INTRODUCTION

SMME’s - small, medium and Micro Enterprises

At the turn of the 21st century Smme’s formed :

- 97.5% of all businesses in S.A

- generated 34.8 % of GDP
- contributed 42.7% by value of all salaries
- provided 54.5% of formal private sector employees

The combination of all businesses (Smmes , Nationals to Multinationals) determines the state of the Economy .

It may be argued that entrepreneurs are the core and essence of any economy. They are the primary source of taxes,
the life blood of state revenue.
GDP - Gross Domestic Product, is the total final
production within a country’s geographic boundaries

Smme’s are a critical growth sector in the economy.

Entrepreneurship :
NB: The essence of entrepreneurship lies in the
perception and exploration of new opportunities in the
realm of business – bringing about a different use of
national resources in that they are withdrawn from
their traditional employ and subjected to new
combinations
Entrepreneur:
- An entrepreneur is a person who identifies an
opportunity in the market, gathers resources and
creates and grows a business venture to meet
these needs. He bears the risk for the venture
and is rewarded with a profit if it succeeds.
- An entrepreneur is central to value creation,
drives capital markets and is the heart of
economic evolution
Key aspects of entrepreneurship :
• Opportunity identification
• Innovation and creativity
• Getting resources – organising/pooling factors of
production
• Creating and growing a venture
• Taking risks – personal and financial
• Being rewarded
• Managing the business
• Creation of value for society
Entrepreneurship vs Small Business

Small Business:
- A small business is any business that is independently owned and
operated but is not dominant in its field and does not engage in any
new innovative practices
- owners not necessarily interested in
growth
- autonomy and security are prime
objectives
- delivery of an established product or services
- stabilises at a certain stage and only grows with
inflation
Entrepreneurial Ventures:
- Principal objectives are profitability and growth
- Innovation
- Strategic objectives set for :
- target market
- market development
- market share
- market position
Success factors of Entrepreneurs:
1. Creativity and innovation
- application of new ideas to products, procedures etc.
2. Risk orientation
- preparedness to make use of identified opportunities in spite of risks
3. Leadership
- Have good interpersonal skills
- Be comfortable with people
- Be amenable to divergent opinion
- Trust people
- Give recognition
- Team builder
- motivator
4. Positive attitude
- Self confidence
- Belief in business and prospects
5. Perseverance
- Belief in project despite setbacks
- Drive
- Ability to strive after their business ideals despite obstacles,
problems
- Overcoming the challenge of the unknown
6. Commitment
- Willingness to commit personal resources
- Devote full time attn
- Sacrificial attitude
Managerial success factors:
• Planning
– Operational
– Tactical
– Strategic
• Knowledge of competitors
– Who they are
– What they are doing
– Relative position
– Give competitive advantage
• Market orientation
– Market oriented
– Market segmentation
– Market demographics
• Client service
– Friendliness
– Quality
– Delivery
– Credit facilities
– Availability of products
– Facility layout and appearance
– Administrative effectiveness
– Facility location
• Quality
– Value for money
– Aim to provide best service/product
• Financial insight and management
– Basic financial concepts
– Cost control
• Knowledge and skills
– Inherent skill
– Use of experts

The Entrepreneurial process

the process through which a new venture is created by an entrepreneur.

There are four distinct phases :
• Identify and evaluate opportunity
• Develop business plan
• Determine resource requirements
• Start and manage business
Opportunity
• An opportunity is a gap left in the market by
those currently serving it
• A good opportunity is:
– Attractive
– Durable
– Timely
– Product/service creates value for end user
THE ENTREPRENEUR

• Critical player in a developing country

• Provides goods and services
• Provides employment

Nb: a well functioning small business sector contributes to the economic and social
growth of a country.

Levels of Entrepreneurship

1. Basic survivalist
-Individualistic
-isolated from markets
-unaware of potential
-illiterate
1. Pre-entrepreneurs
– Not self sustaining
– Welfare oriented approach
– Collectivism

2. Subsistence Entrepreneurs
– Self employed
– Independent income generation
– Inexperienced in business management

3. Small scale Entrepreneurs

• 10 – 49 employees
• Creditworthy
• Well educated
• Adequate collateral
• Eg law firm.
Characteristics of Entrepreneurs

Not necessarily in-born but can be acquired through life experiences. These include:

• Passion

• Locus of control
– Enjoy being in control of own life
– High degree of autonomy

• Need for independence

– To be one’s own boss

• Need for achievement

– High need for achievement
– Self starters, driven internally by strong desire to compete against self-imposed standards
• Risk taking and uncertainty
– Risk of losing money
– Social stigma of failure
– Family
• Creativity and Innovation
– Creativity and innovation a key ingredient to establish and sustain a
niche market
• Determination and Persistence
– Never giving up
– Learning from previous failures and mistakes
 Entrepreneurs vs Inventors
- Inventors not involved in day to day activities
- Inventor places high premium on being an
achiever, patents
- Entrepreneur puts great ideas into action and
sells the new product
- Inventor has high creativity but little
management skills
- Inventor investigates and discovers
Role Models and Support Systems

1. Role models – motivators

- set standards
2. Social networks
• Communication and information change
3. Personal networks
– Day to day contacts
4. Extended Networks
– Network of organisations rather than individuals
– Eg CIS, ECSA, Chamber of Mines, etc

An entrepreneur needs support to succeed.

Push and Pull Factors

The number of entrepreneurs operating at any

one point will depend on the strength of push
and pull factors.
Challenges facing Entrepreneurs

1. Access to start up and expansion finance

• No collateral
2. Access to markets
• Market penetration
• Training orientation
3. Access to appropriate technology
• Efficiency
• Quality
• Cost reduction
4. Access to human resources
• Mgt skills
• Culture
• Role models
 Different Types of Entrepreneurs
• Women entrepreneurs
• Youth entrepreneurs
• Technology entrepreneurs
• Social entrepreneurs – eg NGO’s
• Tourism entrepreneurs