Introduction to Business

Entrepreneurship, and Small Businesses

CHAPTER # 6

Hamidul Islam [Hamid]

Senior Assistant Professor,
Department of Marketing, FBA, AIUB 1
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WHAT IS ENTREPRENEURSHIP?
The capacity and willingness to develop, organize and manage a business
venture along with any of its risks in order to make a profit. The most obvious
example of entrepreneurship is the starting of new businesses.

Entrepreneur:
A person who takes the risks necessary to organize and
manage a business and receives the financial profits and
non-monetary rewards.

Intrapreneur:
A person with entrepreneurial characteristics employed by a corporation
and encouraged to be innovative and creative.

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CHARACTERISTICS OF AN ENTREPRENEUR
 Need for Achievement:
Growth-oriented entrepreneurs have a high need for achievement: they need to succeed, to
achieve, to accomplish challenging tasks. The strong desire for achievement leads to a desire for
independence.
 Low need to Conform:
Growth-oriented entrepreneurs listen, but they are able to ignore other’s advice. They are able to
handle generally accepted rules and standards. Taking the unpopular course of action, if they
consider it best, is the way they do business.
 High Energy Level:
The capacity for continued effort requires a high energy level. All the necessary work---planning,
organizing, directing, creating strategy and finding funds can only be accomplished on a demanding
schedule.

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CHARACTERISTICS OF AN ENTREPRENEUR
 Determination to Success:
Growth-oriented entrepreneurs are persistent (refusing to give up), doing business with
determination for it to succeed. They work hard on the details and uncompromisingly attempt to
find ways to become more profitable.

 Risk Taking Tendency:

It is said that, people with a high need for achievement tend to take risks. Growth-oriented
entrepreneurs believe so strongly in their ability to achieve that they do not see possibility of
failure. They thus accept risk and find it motivating.

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RISKS OF ENTREPRENEURSHIP
The failure rate among new ventures is comparatively high.
Besides business risk, entrepreneurs face significant finance risk, if they typically invest
most – if not all of their financial resources in the business.
They may take a career risk by leaving a secure job for a venture with a highly
uncertain future.
They may also incur family and social risks because the demands of starting and
running a young business leave little time for attention to family and friends.

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REASONS FOR BUSINESS FAILURE
People fail because they jump into a business too quickly. They throw or get
into a business enterprise very quickly , without doing their homework. They do not
analyze their own strengths and weaknesses.
Businesses also fail due because they run out of money. If you cannot pay your
bills and other expenses, you are out of business. Realistic planning for the money
needed is critically important. Estimates of cash requirements are a top priority
before starting the venture.
Failing to plan is an obvious mistake. A detailed business plan forces the
entrepreneur to think ahead, to reflect, to decide on how to proceed.

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SMALL BUSINESSES
One kind of business that is independently owned and operated and is not
dominant in its field of operation.
Such as: Retailing, Wholesaling, sometimes Manufacturing, and working as a
Service provider, etc.

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SMALL BUSINESSES

Small businesses are vital to an economy because they provide

products, jobs, innovation, and opportunities.
Retailing, Wholesaling, Manufacturing, Services, and High technology
attract small businesses because these industries are:

☞ Easy to enter
☞ Require relatively low initial financing
☞ May experience less heavy competition

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SMALL BUSINESSES
ADVANTAGES
Small business ownership offers some personal advantages, including
independence, freedom of choice, and the option of working
at home.
Business advantages include flexibility, the ability to focus on a
few key customers, and the chance to develop a reputation
for quality and service.

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SMALL BUSINESSES
DISADVANTAGES
Small businesses have many disadvantages for their owners such as
expense, physical and psychological stress, and a high failure rate.

Small businesses fail for many reasons:

✔ Undercapitalization
✔ Management Inexperience or Incompetence
✔ Neglect
✔ Disproportionate Burdens imposed by Government Regulation
✔ Vulnerability to competition from larger companies
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Starting a Small Business and the Resources Required

☞ You must have an idea for developing a small business.

