of all key decisions affecting his business because it is your business you
have started. You work for your clients. Clients state what results they expect from you,
but they do not direct your work. You are your own boss therefore you decide when and
where and how to work to get the job done.
ii. Flexibility
To decide hours of operation, working conditions, business location. You do not have to
go where your employer forces you to do work.
iii. Harmony with your life
If you are working for yourself, chances are you will be doing ok that you enjoy hence self-
fulfillment.
iv. Income generating
If all goes well and you are making money, chances are you will make more money than
you did while working for someone else.
v. Profitable
You get to enjoy all the business profits. If your business is doing well, you may not have
to share proceeds with anyone else. The fruits of your labor will all be yours because you
own the vineyard.

2.3 Requirements for entry into self-employment

i. Identify business structure: Determine whether your business will operate as a sole
proprietorship or partnership. You can also set your business up as a limited liability
company or as a corporation.
ii. Register your business: Apply to receive employer identification number. Also
register your business with state and local tax offices.
iii. Licenses and permits: Seek for licenses and permits required to operate a business.
iv. Record keeping: Create and maintain accurate records. Items to list in your records
are details of customers, dates sales or purchases, amount of sales, taxes collected on
sold items and unsold.
v. Taxes – be aware of the taxes that apply to the business to ensure you are fully
compliant.
vi. Will you enjoy your work? – You can only run a business you are passionate about
because it brings happiness that satisfies your life goals. You will have to run a
business that fill the sense of your purpose.

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2.4 The role of an Entrepreneur in business
 Initiator: One who initiates the process of creating a business by coming up with
the idea for the business and planning out how to turn that idea into a reality.
 Risk taker:He is the biggest risk taker in business because he is the one who invests
capital and accountable in the face of failure.
 Allocator: He allocates various resources in the organization. These resources
include; manpower, machines, funds, etc.
 Forecasting: He should be prepared on how to deal with various forecast changes
such as strikes, machine breakdowns, budget cuts, legal policies, political or social
unrest, technological advancement etc.
 Adhering to legal norms: To ensure the enterprise adheres to legal norms and
policies. Not pertaining to this can mean serious legal consequences.
 Reduces risk: Best achieved by bringing people that can help the organization
grow. These people can be stakeholders or investors that have stake in the company.

2.5 The contributions of entrepreneurs to national development

 Entrepreneurs spur economic growth. New products or services created by
entrepreneurs can produce a cascading effect, where it stimulates relate businesses
or sectors that need support the new venture, furthering economic development.
 Boosts national income. Entrepreneurial ventures help generate new wealth,
additionally increased employment and higher earnings contribute to better national
income in the form of higher tax, revenue and higher government spending.
 Entrepreneurs create social change. Through offering unique goods and services,
entrepreneurs break away from tradition and reduce dependence on obsolete
systems and technologies.
 Community development. Entrepreneurs regularly nurture venture by other
likeminded individuals. They also invest in community projects and provide
financial support to local charities.
 Conservation of foreign exchange – You are able to produce goods hence no need
to import therefore contributing to conservation of foreign exchange.
 Promotion of entrepreneurial culture – They encourage individuals to set up and
manage their business and this reduces importation of goods.

2.6 Entrepreneurship culture in Kenya

 Entrepreneurship culture in Kenya is influenced by the following factors:
 Availability of funds
 Modern technology
 Availability of developed infrastructure
 Appropriate knowledge and skills
 Appropriate training
 Government policies
 Individual strength and talents
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  Availability of markets
 Availability of resources
 Culture
 Natural factors
 Political stability
 Competition
 Resource persons and entrepreneurs
 Social security
Born or made Entrepreneurs traits
Born entrepreneurs dream big, take what they want and never stop trying to achieve their
goals. They have the following traits:
 Believe in themselves
 Have some security
 Takes charge
 Crafty and innovative
 Outspoken
 Observed with making money
 Fearless and thrive on challenges
 Take huge financial risks
 They can have a business idea that doesn’t have to bring income instantly when it
is implemented.

