THIKA SCHOOL OF MEDICAL AND HEALTH SCIENCES

NURTURINg PROFeSSIONaL eXCeLLeNCe

DEPARTMENT OF HEALTH AND SOCIAL SCIENCES
ENTREPRENEURSHIP LECTURE NOTES
COURSE OUTLINE

REM
WEE LESSO TOPIC SUB TOPICS ACTIVITI ARKS
K N ES
1 1 INTRODUCTION TO  Definition of terms- Lecture
ENTREPRENEURSHI Entrepreneur, innovation, Discussion
P business, invention
 Contribution of
entrepreneurship to national
development
 Salaried and self
employment.

2 2 EVOLUTION OF  History of entrepreneurship Lecture

ENTREPRENEURSHI in Kenya Discussion
P  Factors affecting
entrepreneurship
development
 Entrepreneurial cultures in
Kenya, South Africa and
India.

3 3 ENTREPRENEURIAL • Cultural habits that promote Lecture

CULTURE entrepreneurial development Discussion
• Inhibit entrepreneurial
development
• Ways of managing the
factors that inhibit
development of
entrepreneurial culture
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4 4 THE 1. Myths associated with Lecture
ENTREPRENEUR entrepreneurship Discussion
2. Types of entrepreneurs
3. Characteristics of
entrepreneurs
4. Roles of entrepreneurs in an
enterprise.
5. Women entrepreneurs

5 5 ENTREPRENEURIAL  Identifying a business Lecture

ACTIVITIES opportunity Discussion
 Evaluating business
activities.

6 6 SsSTARTING SMALL  Forms of business Presentatio

BUSINESS ownership (sole trader, n
partnership, cooperatives,
companies),
 Factors to consider when
starting a small enterprise
 Business life cycle
 Challenges when starting a
small enterprise

7 7 ENTERPRISE SOCIAL  Meaning of social Lecture

RESPONSIBILITIES responsibility Discussion
 Social concerns of an
enterprise
Importance of social
responsibility

8 8 ENTERPRISE  Meaning of enterprise Lecture

MANAGEMENT management Discussion
 Ways of managing an
enterprise
 Business support services

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(banks, insurance and legal
services)

9 9 CONTINUOUS ASSESSMENT TEST (CAT)

10 10 COMMUNICATION  Communication to small Demonstrat
AND INFORMATION enterprise ion
COMMUNICATION  Benefits of ICT to small
TECHNOLOGY IN enterprise.
ENTERPRISE
MANAGEMENT
10 10 EMERGING TRENDS  Ethics Lecture
IN  Environmental discussion
ENTREPRENEURSHI issues
P  Social
responsibility
 Globalization etc

11 11 BUSINESS PLAN • Meaning of a business plan Lecture

• Importance of a business Discussion
plan
• Components of a business
plan
• Developing a business plan

12 12
END OF TERM EXAMINATION

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CHAPTER ONE: INTRODUCTION TO ENTREPRENEURSHIP
Definition of Entrepreneurship and Entrepreneurs
Definition an entrepreneur
An entrepreneur is basically a person who identifies a business opportunity and obtains the resources
necessary to initiate a successful business activity.
 The entrepreneur implements the idea
 Undertakes to operate the business
An entrepreneur is therefore a central key individual in the societywho makes things happens for economic
development.
Entrepreneurship Meaning
In the broader sense entrepreneurship refers to the means of stimulating innovative and creative
undertakings for a better business community or world.
The act or process of identifying business opportunities and gathering the necessary resources to initiate a
successful business activity.
Entrepreneurship is a French word meaning to undertake and focuses on a business enterprise
Entrepreneurship can exist in any situation therefore it is the creation of values through establishing a
business enterprise.
Entrepreneurship means having an idea of one’s own andtrying to implement the idea to create values on it.
Entrepreneurship is a term which encompasses what entrepreneurs do i.e.
a) Identifying a business opportunity of a particular demand
b) Look at the opportunity as a process of creating, something that didnot exist.
c) Constantly searching/ harnessing ones environment and resources to implement the activities.
d) Creating a totally new product and using it in as new.
Entrepreneurship there is the practice at starting of a new business or revitalizing existing businesses in
response to identifying opportunities.
Business/Enterprise
A business undertaking by an individual for the purpose of making a profit.
A business is an occupation or trade and the purchase and sale of products or services to make a profit.
CREATIVITY/INVENTION AND INNOVATION
Definition of Terms
Invention
Creativity/Invention refers to the process of devising a new idea, or thing that result in the
improved efficiency or effectiveness of a system.
Invention is the physical creation of a new concept or idea. An object, process or technique that
displays an element of novelty.

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Invention cannot occur without creativity, but just creativity is not enoughto properly develop an idea.
Examples of invention: product designs, business models, or working prototypes.
Innovation
Innovation is the creation, development and implementation of a new product, process or service, with the
aim of improving efficiency, effectiveness or competitive advantage. Innovation increases your chances to
react to changes and discover new opportunities. It can also help foster competitive advantage as it allows
you to build better products and services for your customers.
 Innovation means improving an existing idea or thing. Commercializing of an idea or
turning idea into an opportunity.
 Innovation builds on creativity when something new, tangible and value-creating is
developed from the ideas.
 Innovation turns new concepts into realities, creating wealth and power.
 Creative destruction occurs when innovations make long-standing arrangement obsolete and
frees resources to be employed elsewhere leading to greater economic efficiency E.g.
computerization.
NOTE. Innovation doesn't always mean to create something new: innovators often take something that
already exists, improve it, change it and make it better.
 Invention can be defined as the creation of a product or introduction of a process for the first time.
Innovation, on the other hand, occurs if someone improves on or makes a significant contribution to
an existing product, process or service.
Reasons for Opposing Innovation
a) The entrepreneurs tend to have a practical concern that unforeseen innovation may cause a
disaster e.g. side effects e.g. of a drug.
b) Fear of losing profits in the event innovation does not translate to the expectations.
c) Where the entrepreneur held a monopoly position in the market, there is fear of losing authority
and control.
d) Fear of upsetting the moral and social value of demand for the product.
e) Desire to preserve the existing market confidence
f) Fear of upsetting tradition in production management and market scope.
g) Fear of opening a loophole to competition hence loss of business grip.
Reasons for Innovation
 Innovation is essential for the entrepreneur in solving the inefficiency problems.
 As a means of cost reduction and imposing significance social and market grip.
 Profit improvements are looked at from the innovation point of view through newer technology

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in management and production.
 To encounter competition by already established businesses.
 To facilitate opening up of new markets both locally and internationally.
 To facilitate diversification of products risks and losses.
 To protect current position of monopoly or success.
Requirements of Innovation
a) Economic demand: People engage in innovation out of belief that the economic returns will be
greater than its costs.
b) Surplus capital: Provides the necessary time and startup costs for implementing a new idea.
c) Abilityto assemble and invest capital.
d) Mobile capital which is stable. Capital cannot serve unless it can move to potential innovator unless it
can move to allow the various types of wealth to be created e.g. title deeds stability is provided by a
rule of law.
e) Availability of growth fostering social institutions which facilitate the speed of technological
advancement.
f) Ability and willingness to think and act creativity (Entrepreneurs) i.e. the philosophical and
psychological requirements.
g) Geographical and other circumstantial causes such as ethical issues. Societies in which innovation
is seen as a sinful or people are punished or are shunned to think differently than others are unlikely to
experience innovation.
h) The size of the firm. Large firms have the advantage of introducing innovation since they can afford it.
They tend to attract more talents employees to advice on new ideas.
Contribution of Entrepreneurship to National Development
Entrepreneurship is important for a number of reasons, from promoting social change to driving
innovation, the economic growth, the improved quality of life, the equitable distribution of
resources and the capacity of the economy to deal with economic, social and environmental
development. Main objectives of national development include:
a) Provide basic needs to every citizen: - food, shelter, health, security, education,clothing
b ) Elimination/Reduction of poverty: reduce rural-urban migration
c) Provision of opportunities for employment and personal advancement
d) Trying to narrow the income differences between the rich and the poor.
Entrepreneurs are frequently thought of as national assets to be cultivated, motivated, and remunerated to
the greatest possible extent.

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Contribution of Entrepreneurship
a) Employment: An entrepreneur gets a job for himself and subsequently to other. This is important in
the sense that it’s not only the entrepreneur who benefits butsothers as well.
b) Living standard: The standard of living of people is measured by how people purchase goods and
services. The entrepreneur pays workers in terms of salaries and wages which enables them to buy the
necessities and that enables them to improve their living standards.
c) Taxes: Entrepreneurs pay taxes to the government from the profits in the business as well as employees
from their salaries. This improves government revenue and therefore the government can use the taxes
to improve the infrastructure of the nation.
d) National productivity: When your products are sold in a local economy, this means that the
equivalent of the same in the money terms is not used for importing similar products. When this happens
the gross domestic productivity (GDP) increases.
e) Innovation and technology: Entrepreneurs aspire for new ideas to improve the existing methods of
producing certain products or provision of better services. Better quality products may end up being
offered in the market.
f) Conservation of foreign exchange: The more you are able you are to produce goods which do not
require imported inputs the more you contribute to the conservation of foreign exchange. This is
because the goods are readily available and there is no need to import them.
g) Export promotion: When a country produces more than they need, the entrepreneurs will be forced to
export the surplus thus earning the country with foreign exchange.
h) Recycling of waste: Entrepreneurs who engage in waste recycling also engage in conservation of the
environment, this is through removal of pollutants from the environment.
i) Business diversification: The entrepreneurs are able to expand business opportunities in order to
maximize returns. In many business set up the consumer are able to enjoy a variety of commodities.
j) Promotion of entrepreneurial culture: They encourage individuals to set up and manage their
business and this reduces importation of goods.

Salaried and Self-Employment.

Salaried Employment
A salaried employee is a person who receives a fixed and regular compensation for the services provided
to the company regardless of the time it takes to perform the services.
 What is Unemployment?
 Advantages and Disadvantages of Salaried employment

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Self-Employment.
Self-employment is the state of working for oneself as a freelancer or the owner of a business rather than
for an employee, working independently and earning a living from it. This is a concept that arises when the
entrepreneur relies on revenues from his business as a source of income
 Advantages and disadvantages of Self Employment?
 Discuss factors that propel people to self-employment.
Advantages of Entrepreneurship
i) Financial gains
ii) Self-employment which leads to job satisfaction and flexibility
iii) Provide job opportunities to the unemployed or those seeking better jobs.
iv) A means of opening up new industries especially in the rural areas facilitating globalization
v) A source of generating income and increased economic growth.
vi) Facilitates competition encouraging high quality products
vii) Facilitates production of more goods and services
viii) Leads to the development of newer markets
ix) Promotes use of modern technology in especially small scale manufacturing to enhance higher
productivity.
Challenges of a Bidding Entrepreneur
a) Long working hours
b) Poor pay
c) Unclear future
d) Fear of losing all that has been invested
e) Bankruptcies and closure
f) Fear of delegating
g) The problem do it yourself and know it all
h) Competition by established business
i) Lack of funds especially before break even
j) Mis-management by employees
Promotion of Entrepreneurship
a) Integrating entrepreneurship into the education system
b) Registration to encourage risk taking
c) National companies to promote entrepreneurship
d) Support of entrepreneurs through friendly loans at the appropriatetime.

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CHAPTER TWO: EVOLUTION OF ENTREPRENEURSHIP
The Evolution of Entrepreneurship in Kenya
Interest in the development of entrepreneurship and small enterprise in Kenya gained momentum as a
possible remedy to the stagnation of economic development and the escalating unemployment problem
between the early 1960 and 1970s.
Although there were attempts by the government to develop entrepreneurship, the main impetus
(impelling force/pushing force) came from the international labourorganization (ILO) report. The report
centered on the potential of the informal sector and suggested that the bulk of Kenya’s urban workers
were self employed in small enterprises. The report proposed that the development of this sector could;
i) Promote employment
ii) Facilitate development
iii) Facilitate equitable distribution of resources.
Based on this report the government responded with a seasonal paper in 1973 which recognized the role
of entrepreneurship in employment creation not just in the formal sector but also in the formal sector.
Subsequent development plans have devoted time to the developmentof strategies and to promote small-
scale enterprises and entrepreneurs which include.
i) The industrial estate programme
ii) Establishment of development agents e.g. ICDC and KIE (KIE-Kenya Industrial Estates established in
1967 functions to empower MSMEs(Micro, Small and Medium Enterprises) in value addition by
providing industrial incubation, affordable finance, and business advisory services to support
industrialization for job and wealth creation), ICDC (industrial and commercial development
corporation)- is a Kenyan government owned development finance institution established in 1954)
iii) Policy and institutional framework to promote entrepreneurs.
iv) Promoting indigenous Kenyan enterprises
How the Government Planned To Promote Entrepreneurship
The development plan laid down proposed to
i) Implement small scale industrial policy
ii) Review the central and local government regulations that a hindrance to entrepreneurial development.
iii) Provision of direct assistance to the small scale businesses all over Kenya.
iv) Establishment of an organization that would give extension services to the small scale enterprises.
v) Creating and strengthening institutions and schemes for the assistance of the small enterprise sector
vi) Establishment of credit guarantee schemes for loans given by commercial banks
vii) Establish procedures to improve small scale training through the ministry of technical training and
Applied Technology.
viii) Overhaul the education system i.e. introduction of the 8.4.4 system.
ix) Establish a fully fledged small industrial division in the ministry of commerce and industry which gave

