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Concept of entrepreneurship
An entrepreneur is the agent who buys factors of production at certain price in order to combine them into a product with a view to selling it at uncertain price in future. - Cantillon An entrepreneur is the economic agent who units all means of production- land of one, the labour of another and capital of yet another and thus produces a product. By selling the product in the market he pays rent of land, wages to labour, interest on capital and what remains is his profit. J.B. Say An entrepreneur is an innovator who brings economic development through new combinations of factors of production. - Joseph Schumpeter
Traits of entrepreneur
Initiation Watching for opportunities Persistence Information seeker & resourceful Quality conscious Commitment to work Efficiency lover Proper planning Self confidence Assertiveness Persuation Efficient monitoring Concern for employees
Function of Entrepreneur
Innovation Risktaking Organization building
Type of Entrepreneur
Innovating Entrepreneur Imitative Entrepreneur Fabian / Drone Entrepreneur
Assignment - 1
Understanding of concept of establishing a business, understanding the logistics of setting up a small business enterprise and identifying strengths & weakness of project.
Types of ownership
Sole Proprietorship Partnership Joint stock company
Sole Proprietorship
Salient features 1. Single ownership 2. One man control 3. Undivided risk 4. Unlimited liability 5. No government regulation
Sole Proprietorship
Advantages
1. 2. 3. 4. 5. 6. Simplicity Quick Decisions High secrecy Direct Motivation Personal Touch Flexibility
Disadvantages
1. 2. 3. 4. Limited Funds Limited Skills Unlimited Liability Uncertain Life
Sole Proprietorship
Expansion of business 1. By Employment of Paid Assistant 2. By Admission of a Partner
By Admission of a Partner
Advantages
Investment of capital. Sharing of managerial responsibility. Pooling of knowledge, experience and judgment. Increase in goodwill & connections. Direct relation between effort and reward, personal incentive and interest. Secrecy ensured. Sharing of losses & liability. Economy of costs.
Disadvantages
Sharing of control/ loss in freedom of action. Division of authority/ lack of independent decisions. Increase in liability and risk. Danger of dishonesty and negligence. Possibility of dispute and differences. Sharing of profits. Difficulty in removing the partner.
Partnership Firm
Salient features Association of 2 or more persons. Maximim 10 in banking business and 20 in non banking business. Contractual relationship written or oral agreement among the partners. Existence of a lawful business Sharing of profit and loss Mutual agency among partners Unlimited liability Restriction on transfer of interest Utmost good faith.
Partnership Firm
Formation / Deed of partnership Name of the firm, Nature of the firms business, Date of agreement, Principal place of the firms business, Duration of partnership. Amount of capital contributed by each partner. The proportion in which the profits and losses are to be shared. Loans & advances by partners and interest payable on them. Amount of withdrawal allowed to each partner and the rate of interest. Amount of salary or commission payable to any partner. Duties, power & obligation of all the partners. Maintenance of accounts and audit. Mode of valuation of goodwill on admission, retirement or death of a partner. Procedure for dissolution of the firm and settlement of accounts. Settlement of disputes among the partners. Etc.
Partnership Firm
Registration of firms Name of the firm, Nature of the firms business, Date of agreement, Principal place of the firms business, Duration of partnership. Dissolution of firm By agreement By notice Contingent Compulsory Through court Settlement of accounts on dissolution
Partnership Firm
Merits
Ease of formation Larger financial resources Specialisation and balanced approach Flexibility of operations Personal incentive and direct supervision Capacity for survival Better human and public relation Business secrecy
Demerits Unlimited liability Limited resources Risk of incompetent/ dishonest partner Lack of harmony Lack of continuity Non transferability of interest. Public distrust
demerits
Difficulty of formation Excessive government control Lack of motivation and personal touch Delay in decisions Conflict of interest Frauds in promotion and management Lack of secrecy Social evils
b. Will it work?
c. Who is my customer?
If obstacles cant be
avoided TERMINATE THE B.P.
b. Analysis of competitors
c. Market segmentation d. Industry and market forecasts 4. Description of venture a. Product(s) b. Service(s) c. Size of business d. Office equipment and personnel e. Background of entrepreneur
c.
d. e.
Promotion
Product forecasts Controls
8.
Organisational plan
a. b. c. d. e. Form of ownership Identification of partners or principal shareholders Authority of principals Management-team background Roles and responsibilities of members of organisation
10. Financial plan a. b. c. d. e. Income statement Cash flow projections Balance sheet Break-even analysis Sources and applications of funds