THE LOCAL GOVERNMENT TRAINING INSTITUTE

LGTI

BTCHRM, DPSM, & BTCLA

ENTREPRENEURSHIP AND SMALL BUSINESS MANAGEMENT

TOPIC ONE

Definition of Core Concepts

Entrepreneurship: Entrepreneurship is the process of creating
something new of value by devoting both energy and time and assume
all the involved risks, for the purpose of getting reward

Entrepreneur: An entrepreneur is one who is engaging with

entrepreneurship activities. He is someone who use innovative and
creative skills to mobilize resources for the purpose of obtaining
reward

Creativity: Creativity means the ability to bring something new into

existence, conceiving the idea and articulating the new knowledge.

Innovation: Innovation means the transformation of creative idea into

useful applications by combining resources in new or unusual ways to
provide values to society for new or improved products, technology, or
services.

Enterprise: Enterprise means an organization, especially a business

or a difficult and important plan that will lead to earn money.

Risk: Risk means any uncertainty event that may result into loss.
Business Idea: A business idea is a concept that can be used for
financial gain that is usually centered on a product or service that can
be offered for money. An idea is the first milestone in the process of
building a successful business.The characteristics of a promising
business idea are:

a) Innovative
b) Unique

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 c) Problem solving

d) Profitable

e) understandable

The difference between Creativity and Innovation

While Creativity is related to ‘imagination’, but innovation is related to

‘implementation’.

The primary difference between creativity and innovation is that the former
refers to conceive a fresh idea or plan, whereas the latter implies initiating
something new to the market, which is not introduced earlier. You can get a
better understanding of the two topics, and their difference, with the help of
given article.

Comparison Chart

Basis for
Creativity Innovation
Comparison
Creativity is an act of
Innovation is the introduction
creating new ideas,
Meaning of something new and
imaginations and
effective into the market.
possibilities.
Process Imaginative Productive
Quantifiable No Yes
Related to Thinking something new Introducing something new
Money
No Yes
Consumption
Risk No Yes

Definition of Creativity

Creativity is the characteristic of a person to generate new ideas,

alternatives, solutions, and possibilities in a unique and different way.

PERSONAL ENTREPRENEURIAL TRAITS

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 1) Persistence: Entrepreneurs don’t give up. Instead they keep trying
until failure isn’t an option and the only way forward is success.
2) Motivation: Motivation is another personality trait that drives
entrepreneurs. Many enjoy what they do and can’t wait to get up each
morning and get started again.
3) Dedication: Another personality trait you’ll find in most entrepreneurs
is dedication. They put in long, hard hours to build their businesses.
4) Vision: True entrepreneurs don’t see their businesses as they are.
They see them as could be. In other words, they have vision.
5) Creativity: Creativity is another of the personality traits displayed by
entrepreneurs. When challenges come their way they don’t give up.
6) Flexibility: Flexibility helps them solve the problems that crop up and
keep their clients and customers satisfied.

reasons that force people to go into entrepreneurship

(a) Internal Factors: These include the following factors:

1) Desire to do something new.
2) Become independent.
3) Achieve what one wants to have in life.
4) Be recognized for one’s contribution.
5) One’s educational background.
6) One’s occupational background and experience in the relevant field.

(b) External Factors:These include:

1. Government assistance and support.
2. Availability of labour and raw material.
3. Encouragement from big business houses.
4. Promising demand for the product.

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 TOPIC TWO

TYPES OF ENTREPRENEUR AND THE ROLES OF ENTREPRENEURSHIP

Describe types of entrepreneurs and entrepreneurship business

Definition: An Entrepreneur is a person who has a role of an

industrialist and forms an organization for the commercial use. He is a
change agent who transforms the demand into supply by forecasting
the needs of the society.
1) Innovative Entrepreneur: These are the ones who invent the new
ideas, new products, new production methods or processes, discover
potential markets and reorganize the company’s structure.
2) Imitating Entrepreneurs: The imitating entrepreneurs are those who
immediately copy the new inventions made by the innovative
entrepreneurs.

3) Fabian Entrepreneurs: These types of entrepreneurs are skeptical

about the changes to be made in the organization.

4) Drone Entrepreneurs: These entrepreneurs are reluctant to change

since they are very conservative and do not want to make any changes
in the organization.

The Role of Entrepreneurship

1) Helps in Wealth Creation and Sharing: By establishing the

business entity, entrepreneurs invest their own resources and attract
capital from investors, lenders and the public.

2) Creating Employment Opportunities Jobs: Entrepreneurs are by

nature and definition job creators, as opposed to job seekers.

3) Balanced Regional Development: Entrepreneurs setting up new

businesses and industrial units help with regional development by
locating in less developed and backward areas.

4) Improves Standards of Living of People: Increase in the standard

of living of people in a community is another key goal of economic
development.

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5) Promote capital formation: Entrepreneurship promotes capital
formation by mobilizing the idle saving of the public.

6) It encourages effective resource mobilization of capital and skill

which might otherwise remain unutilized and idle.

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 TOPIC THREE:
RISKS AND REWARDS OF ENTREPRENEURSHIP

A. The Risks of Entrepreneurship

1) No Steady Pay Check: If you are an entrepreneur, this means that
you will often have to give up the security of a steady salary at the end
of the month. This means that if your business is not doing so well, it
can have a serious effect on your personal income.

2) Sacrificing Personal Capital: A lot of times entrepreneurs have to

use their own savings to get their business off the ground until they
have developed it enough to be ready for external funding from angel
investors, government grants, loans or crowd funding campaigns.

3) Relying on Cash Flow: It can be a real challenge to secure enough

cash flow in your business on an ongoing basis. This is particularly true
if one of your bigger clients pays late or you lose a client, then costs
can quickly exceed your revenues and you will need to tap into savings
to pay the bills.
4) Interest in Your Product/Service: Even with a lot of research and
tests, you only have an estimate of people’s interest in your
product/service, and that interest is somewhat unpredictable. This
means that your financial projections can be flawed, which can have
major effects on your company.
5) Trusting Key Employees: If you are starting your business, you
won’t have the resources to hire a full team, which means you will
have a small group of people putting a lot of effort into the product to
get it going. This means that you will have to put a lot of trust in this
small group of people to get the job done, otherwise your timeline can
be completely wrong.
6) Betting on a Crucial Deadline: Finances are often tight in a start-up
and investors want to see progress, which means that several
milestones can be tied to a certain deadline. This means that
entrepreneurs regularly have to worry about hitting a specific deadline
and need to make sure to have a follow up plan if it does not work out.
7) Committing Personal Time (and Health): You will spend countless
hours working on your business to make it successful, which will make
you miss out on personal time and often entrepreneurs end up
sacrificing their health by not sleeping enough, being under constant
stress and eating unhealthy foods.