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rise to the District focus for rural development.
x) Introduction of entrepreneurship education is all levels of training.
Economic, Social and Political Factors Affecting Entrepreneurial Development
a) High taxation levels. For business and personal incomes which in effect reduce profits earned making it
unattractive to engage in business. Taxation of raw materials and other inputs raise production costs.
b) Corruption and official harassment
 Occurs where entrepreneurs are forced to bribe officials in various government
departments to allow operation or start up.
 Raids under one pretext or another which tends to be very harassing.
c) Unregulated competition from the outside world due. Liberalization which opened importation
competing locally producedgoods.
d) Declining personal incomes of people due to
 Over-increasing cost of living
 Rise in unemployment
e) The high cost of finance. The cost of borrowing is high. Business collapses because they lack ability to
repay loans.
f) Lack of necessary skills and knowledge due to
 High education costs
 Lack of training opportunities
g) Poor transport and communication network
 Making business difficult
 Inconveniencing consumers
 High energy costs
 Lack of entrepreneurial culture
Myths Associated with Entrepreneurship
1) Entrepreneurs are doers not thinkers: Although it is true entrepreneurs tend towards action, they
are also thinkers.
2) Entrepreneurs are born not made: The idea that the characteristics of entrepreneurs cannot
be taught or learned, that they have innate trait, has long been prevalent. Today, however, the
recognition of entrepreneurship as a discipline is helping to dispel the myth.
3) Entrepreneurs are always inventors: entrepreneurship covers more than just invention. It
requires a complete understanding of innovative behavior in all forms.
4) Entrepreneurs are academic and social misfits. The belief that entrepreneurs are academically and
socially ineffective is as a result of some business owners having started successful enterprise after
dropping out of school or quitting a job. Today the entrepreneur is considered a hero socially,

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economically and academically and no longer misfit.
5) Entrepreneurs must fit the profile many books and articles have presented checklist of
characteristics of successful entrepreneur. Today we realize that a standard entrepreneurial profile
6) All entrepreneurs need to run a business successful is money: Many business fail because of
managerial incompetence, lack of financial understanding, poor planning etc. To many entrepreneurs
money is a source but not an end in itself.
7) All entrepreneurs need is luck. Being at “the right place at the right time” is always an
advantage. But luck happens when preparation meets opportunity as an equally appropriate
advantage. Prepared entrepreneurs who seize the opportunity when it arises often seem “Lucky”
they are in fact simply better prepared to deal with situations and turn them into success. What
appears to be luck really is preparation, determination, desire, knowledge and innovativeness?
8) Entrepreneurs must fail; in fact failure can teach many lessons to those willing to learn and
often leads to future successes.
9) Entrepreneurs are extremely risk takers (Gamblers). Entrepreneur is usually working on a
moderate or calculated risk.
10) It takes a lot of money to start a business. This is false because it is all about using the little
resources to make the most out of it.
11) Those who make it are those with rich backups. You can start from scratch with no special
favors or advantages and succeed
12) Some people go about thinking that banks do not lend to those who wish to start upbusinesses.
13) Those who start business, do so in very attractive industries
14) All entrepreneurs are rich and have financial success
15) Starting a business is easy. It is difficult and getting it running takes a lot.
Theories of Entrepreneurship
The theories that explain entrepreneurship include:
a) Psychological Theory e) The Resource Based Theory
b) Motivational Theory f) Competence Based Theory
c) Sociological Theory g) Heterogeneous Demand Theory
d) Economic Theory
Psychological theory
The focus is that entrepreneurs have unique values, attitudes and need which drive them.
People’s behavior results from their attempts to satisfy their unique needs and values.
The psychological school focuses on personality factors believing that entrepreneurs have unique
values and attitudes towards work and life.
Among the most frequent traits of entrepreneurs include the Need for achievement, Locus of Control
and Risk taking propensity.
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Motivational Theory
 Motivation is that which causes you to behave in the way you behave i.e. the why of behavior
 Entrepreneurial motivation is those factors and forces or events that energize an individual, his desires
and the needs to go into and sustain a business venture.
 Types of motivation;
i) Internal Motivation Factors
ii) External Motivation Factors
Internal Motivations and Drives
Refers to those personal traits and desires that induce a person to become an entrepreneur. Such
motivations are;
 Employment Creation Need.
 Need for independence or self-Reliance:
 Need for Power:
 Need for Recognition:
 Need for Security:
 Self-actualization need:
External Motivations and Drives
 Infrastructure: To operate efficiently, any business requires the provision of certain basic facilities
such as power, water, electricity, communication and accessibility.
 Credit Facilities: Refers to provision of money through loans to be used in starting as well as
expanding a business. It is usually very rare for a personto have adequate finance to start or expand his
own business. Some of the external sources include;
 Government agencies
 Banks and non-bank financial institutions
 Non-governmental organizations
 Information Support: Entrepreneurs need information related to the market for their products since
they may not have resources to carryout significant marketing research, yet the success of business
depends on how well they understand the market. It is therefore necessary for such information to be
made easilyaccessible to entrepreneurs.
 Pricing Policy: Pricing policy of the government should be an incentive to an entrepreneur. It should
motivate more and more people to venture into such entrepreneurial activities. When venturing into a
particular business, you will first have to understand the pricing policy applied in such an industry and
assess how that policy will affect your earnings and the survival of your business.
 Tax Policy: It is important that the tax policy act as a motivator to entrepreneurship, all too often, the
authorities in their endeavor to raise revenue resort to increasing indirect taxes such as value added tax
and customs duty.

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 Legal Control: Legal controls and the attendant bureaucracy should be minimized as much as
possible so as to attract entrepreneurs. The legal control can be manifested in the licensing
requirements for establishing various types of businesses.
 Political Climate: The prevailing political climate should be conducive to smooth operation of
business. This climate should be that there is no discrimination and conducive law and order, no tribal
barrier
 Technical Technology Assistance: This covers giving advice on production aspects of the business
and the projection studies for lending institutions.
 Training Consultancy Assistance: The government offers vocational training courses for
entrepreneurs. It also provides counseling to help entrepreneurs solve their problems e.g. of
government agencies is Kenya Institute of Business Training (KIBT).
 Friends Motivation
Maslow’s Need Theory
Theory of human needs is identified with the psychologist Abraham Maslow. This theory is based on
three specific assumptions:
1) The human beings are never satisfied. Their wants are determined by what they have. When
people are hungry or thirsty, the quest for food or water influences how they behave. However
if food and water is acquired, the same person will want something else, perhaps a safe place
to live in or a social status.
2) A satisfied need does not cause behavior. Once people satisfy their need for safety, they are
motivated by yet unsatisfied needs, not the ones – that are satisfied,
3) Human needs are arranged in hierarchy of importance. These needs range from low level
biological (physiological) needs to such high level needs as self-actualization.
Maslow’s Need Theory Pyramid

Self – Actualization Needs (Desire to fulfill our potential)

Esteem Needs (awareness of importance of ourselves)

Belongingness Needs (Desire for friendship and happiness)

Safety Needs (Desire for security from present and future)

Physiological need (food, clothing, and shelter)

 Physiological Needs: The need for Food, Clothing Shelter. They are required for survival. We
require money to satisfy these basic needs. If we do not have any source of income and cannot get
wage employment, we may be motivated to entrepreneurship.
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 Safety or security needs: Once or basic needs are satisfied, our behavior is no longer motivated by
them. At this point we begin to worry about the security or safety of our families i.e. the needto be
free from physical danger and fear of loss of job. For entrepreneurs, since their ability to cater for
these needs depend on how hard they work, these needs will motivate their behavior. They save
money to use in the case of illness, purchase of insurance policies.
 Belongingness Need (Affiliation or acceptance needs): Once safety needs are satisfied, they no
longer motivate us to work harder. Since we are social beings, we need to belong, to be accepted by
others like family, work groups, mentors.
 Esteem needs: They are more abstract than physiological, safety and belonging needs. This kind of
needs produces such satisfaction as; Power, Prestige, Status, self-confidence.
 Self-Actualization Needs: Means making the most of what we have to maximize our potential.
They want to achieve the best and believe that no one is better than them. They aspire for a standard
of excellence.
What Demotivate People to Entrepreneurship?
 Lack of proper information
 Fear of competition.
 Fear of taking risk
 Inhibiting government laws
 Lack of adequate start-up capital
 Lack of knowledge and skills
 Wrong attitudes towards employment

Factors Affecting Entrepreneurial Development

Political Factors
Political environment is concerned with the policies pursued by the government. Components of
political environment include;
i) The political stability
ii) Political system e.g.
a) Capitalism: whereby the means of production are owned by individuals. A capitalist is
a wealthy merchant who uses his/her money to invest in trade for profit.
b) Socialist: means of production are owned by government
c) Market economy: whereby means of production are owned by government and
individuals.
iii) Political climate being favorable
iv) Policiespursued by the government: e.g.
Changes in monetary and fiscal policy
Policies concerning price and wage control
Policies concerning nationalization

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Economic Factors
Concerned with factors that affect consumers’ purchasing power and spending patterns:
a) Inflation: increase in prices of goods and services without a corresponding increase in output.
b) Money supply: Quantity of money in circulation which is supplied by Central Bank
 Interest Rates: rate charged by commercial banks on the money that it lends
 Exchange rates and controls
c) Taxes and subsidies (Incentives given to encourage production of good or service)
d) Income levels
Social Cultural Factors
Is made up of institutions and other forces that affect a society’s basic values, perceptions, preferences and
behaviors. People grow up in a particular society that shapes their basic beliefs and values.
 Social factors e.g. family, religion, social roles and status, reference groups
 Cultural factors like values, beliefs, customs and lifestyle.
Technological Factors
Ways and means of production

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CHAPTER 3: ENTREPRENEURSHIP CULTURE
Culture Definition
Culture is defined as asset of values, perceptions wants and behaviour learned by a member of a society
from family and other institutions
Culture is a tool of leaned behavior patterns of living. It is a powerful human tool for survival constantly
changing and easily lost.
Weber argues that “Protestantism encourages a culture which emphasizes individualism, achievement
motivation, legislation ofentrepreneurial vocations, rationality and self-reliance.
Hosted defines culture as a collective programming of the mind which distinguishes the member of one
group or category of people from another.
Entrepreneurial Culture
Entrepreneurial culture refers to the way of embracing the concept of finding new opportunities in
business and gathering the necessary resources to fill the opportunity. Many governments around the
world want to promote entrepreneurship because they have recognized the importance of
entrepreneurship.
In other words entrepreneurial culture is a way of people embarrassing lifeby participating in activities that
enable then create new business enterprises.
A country can develop the entrepreneurial culture by forming policies thatconstitute the following;
 Integration of entrepreneurship training in the overall education systemto tap on youths
 Exposure of entrepreneurship those look potential to actual business practices and activities
through the networks and business contacts ofrole models.
 Creation of a conducive and enabling that permits new business toimmerge and flourish.
The creation of entrepreneurial culture has to come from deep social convictions based on strong values
and systems of the locals. It should be created in a way that it welcomes entrepreneurship and respects
the investor and also reflecting the core values
What Constitutes Entrepreneurial Culture?
 Growth in concentration of firm’s networks and linkages
 Growth in intermediary organizations to which some tasks are delegated and it different form of
entrepreneurship
 High levels of education skills and learning.
Importance of Entrepreneurship Culture
 Enhances economic growth and building of social capital.
 Enhances job creation
 Acts as a primary source of innovation
 Helps in the devolution of government power for policy implementation.
 Directly influence development in technology, Hunan Resource, Capital formation e.t.c.
The Cultural Habits That Promote Entrepreneurial Development
a) Money orientation
 Money oriented people know the value of money and has the intention ofmaking it.
 The money oriented people use the need of money as a motivating factor pushing then to being
entrepreneurs.
b) Future orientation
 A society that has foresight to know about the future businessenvironment is likely
to have more entrepreneurs.
 This is because they are likely to visualize key changes that are likely to create
opportunity.

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c) Time consciousness
 Knowledge that time exists and its importance
 Knowing the right time to start an entrepreneurial activity.
 Utilization of time
 The correct timing of the market conditions
d) Trust and honesty
 Through trust consumer demand is gained on the products and servicesavailable.
 Entrepreneurs should reciprocate this by ensuring honesty by providingthe expected standards.
e) Hard work i.e. Willingness to work hard distinguishes between successful and unsuccessful persons.
The Cultural Factors Inhibiting Entrepreneurial Development.
a) Religion: religious believes may deter entrepreneurial investments initems such as night clubs and pubs.
b) Language: establishing businesses in areas where language barrier may allow poor communication or
fear of innovation.
c) Personal relationship – Married people may avoid getting involved in business activities since no time
is spared for the family.
d) Attitude towards innovation Especially in cultures which oppose innovation due to fear of change
e) Networks – poor networking and ability to meet people limit new
 Opportunities
 New knowledge
 New information.
f) Technology–lack of technical skills and knowledge may slow growth and development of
entrepreneurial culture hence locks one out of being competitive.
Entrepreneurial Cultural Practices in Kenya
The cultural practices of entrepreneurs varies from country depending onthe
 The material resources
 The industrial climate
 The social & political systems
The undeveloped regions especially Kenya due to the policing of funds lacks;
 Skilled labour
 Existence of minimum social and economic overheads to curb emergencies of innovative
entrepreneurs.
 Entrepreneurship does not emerge out of industrial background with developed institutions to
support and encourage it.
 Kenya has imitators’ entrepreneurs lacking enough innovators unlike other countries like South Africa.
However Kenya has established institutions that provide assistance to aspiring entrepreneurs in terms of
establishing a fund to disburse loans toespecially youths in the hope of promoting entrepreneurship
Steps towards Promoting Entrepreneurship by the Government.
i) Increase small scale industrial sector.
 These are small tiny cottage industries e.g. the Tabaka soap stones
 They have increased and the governments in developing schemes tohelp entrepreneurs
ii) Increase investments in the service sector by increased investments in quality services especially in the;
 Transport sector
 Repairs services
 Entertainment sector
 Hospitality sectors

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iii) Increase in rural entrepreneurship development by;
 Promoting rural entrepreneurship by promoting Agro exports e.g. eggs, meat e.tc,
 Development of brick making,
 Promoting women entrepreneurs in education programmes.
Ways of managing Factors which Inhibits Development of Entrepreneurial Culture.
i) Working in related business to gather the necessary skills required before one starts his own
business.
ii) Setting policies t hat ensure that entrepreneurship training is established in the school
syllabus.
iii) Your people to be encouraged to read articles from newspaper, watch television and business
contacts to enable them choose products in demand with a bright future.
iv) Young youths as well as aspiring adults entrepreneurs should be encouraged to get better and
faster access to
 Knowledge
 Information or business
 Competition
 Internet e.t.c
v) Aspiring entrepreneurs to seek guidance in selection of machines andother facilities.