Made entrepreneurs are those that are self-made successful individuals. They may have
different traits from those who were successful before. They have the following
characteristics.
 Determined.
 Enjoy what they do.
 Serious.
 Risk taker.
 Can manage money.
 High level of confidence.
 Recognizes failure.
 Plan everything.

Conclusion
This learning outcome enhanced on distinguishing between entrepreneurship and self-
employment, analyzing of the importance of self-employment, and determining the roles
of an entrepreneur in a business. It also tackled on requirements for entry into self-
employment, understanding the role of an entrepreneur in national development and
explore the various entrepreneurship cultures in Kenya in accordance to business

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procedures and strategies. Lastly, it covered on the distinction between Born and made
Entrepreneurs as per entrepreneurial traits.

Further Reading

www.google.com/demonstrateknowledgeofentrepreneurshipandselfemployment

5.3.3.3 Self-Assessment

Written Assessment
1. Which of the following do not influence entrepreneurship culture in Kenya?
a) Culture
b) Social security
c) Psychological factors
d) Family
2. The following are roles of an entrepreneur, which one is not?
a) Allocator
b) Licensing
c) Risk taker
d) Business planner
3. Which of the following is not a contribution of entrepreneurship in national
development?
a) Community development
b) Family development
c) Boosts national income
d) Increase in revenue
4. Which of the following is not a requirement to entry into self-employment?
a) Registration of business
b) Record keeping
c) Technology
d) Lack of interest in the business
5. Define born and made entrepreneurs.
6. Define self-employment.
7. Discuss requirements to entry into self-employment.

Oral Assessment
1. Discuss relationship between entrepreneurship and self-employment.
2. Discuss the importance of self-employment.

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Practical Assessment
Identify any entrepreneurship around you. Identify management and discuss the roles of
the entrepreneurs.

5.3.3.4 Tools, Equipment, Supplies and Materials

 Business Plan Template
 Computers
 Video clips
 Internet
 Case studies
 Mobile phone
 Overhead projectors
 Business journals
 Newspapers and Handouts
 Writing materials
 Films

5.3.3.5 References

Angels, Dragons and Vultures (2012) by Simon Aelaud. Venture capital advice for
entrepreneurs.
Starting a successful business. Start up and grow your own company (2008) by Morris,
M.J.
The $100 startup (2012) by Chris Guillebeau.
The entrepreneur equation: evaluating the realities, risks and rewards (2011) by Roth,
Carol. To be an entrepreneur, just get on with it (2016) by Deruan Miriam.

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5.3.4 Learning Outcome No 3: Identify Entrepreneurship Opportunities
5.3.4.1 Learning Activities
Learning Outcome No 3: Identify Entrepreneurship Opportunities
Learning Activities Special Instructions

3.1. Identify sources of business ideas as per business procedures

and strategies. Trainees should state
3.2. Generate business ideas and opportunities as per business business ideas.
procedures and strategies.
3.3. Analyze business life cycle as per business procedures and
strategies.
3.4. Identify legal aspects of business as per procedures and
strategies.
3.5. Assess product demand as per market strategies.
3.6. Identify and evaluate types of business environment as per
business procedures.
3.7. Explore factors to consider when evaluating business
environment based on business procedure and strategies.
3.8. Incorporate technology in business as per best practice.

5.3.4.2 Information Sheet No5/LO3: Identify Entrepreneurship Opportunities

Introduction
This learning outcome aims at equipping students with the knowledge on many
opportunities in entrepreneurship. It entails sources of business idea and its generation,
analyzing life cycle of a business, legal aspects, product demand and types of business
environment, factors to consider when evaluating business environment based on business
procedure and strategies.

Definition of key terms

Sources of business: These are the origins of business idea that can be used for financial
gain that is centered on a product that can be offered money.

