Theme 1 - 1.5.1 And 1.5.2 - Roles Of An Entreupeneuer And Characteristics

Question 1

What are entrepreneurs ?

Answer 1

They are people who have a business idea and want to make money working for themselves - they are owners of a business and without them the business would not exist

Question 2

What are the roles played by entrepreneurs ?

Answer 2

• They are innovators because they try to make money out of a business idea - such ideas might come from spotting a gap in the market or a new invention, market research. However many people may set up a business by copying or adapting what another business does
• They are responsible for organising other factors of production - they buy or hire resources such as materials and labour equipment - these resources are used to make or deliver products - organising involves giving instructions etc
• Since they are the owners of the business - they have to make all the key decisions - they make decisions such as: how to raise finance, product design, choice of production method, prices, wages etc
• They are also risk takers as the money they invested in the business might be lost - however if the business does well then they will make a profit

Question 3

What are the risks when starting your own business ?

Answer 3

The business might fail and this will cause the business to go bankrupt and this means that you might be put into debt - also the person has to leave their current job to start the business and this might be very demotivating as at the start of your business you wont be making much money and this would make you want to quit - especially when you had a very good job to begin with

However the risk is a major motivator for entrepreneurs to carry on

Question 4

How do most entrepreneurs ( those who risk their own capital in setting up and running a business ) find a business idea ?

Answer 4

• Business experience - for most people - starting a small business, the business idea comes from their existing job - for e.g. a plumber might leave work and make their own plumbing business etc etc This is good because its the most risk-free as the entrepreneur already has knowledge of the market
• Personal experience - Some people look at the stuff they do outside of work to find a business idea - this could be a amateur cyclist making a cycle shop
• Skills - Some entrepreneurs look at their own skills to start a business on - for e.g. a person with an administrative job might think that he can speak very well to customers etc therefore he would make a business that sells things as he would be very good at selling things
• Lifestyle choices - Some people may want to open a business because they want to move for e.g. to the countryside and so they invest in a farm to stay in and sell crops etc - or for e.g. someone might have wanted to run a pub and so they made a pub

Question 5

What are the stages in setting up a business ?

Answer 5

• Idea - A business cannot start without an entrepreneur having an business idea
• Research - The viability of a business idea has to be researched - this might involve carrying out market research and analysing the competition to decide whether the idea is likely to work - other research might be meeting people like bankers etc to get advice on making the business
• Planning - This is a very important step in setting up a business
• Financing - Entrepreneurs will provide some of the money needed to set up the business - They have to decide how much finance they will need and which sources they will get this finance from - Sources of finance
• Location - The location an entrepreneur chooses will depend on the nature of the business - for e.g. if the business is a food shop then the business may be located near the target customers, others work from home and yet offer services nationally
• Resources - The business plan will involve many resources needed to set-up and run the business - for e.g. a dentist will need a suitable premises, computer, uniforms etc
• Launch - This is when the business first starts trading - you might do a special launch foe e.g. a restaurant may do a special opening day when everything is for free - this creates good public relations (PR) with customers

Question 6

What happens to people that skip the planning part of the business ?

Answer 6

Some do succeed however many fail and many also say ‘failing to plan is planning to fail’

Question 7

What are some of the activities that entrepreneurs have to do to keep the business functioning well ?

Answer 7

• Financial management - The business needs enough money to fund its operations - this means possibly producing a cash flow forecast, chasing debts, monitoring cash flow into the business and out
• Administration - This means that the business has to have accurate record keeping - for e.g. a business has to record all of its transactions, keep stock records etc
• Marketing -

Question 8

What are the 8 barriers to entrepreneurship ?

Answer 8

1. Lack of finance
2. Lack of entrepreneurial capacity
3. Becoming an employer
4. Legal barrier ( red tape )
5. Lack of ideas
6. Fear of failure
7. Aversion to risk
8. Corrupt and unsupportive environment

Question 9

What is the lack of finance