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CHAPTER 4: THE ENTERPRENUER

An entrepreneur is a person who identifies a business activity and gathers necessary resources to initiate
successful business ventures.
He is the one who undertakes an enterprise; acting as an intermediarybetween capital and labour.
The entrepreneur has been defined on 3 criteria
i) His roles / functions in the production process
ii) His characteristics
iii) His motivations for engaging in entrepreneurial activities.
An entrepreneur is therefore an originator and organizer of new business ventures or a person who brings
innovative changes in existing business.
What motivates the entrepreneur?
 Displacement leading to a need to survive (need to have a job)
 Need to improve standards of living
 Curiosity and need to exercise on time and money invested
 Need for independence and self determination
 Need for financial, social and political security.
 Restlessness due to frustrations of one kind or another.
NB: Self employment and entrepreneurship are not the same. All entrepreneurs are self employed but not
all self employed areentrepreneurs.
TYPES OF ENTREPRENUERS.
 Innovative Entrepreneurs
This is the type of entrepreneur who introduces new goods, in inaugurates new methods of production,
discovers new market and re-organizes the enterprises.
 Imitative / adoptive entrepreneurs
These are characterized by readiness to adopt successful innovations inaugurates by innovative
entrepreneurs. They don’t innovate the change themselves but only imitate techniques and technology
innovated by others.
 Crafts Oriented entrepreneur
These are enterprises who like working with their own hands e.g. carpets.
 Professionals entrepreneur
These are individuals who are specialized in various fields either through training or experience e.g.
doctors, engineers.
 Opportunistic entrepreneur
 These are entrepreneurs who are always on look for opportunities to do business.
 This is a person who starts a business, acts as a manager and with a view to expand the
business to maximum.

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 He might not have the skill or profession but he has the opportunity to start and direct others.
 He sees beyond and has abilities to initiate and venture into business that will expand andgrow.
 He is innovative i.e. somebody able to delegate activities to others, ready and able to see, scan the
environment.
 Social entrepreneur
Recognizes a social problem and uses entrepreneurial principles to organize, create and
manage a venture to achieve social change.
 Political entrepreneur
 Is a business person who utilizes political systems or seeks support from political bodies in
order to promote, expand and profit from their own commercial ventures.
 A political player who seeks to gain certain political and social benefits in return for
providing the common goods that can be shared by an organized general public.
 High Tech: New technological developments have created opportunities for those with the right
technicalexpertise
 Concept Multipliers
Someone who identifies a successful concept that can be duplicated by others
 Acquirer: Those who take over a business started by others and use their own ideas to make it
successful
 Buy/Sell artists: those who buy a company for the purpose of improving it before selling it for profit.
 Economy of Scale exploiters: Those who benefit from large volume of sales by offering
discount prices and operating with low overheads.
 Inventors: Those with particular inventive abilities who design a better product and then create
companies to develop produce and sell the item.
 Self-employed: individuals who perform all the work and keep all the profit.
 Speculator/Value: Those individuals who buy property at a low price with the anticipation those
prices will go up and sell at a higher price.
 Conglomerate: an entrepreneur who builds up a portfolio of ownership in small businesses,
sometimes using shares or assets of one company to provide the financial base to acquire another.
 Matriarch or patriarch: The head of family owned business who often employs several members of
the family
Characteristic/Traits of a Potential Entrepreneur
a) Initiative and risks taken by;
 Doing things before being asked or forced by events
 Acts to extend business in to new areas products etc
 Sees and acts on opportunities
 Looks for and takes action on opportunities.
 Sees and acts on new business opportunities
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b) Persistence and patience through
 Taking repeated action to overcome obstacles
 Taking action to overcome obstacles
 Taking action in the face of significant obstacles.
c) Information and property seeking
 Takes action on his own to get information to help reach business objectives
 Does personal research on how to provide a product or service
 Consultation of experts on business and technical advice
 Asks questions to clarify information
 Undertakes market research analysis and investigation.
d) Concern for high quality work by
 Acting to do things that meet or beat existing standards
 A desire to produce and sell top and better quality products or services
 Compares own work favorable to other.
e) Commitment to work contract by
 Placing the highest priority on getting the job completed.
 Accepts full responsibility for problems that may arise in getting the job done
 Expresses concern on customers satisfaction.
f) Efficiency orientation by;
 Finding ways of doing things faster and cost effectively
 Uses information to improve efficiently.
 Express concern on costs improvements change etc.
g) Systematic planning;
 By developing and using logical plans to meet goals
 Breaking tasks down to sub-tasks
 Developing plans which anticipate obstacles
 Evaluates alternatives
 Takes logical and systematic approach to activities
 Identifies new and potential unique ideas to reach goals Switches to alternative
strategiesto reach goals.
h) Self –confidence;
 Has a strong belief in self and own abilities
 Expresses confidence in own ability to complete task or meet challenges
 Sticks with own judgment in the face of opposition or early lack of success
 Confronts problems and issues directly
 Tells others what they have to do.

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i) Persuasion;
 Convinces people to buy the products or service
 Convinces people on providing funds
 Asserts own competence reliability and the company product.
j) Uses strategic influence and networking;
 To develop business contact
 Uses influential people as agent to accomplish objectives
CHARACTERISTICS / TRAITS OF AN ENTREPRENEUR
 Persistence/determination -They don’t easily get discouraged or give up and therefore consider
problems as challenges.
 Hard work
 Innovative and creative
 Flexible – being open to change
 Goal oriented – strong desire to achieve
 Independence-they like to be independent in matters of theirbusiness
 Good communication skills- Communicate effectively with all concerned i.e. employees, financiers,
customer; suppliers etc
 Good human relation –He should be able to relate
 Self confidence-Which helps him to gain confidence in others
 Highly optimistic- look at the brighter side of things and always hope for the best

Note: Besides the above, he should also pose other competences in termsof knowledge and skills acquired
through education, training, observation and experience.
Differences between an Entrepreneur and a Manager
Motive
The main motive of an entrepreneur is to start a venture setting up an enterprise while the main motive of
a manger is to render services in an enterprise already set up by someone else.
Status
An entrepreneur is the owner of the business while mangers is the servant of the enterprise owned by the
entrepreneur
Risk bearing
An entrepreneur assumes all risks involved but a manger doesn’t bear anyrisk
Rewards
Entrepreneur reward is profit which is uncertain but for a manager salarywhich is certain and fixed
Innovation
An entrepreneur risk an innovator (change agent) while a manager simply translates the entrepreneur ideas
into practice.

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Qualifications
An entrepreneur need to possess qualities and qualification set high achievement motive, foresight, etc
while a manger needs to possess distinct qualification in terms of sound knowledge in management theory
and practice.
ROLES OF AN ENTREPRENUER IN AN ENTERPRISE.
Innovation
As an innovator, he institutes new combination of factors of production.
Role of the organizer
He determines how resources used in the enterprise are to be combined and utilized in order to
maximize output.
Role of the risk taker
He is responsible for the fortunes and misfortunes of the business bear profits and losses.
Role of the director.
He does this by contribution ideas to advance business objectives
Financier
He is the one who contributes the capital needed / necessary to undertakethe business
Controller
He makes the firm decisions and controls all aspects of the business
Coordinator
He is responsible for securing that all business aspirations run smoothly
ENTREPRENEURIAL MOTIVATION
Entrepreneurial motivation is the drives, the desires, the need to achieve or fulfill certain entrepreneurial
needs.
Motivation is that which causes you to behave in the way you behave i.e. the why of behavior
Entrepreneurial motivations are those factors and forces or events that energize an individual, his desires
and the needs to go into and sustain a business venture.
Types of motivation;
a) Internal Motivation Factors
b) External Motivation Factors
Internal Motivations and Drives
Refers to those personal traits and desires that induce a person to become an entrepreneur. Such
motivations are;
 Employment Creation Need.
 Need for independence or self-Reliance: One may want to be one’s own boss especially if one
doesn’t like taking orders from others. You may also want to be in control of your own destiny
(internal locus of control)making your own business decisions, using your time maximally.
 Need for Power: Need to exercise power over others and need to control others. People with a high
need for power have a greater concern for exercising influence and control.

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 Need for Recognition: We normally strive to get recognition about our achievement in life, by our
peers, family and society. If you aspire to be recognized, then this could be an important drive for you
to go intoself employment
 Need for Security: All men thrive to be free from anxiety;
 Anxiety about our very survival
 Survival of our near dearest
 Anxiety about the future, both for ourselves as well as for our families
It is for this reason that we all strive to maximize our returns, wage employment may not meet
this anxiety especially if we are not pensionable.
 Self-actualization need: Refers to the need to accomplish that which you as a person is capable of
achieving, the need to be unique.
Through entrepreneurial activities and with dedication and commitment, you can realize this need, a
need that is very difficult to realize by all or most individuals in the formal employment.
External Motivations and Drives
Unlike internal motivations which are in your inner being, the external motivations refer to those that are
provided by others, especially the legal authorities and societyin general.
These provide an enabling environment for entrepreneurship. Some of them are;
 Infrastructure: To operate efficiently, any business requires the provision of certain basic facilities
such as power, water, electricity, communication and accessibility.
 Credit Facilities: Refers to provision of money through loans to be used in starting as well as
expanding a business. It is usually very rare for a personto have adequate finance to start or expand his
own business. Some of the external sources include;
 Government agencies
 Banks and non-bank financial institutions
 Non-governmental organizations
 Information Support: Entrepreneurs need information related to the market for their products since
they may not have resources to carryout significant marketing research, yet the success of business
depends on how well they understand the market. It is therefore necessary for such information to be
made easilyaccessible to entrepreneurs.
 Pricing Policy: Pricing policy of the government should be an incentive to an entrepreneur. It should
motivate more and more people to venture into such entrepreneurial activities. When venturing into a
particular business, you will first have to understand the pricing policy applied in such an industry and
assess how that policy will affect your earnings and the survival of your business.
 Tax Policy: It is important that the tax policy act as a motivator to entrepreneurship, all too often, the
authorities in their endeavor to raise revenue resort to increasing indirect taxes such as value added tax
and customs duty.
 Legal Control: Legal controls and the attendant bureaucracy should be minimized as much as
possible so as to attract entrepreneurs. The legal control can be manifested in the licensing
requirements for establishing various types of businesses.

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 Political Climate: The prevailing political climate should be conducive to smooth operation of
business. This climate should be that there is no discrimination and conducive law and order, no tribal
barrier
 Technical Technology Assistance: This covers giving advice on production aspects of the business
and the projection studies for lending institutions.

 Training Consultancy Assistance: The government offers vocational training courses for
entrepreneurs. It also provides counseling to help entrepreneurs solve their problems e.g. of
government agencies is Kenya Institute of Business Training (KIBT).
ENTREPRENEURIAL COMPETENCIES
LEADERSHIP
Leadership is the ability to inspire, influence, and persuade others to give maximum effort and cooperation
willingly and voluntarily towards the attainment of the unplanned goals.
Good leadership is a necessity in any business organization. It is important your portray appropriate
leadership qualities such as leadership behavior, leading and motivating others, leadership responsibilities,
leaders influence and activities;
Leadership Behavior
As a leader, you should have the following qualities:
1) Vision and foresight: you should look into the future when making plans, you need vision in order to
be able to determine how you want your business to develop
2) Strong desire to influence others: You can influence your staff if they have confidence and trust in
you.
3) Ability to learn from past errors and build on past experience i.e. experience is the best
teacher, you should be able to improve your business through learning from experience and avoiding
past mistakes
4) High ambition: Should always aim high and for the best in your undertakings and
expectations.
5) Imagination: as a leader you should see beyond the horizon
6) Creativity: You should be as original as possible in ideas and activities. You should have the daring
to try new methods of operation.
7) Initiative as a leader, you have the role of getting things started. You should also find new and
better ways of doing things you are the agent of change.
8) Good human relations: as a leader you should sell good image of your business.
Leading and Motivating Others
As an entrepreneur success depends on how you motivate your employees. The following
techniques should be employed:
1) Built Workers self-esteem: By praising the good work done by your employees, you are building
confidence in selves. Appreciate what they have done.

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2) Inform employees: Tell your staff what you are trying to accomplish.
3) Delegation of authority and responsibility: Good delegation will allow you as a leader to devote
more time to important and crucial issues within your business.
4) Maintain contact: know your staff well enough by maintaining personal contact.
5) Apply reinforcement principal: you should reward behaviors that you consider desirable because
people tend to repeat rewarded behavior. Don’t reward undesirable behaviors as people tend not to
repeat unrewarded behavior.
6) Be an active listener: By active listening you will be an effective communicator which is an
important quality of a leader. Your employees will take it that you appreciate them and have concern
in them.
7) Set specific goals: set specific clearly understood measurable goals and continuously review them.
8) Take collective action: When you must deal with some negative aspects of a workers performance
you should talk to that worker in private; never criticize a worker in public.
Leadership Styles
Leadership styles are divided into three classifications;
Autocratic Style:
 The oldest and most traditional form of leadership style. In this style, the manager draws a very
firm discipline line.
 Everybody knows what he/she can or cannot do.
 Many like this form of leadership because it gives a sense of purpose and security.
 They know what is expected of them and they know that they must leave up to certain
standards
Laissez Faire / Free-Reign
 A very permissive type of style, employees are left alone toreach their own potential.
 Some people are responsive to these style and do not abuse their freedom, others take advantage of
the climate and do not leave up to their potential.
Democratic Style
 This style depends upon the organization, its objectives and the personalities of its people.
 In democratic climate a manager builds a sense of union and common interest among his/her
workers.
 It is at times even hard to recognize who the manager is.
 Leaders set discipline lines against which nobody seems to object.
Note: Most leaders use a combination of styles, depending on the group and the situations.