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8) Emotional Risk: Starting a business will mean that you will go
through an emotional rollercoaster – you may feel others had it easier
to start with, there might be jealousy of a competitor who got into
press, romantic difficulties because you are spending so much time on
the business, self-doubt, problems with time management and not
enough time to see your family and friends, feeling of rejection by
investors, press, etc.,

9) Risk of Scaling: As your business is growing, a new set of challenges

will be awaiting you, spanning from hiring more employees, opening
another office, technical upgrades, launching a new product to
acquiring another business. There are a lot of pitfalls on the way so you
need a strong support network and a team you can trust to help you
with these challenges.

B. The Rewards of Entrepreneurship

1) Control: A major benefit of starting you own venture is that you

have a large degree of agency and control of what is happening

in your company.

2) Excitement: Building your own business can be a very exciting

and highly enjoyable process as you get to apply your skills and

abilities to solve problems, make fascinating breakthroughs and

meet interesting people. ]

3) Flexibility: Because you own the company, you can decide how

to organize your schedule and when to take time off, but the

truth is that entrepreneurs often have to work very long hours,

particularly in the beginning.

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4) Freedom: The freedom you have will also add to your life

satisfaction and make you more fulfilled. You have the freedom

to choose if you want to work from home or while you are

travelling, and you can choose when you want to work.

5) New Skills: Even if you have expertise in certain areas, in the

beginning you have to do a bit of everything and this way you

will learn about accounting, design, marketing, public speaking,

how to delegate, how to be more creative, about sales and much

more.

6) Rational Salary: Another advantage is that your salary is directly

related to how much work you put in and how many new

contracts you close.

7) Impact: You get to see the impact you make first hand as you

work closely with your customers and the problems you solve

make a real difference in people’s lives.

TOPIC FOUR

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 THE CHALLENGES THAT ARE FACING ENTREPRENEURS IN LESS

DEVELOPED COUNTRIES AND SUGGESTED SOLUTION TO OVERCOME

THE PROBLEM

Problems Faced by Entrepreneurs in Africa and suggested solution

1. Infrastructure: Economic development of any sort requires basic

infrastructural framework. Good roads, consistent power supply and
transportation facilities such as railroads and waterways are to a great
extent lacking in most of Africa. Small manufacturers instead have to
contend with constant power blackouts and surges. This in turn causes
equipment damage and reduced productivity. Bigger firms have to
invest in electric power generators and this makes the production
process more expensive and the products end up being less
competitive in the market. The deplorable state of roads and railway
systems is also a major problem for local business people.

2. Financing: Startups in all parts of the world mostly have to contend

with limited capital. This makes it necessary for them to get extra
financing to execute business operations. What makes this a major
problem in Africa is the fact that there is limited access to such funding
and that it comes with a hefty price tag attached.
3. Corruption: One of the biggest challenges of entrepreneurship in
Africa has to do with corruption. It is common for traders to face an
ethical conundrum whereby they either have to pay hefty bribes or risk
having their activity blocked by high-ranking public officials. It deters
both the growth of the region and the spirit behind entrepreneurship.
4. Political Instability: Political uncertainty rocks a big percentage of
the African continent. Businesses thrive on forecasts and speculations
about the future. Accurate predictions rely on consistency and
certainty.
5. Globalization: This has proved to be a double-edged sword in more
ways than one for the continent. Even though it has presented
numerous opportunities for growth and expansion, this has also limited
this growth.
6. Evolving Regulations and Policies: A majority of African countries
have to work under confusing regulations and policies that are
constantly changing.
7. Gender Bias: There are some unique problems of women
entrepreneurs on the continent that are exclusive to the gender. A
majority of them have no property to set up as collateral for funding
limiting their access to capital.

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Solutions to Problems Facing Entrepreneurs in Africa

Due to the fundamental role that small business owners play on the African
economy, the fact that it is lagging behind should be a matter of concern.
The challenges facing entrepreneurs in developing countries on the
continent can be addressed. Consider a few possible solutions that can
improve entrepreneurial participation in Africa and the global market at
large:

1. Anti-corruption Campaigns: Corruption is at the heart of this

problem and should be the first to be eliminated. This should begin at
the lowest possible level with individual entrepreneurs refusing to offer
bribes for rightful services. Even though it is an abuse of power and
numerous campaigns have tried ending it from the top downwards,
even the traders are complicit and should bear their fair portion of the
blame. Such an approach would however take collective action
because any single entity that refuses to offer bribes will suffer and get
overpowered by the competition. But if like-minded firms and
individuals were to agree to say no to the vice, they will make a
difference.
2. Improved Financial Assistance: There are numerous alternative
funding options for startups. Small entrepreneurs have the
responsibility to understand these options and make good use of them.
They also need to improve their business management skills so as to
be able to draft proposals and business plans that are usually requisite
for any form of funding. Better education will also reduce
misappropriation of borrowed funds and help small businesses to
expand.
Financiers also need to develop more products for these small
enterprises and create awareness of them. This will help more business
persons to take advantage of them for mutual benefits.
3. Government Initiatives: The governance systems of most African
countries still have room for improvement when it comes to assisting
local entrepreneurs to grow. They could for instance adjust policies
that work against investment interests within local markets and
abroad. It would also be in the investors’ best interests if such policies
are kept consistent so that they can learn the requirements and tailor
their approaches to conform. Offering a stable trading environment is
also paramount if at all the African continent is to catch up and keep
pace with the rest of the world. Consistent effort in the right direction
is however required if the dream is to be realized. Peace campaigns
and governmental reforms are needed so as to quell the public’s
outcry over the current state of affairs.
4. Regional Blocks: Regional trading units are a big step in the right
direction. Just like on the international market scene, the continent’s
different markets have differing levels of demand and supply for

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 products. It is easy to identify these trends and take advantage of
them and trading blocks make this a lot easier. These usually comprise
neighboring countries with similar cultures and sophistication levels.
Kenya has set a good model in this regard by opening up its borders to
all African visitors. The president made this statement in his inaugural
speech for the second term in office saying that all visitors would
receive a visa at their ports of entry. Such regional integration will
foster unity and help make the continent one united market supporting
local entrepreneurs. Ghana, Benin, Rwanda and Mauritius also have
similar laws in place and it is hoped that others will follow suit.
5. Improving Local Infrastructure: This is one of the greatest crippling
challenges for the continent but fortunately it is also solvable. It calls
for additional investment into the sector using locally collected tax
revenues and funding from the region’s institutions.