Product demand: A customer’s willingness to purchase a product or services at a given

price.

Business life cycle: They are phases that a business idea passes through from the time it is
formed in the entrepreneur’s mind to the time business rolls and expands or declines.

Business legal aspects: They are legal frameworks through which a business operates.

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Content/Procedures/Methods/Illustrations
3.1 Sources of business ideas include:
 Customer surveys: Customer needs and wants to justify for the service or product
that you can offer them.
 Interests and hobbies: Most people have founded great successful businesses
while pursuing their interests and hobbies i.e. by doing what they love doing in their
leisure times.
 Brainstorming and dreams: This starts with identifying a problem statement or
question. Designing solution to these problems lead to business ideas.
 Franchising: It is a situation where sole traders mark distributor of a product gives
exclusive rights to independent retailers for local distribution.
 Mass media: Include T.V. newspapers, internet, radio, and magazines. They are
also a great source of ideas, information and opportunities.
 Personal experience and talents: Most of the ideas are also as a result of
experience in a workplace.
 Trade fairs and exhibitions: Attending such events regularly makes one discover
new services and products.

3.2 Generate business ideas and opportunities

To generate more business ideas and opportunities, one must be able to do the following:
 Meet new people
 Tap into your interests
 Keep “pain point” journal
 Travel
 Explore new ways of thinking
 Do your market research
 Go online
 Attending educational events

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3.3 Business life cycle

Stabilization stage
Innovation

Growth stage

Start-up stage

Idea generation

Figure 23. Business life cycle

Business life cycle refers to the phases that a business passes through from time the idea is
formed in the entrepreneur’s mind to the time business rolls and expands or even declines.
Many businesses go through six stages in their life as shown below;
a) Idea generation: This is the preliminary stage for the business. Here, the
entrepreneur does a lot of groundwork to access the viability of the venture he is
about to get into.
b) Start – up stage: Activities may involve preparation of a formal business plan,
registration of the business, sourcing capital, recruiting and designing the product.
During this phase, sales are low but slowly increasing its sales as the time passes
by. At this phase entrepreneurship concentrates with marketing their product and
services to their target customers business are prone to incur losses in this phase.
c) Growth stage: at this stage of business common experiences may include:
 Increased sales and profit
 Wider market coverage in terms of geographical region
 A growing number of employees
 Variety of products and services
 Increased competition
 Need for additional expenditures
d) Stabilization stage: At this stage, business sales and profits stagnate. The business
may also experience intensified competition. Sales may go down due to the
presence of competitors in the market, profit margin starts to go down.
e) Innovation stage: Organizations that fail to innovate at stabilization stage are likely
to decline. To ensure come back to growth, the entrepreneur is required to re-look

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 at the way’s businesses have been conducted. The cash generation is higher than
the profit on the income statement.
Among innovative attempts include:
 Change of management
 Repackage the product/service
 Change the technology
 New distribution methods
 Advertise and promote differently
f) Decline stage: This stage is not in normal plan of business. The entrepreneur does
not foresee business declining at the start-up stage. Sales and cash flow all decline.
Companies accept to extend their business venture by adapting to the changing
environment. Firms loses their competitive advantages and finally exits the market.

3.4 Business Legal aspects

Businesses operate within a legal framework that for the most part, works. The legal aspects
include:
 Legal entity: All businesses are categorized as some sort of legal entity that governs
the way they are treated under the law. Some business structures are considered free
standing entities that have special rights and the owners have limited liability.
Others like sole proprietorship, the owner assumes all the liability and rewards.
 Compliance: Compliance to local (city and county), state and federal laws will be
something that all businesses will need to deal with.
 Contracts: Most businesses will enter into a contract with a person or another
business at some point in their existence. These contracts are what define how the
working relationship will be carried out and who will be responsible for deliverables
and payments.
 Resolving disputes: The legal system is set up to solve disputes. These disputes
usually revolve around some sort of breach of contracts, violation of intellectual
property or breaking the law.
 A necessity that’s not the evil: Having good corporate counsel will make your
business better.