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Sources of Influence in Leadership
a) Legitimate Authority: A person may gain compliance from sub-ordinates because of the authority
which is associated with the office the person holds. The power of the office is often derived from the
person’s responsibilities as a manager, administrator or politician. Owners of business enterprises
enjoy the power to reward reprimand or punish their subordinates.
b) Economic Power: The clout that comes with economic might sometimes referred to as reward power.
So a person, who is in a position to administer economic rewards, could influence the behavior of
subordinates through appointments or denial of such rewards.
c) Coercive Power: a person who is in a position to get other people to do things by the use of force or
threats and intimidation is said to posses’ coercive involuntary action where the subordinates submit
their consent only because they fear the repercussions of punishmentor violence.
d) Persuasion: There are times when persons in positions of responsibility need to use wit and sweet
words in order to get things done through others.
e) Referent power: Is based on the subordinate’s identification with the leader. The leader exercises
influence because of perceived attractiveness, personal character, reputation or what is called
“charisma” e.g. doctors, athletes, academicians, wealthy people. This respect could be turned into a
source of influence for those who admire a particular person.
f) Expert Power.
THEORIES OF LEADERSHIP
i) Trait Theory
 Assumes that leaders are born not made.
 Leadership consists of certain inherited characteristics or personality traits which distinguish leaders
from followers. E.g. need for achievement, focus, assertiveness, etc
ii) Situational Theory
 Leadership is considered to be a function of the situation which a leader emerges and works. It is
based on assumption that leadership is basically situational.
 The person who becomes the leader of the work group is thought to be the person whoknows
best what to do and seen by the group as the most suitable leader in the particular situation
iii) Behavioral Theory
 It is based on the assumption that leadership effectiveness depends upon what the leader does. The
leadership behavior is the product of the leader and the followers.
 A leader uses his skills to exercise influence and modify behavior of his subordinates. Qualities of a
leader: Should have energy, perseverance, education-up-to-date, intelligent, personality, creative,
innovative, optimistic, balanced, objective, enthusiastic
DECISION MAKING
 This is selection from among alternatives of a course of action.
 Is a process of choosing from among various alternatives?

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Categories of Business Problems
i) Inadequacy of resources such as raw materials to produce products, skilled manpower, capital
etc.
ii) Organizational problems such as poor delegation of duties, undefined rules etc
iii) Environmental problems such as poor business locations, poor or unsafe working conditions etc.
How to Identify a Problem in a Business.
 Past Experience: where you have experienced a similar problem
 Conducting a survey to find out if activities are carried out according to plan
 Hiring consultancy services
 Employing work study methods
Methods of Decision Making
These are several methods you can use to make business decisions, among them we have;
i) Rule of Thumb: A decision is made based on existing established procedures e.g. based on laws,
customs, religion, etc. You can’t change
ii) Committee Approach/ Team work: Its where using a selected number of people from the main
group to make a decision which will be accepted by all.
iii) Critical Path Analysis: This is making decision stage by stage until the final decision is reached.
iv) Brainstorming: This is where all members of a group develop ideas for a solution
v) Problem solving Chart
vi) Solution Evaluation Form
Steps of Decision Making Process
1) Identify the major problem e.g. low productivity
2) Determine major causes of the problem e.g. low salaries, poor working conditions
3) Determine potential solutions – how to solve
4) Evaluate potential solutions
5) Select the best solution
6) Implement the solution
7) Verify the solution.
Problem Solving Chart
 You can use a problem solving chart as one way of organizing possible solutions to the problems.
 After completing it you will be able to analyze alternative solutions in terms of potential advantages
disadvantages and consequences. A space is provided on the chart for fourpossible solutions.
 If there are more than four possible solutions, it may be difficult for you to analyze the information
adequately.
 Listing potential advantage will indicate how each potential disadvantage will illustrate how the
potential solution will adversely affect you
 In some instances, an advantage or disadvantage may be the same for two or more alternative solutions.

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 Potential consequences you identify in the last column will be the results of analyzing the potential
advantages and disadvantages.
 They should equal the potential net result of implementing a particular solution.
 The problem solving chart can help you to analyze and solve major problems which would otherwise
have an adverse effect on your business.
Potential
Alternative Solution Potential Advantage Disadvantage Potential consequences
1.Salary Increment High productivity Reduced profits High production costs
2.Improve working
conditions
3.Buying new computers
4.
Solution Evaluation Form
 Another procedure for analyzing potential solutions is to identify reasons for and reasons against each
potential solution.
 To use the solution evaluation form to the best advantage, you should:
i) Write a brief description of the problem at the top of the form
ii) Write a brief description of the proposed solution.
iii) In the reasons for column, list important factors which would favor implementing the proposed
solution.
iv) In the reasons against column list important factors for not implementing the proposed solutions.
v) Rate each factor by its importance to you. The numerical ratings might be 1, 2, 3, 4, 5 where a low
rating of 1 indicates that the factor affects the problem only slightly and a high rating of 5 indicates
that the factor is extremely important in making your decision. Each factor in the reason for column
and each factor in the reason against column would receive a numerical rating
vi) Add the ratings in each of the two rating columns, the column with a higher total will give you some
indication of the potential for a particular solution. If there is a big difference between the two totals
(in favor of reasons for the solution) you may feel more secure in the use of this technique to make a
decision. If there is little difference in totals for both columns, it might indicate that you need
additional information about the problem.
Problem Low Morale
Description:
Problem Solution:
Numerical Rating Reasons for Reasons against Numerical Rating

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TIME MANAGEMENT
 Time is a measure of life.
 A unique resource, shared equally, cannot be stored, cannot be replaced once it is lost.
 Time is an entrepreneur’s scarcest resource & unless it’s managed, nothing else can be managed
 Time Management is the management of the activities we engage in during our time to achieve a goal.
 Some of the factors that contribute to time wasting in a business include;
a) Failure to delegate duties: an entrepreneur should not do all the work by him /herself but delegate
it to others.
b) Poor mailing process: This is where a mail is taken to a wrong person who might hold it; therefore
urgent matter might not be attended to.
c) Unnecessary interruptions by friends or relatives
d) Poorly conducted meetings: whereby people talk much and not sensible matters
e) Poor scheduling of events: avoid postponing of activities when they are supposed to be attended
to.
f ) Excessive paper work.
g ) Indecisiveness: unable to decide
To avoid these pitfalls,you should do the following:
 Keep a business dairy
 Select your priorities, whether to attend a wedding or attend to your customers Avoid
unnecessary interruptions i.e. meeting your relatives and friends
 Reduce paperwork, by delegating some to your subordinates/ support staff or introducing ICT
facilities.
 Avoid postponing activities – do them when they are required
 Keep to schedule- doactivities according to the way you have arranged them, don’t change
 Keep clearing your desks in-trays- have a clean and organized working place
 Be time conscious and use time carefully.
To Manage your Time
 Draw – up and action plan – i.e. “things to do list”
 Set out priorities based on what is urgent and important
 Schedule your time realistically
 Delegate as much as you can and monitor progress realized.
 Attempt to perform as much/many tasks as possible during the early part of the day. “Use
20% of your time to accomplish 50% of task”
 Let workers work within their limits
 If any new tasks arise during the working time, advert the risks and allocate the priority rate and
control interruption. Always try to allow time during the day and keep in touch with your workers.

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Allow time to think about tomorrow.
 Try to have competent personnel –skilled personnel.
 Improve your communication skills.
Tools of Time Management: Time tables, Schedules, Programmes
Question: What are the benefits of effective time management in your business?
CHANGE
 Change is the need to make or become different, to replace or improve, to reform or reorganize to fit to
the current situation which results in higher productivity or performance.
 Is a systematic planned effort to improve effectiveness of the business. Change is risky, uncertain
 As an entrepreneur you play a key role of managing change in your business.
Need for Change
a) There is need to adopt / adapt
b) To remain viable (economically)
c) We want growth (sales + profit), employees, customers (increase market share), diversify
d) Enhance chances of survival (Change before Change changes you).
Reasons for change
1. People change because they are dissatisfied with the status quo.
2. Interdepartmental conflicts – conflicts in departments
3. The need to cut costs
4. To need to improve efficiency
5. Need for company or personal security
6. Existence of a new demand in the market
7. Tough international and national competition
8. Change in technology etc
Note: These conditions create threats and present opportunities in an organization
Factors that influence change in your business
a) Economic activities: e.g. changes in the prices of some input
b) Competition: The competitors activities; be watchful on competition to respond in good time
e.g. by aggressive advertising, reducing the price
c) The government and political environment: New policies, regulations relating to taxation and
remuneration policies
d) Technology: For adaptability and business growth. Go for the new technology
e) Educational and social factors: e.g. your customers changes in education status, taste, family size,
status, age, sex, population distribution,
The above call for change in terms of quality, price, promptness in delivery, packaging, labeling of your
product etc.

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Types of Change:
i) Change of Product: e.g. you change your products labeling, size, packaging, color, taste, quality,
smell
ii) Change of service: change in terms of promptness (quick/fastness) and quality service
iii) Change of technology: e.g. Tools and equipment, material, technical skills, procedures, production
methods
iv) Change of policy: Change of objectives, goals and policies to follow to meet government
policies.
Why People Resist Change
a) Fear of the unknown (don’t know what next)
b) Misinformation (false information), no information at all, no communication
c) Threat to status quo
d) Threat to power base: Most want to retain their normal ways of life. Fear of no one
recognizing business in foreign places, location/town
e) Miss-trust or distrust of change agents. E.g. some people don’t take change because of the people
who bring about or initiate that particular change.
f) Fear of possible failure: either social or economic failures
g) No perceived tangible benefits: people want immediate returns / gains
Managing Change
5 basic steps in the process of change management / implementation
i) Precise definition of the operational changes needed
ii) Define how the new working methods will affect particular people and groups
iii) Identification of attitudes and perspectives currently held by employees and how this support current
practice
iv) Outline statement of attitudes and perspectives necessary to enable people to adapt successfully to
new environments and new working methods
v) Implementation of measure designed to change existing attitudes.
COPING WITH COMPETITION
Competition is the act to vie for customers or market.
Direct competitors: Services / Products which are similar to the same already in the market.
Indirect competitor: Offering different kinds of goods/ services to the same market/customers.
Identification
Identify and list out names, location and activities of all your competitors.
Analysis
You analyze yourself and your competitors on the basis of yourself and your competitors on the basis of:
a) Market: What is your/ the market? What share of the market do you/they have? What
advantages do you/they have in servicing your/their market segments?

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b) Product: How does your product quality compare with the competitors? What special services do
you / they offer? Do you/they have a programme to improve your/their products? Is there a
possibility of developing a new/ or improved product to satisfy new needs?
c) Production: How do you compare your technology with the competitors? How do you compare
sources of raw materials with those of your competitors? How do your skills (and those of your
workers) compare with the competitors? What advantages / disadvantages does your / their location
have?
d) Finance: How do you compare your financial resources with your competitors?
e) Government Policy: have you identified any opportunities or threats resulting from new or existing
government policies(e.g. relaxation of import restrictions, introduction of VAT)
f) Environment: Do changes in the general environment including the local communities offer any
opportunities or threats to you for example there is a large number of young people whose tastes are
different from the rest of society.
After obtaining answers to these and any other questions you develop, arrange them in strength/ weaknesses
/ opportunities and threats SWOT Table.
Types of Competition
1. Pure / Perfect competition: Characterized by situation homogeneous (similar)
2. Oligopolistic competition
3. Monopolistic competition
Entrepreneurial Skills
 A skill is knowledge which is demonstrated by action.
 An entrepreneur is someone who has good business idea and can turn that idea into reality.
 To be successful an entrepreneur must
 Identify an opportunity and understand it in great depth
 Spot a gap in the market and recognize what new product or service will fill the gap
 Must know what features the product will have and why it will appeal to customers
 Know how to inform the customer about it and deliver the new product.
 Turning an idea into reality an entrepreneur needs skills;
 General Management skill and
 People Management Skills
 General management business skills include;
 Strategy skills,  Time management skills,
 Planning skills,  Leadership skills,
 Marketing skills,  Motivational skills,
 Financial skills,  Communication skills,
 Project management skills,  Negotiation skills

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CHAPTER 5: ENTREPRENEURIAL OPPORTUNITIES
Procedures of Starting a Business
 Identification of a business idea
 Development of a business plan
 Location of a business demand evaluation
 Registration of the business
 Choice of the business organization
 Business name
 Trading licenses / permit
 Start-up and management of the business.
 All entrepreneurs are business people – though not all business people are entrepreneurs.
 Entrepreneurs tend to be more innovative than ordinary business people and end up
developing a business plans.
Means of Generating a Business Idea
i) Identifying a need vii) Gaining from waste
ii) Brainstorming viii) Look to see and listen to hear
iii) Building on ones skill, hobbies or ix) Research
interests x) Importing an idea
iv) Spotting a market niche xi) Day dreaming
v) Listening to what people say xii) Spin off from employment.
vi) Attribute listening
Identifying a Need
 A need can be an opportunity and indeed a consumer buys to satisfy need. Abraham Maslow in his
humanistic hierarchy of needs, physical needs to very high personalized needs.
 Therefore identifying an unidentified or unserved need is a sure way of generating business ideas.
Brain Storming
 This is a process of detaching analysis of an idea from the actual ideas.
 The idea may or may not be related to a given product. In brainstorming even silly and stupid ideas
may be generated.
Building on One’s Skill, Hobbies or Interests
 Business ideas can be generated through
a) Personal interests and hobbies
b) Copying or improving somebody’s ideas. (Skills)
Sporting a Market Niche
 Entrepreneurs usually look for gaps in the growing markets, identifying market sections which are not
being utilized.