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 TOPIC FIVE
DEFINE BUSINESS IDEAS AND BUSINESS OPPORTUNITIES

The meaning of business idea: A business idea is a concept that can be

used for financial gain that is usually centered on a product or service that
can be offered for money. An idea is the base of the pyramid when it comes
to the business as a whole.
The meaning of opportunity is as follows:
From an entrepreneurial perspective, an opportunity is a gap left in the
market by those who currently serve it.

Identify sources of business ideas

Answer
Sources of business ideas include the following:
a) Hobbies or personal interests
b) An entrepreneur’s skills, expertise or aptitude
c) Chance
d) Existing unresolved problems
e) Everyday activities
f) Suggestions from someone else
g) Consumers
h) Retailers, wholesalers, manufacturers and agents

Business Idea and Business Opportunity

Business Opportunity: Any idea which is proven and already exists. YES,
there is the further scope of enhancing the opportunity. Working out with the
PEST analysis and find the room for growth, maybe in a different geography,
may be locally or globally, Maybe with different price point.

Business Idea: Product or services which do not exist do a “PURE GAP

ANALYSIS” or “PAIN POINT ANALYSIS” works with your skills, identify
your core competence to fulfill the gaps or pain points, and develop a new
service or a new product. Market it globally or locally. Take feedback, and
tune your product or services accordingly. OR come up with product or
services which will make life easier where a bit
of Creativity and Innovation is required.

Characteristics of a Good Business Idea

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The best business ideas generate high profits and involve low risk.
Unfortunately very few such opportunities exist. However, here are fifteen
characteristics of a commercially viable idea.
1) Identified market need or gap – the idea must meet a clearly
identified market need to be commercially viable.
2) No or few existing competitors – the more innovative the
product/service and markets, the fewer competitors, and the higher the
price you are normally able to charge.
3) Growing market – it is always easier to launch a business into a new or
growing rather than declining market. Of course it may be that you are
launching a business that will create a completely new market.
4) Clearly identified customers and a viable business model – if a
business does not know who it is selling to it won’t know how to sell to
them, which means it probably will not succeed.
5) Low funding requirements – the lower the funding requirement, the
easier it is to start-up and the less you have to lose if the idea does not
work.
6) Sustainable – the business must be built on solid foundations so that it
has longevity.
7) High profit margins – the more innovative the product/service and its
target market, the higher the margin is likely to be.
8) Effective communications strategy – once you know who you are
selling to, and why they should buy from you, you need to be able to
communicate a persuasive message to them and build a loyal customer
base.
9) Not easily copied – if it can be, protect intellectual property. However,
often getting to the market quickly and developing a brand reputation is
the best safeguard.
10) Identifiable risks that can be monitored and mitigated – the
future of a start-up is, by definition uncertain. Identifying risks is the first
step to understanding how they can be monitored and then mitigated.
The more strategic options you have identified the greater your chance of
success.
11) Low fixed costs – low fixed costs mean lower risk, should volume
reduce. It gives you flexibility. A combination of high profit margin and low
fixed costs (high profit, low risk) is always very attractive.
12) Controllable – putting in robust operating and financial controls
increase the chances of survival and success and ultimately will add value
to the firm. The major imperative in the early years is to monitor and
manage cash flow.

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13) Management skills that can be leveraged – the
entrepreneur needs to have the appropriate management skills and, if
they do not, they need to acquire them or recruit or partner with others
with the appropriate skills.
14) Financeable – if you do not have sufficient resources yourself, the
project needs to be able to attract finance.

TOPIC SIX

BUSINESS PLAN

What is a business plan?

A business plan lays out a written roadmap for the firm from marketing,
financial, and operational standpoints

Why is it important that an entrepreneur prepares a good business

plan?

The business plan is a valuable document for the entrepreneur, potential

investors and even for the employees. The business plan is important to
these people due to the following reasons:

a) It helps determine the viability of the venture in a target market.

b) It guides the entrepreneur in starting the enterprise.
c) The thinking involved in the preparation of the business plan makes
the entrepreneur aware of the issues that could impede the venture’s
success.
d) It serves as a guide to investors and thereby helps in obtaining finance.
e) Writing the business plan forces the founders to think about all aspects
of the venture.
f) A clear business plan articulates the vision and goals of the founders.
g) A business plan communicates to all stakeholders. They can judge the
venture’s future on the basis of the business plan.

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 h) The business plan helps identify the important variables that will
determine the success or failure of the firm.
i) The business plan is used as a selling document to outsiders.

Users of Business Plan

1. Lenders: Before authorizing a small-business loan, a financial

institution will want to read a well-crafted business plan. This helps
the lender assess if the business objectives are sound and if you’ve
accurately anticipated various expenditures and projected revenue.
2. Investors: If you decide to take on investors at any point, they will
want to read your business plan before making a commitment. The
business plan spells out anticipated revenue streams, earning
projections and researched plans for reaching your target
demographic.

3. Partners: If you decide to bring on a partner or hire someone in a

high-level executive position, he will want to read your business plan.
Reading the plan will help a potential upper-echelon employee
understand your objectives, your operating procedures and his own
potential for career growth and development.

4. Employees: A good business needs support from experienced top-level

employees. A business plan will help them understand what they are
getting into. Of course, showing the business plan to the rank and file
is not necessary.

5. Owner of the Business: A business plan helps in planning. While writing

the business plan, it is likely that the entrepreneur was able to detect
many shortcomings in the original business idea and these
shortcomings could be overcome by thinking through and plugging the
gaps.

6. Later, this plan can serve as a guide or manual to help in business and

strategy formulation.

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 7. Other Users: Very often, an entrepreneur seeks moral support from
friends and family. A business plan can be a good way of presenting
your business to your father, mother, wife, and colleagues. By going
through it, they will have a better appreciation of what you are setting
out to do.

