Entrepreneurship

1. Entrepreneurs
hipSMALL BUSINESS

2. An enterprise refers to a business or an
organization engaged in the
manufacturing or trade of goods,
services, or both to consumers.
ENTERPRISE

3.  In every economy we see businesses of various sizes such as
Micro, Small and Medium
Enterprises
ENTERPRISE

4.  We can say a business is small if it has
Independent management
Owner supplied capital
Mainly local area of operation
Relatively small size within an industry
WHAT DO WE MEAN BY A SMALL
BUSINESS?

5. A small business is one that is
independently owned and operated
and in not dominant in its field of
operation.
DEFINITION OF SMALL BUSINESS

6.  Small businesses
provide goods as
services as well as
serve as a nursery of
entrepreneurial and
managerial talent.
 Initially the capital
investment is small and
the technology used is
low, so it becomes easy
for first time
entrepreneurs to set up
a venture.
WHY FOCUS ON SMALL BUSINESS?

7.  It provides an opportunity for entrepreneurs to hone their
skills and talents, to experiment, to innovate and transform
their ideas into goods and services needed by the society
 It creats job opportunities for millions of people, including
many with low levels of formal education.
 Small-scale sector has emerged as an engine of growth
 Employment Generation
 Low Initial Capital Investment
 Balanced Regional Development
 Equitable Distribution of Income
 Exports
 Development of Entrepreneurship
WHY FOCUS ON SMALL BUSINESS?

8. IMPORTANCE OF SME’S
Large Enterprises
Medium Enterprises
Small Enterprises (Formal Sole proprietorship, Partnerships
and companies)
Micro Enterprises (Informal)

9.  91000 SME’S
 THEY FORM 90% OF ALL BUSINESSES IN OMAN
 40% OF THESE BUSINESSES ARE RETAIL SECTOR
HOW MANY SMALL & MEDIUM
BUSINESSES IN OMAN?

10. Business Enterprise Number of employees
Annual Sales
Micro Fewer than 5 workers Less than RO 25,000
Small 5 – 9 workers RO 25,000 to RO 250, 000
Medium 10 – 99 workers RO 250,000 to RO 1.5 m
WHAT IS SMALL?

11.  Sole proprietorship: A sole proprietorship is a business owned
by one person for-profit. The owner may operate the business
alone or may employ some workers or staff.
 Partnership: A partnership is a business owned by two or
more people. In most forms of partnerships, each partner has
unlimited liability for the debts incurred by the business.
 Corporation: corporations are big companies and they can be
either government-owned or privately-owned. The board of
directors is elected to manage the companies.
WHAT FORMS OF ORGANIZATIONS DO
THESE BUSINESSES FOLLOW?

12.  40% OF THESE BUSINESSES ARE RETAIL SECTOR
 Retail Trade / Wholesale Trade:
 Example: Departmental stores, shops selling Gifts, perfumes
and chocolates, cloths and garments (online retail)
 Services:
 Example: barber shop, restaurant, tour operators, travel
agency, dentist shop, shoe repair shop, photographer shop
 Small Manufacturing Enterprises:
 Example: bread making enterprises, soap making enterprises,
note book making enterprises FURNITURE
 Handicrafts:
IN WHAT INDUSTRIES ARE THESE SME’S
ESTABLSIHED?

13.  Agriculture, agro based products, fisheries and livestock:
Farming and cultivation of various crops and vegetables is
called agriculture and the processing and the sale of the fruits
and other cultivated products refers to agro based business.
Agriculture, livestock (animal farms) and fisheries are among
the oldest and most important sectors of the Omani economy.
IN WHAT INDUSTRIES ARE THESE SME’S
ESTABLSIHED?

14.  Low startup capital:
 With a small sum of money a small business can be started.
 Ease of entry and exit:
 With a small sum of money one can set up a corn/ popcorn shop,
we can easily start and easily exit the business.
 Operational flexibility:
 Small businesses have the advantage of operational flexibility as
the sole proprietor makes decisions which are taken quickly and
without any major delays.
 More satisfied customers – Personal Touch:
 Customers are more satisfied as owners are easily approachable.
They are dealt face to face.
ADVANTAGES OF SMALL BUSINESSES

15.  Lack of Capital – Financial Limitations:
 Lack of capital obviously hinders the expansion of most small businesses.
Due to their size, small businesses are unable to attract bank financing.
 Lack of Managerial Skills:
 Small businesses may face problem of management as they are only
dependent on the owner(s) managerial skills.
 Lack of adequate technology:
 Small businesses find it difficult to cope (manage) with the rapid changes
in science and technology. This is because they do not have the capital to
use new technology.
 Lack of expert staff:
 It is difficult to hire or take consultancy from experts as they lack capital.
 Risk of losing business
DISADVANTAGES OF SMALL BUSINESSES

16. HOW SMALL BUSINESS
IS FORMED?

17.  1. Search for and identify the business opportunities
 The list of possible products/services/ ideas is almost unlimited.
 Opportunities
 Existing industry dynamics and players
 Competitors
 Best practices from other industries
 Entrepreneurship Development Cell
 Conferences and Workshops
 Journals and magazines contributing insights in the form of papers and articles
on entrepreneurship
 Day to day interaction with business stakeholders
 Foreign visits by a prospective entrepreneur
 The best place to start searching is to find your appropriate market niche.
 Niche Marketing is the process of finding a small- but profitable – demand for
something, and then producing a custom-made product for that market.
STEPS IN STARTING A SMALL BUSINESS.