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Listening to what People say

 These are people who simply say or speak their needs e.g. if these good bus services
Attribute listening
 This method of generating business ideas is based on changing the way one looks at something in
order to find a new use for it.
 It attempts to answer the question – what do we do with this product.
Gaining from Waste
What would appear waste can be used- say recycles to create a new opportunity.
Others
By soliciting ideas by interview, reading, observations, listening
The Process of Screening a Business Idea.
 After generating business ideas- it is important that some evaluation through a screening process be
made.
 The screening process is a systematic evaluation ideas in order to select the best idea which would suit
one.
 The screening process must be done carefully, objectively, soberly and without anyemotions.
 The business idea screening is required even when there is only one idea to consider. This is because
this is a stage of starting a business that may be not be profitable or may be difficult to run
 The screening process must therefore evaluate the following
a) Personal Evaluation
 The objective for going to business
 Personal interests
 The degree of commitment to the business or others e.g. family.
b) Personal Skills
The self SWOT analysis aims at analyzing ones:
 Strengths
 Weaknesses
 Opportunities
 Treats
 “Strengths” and “Weaknesses” should focus on the internal environment (management,
product/service), whilst “Opportunities” and “Threats” should focus on the external environment
(economy, market and competitors).
 Clearly, it is important that your business idea has significant strengths (or can develop them) and a
plan to counter to any weaknesses. Your business idea should be developed to take advantage of any
opportunities and thought should be given tohow you would respond to threats.

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 A SWOT analysis should provide proof to you, your investors and funders etc. of the likelihood of your
business succeeding or failing. If your analysis suggests it will fail you need to reconsider your idea.
 The screening process or evaluation helps identify;
 Strengths: E.g. Distinctive competence, Adequate finances, Access to economies of scale, Good
innovation ability, proven management
 Weakness: E.g. Lack of key skill, internal operations problems, Low morale, Poor track records,
weak internal image
 Opportunities: E.g. Potential customers, Potential goodwill, a favorable socialenvironment
 Threats: Strong competitions, adverse government policies, Political instability, mismanaged
economy, unfavorable legislation
c) Market Evaluations
 The aim is to create assurance of adequate market
 The main components include:
i) Consumer demand analysis
ii) Product price and placements
iii) No. of competitors in markets.
d) An analysis of availability of raw materials in terms of
i) Adequacy ii) Reliability iii) Price
e) Analysis of providing technology in terms of
 Appropriateness
 Affordability
f) An analysis of skills available
g) Analysis of the government policies.
Characteristics of a Good Business idea.
 Easy to manage and involve minimal risk.
 Does not require excessive capital investments
 Offers a good returns on capital The idea has scope for growth, expansion and
diversification
 Comparative with owner’s goal and interest
 Not against expectation of the society
 Has a short gestation period
 Has a readily available market
 Easy to exit when necessary.

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The Sources of New Ideas
 Some of the more frequently used sources of business ideas for entrepreneurs include.
1. Consumers: Potential entrepreneurs not only pay attention to potential customers but also
monitor their potential needs through allowing the customers to express their opinions.
2. Existing products and services: Through monitoring and evaluating competitive products and services.
3. Distribution channels: Contact with members of the distribution channels since they are familiar with
the needsof the market and give suggestions of new products and consumer needs.
4. Government: Can be a source of a business idea through:
a) The patent office which contains numerous product possibilities.
b) Official government magazines
c) Government regulatory bodies e.g. KBS
d) Government shows and exhibitions
5. Research and development: Is the largest source of new ideas to the entrepreneur.
6. Education: i.e. picking a given line of study e.g. construction, Vocational training programmes
and experience.
7. Personal hobbies especially for craft entrepreneurs.
8. Personal contacts and observations through.
9. Interactions, Newspapers and magazines.
10. Conducting surveys and interviews of the people around.
Definition of a Business Opportunity
 A business opportunity may be defined as an attractive project idea Which an entrepreneur accepts
for investment on the basis of what is known about the possible success for the project
 A real business opportunity can by distinguish from a mere possibility through the following two
ingredients;
i) A good market scope
ii) An attractive return on investment (profit)
Qualities(Characteristics) of a Good Business Opportunity:
The following are qualities of a good business opportunity.
 Demand – there should exist a good market scope
 Returns on investment– i.e. the business should be sufficiently profitable.
 Availability of raw materials
 Enough skilled people.
Evaluation of Business Opportunities (Objectives of a Pre-Feasibility Study)
 Once a business opportunity has been identified one needs to confirm that it is viable through a pre-
feasibility study.

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 The Main Objective of a feasibility study is to determine whether.

 The investment opportunity is promising enough
 The project is viable from themarketing manufacturing and other points of view.
 Any aspect of the project that may be crucial to call for in-depth analysis.
The Purpose of Pre-feasibility Study (Market Research)
a) To verify that the investment opportunity is promising enough to make a firm decision.
b) To confirm that the project is viable from the;
i) Marketing
ii) Manufacturing and
iii) Other points of view
c) To identify any aspects of the project that is critical or crucial enough to call for in depth
analysis
d) To acquire comprehensive technical, economic and commercial data for the final investment decision.
e) To enable an in-depth study of aspects such as; Market potential, Technical requirements, Managerial
ability, financial projections and analysis, Risks evaluation, Business environmental analysis.
f) To enable sourcing reliable information such as;
i) Authorized publications
ii) Consultant’s openings.
g) To establish the final outcome of whether or not to proceed with the business.
BUSINESS INCUBATION
 Business incubation is the process of nurturing small and start – up initiatives or business to relative
maturity to become self-sustaining business, healthy and wealth-generating entities.
 The failure rate of any start-up business stands at 90% globally.
 The main causes of business failure;
 Insufficient capital for start-up.
 Insufficient knowledge of business and industry.
 Lack of Entrepreneurial and business skills.
 Lack of Managerial skills.
 Inadequate Training.
 Lack of credit facilities.
 Lack of markets.
 Insufficient knowledge of markets.
 Inadequate infrastructure.
 Non-Empowering political environment.
 For these reasons, many businesses which are ill-equipped do not survive. A businessincubator is
important for precisely those reasons above to provide these support services.

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 Statistics show that the success rate for incubated businesses initiatives is very high (over 80%) are
bound to succeed.
The Incubation Process
 The business incubation programmes are designed to accelerate successful development of
entrepreneurial companies through a vary of support resources and services.
 Incubators vary in the way they deliver their services in their organizational structure and in the types of
clients they serve.
 Business incubators differ from research and technology in their dedication to start-up and early stage
businesses.
 Research and Technology institutes tend to be large scale projects that house everything from corporate
government or university labs to very small companies.
 The research institutions do not offer business assistance services which are the main objective of
business incubation.
 Unlike many business assistance programmes business incubators do not serve any and all companies.
 Entrepreneurs who may wish to enter a business incubation program must apply for admission.
 Acceptance criteria vary from program to program but in general only those with feasible business
ideas and workable business plan are admitted.
 The time a company spends in an incubation programme vary widely depending on a number of factors,
including the type of business and the Entrepreneur’s level of business expertise.
The Benefits of Incubation.
 Creating jobs and wealth
 Fosters a community’s Entrepreneurial climate -
 Technology commercialization.
 Diversification of Local Resource.
 Acceleration of local development.
 Facilitation of Business creation and growth.
 Encouraging entrepreneurship especially women.
 Revitalization of the community as a whole.
 Growth of Private Sector Investment.
 Increased Tax Revenue.
 Equitable Development.
Government Roles in Promoting Incubation
1. Creation of an enabling environment through;
 Purchasing consumer products.
 Support programmes financially of the incubation process.
2 . Government policy to buy from incubators.

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3 . Give small scale businesses loans andgrants.
4. Launch campaign to sensitize the private sector to work with business incubation initiative.
5. Take a lead role in the incubation process.
6. Assist in the coordination, encouraging and streamlining the efforts of incubation at National level.
7. Lobby and Rally with Kenyans in Diaspora together with developing partners to support business
Incubation.
8. To encourage coordination of independent efforts country-wide for better synergy and a more effective
Natural impact
9. To rally universities and other research institutions behind the concept to facilitate research and
development in order to enrich business incubation
10. To provide support to business incubation initiative by providing morale support through Media
Initiatives.
HOW TO RECOGNIZE AN OPPORTUNITY
The three key approaches to identify the best investment opportunities are:
1. Observing Trends: Study how customers interact with products. For instance, the latest PayPal report
points to the fact that mobile transactions in the Arab world are set to increase from 10% to 20% by
2015. Such information shows that there is both a desire and a trend in our markets for mobile shopping,
and an entrepreneur might find in this case an opportunity to build a mobile application for purchases
from major local stores.
Observing such trends can be done through statistical reports published free of charge based on research
done by specialized companies and institutions. Some reports may not be free; these usually contain
more valuable and detailed information.
2. Solving a Problem: Recognize problems and develop innovative ways to solve them. Anti- virus
software companies are entirely built on this approach.
3. Gaps in the Marketplace: Look for very specific segments of customers that other companies do not
serve because they prefer to target broader groups.
OPPORTUNITY EVALUATION
A market opportunity assessment is the process of synthesizing market research and client data to identify
opportunities for growth in a specific market or business area and formulate an actionable strategy to
realize this growth. Identify, target, action.
Factors to Consider When Evaluating An Opportunity
1. Access to customers. If I can’t get enough customer development interviews within a reasonable
period of time, then it will be that much harder and take that much longer to get started.
Conversely, if I have existing relationships with, or at least easy access to, customers I can get
feedback on my product much easier. When the time is right, sales and marketing will also be that
much easier, shorter, and cheaper with existing access to customers. For example, if Tim Ferriss
wanted to launch a productivity related product, he would have an advantage because of all of his
existing relevant blog traffic and subscribers. I’ve seen access to customers be especially important
to enterprise products. Having relationships with decisions makers helps with customer development
and sales.

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2. Passion. Starting a company is hard and time consuming. If I’m solving a problem I’m passionate
about and/or serving a customer segment I enjoy spending time with, my overall quality of life will
be higher, and I believe I will be more successful. In starting a company, you inevitably have to ask
a lot of people for help. For example, big things like introductions to key people, or for small things
like to share your site with their friends. I want to be in a business that I’m proud of and passionate
about so I’m motivated to hustle. Many businesses require spending a lot of time with customers, so
I’ll want to enjoy thattime. Lifestyle is an important factor to me.
3. Skill set required. If the skill set required to execute the business plays to the strength of the
team, execution risk should be less. For example, distribution: I wouldn’t want to start a business
with a sales distribution strategy if I didn’t know sales. Conversely, if it’s a consumer app that
acquires customer through search, a team of SEO experts could be pretty effective. If I’m trying to
solve a hard technical problem, I would want to make sure I have incredible technical talent on
board. I would be more confident in an entrepreneur that’s started one or more ventures previously
or at least have experience in the skill sets required to start and run the business. As an
entrepreneur, I’dwant to start a business that requires skills that I have. Of course you can learn, but
that becomes one extra cost, time constraint, and risk.
4. Ability to validate. How confident can I be, or quickly get, that I’m pursuing a viable business? If
I can’t get 10 customer development interviews within a week, and begin to prove there’s a viable
business within a few months, I don’t want to do it. I know that massively limits my upside, but
again, my goals are specific. Does it require product development to get validation (i.e. something
like Snapchat)? Do I have to sit through 10 month sales cycles to know if it can be sold? Those are
risky paths to go down. That’s part of the reason I’ve been interested in companies solving known
and validated problems or in existing and validated markets (second movers).
5. Need for financing/ability to generate cash flow. If a lot of money is required to start testing the
concept, either because costs are high or because it will take a while to become cash flow positive,
financing will be required either from founders or investors. If you don’t have any existing
relationships to investors, or at least close connections, that’s, another time suck and risk factor. It’s
certainly surmountable though if you’re good. Raising money, while glorified in the media, does
have downsides. For example, you can lose some control over your business and you have to give
up equity (and therefore upside). The more cash you need at the start, when your valuation is the
lowest, the more equity you will have to give up.
6. Diversified. I never want to have all my eggs in one basket. I don’t want my life to be dependent
on one customer or employer. I don’t want one trend, industry, or customer group to affect
everything I’m doing. It’s easy for investors to diversify. For entrepreneurs it’s a bit harder, but
possible. I personally don’t have a very wide portfolio now,but I plan to.
7. Size of market/opportunity. How much upside is there? If your goal is to build a massive
company, you will need to be in a massive market. This item will largely depend on personal goals.
8. Quantity and quality of work. How enjoyable will the work be? How much time will it require?
Most opportunities will require significant time investments. Overall lifestyle is an important
factor to me, so I wouldn’t want to spend 100 hours a week doing something I hate. Thisfactor should
likely be considered as a ratio to potential upside (see above).

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CHAPTER SIX: ORGANIZATIONAL FORMS
Unincorporated Business
These are businesse s w h i c h d o not have separate entity (e x i s t e n c e from that of their owners)
According to law such organizations are one and same in the existence of the owner.
They do not have separate rights and obligations from those of their owners
They include;
 Sole Proprietorship
 Partnership
Sole Proprietorship
Sole means single while proprietorship refers to the owner of a business owned by one person who takes
responsibility on risks of the business. He eitherenjoys the profits or servers the losses of the business alone.
Formation of Sole Proprietorship
It is simple and easy to form since legally only licensed from the government is required. If the name of the
business is different from that of the ownerthe business name should be registered with the registrar.
Management of Sole Proprietor
The owner of the business is the manager of the business
 He makes decisions operating the day to day activities the business.
 He may employ people to work in the business or be assisted by familymembers.
Sources of Capital
The term capital is used her to refer to the resource required to start andoperate the business. He may obtain
capital from;
i) His own savings
ii) Borrowing from friends and relatives
iii) Banks and other financial institutions
iv) Credit suppliers
v) Borrowing from government institutions i.e. KIE(Kenya Industrial Estates established in 1967
functions to empower MSMEs(Micro, Small and Medium Enterprises) in value addition by providing
industrial incubation, affordable finance, and business advisory services to support industrialization for
job and wealth creation), ICDC (industrial and commercial development corporation)- is a Kenyan
government owned development finance institution established in 1954
vi) Funding from non-government organizations
vii) Hire purchase funds
viii) The business itself from retained profits.
LIABILITY
Liability refers to the extent which the owner of the business can be called upon to meet the debts of the
business.
 A sole proprietorship is viewed as being one and the same with the owner hence does not have
separate rights and obligation.