Components of Business Plan

A full-length business plan includes the following sections:

a) Executive summary: The first and most important section, summarizing

everything you hope to accomplish with your business.
b) Business description: Business description defines your business’s
status. It should have complete information about what the company
provides or will be providing, its products and services, its targets or goals
and the audience, prospects and customers it serves already or plans to
serve. This description will also help the reader to find out why your
business is different or differs from the competition that will help you
cater the target audience

c) Marketing plan: This section explains the current market scenario of the
industry – the size of the market, market trends, success stories, what is
working and what isn’t, and what is being favoured and expected by the
customers in the market.

d) Operations plan: Shows that you’ve thought through the logistics of

actually operating your company, including hiring staff, shipping, storage,
and more.

e) Organization and management: This section gives the information of

all the members on board, their qualifications, experience, and their posts
in the company.

f) Financial plan: Financial plan explains how the company is planning to

earn money using the business structure explained in the business model
section. It explains the intricacies of the expenses and income sources of
the company.

g) Appendix: The appendix is used to support the rest of the business plan.
Every business plan should have a full set of financial projections in the
appendix, with the summary of these financials in the executive summary
and the financial plan. Other documentation that could appear in the
appendix includes technical drawings, partnership and/or customer
letters, expanded competitor reviews and/or customer lists

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 Types of Business Plan
1) Start-Up Business Plans: New businesses should detail the steps
to start the new enterprise with a start-up business plan. This
document typically includes sections describing the company, the
product or service your business will supply, market evaluations and
your projected management team.
2) Internal Business Plans: Internal business plans target a specific
audience within the business, for example, the marketing team who
need to evaluate a proposed project.

3) Strategic Business Plans: A strategic business plan provides a high-

level view of a company’s goals and how it will achieve them,
laying out a foundational plan for the entire company.

4) Feasibility Business Plans: A feasibility business plan answers two

primary questions about a proposed business venture: who, if anyone,
will purchase the service or product a company wants to sell,
and if the venture can turn a profit.

5) Operations Business Plans: Operations plans are internal plans that

consist of elements related to company operations. An operations
plan, specifies implementation markers and deadlines for the coming
year. The operations plan outlines employees’ responsibilities.

6) Growth Business Plans: Growth plans or expansion plans are in-

depth descriptions of proposed growth and are written for internal
or external purposes.

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 TOPIC SEVEN

SOURCES OF FUNDS

1) Personal investment: When starting a business, your first investor

should be yourself either with your own cash or with collateral on your
assets. This proves to investors and bankers that you have a long-
term commitment to your project and that you are ready to take risks.
2) Venture Capital: A venture capitalist is an investor who either
provides capital to startup ventures or supports small companies that
wish to expand but do not have access to equities markets.

3) Business Angels: An angel investor is a wealthy individual who provides

funding for a startup, often in exchange for an ownership stake in the
company. The term “angel” once referred to wealthy individuals in the
Broadway theatre community who would step up to save a production
from closing its doors.

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4) Retained Profits: This is a better source of capital for a company than
debt or equity is a positive operating income from quarter to quarter. The
company is generating that positive operating income from its own
successful business operations.

5) Sale of Stock: Although not an option for most startups, voluntary

investment through stock purchases in an ongoing business on the basis
of its attractive financial profile is close to the heart of capitalism. Other
than a large infusion of venture capital, stock offerings are the fastest way
for a successful business to scale up.

6) Sale of Fixed Assets: The sale of a firm's assets is most profitable for a
mature firm. A firm, for example, can sell older assets that have been
replaced by others or that are no longer needed for operations. If these
assets have been fully depreciated and have little or no book value, you
will have a taxable gain from the sale.

7) Debt Collection: Sometimes businesses and smaller businesses

particularly allow customers to let their agreed-upon payments slide. This
is certainly a bad business practice on a number of grounds, and the
appropriate remedy is to put more effort into collections. Doing so also
increases available capital.

8) Government Grants: The government, especially the small business

administration, offers grants to entrepreneurs who want to have research-
related business ideas.

9) Bank loans: Bank loans are the most commonly used source of funding
for small and medium-sized businesses. Consider the fact that all banks
offer different advantages, whether it's personalized service or
customized repayment. It's a good idea to shop around and find the bank
that meets your specific needs.

The 5 C’s of Credit

Credit analysis by a lender is used to determine the risk associated with

making a loan. Regardless of the type of financing needed, a bank or lending
institution will be interested in both your business and personal financials.
Credit analysis is governed by the “5 Cs:” character, capacity, condition,
capital and collateral.

1) Character: This is a lender’s opinion of a borrower’s general

trustworthiness, credibility and personality. Lenders need to know the
borrower and guarantors are honest and have integrity.
2) Capacity (Cash flow): This is your ability to repay the loan. The
lender wants to know that your business is able to repay the loan.

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 3) Condition: This is how the business will use the loan and how that
could be affected by economic or industry factors.
4) Capital: This is the amount of money invested by the business owner
or management team.
5) Collateral: This is Assets that can be pledged as security. A lender will
consider the value of the business’ assets and the personal assets of
the guarantors as a secondary source of repayment.

TOPIC EIGHT

ENTREPRENEURIAL MYTH

1ST Myth: Entrepreneurs are doers not thinkers

This myth advocates that entrepreneurs are action oriented and should not
waste time thinking. The reality is however that both action orientation and
imagination are important. The emphasis today on the creation of clear and
complete business plans is an indication that “Thinking” entrepreneurs are
as important as doing entrepreneurs

2ND Myth:Entrepreneurs are born not made

A persistent notion is that most entrepreneurs are born with innate /inborn
characteristics that prepare them for the life of new venture creation.

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Those who believe that entrepreneurs are born conclude that
entrepreneurship cannot be learned.

3RD Myth:Entrepreneurs are always inventors

The proponents of this myth argue that to become an entrepreneur, he/she

must discover something that never existed before. The idea that
entrepreneurs are always inventors is a result of misunderstanding. Although
many inventors are also entrepreneurs numerous entrepreneurs cover all
sorts of innovative activities which are beyond but inclusive of inventors.
Innovators could be inventors, duplicators, adopt extensions or synthesizers.

4TH Myth: Entrepreneurs are academic and social misfits

The belief that entrepreneurs are academically and socially ineffective is a

result of some business owners having started successful enterprises after
dropping out of school, quitting a job or as a reaction to their inability to cope
with the situation.

5TH Myth: Entrepreneurs must fit the “profile”

The proponents of this myth argue that entrepreneurs must fit a package of
a ‘fit for all’ characteristic. Whether a definable and validated set of
entrepreneurial characteristics exist is more controversial. Many
entrepreneurs have presented checklists of characteristics of the successful
entrepreneur. These lists were not complete and validated. Burn (2001)
contends that even if it is possible to identify personal characteristics of
owner managers and entrepreneurs it is not always possible to link directly
with a particular sort of business.

