Establishing a Business

Question 1

Define the term

entrepreneur is …

Answer 1

Someone who is willing to take the risk of setting up their own business enterprise

Question 2

functions of an entrepreneur

Answer 2

• Conceptualising,
• planning,
• accessing funds,
• organising,
• operating and
• evaluating the performance of a business.
• bearing of risks and the
• entitlement to the profits and losses of the business.

Question 3

characteristics of the typical entrepreneur

Answer 3

*Personal traits and leadership qualities:

(a) creative;

(b) innovative;

(c) flexible;

(d) goal-oriented;

(e) persistent;

(f) persevering; and,

(g) propensity to take calculated risks.

Question 4

describe the

role of the entrepreneur in the decision making process

Answer 4

Importance of entrepreneurial organizational skills.

(a) conceptualising;

(b) planning;

(c) accessing financing;

(d) organising the factors of production;

(e) operating the business;

(f) evaluating; and,

(g) risk bearing.

Question 5

outline the

role of the entrepreneur in economic development

Answer 5

• a) collaborating;
• (b) providing goods and services to satisfy
  citizens;
• (c) creating jobs; and,
• (d) contributing to nation building.

Question 6

outline

reasons why an individual may want to establish a business

Answer 6

(a) desire for financial independence;

(b) self-fulfilment;

(c) self-actualisation;

(d) increased income; and,

(e) increased control of working life.

Question 7

outline the

essential steps that should be taken in establishing a business

Answer 7

Steps for establishing a business:

(a) conceptualisation;

(b) research (market probe);

(c) identification of resources (financial, human, material);

(d) creation of business plan;

(e) acquisition of funds; and,

(f) operation of the business.

Question 8

identify the

reasons for preparing a business plan

Answer 8

(a) to ensure that careful research is conducted into the feasibility of the business;

(b) to attract potential investors;

(c) to source financing; and,

(d) to guide the operations of the business when making decisions.

Question 9

describe the

elements of a business plan

Answer 9

Description of the basic elements of a business plan.

(a) Executive summary: an overview of the business.

(b) Operational plan: The business and its objectives – name, address, legal structure, aims and objectives. Personnel, suppliers, equipment
necessary.

(c) The business opportunity: a description of the product or service.

(d) The marketing plan: a description of the potential customers and nature of competition.

(e) Financial forecast: sources of finance, sales, cash flow, profit and loss forecasts.

Question 10

identify

sources of information for conducting research into the establishment of businesses

Answer 10

• Primary - new research carried out by entrepreneur for his/her own purposes
• secondary - existing published research

Question 11

discuss the

significance of conducting a feasibility study into the establishing of a business

Answer 11

Reasons why a feasibility study is important:

(a) To ascertain the viability.

(b) identity possible costs attached to the project/business

(c) identify possible sources of finance.

Question 12

explain the

relationship between planning and the operation of a business

Answer 12

Business need necessity for short-term, medium-term
and long-term planning in order to operate sucessfully
* short-term plans:
* typically periods up to 1 year.
* interest to be paid on funds borrowed to set up
* supplies received on credit to be paid for
* ca;culations to predict cash coming in and out of business
* have enough cash to finance demands for cash payments from lenders, suppliers andpay wages
* Medium-term plans:
* cover period of 1 to 3 or 4 years
* Seeks to tackle short-term issues or problems
* targets can be set for what the busienss wants to achieve in period in question
* Long-term plans
* over 5 years
* establish broad goals for business to achieve
* aspiratioinal
* set out what business hopes to become over time

Question 13

identify

regulatory practices instituted by governments for the
establishment and conduct of different types of businesses

Answer 13

Local, regional and global rules for establishing and conducting business, including local government (municipal, village council, parish
council) regulations. For example:

(a) monetary and fiscal policies;

(b) consumer protection agencies; and,

(c) environmental policies.

Question 14

factors that determine the location of a business

Answer 14

Factors affecting location:

(a) geographical;

(b) availability of raw materials and supplies;

(c) infrastructure;

(d) power and water;

(e) telecommunications;

(f) transport;

(g) health facilities;

(h) labour supply;

(i) governmental regulation.

Question 15

significance of collateral in accessing capital to
establish a business

Answer 15

Collateral:

(a) concept;

(b) evaluation of different types;
* property,
* stocks,
* bonds,
* money,
* cash
* surrender on life insurance policies,
* motor vehicles,
* appliances; and,

(c) the value of collateral.