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 Where a sole proprietorship business cannot pay its liabilities all its assets and the business
properties are sold in order to clear the business debts.
 The responsibility of the owner of the sole proprietorship business is thus unlimited.
The sole proprietor is therefore said to have unlimited liability.
 This means that the liability of the owner is no just restricted to capital contributed but extends to
include its personal property.
Features of a Sole Proprietorship
i) Is a business owned by one person
ii) It had no separate legal existence from its owner
iii) It has a limited legal life since its existence depends on the life of theowner.
iv) The owner has unlimited liability in the business.
Advantages of a Sole Proprietorship
1. It is easy to start since only a license is required
2. Quick decision making
3. Freedom of action at any time
4. Flexibility in adopting quickly to changes in customers’ needs
5. Profits are entirely on the owner’s hands
6. There is control over business secrets
7. Easy to use family labor cheaply.
Disadvantages of Sole Proprietorship
1. Limited life in case of death of the owner
2. Unlimited liability may cause the owner to loosing personal property.
3. The sole proprietor serves loses entirely by himself
4. Limited capital may delay expansion.
5. working for longer hours may result to fatigue
6. Lack of essential skills may cause mis-management.
Circumstances under which the Sole Proprietorship ideal
1. When customers show preference to specialized services
2. Where small capital is required to start up a business
3. Where returns are low and may not warrantee existence of a largebusiness.
4. Where the market experiences frequent demand changes
5. Where locations are remote and the population may be small.
Dissolution of a Sole Proprietorship
 Dissolution refers to the termination of the legal existence of the business.

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This may be caused by;
i) The death of the owner
ii) The transfer of the business to another person.
Problems the Sole Proprietorship may face.
i) Lack of continuity in case of death.
ii) Lack of skills may lead to mis-management
iii) Working for longer hours may lead to fatigue
iv) Loses are served by the owner
v) Limited capital to facilitate expansion functions.
vi) Lack of consultancy may lead to poor decision making
vii) Unlimited liability may cause lose of property.
PARTNERSHIP
According to the partnership Act. A partnership is referred to as a relationship which subsists between
persons carrying on a business in common with view of making profits.
A partnership is thus an extension of sole proprietorship and is in fact necessitated by the fact that a sole
trader may for several reasons fail to carry out his business efficiently and profitability.
Partners pull the financial and managerial skills together in order to makeprofit.
Formation
According to the partnership Act (934) a partnership business may come into existence through any of
the following ways.
i) Orally
ii) By actions of persons concerned
iii) By a simple put in written
iv) By a partnership deed
NB the above ways of forming a partnership are allowed by thepartnership Act,
However it’s better to remember that it may be made illegal under thefollowing circumstances.
Circumstances under which the Partnership is illegal
 If the partnership has been formed for an illegal purpose e.g. theft.
 If is formed and the partners do not meet the minimum qualifications e.g.auditing
 Where the partnership contains more than 20 members
 Where the partnership wants to run their business with the name which does not disclose the true
names of all the partners or the name had not been registered under the registration of the business Act
under which it is deemed illegal.
Requirements for the Registration of a Business Name.
Under the partnership Act, the partners must furnish the registrar of business names for the following
a) The business name

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b) The general nature of the business
c) The principle place of location of the business
d) The present Christian and sir names together with their usual residential address.
e) The nationality of each partners
f) Any other occupation of the partners
g) The date of commencement of their business.
Types of Partners
a) General partners
These are the real partners in new sense of the partners which refers to those partners who are the most
active partners in the partnership
In most cases the general partner is a reliable of the debts of the partnership.
b) Limited partners
This is a partner whose liabilities are limited to the amount of capital contributed to the partnership business
These types of partners do not usually participate in the management of the partnership because if they do
they lose their limited liability in respect to the transaction and decisions participated in.
c) Active partner
This is the type of partner who takes the active part in the running of thebusiness.
In most cases such a partner may be employed somewhere or may be in another business all together
The partner contributes capital to the partnership business and the profitsor losses at lower proportions.
Articles of Partnership/ Partnership Deed.
Although it is not a statutory requirement the partnership can be formed by a written agreement, it is
usual for the partnership business in particular those involved in huge commitments to write articles of a
partnership alsoknown as a partnership deed.
The aim of this document is to safeguard the interest of each partner and it constitutes a legal contract
among the partners.
Contents of a Partnership Deed
1. The nature of the business to be carried out
2. The capital and property of the firm together with the respective capitalcontributions of each partner.
3. The sharing of profits or losses by partners.
4. The rules as to the case of interest on capital and drawings bypartners.
5. Provision for proper accounts and their audit
6. The power of each partner.
7. The drowns for the resolution of the partnership
8. The method of determining the value of good will on retirement of drafting in of a new partner.
9. The method of determining the amount payable to a deceased partner.
10. No partners may should carry on a competing business
11. Any changes in partnership composition must be agreed upon by all partners.

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Management of Partnership
Members of a partnership are correctively responsible for themanagement of the business.
The members may share responsibilities and duties according to the respective skills and availability in
order to ensure effectiveness in management of the partnership.
The partners may decide to hire skilled or non-skilled labour to assist themanagement of the partners.
Features/ Characteristics of a Partnership
1. Mutual agency – each partner is an agent of the partnership and therefore any action by one partner
with transacting the business binds the rest of the partners provided his actions are within the partners
express or implied authority.
2. Limited life- since the partnership is a relationship originating from an agreement between
two or more members any changes in their relationship caused by factors such as- death
withdrawal of a partner e.t.c terminates the partnership or dissolves it.
3. Unlimited liability
In a partnership the partners’ liability is not limited to the amount of capital investment.
The partners are separately held liable for the debts of business and their personal properties may be sold to
meet such debts.
4. Ownership of interests – the interest of a partner in a partnership business e.g. right to
inspect the accounting records of a firm of a firm, admission or dismissal of partner transit of
interest e.t.c must have the full consent of the partnership.
5. Sharing of profits
Each partners share of profits of proportional to his/her investment in thepartnership. And any agreement of
non-partner to share the profits does not make a non-partner a partner.
NB circumstances under which a non-partner may be included in sharing the partnership profits and
losses.
1. As compensation for services rendered to the partnership
2. As compensation for the partnership use of his/her property or name.
3. As payments for loans advanced to the firm
4. As payment to the next of kin.
Sources of Capital of a Partnership
1. Contributions from partners
2. Loans from commercial banks and other financial institutions
3. Stock from hire purchase firms
4. Credit facilities from suppliers
5. Loans from government institutions e.g. K.I.E e.t.c.
6. Plough backs from retained profits

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Classification of Partnerships
There are five ways through which partnership are classified.
1. By trading
A partnership may be classified as;
a) Non-trading partnerships- these partnerships whose activities are to offer services e.g. legal,
medical, accountancy, teaching e.t.c.
b) Trading partnerships– these are partnerships whose main activities are manufacturing,
purchasing or sales of goods.
2. By liability
a) General partnerships – are partnerships in which all partners may publicity act on behalf of the
firm and each partner individually be held responsible for the debts of the firm. Their properties may be
attached to clear the debts of their partnership.
b) Limited partnerships – a partnership whose activities of certain partners are limited. The personal
liabilities of such partners (limited partners) are limited to a certain amount stated. These amounts are
normally equivalent to theamount of their contributions.
NB the following conditions must be fulfilled for a limited partnership to beformed.
1. The partnership should not consist more than 20 partners.
2. The partnership must consist one or more general partners.
3. The limited partners are not liable to the partnership debts beyond his capital contribution.
NB Restrictions Of The Limited Partners.
1. Is entitled to inspect the books of the firm and examine the partnership state at any time.
2. The death, withdrawal bankruptcy of a partner shall not cause dissolution of a partnership or the
partnership cannot be dissolved by a court orderbecause of lunacy of the partner.
3. A limited partnership is only dissolved by the general partners unlessbrought through a court order.
4. Any differences on partnership matters can only be decided by amajority of the general partners.
5. With the consent of the general partners a limited partner may assign his/her shares in the partnership
to another person.
6. A person may be introduced into the partnership without the consent of the limited partners.
3. By time duration
a) A temporally partnership ( joint venture partnership) – this is a partnership formed for a specified period
of time
 Termination of the stated period or accomplishment of the purpose maycause the partnership to come
to an end.
b) A permanent partnership (partnership at will) – This is a partnership formed to carry the business
indefinitely
 It does not have a fixed life of fulfilling its purpose

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4. By Activity
a) Active partner – this is a partner who is actively involved in the day to day management of the
partnership and may be paid a salary for these services. And the partner is held liable for the debts of the
firm.
b) A dormant /sleeping partner – does not take part of the day to daymanagement of the partnership but
contributes capital, shares profits andis liable for the business debts
5. By Capital Contributed
a) Real partner – a partner who contributes capital into the business and whose name may be used in
relation to transactions of the business and enjoys the profits of the partnerships.
b) Nominal partner – is a partner who has not contributed any capital to the business but allows his or
her name to be used in the business. They are usually influential persons whose names can be used.
 He is not fully liable to the partnership debts however is he presents himself to the public in a
manner that portrays him a general partner he will be held liable.
c) Quinsy-partners – a partner who has retired from the partnership but has left his capital in the
partnership business which is treated as a loan, he earns interest
6. By Age
a) Majority partner – A partner who has attained the age of 18 years and above. Such a partner unless
stated to the centrally can be held liable for the partner.
i) Partner shares only profits and not losses since he didn’t participate in decision making that may have
caused such losses.
ii) The liability of the minor is limited only to the amount of capital contributed to the business since any
liabilities arising may not be part hisdecision making.
iii) The minor partners can act on behalf the partnership and such acts shall be binding on the other
partnership
iv) When the minor partner attains the age of majority he/she has up to six months to decide whether or
not to continue with the partnership. If he/she decides to stay, he has full responsibilities and rights of a
major partner.
Termination/ Dissolution of Partnership
 Although the partnership deed or articles of partnership will contain regulations of terminating the
partnership, nevertheless in the absence of our subject these regulations, a partnership may be dissolved
in the following ways.
1. When the fixed time if any are stated in the articles of the partnership expires.
2. If the partnership was specifically entered into for a given venture, transactions or undertakings the
completion of which or achievement will automatically dissolve the partnership.
3. If the partnership is a partnership at will, it can be dissolved by anypartner giving notice of his intention
to dissolve the partnership.

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4. By mutual consent of all partners
5. By bankruptcy or death of one the partners.
6. By one partner’s shares in the partnership being changed or attachedby a court order for private debts.
7. If any events occur which will make the partnership business illegal,the partnership will stand dissolved
irrespective of the content of the partnership deed.
8. Automatic or compulsory dissolution as it is provided section 39 of the partnership Act which lay the
following grounds under which a partnershipmay be dissolved by a court order.
i) If any one of the partners becomes insane
ii) If any of one partner becomes permanently incase of performing his/her duties through in capabilities,
accidents or disabilities
iii) Where a partner has acted in a manner which is pre-judicial to the carrying out firm’s business and
may bring the name of the business to itsdisables.
iv) Where a partner was found guilty of breach the partnership contract.
v) Where the firm has been operating in losses.
Circumstances Under Which The Partnership Deed Is Ideal.
1. In a business where the amount of capital required is reasonably large.
2. If professional were pulling together effort for efficiency and betterperformance.
3. If professional areas where the law prohibits a couple of days.
Advantages of Operating a Business under a Partnership
1. A partnership business benefits from the talents of individual ensuring almost efficiency and
acceptance.
2. Since a partnership would be owned by a no. of partners it sets a basisof pulling together saving to raise
large capital for investments
3. Sound decision making through consultative processes
4. A higher growth rate as a result of combining ambitious from different partners.
5. Partnerships have a good will and financial influence enabling it to raise finance easily.
6. Collateral or security of loans can be easily be raised.
7. Formation of partnership business requires minimal government interventions.
Disadvantages of Operating a Business under a Partnership
1. Slow decision making due to long discussion processes
2. Sharing of profits tends to disregard hard working partners.
3. Partnership businesses have limited life in case of retirement or dead of one partner.
4. Disagreements make partnerships business vulnerable to disputes among partners.
5. The partners have unlimited liability which lead to loosing personal property in the event the
partnership business cannot settle its debts.
6. The agency burden where every partner is an agent of the partnership and one’s partner’s mistake
may affect the rest.
7. Limited managerial skill may lead to mismanagement of the business.

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Incorporated Business / Joint Stock Companies
Incorporated Business
 We have so far looked at unincorporated business and have seen the main features of such business is
that they do not have a separate legalexistence from the owners.
 We shall now focus on business units that are legally viewed as separate and distinct units from their
owners
 Such businesses are called incorporated or joint stock companies.
 Incorporated business organizations are legally separate and distinctfrom their owners or members.
 The main forms of incorporated business or Joint Stock Company include;
a) Companies
b) Co-operative Societies
c) Public Co-operation
 These are advanced forms of companies where a group of people pull their savings together and
contribute as capital to set up a business enterprises or companies.
 These companies are governed by Acts of parliament under the Kenya all joint stock companies fall
under the Kenya Companies Act = (cap 486)of 1948
 The Act lays down the formation and general conduct of Joint Stock Companies.
Companies
 A company is a business registered by the registrar of companies Act.
 The Act of registering a company is known as incorporation.
Incorporation
 This is a process that creates an organization separate and distinct from the persons forming it (owners)
 The organization is known as a body corporate and registered companyis known as a corporation
NB Companies are business organizations or units formed to carry out aspecific activity.
 They are organized by processing an existence that is separate anddistinct from the persons who own it.
 Companies have rights and obligations of a natural person.
Rights and Obligations of Companies
1. It can own and dispose off property.
2. It can enter into a contract on its own name
3. It can borrow and lend money in its own capacity
4. It can hire and fire employees
5. It can sue and be sued in its own right
6. It can form subordinate agencies and its authority
7. It can spread information.