6TH Myth: All entrepreneurs need is money

This myth suggests that to become a successful entrepreneur all that is

needed is money. It is true a venture needs capital to survive; yet having
money is not the only solution to avoid failure. Money does not assure
successes and in some cases it may be a problem because with excess
capital entrepreneurs may encumber themselves with unnecessary assets
and inefficient organizations.

7TH Myth: All entrepreneurs need is luck

The proponents of this myth argue that the success of entrepreneurs is

simply determined by luck or similar forces. But the reality is that what is

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considered to be lucky is not lucky as such; instead it is just that
entrepreneurs were in the right place at the right time.

8TH Myth: Ignorance is bliss for entrepreneurs

The argument put forward by those who support this view is that
entrepreneurs are ignorant; that is why they keep on doing planning and
evaluation. Worse scenario is that each time they do, they discover new
problems.

9TH Myth:Entrepreneurs seek success but experience high failure

rates

Entrepreneurs fail miserably with the first venture.It is true that many
entrepreneurs suffer a number of failures before they are successful. WHY:
because: Entrepreneurship involves a learning process and ability to cope
with problems and to learn from those problems.

10TH Myth: Entrepreneurs are gamblers

Proponents of this myth argue that entrepreneurs risk highly. The reality is
that entrepreneurs usually work in moderate ‘calculated’ risks. They do not
deliberately seek to take more risk or to take unnecessary risk, nor do they
shy away from unavoidable risk.

TOPIC NINE
FORM OF BUSINESS ORGANIZATION

FORMS OF BUSINESS ORGANIZATION

Introduction

One of the first decisions that you will have to make as a business owner is
how the business should be structured. All businesses must adopt some
legal configuration that defines the rights and liabilities of participants in the
business’s ownership, control, personal liability, life span, and financial
structure. This decision will have long-term implications, so you may want to
consult with an accountant and attorney to help you select the form of
ownership that is right for you. In making a choice, you will want to take into
account the following:

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 a) Your vision regarding the size and nature of your business.
b) The level of control you wish to have.

c) The level of “structure” you are willing to deal with.

d) The business’s vulnerability to lawsuits.

e) Tax implications of the different organizational structures.

f) Expected profit (or loss) of the business.

g) Whether or not you need to re-invest earnings into the business.

h) Your need for access to cash out of the business for yourself.

An overview of the four basic legal forms of organization: Sole

Proprietorship; Partnerships; Corporations and Limited Liability
Company follows.

1. Sole Proprietorship

The vast majority of small businesses start out as sole proprietorships.

These firms are owned by one person, usually the individual who has day-to-
day responsibility for running the business. Sole proprietorships own all the
assets of the business and the profits generated by it. They also assume
complete responsibility for any of its liabilities or debts. In the eyes of the
law and the public, you are one in the same with the business.

1.1 What are some of the Advantages of a Sole Proprietorship?

There are many reasons why a person would choose to start their business
up using a sole proprietorship structure. Some of the main advantages of
sole proprietorships include:

1) Ease of formation: Starting a sole proprietorship is much less

complicated than starting a formal corporation, and also much
cheaper. Some states allow sole proprietorships to be formed without the
double taxation standards applicable to most corporations. The
proprietorship can be named after the owner, or a fictitious name can be
used to enhance the business’ marketing
2) Tax benefits: The owner of a sole proprietorship is not required to file a
separate business tax report. Instead, they will list business information
and figures within their individual tax return. This can save additional
costs on accounting and tax filing. The business will be taxed at the rates
applied to personal income, not corporate tax rates
3) Employment: Sole proprietorships can hire employees. This can lead to
many of the benefits associated with job creation, such as tax
breaks. Also, spouses of the business owner can be employed without
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 having to be formally declared as an employee. Married couples can also
start a sole proprietorship, though liability can only assumed by one
individual
4) Quick Decisions: Control over all business decisions remains in the
hands of the owner. The owner can also fully transfer the sole
proprietorship at any time as they deem necessary
5) Personal Contact: The proprietor can maintain personal contacts with
his employees and clients. Such contacts help in the growth of the
enterprises.
6) Flexibility: Since the full authority rests with the single proprietor, he/she
can make prompt decision any time.
7) Direct Motivation: There is direct motivation between efforts and
rewards. Nobody share the profit of business. Therefore the entrepreneur
has sufficient incentive to work hard.
8) High Secrecy: the proprietor has not to publish his accounts and the
business secrets are known to him alone. Maintenance of secrets guards
him from competitors

What are the Disadvantages of Sole Proprietorships?

Forming a sole proprietorship does involve some risks, mainly to the owner
of the business, as legally speaking they are not treated separately from the
business. Some disadvantages of sole proprietorships are:

1) Unlimited Liability: The business owner will be held directly

responsible for any losses, debts, or violations coming from the
business. For example if the business must pay any debts, these will
be satisfied from the owner’s own personal funds. The owner could be
sued for any unlawful acts committed by the employees. This is
drastically different from corporations, wherein the members enjoy
limited liability (i.e., they cannot be held liable for losses or violations)
2) Limited Skills: proprietorship is one man show and one man cannot
be an expert in all areas (production marketing, financing
procurement, personnel etc.)
3) Lack of “continuity”: The business does not continue if the owner
becomes deceased or incapacitated, since they are treated as one and
the same. Upon the owner’s death, the business is liquidated and
becomes part of the owner’s personal estate, to be distributed to
beneficiaries. This can result in heavy tax consequences on
beneficiaries due to inheritance taxes and estate taxes
4) Difficulty in raising capital: Since the initial funds are usually
provided by the owner, it can be difficult to generate capital. Sole
proprietorships do not issue stocks or other money-generating
investments like corporations do.

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 5) Overworked: the owner being the organizer perform a wide range of
activities some of which he may have no experience in. he is therefore
very much overworked.

Partnership Firm

In a Partnership, two or more people share ownership of a single business.

Like proprietorships, the law does not distinguish between the business and
its owners. The Partners should have a legal agreement that sets forth how
decisions will be made, profits will be shared, disputes will be resolved, how
future partners will be admitted to the partnership, how partners can be
bought out, or what steps will be taken to dissolve the partnership when
needed; Yes, its hard to think about a “break-up” when the business is just
getting started, but many partnerships split up at crisis times and unless
there is a defined process, there will be even greater problems. They also
must decide up front how much time and capital each will contribute, etc.