☞ You need to devise a business plan to guide planning and
development of the business.
☞ You must decide what form of business ownership to use:
sole proprietorship, partnership, or corporation. Small business
owners are expected to provide some of the funds required to
start their businesses, but funds also can be obtained from friends
and family, financial institutions, etc.
☞ You must decide whether to start a new business from
scratch, buy an existing one, or buy a franchise operation.
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SMALL BUSINESS OPPORTUNITIES

Many people imagine themselves running their own business, making the
key decisions and earning a profit. Becoming a small business owner can
provide these opportunities.
Three typical ways to become a small business owner includes:

Take over a Family Business

Buying an Existing Business
Starting a New Business

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SMALL BUSINESS OPPORTUNITIES
Take over a Family Business:
Children have often taken over the family business. In most cases,
the employees in small bakeries, barbershops, grocery stores,
butcher shops were the owners’ children. They learned the
business by working with their parents. Sometimes the children
learned well and wanted to continue the business.

Buying an Existing Business:

Some people buy out an established business. The buyer
and seller agree on terms involving inventory, equipment
and price. The details of this purchase agreement should be
spelled out in a legal contract between the buyer and
seller.
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SMALL BUSINESS OPPORTUNITIES
Starting a New Business:
Starting a new business requires hard work and careful planning. Without solid
planning, a new owner is likely to be filled by lots of problems. Because a new business
has no previous customers or business records, as an established business does,
getting all the information needed to do a good job will involve hard work.

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DIFFERENT TYPES OF SMALL BUSINESSES
Different types of small businesses exist in the market, which are
as follows:
1. Retailing
2. Wholesaling
3. Manufacturing
4. Services
5. Home Based/ Home Made Business

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TYPES OF SMALL BUSINESSES
1. RETAILING [RETAILERS]
Retailers are merchants who sell goods to ultimate consumers.
Example: Traditional Grocery Stores, Tea Stalls, Medicine Stores, Restaurants,
Shoe Stores, etc. appear in different parts of Dhaka City and other areas of the
country.
Small, local retail businesses sell many of the same products as the large retail
stores sell in the local market.

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TYPES OF SMALL BUSINESSES
2. WHOLESALING [WHOLESALERS]
Wholesaling involves selling to other sellers, such as retailers, other wholesalers or
industrial firms. Wholesale trade consists mainly of small businesses.
Small wholesalers, also sell a wide range of products, including groceries, supplies,
machinery, fruits and vegetables.
These businesses serve as a link between manufacturers and retailers or industrial
users.
Example: Grocery Stores in Kawran Bazar, Dhaka

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TYPES OF SMALL BUSINESSES
3. MANUFACTURING [MANUFACTURERS]
Small Manufacturing businesses number in the thousands. This Category includes
clothing manufactures, Handloom, furniture shops, bakeries, etc.
The manufacturing business involves converting raw materials into products
needed by the society. Therefore, the owner must understand production and
marketing and how these business functions complement each other.

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TYPES OF SMALL BUSINESSES
4. SERVICE [SERVICE PROVIDER]
Intangible products that can not be physically possessed and that involve
performance or effort.
Types of Service Businesses:
 Professional Business Services:
Businesses that provide services to other business organizations.
Example: Advertising Agencies, Tax Consultants, Accounting firms, etc.
 Personal Services: Laundries, Barber, Beauty Saloons, etc.
 Repair Services: Automobile Repair, Jewellery Repair, etc.
 Entertainment and Recreation Services: Movie Theatres,
Amusement Parks.
 Hotels and Motels
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TYPES OF SMALL BUSINESSES
5. HOME BASED/ HOME MADE BUSINESS
Businesses in which an individual works or conducts activities from home
(Self contribution or joint contributions from family members).
Example: Snacks, Pickles (Home Made Aachars), Handicrafts, etc.

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END OF THE CHAPTER

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