18.  2. Study the market feasibility of the products / opportunities.
 Estimating the size of the market.
 Estimating the competition.
 Estimating your share of the market.
STEP 2

19.  Decide whether to start a new business, buy an existing one,
or buy a franchise.
 Decision to start a new business
 Reasons for starting a new business
 Owner’s freedom to:
 Define the nature of the business.
 Have a free hand in selecting and developing business and
personnel.
 Take advantage of the latest technology, materials and tools.
 Select a competitive environment.
STEP 3

20.  Reasons for buying an existing business
 Personnel are already working.
 The facilities are already available.
 A product is already being produced for an existing market.
 The location may be desirable.
 Relationships have been established with banks and trade
creditors.
 Revenue and profits are being generated, and goodwill exists.
DECISION TO BUY AN EXISTING BUSINESS

21.  Franchise – a business licensed to sell a company’s product
exclusively in a particular area or to operate a business that
carries that company’s name.
 Examples: McDonalds, KFC, Pizza Hut, Starbucks
 Franchisor – The franchisor refers to the companies that own
trademarks (brand name) and products, which gives the right to
the franchisee to use the trademarks and sell products and
services in a different location. The franchisor gets an agreed -
upon fee.
 Franchisee - A business owner who gets the right to sell goods or
services of a company, in exchange for some payment/ fee
DECISION TO BUY A FRANCHISE

22.  Reasons for buying a franchise
 The franchiser and franchisee desires the success of the other.
 The franchiser brings proven and successful methods of operation and
obtains guidance from experienced people by obtaining a franchise.
 The market niche has been identified, and sales activities are in place.
 Reasons for not buying a franchise
 The best business being franchise is costly.
 Expenses include investments and fees, as well as royalty payments.
 New franchisees face far greater financial risk.
 The best franchise is not a guarantee of success.
 The franchisee may not have enough independence.
DECISION TO BUY A FRANCHISE

23.  DEVELOPING MARKETING STRATEGIES - How to Market the Products?
 Setting Objectives.
 Marketing objectives should be tied in with your competitive edge and flow from
your mission statement.
 A competitive edge / competitive advantage is a particular characteristic that
makes a firm more attractive to customers than its rivals. Your competitive edge is
something that customers want and only you can supply which gives you an
advantage over your competitors. Some factors that might provide such an
advantage are quality, reliability, integrity, and service as well as lower prices.
 Choosing Target Market
 A target market is the part of the total market toward which promotional efforts are
concentrated. Use market segmentation.
 Market segmentation is the division of the market for a product into groups of
customers with identifiable needs and characteristics .
 Developing an Effective Marketing Mix
 A marketing mix is the proper blending of the basic elements of product, price,
promotion and place into an integrated marketing program.
SMALL BUSINESS ADMINISTRATIVE
FUNCTIONS

24.  • Moving quickly to satisfy customers’ needs.
 • Using pricing to differentiate the product.
 • Paying attention to packaging.
 • Building customer’s loyalty.
 • Offering samples and demonstrations.
 • Aligning at specialized market segments.
 Localizing business.
 Providing personal touch.
 Providing technical repair services.

SUGGESTED MARKETING STRATEGIES
FOR SMALL BUSINESS

25.  Advertising is a form of commercial mass communication
designed to promote the sale of a product or service, or a
message on behalf of an institution or organization. Thus, it
informs customers of the availability, desirability and uses of a
product.

 Forms of Advertising
 The most popular advertising media used by small businesses
are display ads in television, newspapers, radio, store signs,
direct mail, circulars, handbills, yellow pages ads, outdoor signs
and internet.

2. ADVERTISING THE PRODUCT

26.  Merchandising is promoting the sale of a product at the point of
purchase. It is the way the product is presented to customers,
including window displays, store banners, product label and
packaging and product demonstration.
 Sales promotion includes marketing activities (other than
advertising and personal selling) that stimulate consumer
purchasing and dealer effectiveness.
 Consumer Promotions use coupons, discounts, contests, trading
stamps, samples, rebates, etc.
 Trade Promotions includes free goods, buying allowances,
merchandise allowances, cooperative advertising and free items
given as premiums.
 Sales Force Promotions consists of benefits, such as contests,
bonuses, extra commissions, and sales rallies.
 Publicity is information about a business that is published or
broadcasted without charge.
3. PROMOTING THE PRODUCT