Characteristics of Partnership
1) Agreement: Without agreement partnership cannot be formed. The
agreement may be written or oral. But it must be written on settle the
disputes.
2) Registration: It is not necessary that a partnership may be
registered. But in case of registered firm many problems can be
created.
3) Number of Partners: In a partnership there should be at least two
partners. In ordinary business the partners must not exceed the
twenty.
4) Profit and Loss Distribution: The basic aim of partnership is to earn
profit. This profit is distributed among the partners according their
agreement. In case of loss also all the partners share in it.
5) Business: The object of the partnership it to carry on the business. It
may be production or trading. It should be according the laws of the
state.
6) Unlimited Liability: The liability of the partner is not limited to his
invested amount. In case of loss the private property of the partner
also used to pay the business obligations.
7) Entity: Law has not granted it any legal entity, it is not independent
from the partners. It has not separate entity from its members.
8) Share in Capital: According to the agreement every partner
contributes his share. It is not necessary all the partners should
contribute equally. Some people provide only skill and ability to
become a partner.
9) Management: All the partners can participate actively in the business
management. Sometimes only few persons are allowed to handle the
business affairs.

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 10) Payment of Tax: Every partner pays the tax on his share of
profit individually.
11) Co-Operation: For the successful partnership mutual co-
operation and mutual confidence is an important factor.
12) No Audit: in the partnership there is any restriction for the audit
of accounts. So this type of organization may operate freely.
13) Partners are Agent: Every partner stand as an agent and
principal to one another. In the position of an agent one can do
contract with other parties on behalf of the firm
14) Transferability of Shares: No one partner can transfer his
share to any other person without the consent of the existing partners.
15) Dissolution: It is a temporary form of business. It operates at
the pleasure of the partners. It is dissolved if a partner leaves dies or
declared bankrupt or insane. Partners can also dissolve it by obtaining
the degree from the court

Partnership Deed

A deed of partnership is a legally binding agreement between the partners

that are setting up in business together. It describes how the partnership will
be run and the rights and duties of the partners themselves.

It's not necessary to have a deed of partnership in order to set up a

partnership, but it's a good idea, as it will help to avoid misunderstandings
and disputes between partners in the future. If the partnership does not have
a deed, it will be governed by the terms of the Partnership Act which does
not offer solutions to many of the problems that can arise and may not suit
the way that you and your partners want to work together

Components of Partnership Deed

The following are the main factors that should be considered when creating a
partnership agreement:

1) Date of Agreement: It is very important that you state when the

agreement was signed.
2) Description of Partners:Describe how or what are each partner’s
interests for his/her own benefit. Indicate that all individuals are of the
legal age of majority.
3) Name of Firm / Business: Make sure that there’s no conflict with an
existing firm name. Before you register your firm name, make sure
that you understand your organization’s structure and its logistics (i.e.:
General partnership vs. Corporation.) Register the chosen name of
your firm. It is important to note if the name can still be used or not
after the death of one of the partner(s). Develop guidelines that will
mention the utilization of the company’s name for any other activities.

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4) Term of Partnership:When does it start? For what period of time?
When will it be terminated? How will assets be distributed at
termination? In the event of breach of any terms of partnership
agreement, what is recourse/remedy for non-breach partner(s) if
partnership dissolves, who gets to keep the name Do you want a no-
compete agreement? Shotgun (Buy Sell) Agreement – crucial
5) Location of Business: Indicate where your headquarters will be
located and you’re servicing area. Decide on required proximity of
each partner. If travel is required as normal course of business, who
will travel? What costs are covered? (fly/drive)
6) Business Purpose of Partnership: Detail the extent/limitations your
business activities. Describe the legit business activities. Provisions for
future changes of business activities.
7) Capital Contributions from Each Partner: Make sure that you state
the form of contribution (cash, assets, etc…) the most important thing
of the partnership agreement is that you must indicate the percentage
of contribution of all parties involved in the business activities. Indicate
when these contributions (noted above) should be delivered. (Give
specific dates). It is also important to take note of the value of the non-
monetary contributions and its interest. Input how and when you or
your partners can make adjustments to their contributions. State if
there will be any future capital contributions. Partners cannot use
business as security for personal commitments unless agreed to in
writing by other partner(s) If either partner is married/common-law and
that partner dies, what happens to his/her stake? (Do you want to be
partners with your buddy’s wife?). Are there any loans to the
partnership? If yes, please indicate how and who will repay the debt.
(Almost always joint and several) How debt decisions (increase/pay
down) are reached?
8) Operational Contribution from Each Partner: What will each
partner’s role be in the day-to-day operations of the business? Who will
have cheque-signing authority? Who will have control/possession of
financial records? What is disclosure process for other partner(s) Who
will make hiring/firing decisions? Who will make marketing decisions?
Who will make purchase decisions? (Capital and non-capital). How are
family members’ interactions handled? Employment, purchases, other
involvement… Are there other operational issues needing clarification
and agreement? (Dress code, hours of work, holidays etc)
9) Compensation: What will be each partner’s compensation package?
How will changes to compensation be mediated in event of
disagreement?How will ‘perks’ and personal expenses be monitored
and equitably allocated? Are there company vehicles involved? What
are the rules for personal use?
10) Disagreement Arbitration; What is the process followed in the
event of disagreement? Is the mediator empowered to make binding

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 decisions? In the event of legal action by one or more partners, who
will choose the venue? (More critical when geographic distance)

Advantages of a Partnership
1) Partnerships are relatively easy to establish; however time should be
invested in developing the partnership agreement.
2) With more than one owner, the ability to raise funds may be increased.
3) The profits from the business flow directly through to the partners’
personal tax return.
4) Prospective employees may be attracted to the business if given the
incentive to become a partner.
5) The business usually will benefit from partners who have
complementary skills.

Disadvantages of a Partnership
1) Partners are jointly and individually liable for the actions of the other
partners.
2) Profits must be shared with others.
3) Since decisions are shared, disagreements can occur.
4) Some employee benefits are not deductible from business income on
tax returns.
5) The partnership may have a limited life; it may end upon the
withdrawal or death of a partner.

Types of Partnerships that should be considered:

1. General Partnership: Partners divide responsibility for management and

liability, as well as the shares of profit or loss according to their internal
agreement. Equal shares are assumed unless there is a written agreement
that states differently.

2. Limited Partnership and Partnership with limited liability:

“Limited” means that most of the partners have limited liability (to the
extent of their investment) as well as limited input regarding management
decision, which generally encourages investors for short term projects, or for
investing in capital assets. This form of ownership is not often used for
operating retail or service businesses. Forming a limited partnership is more
complex and formal than that of a general partnership.