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Features of a Company
 It is an artificial person created through legal process
 A company has rights and obligations of natural person e.g. holding anddisposing property.
 A company has a perpetual life independency of the owners lives i.e.has perpetual succession.
 A company has a separate legal identity from the owner.
 A company is created for a particular purpose
 The owners of a company enjoy limited liability
Types of Companies
There are basically two types of companies. Namely;
a) Public Limited Companies
b) Private Limited Companies
Public Limited Companies
 A public limited company has a minimum number of 7 members with no maximum membership.
 The maximum membership normally is determined by the number of authorized shares (capital) of the
company
 In Kenya a public limited company has the term limited at the end.
Characteristics/Features of a Public Limited Company.
1. Minimum membership is 7 with no maximum
2. Invites members of the public to subscribe to its shares
3. The shares are easily transferable among shareholders
4. It has a minimum of 3 directors
5. It has authorized minimum capital figure.
NB: Authorized share capital is to the total shares that have been legally authorized by the government
during the company’s registration
 A public limited company starts to operate after receiving a certificate ofcommencement( trading)
Private Limited Company
This is a company with a minimum of 2 persons and a maximum of 50 persons excluding all
past and present employees.
A private limited company should have name ending with limited.
Characteristics/Features of a Private Limited Company.
1) Has a minimum of 2 members and maximum 50 members
2) It does not invite the members of the public to subscribe its shares.
3) Its shares are not easily transferable unless with consent with other share holders.
4) Operates with only one director.
5) Its shares don’t have authorized minimum capital figure It can start its operations after
receiving its certificate

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Limited Liability Concept in Companies
 This is the fact that the liability of companies of owners is restricted to the amount of investment of a
company plus any other amounts that to be undertaken to be contributed towards payment of one
company’s debt.
 The word limited indicates that the liability of the owners of members in respect to this amounts (capital
contributed) and not their personal property.
 A company may be limited by-:
 Shares
 Guarantee.
Companies Limited by Shares
 This is a company where member’s liability is limited to the value of shares held.
 The liability of members is limited to the share contributed.
Company Limited by Guarantee
 This is a company whose members liability is limited to the amount that members have undertaken
to contribute to the business debts.
 These contributions may cover for;
 Court charges and
 Any other expenses.
Formation of Companies
 A company may be formed by any person or persons associating for a legal purpose through
registration with a registrar of companies under the Companies Act.
 Although a limited company is a legal person it can only act through human agents who must register it
with registrar of companies and for a company to be.
MEMORANDUM OF ASSOCIATION
 This is document that defines that relationship between the company and outsiders.
 It informs the outsiders what the company does, the amount that is required.
 The memorandum of association is the company’s chatter constitution and once the company is
registered the memo becomes a legal document that can only be altered by law.

Importance of the Memorandum of Association

a) It defines the limits of company associations.
b) It informs subscribers the purpose for which their money will be put.
c) It protects subscribers form possible misuse of their money

d) It protects outside parties dealing with the company by informing them the extent of its operation.
Contents of a Memorandum of Association.
1. Name clause – This states that name of the company ending with the work limited.
 Any name may be selected to be used by the company as long as it is not prohibited by
law.
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 This requirement is meant to protect people who may erroneously enter into a contract in the
company believing it to be another company an also protects companies from possibly mis-use of
their names.
2. Object clause – this clause outline the objectives of the company anything outside this objective
will ultra virus.
3. Situation clause- This clause discloses the locations of the legislative office and it contains the
following elements.
i) Where the company is situated
ii) Where the letters may be delivered
iii) Where sermons may be served.
4. Liability clause – This clause states the status of the member’s liability with regard to the debts of
the company.
 The clause enables people who may enter into contract with the company to determine
the extent of the company’s liability.
 The statement of liability should clearly specify the members liability regard to the
company debts.
5. Capital clause
 The clause states the total capital of the company is authorized capital into shares and
their corresponding value.
 In case of a public company, the capital clause will give the minimum amount of capital
that the company must raise before it commences business.
6. Association of substitution clause- This contains a declaration by the promoters (original owners) that
they desire to form a company to pursue the objects of the memorandum of association and that they
agree to take payments of their shares.
 The promoters are required to give details of their name addresses, occupation and no. of shares
ARTICLES OF ASSOCIATION
 This document contains the rules and regulations pertaining the relationship between the shareholders
and the company among the shareholders themselves.
 These rules regulate the internal relations of the company forming a binding contact between the
members and the companies and as well as among the members themselves.
Content of Articles of Association.
1. The right of each member e.g. voting rights.
2. The issue, transfer and for future of shares and the alterations of shareholders.
3. Procedures of calling and conducting meeting
4. The methods of appointing or electing officials
5. Qualification procedures duties and rights of directors
6. Preparation of books ofaccounts and the auditor’s report.
NB whereas the memorandum of association is mandatory document of all companies, the articles of
association are optional.

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 Where the company does not draw the articles of association, it can adopt the standard articles of
association contained in the company Act.
 A company may alter or amend its articles of association and such amends shall be valid.
 The power to alter the articles of association is specified in the memorandum of association.
List of persons who have consented to the directors of a company
 The directors are chosen from the founders of the company referred to as promoters and the list
contains details of names addresses, occupations, shares subscribed and a statement of agreement to
serve as directors.
A statutory declaration of compliant with the requirement of the company’s Act.

 The declaration must be signed by person’s names as directors or the company’s secretary.
The declaration must be equally by signed by the advocate engaged in the formation of the
company and must expressly state that the company is formed by lawful persons.
CERTIFICATE OF INCORPORATION/ REGISTRATION OF A COMPANY.
 Once all the required documents are properly filled with the registrar of companies is ratified with
what is contained in these documents.
 The registration brings the company into being and the companies issued with a certificate of
registration.
 The registration gives a company an identity that is separated and distinct from its owners.
 From the date of incorporation the company becomes a body corporate with the name powers and rights
and obligations of an incorporated company.
 The process of forming a company is formalized when a certificate of incorporation issued has inclusive
evidence that all the information has been complied with and that the company is duly registered.
NB - A private company can start its business operations immediately it is issued with a certificate of
incorporation, this is because the company does not have to invite the members of the public to buy shares.
 A public limited company must proceed to issue proposals inviting the members of the public to buy
shares.(A prospectus a notice or circular of advertisement inviting the public to purchase the shares of a
company).
 Public limited companies can only be allowed to purchase goods only when the registrar is satisfied that:
i) The company has raised a minimum amount of capital as required by the memo.
ii) That every director has paid to the company the minimum amount of money on the shares to be
taken.
iii) That there’s a declaration by at least one director that the company shall comply with the regulations
stipulated by the law that governs companies.
Once the registrar is satisfied by the above requirements then the public limited company is issued
with the certificate of trading which will enable the company to commerce its operations.

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Ownership and Management of Companies
i)Ownership

 A company is owned by any person who has subscribed and purchased that company’sshares.
The owners of a company are known as shareholders and their names are entered into the company’s
registrar.
 Each share holder has a claim in the property of the company proportional to the sharesheld.
 The shareholders of a company have unlimited rights to the transfer or sale of their shares in the
company.
ii) Management
 The management of a company is in the hands of the board of directors.
 The initial directors stay in the office till the first meeting (AGM) is held at which new directors
are elected.
 The size of the board is usually determined by the size of the company.
 The board of directors is charged of formulating and overseeing the implementation of company
policies.
 The board is normally supported by a terms of profession employed to the responsible for the day to
day management of various departments.

 For a public limited company, the directors are required by law to present the company’s fiinancial
statement at the AGM meetings and filled with the registrar of companies.
Sources of Capital of a Company
i) From the public through the sale of shares
ii) From commercial banks and other financial institutions
iii) Government institutions i.e. KIT, ICDC e.t.c
iv) Suppliers inform of trade credits.
v) The business itself inform of retained profits
vi) Higher purchase traders.
vii) Rent revenue earnings from any investments.

Public Limited Companies

 These are stock joint companies that have sold stock to the general public and thus attract public money
in form of share capital i.e. ordinary or preference shares.
 Such companies are usually quoted at the stock exchange where shares are bought and sold through
stock brokers.
 These companies usually raise large size of money from the public and in order to do so the companies
must;
 Obtain permission from the development market authority also known as “New issue committee” this

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committee assesses the financial soundness of such companies before allowing them to attract public
money.
i) The aim is to safeguard the interests of public investors
ii) The company in need of public money will have to obtain permission from the Nairobi stock
exchange council before it can be allowed to have its shares dealt with.
Private Limited Companies
 These companies are formed by submitting the necessary requirement to the registrar of companies
(the five documents)
 Once this has satisfied the registrar of companies such a company will receive a certificate of
incorporation.
 The private limited companies are usually not allowed to advertise their shares to attract public money
and as such they sell their shares privately (private placing to the interested members of the public.
 Like public limited companies, private limited companies have limited liability; their shares are not
fully transferable as they are not quoted at the stock exchange.
 Any transfer of shares requires the consent of other share members of the company.
Advantages of a Company
1. More capital can be raised since it has large membership
2. The company offers better collateral for loans to be advanced.
3. Limited liability secures private property in case of inability to paydebts.
4. The companies have continuity i.e. have perpetual life or succession.
5. A company has a liability to hire highly qualified professionals facilitating better management
6. Shares are easily transferable.
7. The companies have legal identity and therefore no conflicts to its members.
Disadvantages of a Company
1. Difficult to form since it is costly and has long legal procedures
2. The company has restricted operations by the memorandum ofassociation
3. Slow decision making due to long approval procedures
4. Limited ownership caused by land of control of the firm
5. The agency burden may cause mismanagement when especially theboard is weak.
6. Double taxation especially of the dividends
7. Lack of secrecy since the company has to publish its financial statusannually.

Main Features of Joint Stock Companies

 As already noted a joint stock company is an association of people who contribute capital to form
common stock in order to carry on a business activity for product motive.
 The company formed comprises- corporate status and is registered under the company’sact.
 A joint stock company may be public or private company and its main features include;
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a) Legal personality – the company has identities separates from that of other persons contributing
capital and can therefore hold property, contract in its own name sue andbe sued.
b) The shares are transferable – the share holders can sell their interest in the companies to
other persons willing to invest in it (freely for public ltd company but limited to the consent of the
rest of the shareholders for private company.
c) Common sill – as a separate entity it will be necessary for a joint stock company to sign
documents and such signatures are normally embodied in a common sill of a company. The seal is
kept under custody of the responsible offices.
d) Members/ shareholders can not bind the company by their Acts
e) Individual/ members are not entitled to take part in business since it is managed by the board of
directors
f) Shareholders have a limited liability.
Advantages of Joint Stock Companies
i) The liability of share holders is limited to the capital contributed by shares guarantee.
ii) A joint stock company is going concern implying that it has perpetual existence separatefrom that of
the shareholders.
iii) A joint stock company is an artificial legal person independent of the shareholders and it can own its
assets and liabilities.
iv) The shares of a joint stock company in particular public limited company are freely
transferable.
v) The shares of a joint stock company can easily be used as security for loans making it easy to
obtain loans.
Disadvantages of Joint Stock Companies
i) It lacks secrecy and privacy since it requires audited financial statement annually.
ii) The formation of a joint stock company requires long legal formalities.
iii) They are difficult to form since they require a heavy capital investment.
iv) Joint stock companies cannot increase their capital investments beyond the legally authorized
capital.
v) The decision making process of joint stock company is slow and bureaucratic due to
consultations.
vi) Joint stock companies are not flexible to changes.
Dissolution of a Joint Stock Company
 When a company has started it’s expected to continue with its operations to the future since it is a
form of business with perpetual succession.
 Termination of the life of a company may be through;
1. Failure to commerce business within one year of its formation – upon this it may be would up
by its court order on application.
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2. The membership falling below the required minimum and this dissolution may be decided
by a court order.
3. Accomplishment of the purpose or expire of the period of operation.
4. The registration if it fails to comply with statutory cooperation e.g. failure to file annual files to
the registrar of companies or engaging in illegal activities.
5. A resolution by members to voluntarily wind up the company which may arise through;

 Where the company does not have a future on that line of business
 The members wish to sell it as a going concern in order to share profits.
 Where one company is acquired by another and the members wish to discontinue it so as to
terminate its existence a separate legal entity.
6. Through a merger with a larger company
7. Insolvency – the company is not able to meet its obligations.
Holding Companies
 The company Act of the laws of Kenya defines a Holding Company as one which has more than half of
equity share capital of another company of which it is a member or controls a bigger percentage of the
board of directors of one or more other companies which are called subsidiary companies.
 A holding company may be public or private depending upon wishes of the promoters or shareholders.
 In Kenya a good example of a holding company is ICDC.
Public Corporations
 This is the net price to which the government has stakes in. The government owns a certain percentage
of the enterprises shares.
 Where a government has a fall ownership of the corporation, the business enterprise is known as a
parastatal
 Some public corporations are profit seeking while other are not. Examples of such public corporations
include;
 Kenya Pipeline
 Kenya Airways
 KCB(Kenya commercial Bank)
 Kenya Power Lighting Company (KPLC)
 Parastatals are run to provide the essential services such as education, medical etc.
Similarities Between Public Cooperation’s And Joint Stock Companies.
 They are both legal entities
 They are governed by a board of directors appointed
 They are self financing.
Public Corporations
1. A Corporation is wholly and partially owned by the government