3.5 Product demand Assessment

This involves determining how many units of products will be sold over the course of a
year. Factors to include:
 Go over past sale records
 Use marketing projections to help estimate demand
 Use a competitor’s sales data
 Pay attention to the local and global economy
 Estimate sales on recent performance

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3.6 Types of business environment
Are factors that affect the function of the organization and how organization works directly
or indirectly? They include internal environment which affects operations of a company
are within the control of management and external environment which are beyond the
control of the organization.

Internal business environment:

 Financial: Finances determine whether your company survives or dies. When
money is limited it affects the operations of the business.
 Employees and managers: Employees are the major part of your company internal
environment. They should be good at their jobs. On other hand managers should be
good at handling lower-level employees and overseeing other parts of internal
environment.
 Resources: Availability of resources can also determine how the business performs.
Scarce resources will affect the number of sales made, quality of products or
services produced and even the period which the business will last.
 Company culture: This consist of values, attitude and priorities that your
employees live by. Your staff will infer your values based on the type of people you
hire, fire and promote

External factors:
 Competition: Unless a company has unique features, competition will always be
there. When you start a company, you will compete against more establishes and
experienced businesses. Competition can either make or break your business.
 Political: Changes in government policy can have a very huge effect on the business
in question. Example the tobacco industries have been on forced to put warning
labels on their product and lost the right to advertise on the television.
 Customers and suppliers: Next to the employees, customers and suppliers are the
second most important in your business. Suppliers have a huge impact on the cost
and customers depend on how good your products are and whether you’re
advertising makes customers want to buy from you among others.
 Economical factor: In a bad economy, even a well-run business may not survive.
High interest rates on banks and credit cards will discourage / limit the entrepreneur
and customers spending on your products or services.

3.7 Factors to consider when evaluating business environment

 Ability to manage cash: You need to look at the ability to manage cash flow. Is
there a start-up funding for your business? What about ways to keep funding your
business each month. Figure out how cash flows will be managed and take a look
at your business plan.
 Passion and persistence: Are you working with people who will get their jobs
done? Do you trust they have passion for the work assigned to them? How will they

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 approach difficulties in case they face them in the future? You need to ensure that
you have the passion to be in that business and the desire to come out of challenges.
 Market size: It’s one of the most important factors when evaluating a business
opportunity. Researching the market and figuring out whether there we market for
your products and how big it is.
 Relationships: What is your relationship with the potential investors or customers?
When you have more relationships the chances for your business to run smoothly
is high.
 Management skill sets: What are the skills of those involved in your business?
When looking for the business opportunity to invest in or expand into, look at the
management. What skills do they have? Are they appropriate?

Incorporation of technology in business

 Provides for communication with customer: technology affects a firm’s ability to
communicate with customers. This is best achieved by use of internet.
 Efficiency of operations: Technology also helps a business understand its cash flow
needs and preserve precious resources such as time and physical space.
 Security: Most businesses of the modern era are subject to security threats and
vandalism. Technology can be used to protect financial data, confidential execution
decisions and other proprietary information.
 Business culture and relations: Technology creates a team dynamic within a
business because employees of different locations have better interactions.
 Research capacity: A business that has the technological capacity to research new
opportunities will stay a step ahead of its competition. For a business to survive, it
must grow and acquire new opportunities.

Conclusion
This learning outcome covered on how to identify sources of business ideas, generate
business ideas and opportunities and analyze business life cycle, identify legal aspects,
assess product demand, identify and evaluate types of business environment, explore
factors to consider when evaluating business environment based on business procedure and
strategies and demonstrate skill in incorporation of technology in business as per best
practices and as per business procedures and strategies.

Further Reading

https://YouTube/f6nxcfbDFZo
https://YouTube/7bMpgBuoZY0

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