3. Joint Venture: Acts like a general partnership, but is clearly for a limited
period of time or a single project. If the partners in a joint venture repeat the
activity, they will be recognized as an ongoing partnership and will have to
file as such, and distribute accumulated partnership assets up on dissolution
of the entity.

Types of Partners
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The different kinds of Partners that are found in Partnership Firms are as
follows!
1. Active or managing partner: A person who takes active interest in the
conduct and management of the business of the firm is known as active or
managing partner. He carries on business on behalf of the other partners. If
he wants to retire, he has to give a public notice of his retirement; otherwise
he will continue to be liable for the acts of the firm.
2. Sleeping or dormant partner: A sleeping partner is a partner who
‘sleeps’, that is, he does not take active part in the management of the
business. Such a partner only contributes to the share capital of the firm, is
bound by the activities of other partners, and shares the profits and losses of
the business. A sleeping partner, unlike an active partner, is not required to
give a public notice of his retirement. As such, he will not be liable to third
parties for the acts done after his retirement.
3. Nominal or ostensible partner: A nominal partner is one who does not
have any real interest in the business but lends his name to the firm, without
any capital contributions, and doesn’t share the profits of the business. He
also does not usually have a voice in the management of the business of the
firm, but he is liable to outsiders as an actual partner.
4. Sleeping vs. Nominal Partners: It may be clarified that a nominal
partner is not the same as a sleeping partner. A sleeping partner contributes
capital shares profits and losses, but is not known to the outsiders.
A nominal partner, on the contrary, is admitted with the purpose of taking
advantage of his name or reputation. As such, he is known to the outsiders,
although he does not share the profits of the firm nor does he take part in its
management. Nonetheless, both are liable to third parties for the acts of the
firm.
5. Partner by estoppel or holding out: If a person, by his words or
conduct, holds out to another that he is a partner, he will be stopped from
denying that he is not a partner. The person who thus becomes liable to third
parties to pay the debts of the firm is known as a holding out partner.
There are two essential conditions for the principle of holding out : (a) the
person to be held out must have made the representation, by words written
or spoken or by conduct, that he was a partner ; and (6) the other party must
prove that he had knowledge of the representation and acted on it, for
instance, gave the credit.
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6. Partner in profits only: When a partner agrees with the others that he
would only share the profits of the firm and would not be liable for its losses,
he is in own as partner in profits only.
7. Minor as a partner: A partnership is created by an agreement. And if a
partner is incapable of entering into a contract, he cannot become a partner.
Thus, at the time of creation of a firm a minor (i.e., a person who has not
attained the age of 18 years) cannot be one of the parties to the contract.
But a minor ‘can be admitted to the benefits of partnership’, with the
consent of all partners. A minor partner is entitled to his share of profits and
to have access to the accounts of the firm for purposes of inspection and
copy.

Joint Stock Companies

Definitions of Joint Stock Company:

Before going for starting a business in company form of business, the

entrepreneur must pass detail knowledge about the company. A good
number of authors have defined the Company in their own ways and
languages. Few important among them are presented below:

(1) Prof. L. H. Haney: "A Joint Stock Company is a voluntary association of

individuals for profit, having a capital divided into transferable shares, the
ownership of which is the condition of membership."
(2) James Stephens: "A company is an association of many persons who
contribute money or money's worth to a common stock and employs it in
some trade or business, and who share the profit and loss arising there
from."

Characteristics of Joint Stock Company:

The analysis of above definitions reveals the following characteristics of a

company:

1. Association of persons: A company is a voluntary association of

persons established for profit motive. A private company must have at least
two persons and the public limited company must have at least seven
persons to get it registered. The maximum number of persons required for
the registration in case of private company is fifty and in case of public
company there is no maximum limit.
2. Artificial person: A company is an artificial person. It is created by law.
Like that of the natural person, it can own property, incur debts, file suits,
and enter into contracts with others under its own name. It can be sued and
fined but cannot be imprisoned.

30
3. Separate legal entity: A company being created under law has a
separate entity from its members. Any of its members can enter into
contracts with others. A member cannot bind a company by his acts or
dealings with the third parties. The company can file a suit against its
members and its shareholders can also sue the company. Further, a
shareholder is not liable for the acts of the company even though he may be
holding all the shares of that company.
4. Limited liability: The liability of the members or shareholders is limited
to the extent of the value of shares held or the amount guaranteed by them.
The shareholders are not personally liable for the debts of a company
beyond that limit.
5. Transferability of shares: The shares of a public limited company are
freely transferable and can be purchased and sold through the stock
exchanges. A shareholder of a public limited company can transfer his
shares without the consent of other shareholders. But there are certain
restrictions on transferability of shares in case of private limited company.
6. Common seal: Since a company is an artificial person, it cannot put its
signature on any document. Therefore, it is statutory for every company to
have a seal on which the name of the company is engraved. Affixing of seal
on any document signifies the signature of the company. Of course two
directors have to sign as witnesses in such .cases.
7. Separation of ownership from management: The shareholders are
the owners of the company. They are heterogeneous group of people who
are widely scattered throughout the country and abroad. The shareholders
elect their representatives called directors to manage the company. Thus,
the company is managed by directors rather than the shareholders. This
results in separation of ownership from management.
8. Perpetual succession: The Company enjoys a continuous existence. Its
existence is not affected by death, lunacy or insolvency of its shareholders or
directors as the case in partnership or sole proprietorship. The company can
only be dissolved by the operation of law.
9. Investment facilities: A joint stock company raises its funds through
issue of shares to general public. Due to the small denomination of the
shares, the company provides investment opportunities to all sections of
people who want to put their surplus money in the company's share.
10. Accountability: A joint stock company has to function as per the
provisions of the Companies Act. The accounts are to be audited by qualified
auditors. Such accounts and exports are published for the information of all
stakeholders. Regular and timely reports are to be submitted to the
Government.
11. Restricted action: A company cannot go beyond the powers
mentioned in the abject clause of the Memorandum of Association.
Therefore, its action is limited.

Types of Joint Stock Companies

31
Following are the important kinds of Joint Stock Company:
2. Chartered Company.
3. Statutory Company.
4. Registered Company.

1. Chartered company: A company which is created by the Royal order is

called chartered company. Its powers, rights and functions are governed by
the charter. In the present age this type of company is not liked by the
people. Most the companies are registered.