27.  Business Plan
 The business plan is a written document prepared by the
entrepreneur that describes the external and internal
elements involved in starting a new venture.
 A business plan is a written narrative that describes what a
new business plans to accomplish.
 Who Reads the Business Plan—And What Are They Looking
For?
 Business Plan - Dual-Use Document
 For most new ventures, the business plan is a dual-purpose
document used both inside and outside the firm.
 There are two primary audiences for a firm’s business plan.
BUSINESS PLAN

28. Audience What They are Looking For
A Firm’s Employees
(used inside)
A clearly written business plan helps the employees of a
firm operate in sync and move forward in a consistent
and purposeful manner.
Investors and other external
stakeholders
(used outside)
A firm’s business plan must make the case that the firm
is a good use of an investor’s funds or the attention of
others.
THERE ARE TWO PRIMARY AUDIENCES

29.  Guidelines for Writing a Business Plan
 Structure of the Business Plan
 To make the best impression a business plan should follow a
conventional structure, such as the outline for the business plan shown
in the chapter.
 Typically, investors are busy people and want a plan where they can
easily find critical information.
 Along with facts and figures, a business plan needs to project a sense of
readiness (keenness) about the possibilities that surround a new venture.
 Content of the Business Plan
 The business plan should give clear and concise (short, brief) information
on all the important aspects of the proposed venture.
 It must be long enough to provide sufficient information yet short enough
to maintain reader interest.
 For most plans, 25 to 35 pages are sufficient.

30.  Recognizing the Elements of the Plan May Change
 It’s important to recognize that the plan will usually change while
written.
 Often new information emerges when an entrepreneur or a team of
entrepreneurs involved in writing the plan and start getting feedback
from others.

31.  A suggested outline of a business plan is shown. Most business
plans do not include all the elements introduced in the following
sample plan; we include them here for the purpose of
completeness.
 Each entrepreneur must decide which elements to include in his
or her plan.
 Elements of a Business Plan
 Section 1: Executive Summary
 The executive summary is a short overview of the entire business plan
 It provides a busy reader with everything that needs to be known about
the new venture’s distinctive (unique) nature.
 An executive summary shouldn’t exceed two single-space pages.
 Note: In many instances an investor will ask for a copy of a firm’s
executive summary and will ask for a copy of the entire plan only
if the executive summary is sufficiently convincing.
OUTLINE OF A BUSINESS PLAN

32.  Section 2: Company Description
 The main body of the business plan beings with a general description
of the company.
 Items to include in this section:
 Company description.
 Company history.
 Mission statement.
 Products and services.
 Current status.
 Legal status and ownership.
 Key partnerships (if any).
 Note: It demonstrates to your reader that you know how to
translate an idea into a business

33.  Section 3: Industry Analysis
 This section should begin by describing the industry the business will
enter in terms of its size, growth rate, and sales projections.
 Items to include in this section:
 Industry size, growth rate, and sales projections.
 Industry trends.
 Long-term prospects.
 Note: Before a business selects a target market it should have
an idea of its industry—including where its opportunities are
and where its points of vulnerability are.

34.  Section 4: Market Analysis
 The market analysis breaks the industry into segments and focus on the
specific segment (or target market) to which the firm will try to satisfy.
 Items to include in this section:
 Market segmentation and target market selection.
 Buyer behavior (customer needs).
 Competitor analysis.
 Note: Most new ventures do not service their entire industry.
Instead, they focus on servicing a specific (target) market within
the industry.
 Section 5: Marketing Plan
 The marketing plan focuses on how the business will market and sell its
product or service.
 Items to include in this section:
 Overall marketing strategy.
 Product, price, promotions, and distribution.

35.  Section 6: Management Team and Company Structure
 The management team of a new venture typically consists of the
founder or founders and a handful of key management personnel.
 Items to include in this section:
 Management team.
 Board of directors (If required).
 Company structure.
 Note: Many investors and others who read the business plan
look first at the executive summary and then go directly to the
management team section to assess the strength of the
people starting the firm.

36.  Section 7: Operations Plan
 Outlines how your business will be run and how your product or
service will be produced.
 A useful way to illustrate how your business will be run is to describe
it in terms of “back stage” (unseen to the customer) and “front stage”
(seen by the customer) activities.
 Items to include in this section:
 General approach to operations.
 Business location.
 Facilities and equipment.
 Note: It is best to keep this section short and crisp.

37.  Section 8: Product (or Service) Design and Development Plan
 If you’re developing a completely new product or service, you need to
include a section that focuses on the status of your development
efforts.
 Items to include in this section:
 Development status and tasks.
 Challenges and risks.
 Intellectual property.
 Note: Many good ventures are not successful as their product
development efforts turn out to be more difficult than
expected.

38.  Section 9: Financial Projections
 The final section of a business plan presents a firm’s projected (or
pro forma) financial projections.
 Items to include in this section:
 Sources and uses of funds statement.
 Assumptions sheet.
 Pro forma (model, projected) income statements.
 Pro forma balance sheets.
 Pro forma cash flows.
 Note: Financial projections express the business plan in
financial terms.