2. Statutory company: A company which is formed by the order of

Governor General, President or Prime Minister or by the Special act of
parliament is called statutory company. These companies are organized for
the object of social welfare business. Government provides full protection to
these companies. These companies have a monopoly in their business. The
share holders have a limited liability.
3. Registered company: Those companies which are formed under the
company’s Acts of the particular country are called registered companies.
Registered company has separate entity from its members. Examples: - ( i )
IPP Media Limited ( ii ) Adam jee Industries Limited

Registered company has following kinds:

a) Unlimited Company.
b) Company Limited by Shares.
c) Company Limited by guarantee.
1. Unlimited company: The shareholders of the unlimited company are
liable to pay the debts and other obligations of the business. So the liability
of the members is unlimited.
Features :- ( i ) It has separate legal entity. ( ii ) Its share can be transferred
easily. ( iii ) It is managed by the board of directors.( vi ) It is registered
under the companies ordinance.
2. Limited company or company Limited by Shares :-

32
In this company the liability of each member is limited to the amount of the
shares which he holds. It has two kinds :
( i ) Private limited company. ( ii ) Public limited company.

Private limited company :- It can be formed at least by two persons but

total membership cannot exceed than fifty. Neither it can issue the shares
nor can it transfer the shares. Company also uses the word limited with its
name. Liability of the share holders is also limited.

Public limited company: - At least seven members can form the public
limited company but there is no limit to the maximum member. Company
can sell the shares to the public. The shares can easily transfer. It can issue
the debentures to borrow the capital.

Difference between a public company and a private company

The distinction between a public company and a private company are
explained in the following manner:
1) Minimum number of members: The minimum number of person
required to form a public company is seven, whereas in a private
company their number is only two.
2) Maximum number of members: There is no limit on the maximum
number of member of a public company, but a private company cannot
have more than fifty members excluding past and present employees.
3) Commencement of Business: A private company can commence its
business as soon as it is incorporated. But a public company shall not
commence its business immediately unless it has been granted the
certificate of commencement of business.
A certificate of incorporation is a legal paper that outlines key
company information. It certifies and confirms that a company
exists legally and is permitted to trade while a certificate of
trade

Distinguish Between Certificate of Incorporation and Trading

Certificate.
Medium

Solution
Certficate of Incorporation :
A certificate of incorporation is a legal document relating ot the
formation of a company or corporation. Usually contains :
Name of the state

33
Business code
Company name
Company legal address
Quantity of Authorized share of stock
Value of the shares of stock
Main purpose of the business.

Trading certificate :
Before trading, all public companies will need to apply for trading
certificate. Private companies donot need to apply for trading
certificate and are therefore able to trade as soon as a Certificate of
Incorporation

4) Invitation to public: A public company by issuing a prospectus may

invite public to subscribe to its shares whereas a private company
cannot extend such invitation to the public.
5) Transferability of shares: There is no restriction on the transfer of
share In the case of public company whereas a private company by its
articles must restrict the right of members to transfer the share.
6) Number of Directors: A public company must have at least three
directors whereas a private company may have two directors.
7) Statutory Meeting: A public company must hold a statutory meeting
and file with the register a statutory report. But in a private company
there are no such obligations.
8) Restrictions on the appointment of Directors: A director of a
public company shall file with the register consent to act as such. He
shall sign the memorandum and enter into a contact for qualification
shares. He cannot vote or take part in the discussion on a contract in
which he is interested. Two-thirds of the directors of a public company
must retire by rotation. These restrictions do not apply to a private
company.

QUESTION TWENTY THREE

Write the letter of the appropriate business regulatory body against its
functions

X. FUNCTIONS

34
 1. Collect revenue of the central government-TRA
2. Regulates fuel pumps, weighing and measuring instruments-WMA
3. Is mandated to monitor sound in music theatres, sound related
business and pollution- NEMC
4. To approve, register and control the use of standard marks in
accordance with the provisions of the Standards Act-TBS
5. Monitor the safety of workers in factories and workplaces-OSHA
6. Regulates prices of water and electricity in Tanzania-EWURA
7. Administer companies and business names laws-BRELA
8. Is a custodian of business information in our country-TIC
9. regulates operations of surface transport vehicles in mainland
Tanzania-LATRA
10. regulates business of cell phone companies in Tanzania-TCRA

Y. REGULATORY BODIES
A) Weight and Measures Agency (WMA) B) Business Registration and
Licensing Authority (BRELA) C) National Environment Management Council
(NEMC) D) Occupational Safety and Health Agency (OSHA) E) Land Transport
Regulatory Authority (LATRA) F) Energy and Water Utilities Regulatory
(EWURA) G) Tanzania Revenue Authority (TRA) H) Tanzania Communications
Regulatory Authority (TCRA)

i) Surface and Marine Transport Authority (SUMATRA) J) Tanzania Food and

Drugs Authority (TFDA) K) Tanzania Medicine and Medical Devices Authority
(TMDA) L) Tanzania Investment Centre (TIC) M) Tanzania Bureau of
Standards (TBS)

ANSWER
X 1 2 3 4 5 6 7 8 9 10
Y G A C M D F B L I H

QUESTION TWENTY FOUR

a) Differentiate the following terminologies as applied in entrepreneurship

i. Business opportunity vs. Business idea \
ii. Executive summary vs. Mission statement
iii. Innovation vs Creativity
iv. Franchising vs. Licensing
v. Controllable risk vs. Uncontrollable risk

Answer

35
 i. A business idea is a concept that can be used to make money while a
business opportunity is a proven concept that generates on-going
income. In other words, a business opportunity is a business idea that
has been researched upon, refined and packaged into a promising
venture that is ready to launch. Major difference between business
idea and business opportunity is that you can sell a Business
Opportunity but you cannot sell Business idea.

ii. The mission statement describes your vision and the executive
summary is a concise outline of the contents of your business
plan. The mission statement gives direction to your planning efforts
and the executive summary is a marketing document to be used in
attracting investors

iii. Creativity is related to ‘imagination’, but innovation is related to

‘implementation’. Creativity is about thinking new things while
creativity is about implementing new things

iv. A license is a legal relationship where one party, called the “Licensor”,
grants to the other party, called the “Licensee”, the right to use or
benefit from a trademark, technology, or other legal rights while A
franchise is a legal relationship where one party, called the
“Franchisor”, grants to the other party, called the “Franchisee”, the
right to develop, establish, and duplicate the operations of the
franchisor’s business.

v. Controllable risk factors are those which you can take steps to
change or influence. While uncontrollable risks are those which you
cannot take steps or influence

36