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2. Corporations tend to be monopolists
3. Are operated on public interest not entirely on profit motive.
4. They are paid for by the public from the taxes collected by the government.
Joint Stock Companies
i) Owned by the public and has shareholders.
ii) They are subjected to companies
iii) Purely operate on a profit motive.
iv) Private funds finance joint stock companies.
Parastatal Bodies
A parastatal body is an organization distinguished from a body government but in which the
government is a sole owner.
 They are established by the government to perform specific functions and their management is
in the hands of board of directors.
 The board of directors is appointed by the government and the parastatals bodies do not sell
shares since they are whole financed by the government.
Examples
 Marketing boards
 Coffee board of Kenya e.t.c.
Marketing Boards
 These are produce organizations set up to encourage and control of the Agricultural produce.
 Their objective is to protect producers and consumers and may be formed by both producers
coming together or be constituted by the government.
Classification of Marketing Boards
i) Commodity marketing boards: these are producer organizations with objectives are restricted to
purchasing and selling of commodities e.g. coffee, tea, pyrethrum
ii) Producer marketing board: this is a produce organization dealing with a wide range of products
e.g. maize, wheat e.t.c
iii) Expert marketing boards: this concentrate on marking one or more products overseas e.g. KTDA or
coffee board.
Functions of Marketing Boards.
i) To encourage and control the marketing of Agricultural produce through purchasing at fixed prices to
facilitate stable incomes
ii) To encourage income and price stability through the buffer stock in buffer fundingsystem.
iii) To facilitate farmers to obtain loans for farm inputs e.g. quality fertilizers, seeds and equipment.
iv) To support the government in licensing regulations
v) To provide a wide range of sport e.g. transport, grading, packaging of products e.t.c

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vi) Marketing boards provide advisory advice to farmers

vii) They facilitate research on agricultural products and markets.
Formation of a Public Cooperation
 They are formed by a specific Act of parliament which define and powers and the overall mandate
of their institutions.
 The law creating corporations also state the minimum capital under which they will operate.
 The corporations are viewed as separate legal entities and may be wholly or partially owned by the
government.
Management of Public Corporations.
 This is under a board of directors.
 The directors are appointed by the government when the government owns wholly the corporation or
relevant joint directors and government appointed directors where the government owns partially the
cooperation.
 The government influences decisions of the corporations either directly or indirectly e.g. pricing
decisions.
 In Kenya the board of directors is appointed by the relevant ministries or by the president.
 It is this board which is responsible for the implementation of the policies of the organization.
 The board may employ professional managers charged with the day to day running corporations.
Sources of Share Capital
i) Public corporations may get their capital from the government through loans or budgetary
provisions.
ii) Where the government own corporations jointly both contributions of capital and the public will
raise capital through issuing shares.
iii) As a body corporate a public corporate has power to borrow money from financial institutions.
Features of a Public Corporation
1. A service motive- they provide essential services to the citizens and may therefore not aim at
making profits – entirely.
2. They are formed by an Act of parliament which states that government ministries will take charge
of such corporations.
3. They are subsidized by the government to enable them provide essential goods and services at
minimum fees.
4. The board of directors is wholly appointed by the government or jointly with other stake holders to
influence the policies of the cooperation.
5. They are financed by the government but for jointly owned public corporations.
6. It has a legal distinct from the government or any other owners
7. They have limited liability

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Advantages of Public Corporations.
i) Raising initial capital is each since funds comes from the government
ii) Public corporations improve the welfare of the people since basic goods and services are
offered at affordable prices
iii) The company has limited liability
iv) They are used to meet government objectives.
Disadvantages of Public Corporations
a) Political influence may lead to a week management
b) Public corporations may not respond to consumer needs since some operate asmonopolist.
c) Public corporations have a public interest making them difficult to achieve theirobjectives.
d) The job insecurity of senior managers e.g. C.O.S, may lead to dishonest management
e) Slow decision making because of the size of same public corporations
f) Most corporations are loss making
Dissolution of Public Corporations.
 Since formation of a public corporation is by an Act of parliament it follows therefore, that in order to
dissolve such an organization one would have to repeal the Act of parliament under which they are
allowed.
 The following reasons may lead to repealing the Act of parliament under which they are formed.
1. Perpetual operations of the corporation of a loss
2. Outright insolvency.
3. Mismanagement which mat adversely affect the performance of the corporation
Co-operative Societies
 This refers to a co-operative. The term co-operative is derived from cooperation
 It is a body of people or a body of persons who have agreed to come together to achieve a certain
goal.
 The members of the public get together to voluntarily contribute capital to the corporative society
sharing the risks of investments in order to achieve and enjoy the benefits.
Reasons for Promoting Cooperative Societies in Kenya.
 They facilitate members to manage their own society and distribute themselves the benefitgenerated.
 In order to increase bargaining power in selling the members produce or gaining maximumsatisfaction.
 In order to enhance participation by members in economic activities minimizing themiddlemen.
 In order to reduce market cost of produce especially in transportation and storage.
 In order to promote and improve quality production
 In order to facilitate stable income earning
 In order to put together capital resources of expensive investment e.g. transport, refrigeration
e.t.c.

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Formation of Co-operative Societies
 They are formed by a minimum number of 10 members who pursue to undertake some objectives
 The members work out a defined plan of what the co-operative society is supposed to do.
 For the co-operative society to be formed they have to submit their constitution to the commissions of
co-operative societies with the following detail:
 The objectives of the society
 By-laws of the society
 The areas of corporation of the society.
 The nature of the business to be undertaken
 The location of the head office.
 The application of registration is to be submitted to the commissioner through the local
cooperatives.
 Upon satisfying the commissioner, a certificate of registration is issued.
 The co-operation then recruits members who pay registration fees and buy their specified shares in
the society.
 No member is allowed to buy more than 5% of the share capital.
 The registration of the co-operative society makes it a body separate meaning it becomes a separated
entity distinct from its owners and with perpetual succession.
Ownership and Management of a Co-operative Societies.
 It is owned by its owners and its ownership and membership is opened and voluntarily. The members
in a co-operative society have a limited liability to the amount contributed.
 The supreme authority of the registered co-operative society is in the AGM (Annual general meeting).

 During the AGM the managing director is elected on one person one vote basis irrespective of the shares
owned by each member.
 The outcome is determined by a simple majority and such elections are supervised by the district
corporation officer.
 The managing director serves for a period of time after which elections are held by a vote.

 The elected members hold constant meetings to discuss operations and the concerned of the cooperative.

 The committee may employ professional staff to charge of various parts in the society.
 A number of sub-committees may be formed from the elected officers to take to take various
responsibilities of various societies.

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Examples of Committees in a Co-operative society
1. Executive Committee: The committee is charged with the day to day running of the society and its
membership is made up of the following:
 Chairman
 V-chairman
 Honorable secretary
 Treasurer
 Secretary
2. Education Committee: It is charged with educating members of the society and it is made up of 3-
members answerable to the executive.
3. Credit Committee: It is normally common in saving and credit societies. It is made up of 3-members
answerable to the executive and it is charged with the following:
i) Processing loan applied and making recommendations.
ii) Loan recovery
iii) Credit recommendations and approval
4. Supervisory Committee: It is charged with overseeing the overall management of the society’s
finances.
The Relationship between the Cooperative Society and its Business with its Members
 A cooperative society should usually transact its business with its members.
 This business relationship relates the following relations.
i)The customer relations- The members can be customers of the cooperative society by purchasing its
goods and services
ii) The supplier relations-The members can supply to the society by the selling to the cooperative
society marketing their produce.
iii) The employee relations- The members can be employees who work for the cooperative society
which they jointly own.
Sources of Capital for Cooperative Societies.
1.Members contributions through;
i) Registration fee
ii) Amount contributed by members to purchase shares
iii) The fee charged from the proceeds or sales of the members produce.
iv) Interest earned on money loaned out or firm inputs advanced to members.
2.The loans from financial institutions.
3.Plough backs or financing through retained profits.

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Features of the Cooperative Society
1. Separate entity- Registration of a cooperative society makes it separate from its owners and the
cooperative society has rights and obligations that are separate distinct from those of its owners.
2. Liability-The liability of its members is restricted to the amounts they have contributed in terms of
capital.
3. The minimum membership of a cooperative society is 10 persons and the maximum number is
specified since it depends on the share capital of the society.
4. Continuity-The cooperative society has a perpetual life.
5. Cooperative societies are governed using by-laws contained in the constitution of the cooperatives.
6. The share capital is divided into units both persons who want to become members of the
society.
7. The cooperative society is run by management committee elected
8. The distribution of profits to the members is according to the level of activity carried out
among members-High volume of activity command high portions of profits.
Essentials for the Success of a Cooperative Society.
1. Adequate volumes to secure the benefits of large scale production.
2. Adequate finance to fund operations construction purchasing of equipments.
3. A sound management team with effective entrepreneur skills.
4. Existence of a definite objective
Principles of Cooperatives
1. Open Membership: Membership is open and voluntary without artificial restriction imposed on
membership
2. Democratic administration: The affairs of the cooperative society are managed in a democratic
manner and elections areon a one person
3. Service to members: The primary purpose of a cooperative society is to render services to members.
4. Distribution of profits or surplus: Distribution of profits or surplus is based on aspecified rate.
5. Limited interest on capital: This is because the aim of cooperative society is to help its members
and not make profit.
6. Cooperation with officer cooperative society so as to achieve a common purpose and a common
objective.
7. Education to its members.
Types of Cooperative Societies.
A cooperative is a voluntary association of persons who come together to promote their social
economic interest. The types include:-
Producer Cooperatives
A producer cooperative is an association of producers such as societies which collect, process, market and

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distribute the members produce.
Functions of Producer Cooperatives
i) Getting better prizes for members produce.
ii) Providing better transport facilities for moving the produce from the source to the market.
iii) Providing better storage facilities for members for members produce.
iv) Provinggrading, packing and processing services to the members.
v) Extending credit facilities to its members.
vi) Educating members on better methods of production through seminars, demonstrations etc.
vii) Facilitating use of quality seeds, fertilizers and farm inputs
Consumers Cooperatives
 A consumer cooperative is an association of borers who have the same consumer needs.
 The consumers buy bulky and sells to the consumers at lower/fair prices.
 This reduces the cost of products by eliminating the middle men.
 The main function of these cooperative societies is to purchase and distribute quality goods to
members at reasonable prices.
Benefits of the Consumer Cooperatives
i) They make goods easy available to members.
ii) They buy goods in bulky and sell to members at lower prices.
iii) Theydistribute the realized profits to members at lower prices
Why consumer cooperatives are not popular in Kenya.
 Fears competition between the local traders which push prices down and provide quality
goods hence no need for cooperatives.
 Many people supply enough subsequent food for themselves.
 Most people cannot afford large amount of capital required to start.
 Most population in Kenya lives in the rural setup and may not accept the cooperativerule.
 No proper attention to such cooperatives by the government.
Savings and Credit Cooperative Society (SACCOS)
 These societies are formed by persons who come together to save their money in a common pull with a
view of getting loans to improve their welfare.
 The members of a SACCO are usually under one employer and members’ contributions are deducted
from their salaries but the employer to the cooperative society through a check of system at regular
intervals usually monthly.
 At the members savings earn interest and get loans at reasonable interest rates normally 1%per month.
 Members’ savings serves as a security for a loan, three guarantors and a pay slip.
Why SACCOS Are Popular Among Employees
a) It is easy to save with the SACCO since deductions are done through a check of system.

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i) Easy to get loans from SACCOS due to fewer simple requirements.
ii) Interest charge on loans is low compared to commercial banks.
iii) Loans do not require collateral except far members’ salary slip and guarantors.
iv) Members savings are save since they are insured.
v) In case of death the beneficiaries do not lose their savings in cooperatives nor are they
called upon to repay.
vi) SACCOS are flexible since they give different types of loans e.g. normal, emergency,
school fees loans, medical etc.
Structure of Cooperative Societies
 This refers to the hierarchy of the cooperative movement.
 It shows the various levels of which various cooperatives operate this include:
i) Primary Cooperatives
Draw membership from business organizations engaged in production of particular goodsand services.
Such cooperatives are found in specific geographical turgid or sector.
Examples: Local agricultural societies in different regions.
ii) Secondary Cooperatives made up of the primary cooperative within a region e.g. a district. Through
such cooperative the primary cooperative society pulls their objectives.
Main Reasons of Forming a Cooperative Union
 To strengthen the buying capacity especially of farm inputs or transport facilities.
 To negotiate for loans for members cooperatives from the cooperative banks.

 To market the produce of members cooperatives.

 To help members cooperatives with the processing of their produce.

 To help member’s cooperatives with storage, administrative services, accounting etc.

 To educate, advice, train, the staff of members cooperatives.
National Union.
 This is the union of various cooperative unions.
 The national cooperatives form umbrella bodies of cooperatives formed.
 The membership of such a cooperative comprises cooperative societies or operating in a particular
production line.
Examples:-
 The Kenya Planters Cooperative Union.
 The Kenya Union of Savings and Credit.
Apex Cooperatives.
These are the overall cooperative bodies to which all other cooperatives i.e. primary, cooperative
unions and national union are carried. An example in Kenya is is the Kenya National Federation of
Cooperatives Union. They are formed to promote cooperative performance with the aim of:-

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a) Providing information about the activities of cooperative in Kenya.
b) Providing education and training for member cooperative for efficient and
c) Represent Kenya cooperatives both regionally and internationally.
Another example is the Kenya Cooperative Bank.
iii) International Cooperatives: Are composed of national cooperatives from various countries e.g. The
Kenya Federation of Cooperatives

Problems Facing Cooperative Societies.

 Mismanagement by cooperative officials who take advantage of their knowledge and position to
benefit themselves.
 Unskilled management elected without any knowledge whatsoever with management skills.
 Lack of adequate capital due to small contributors and difficult to get bank loans.
 Capital interference and self interests.
 Most cooperatives are agro based facing price fluctuations climatic problems, low prices etc.
 Little government input to rejuvenate the cooperative societies.
Advantages of Cooperative Societies.
 Low cost services to members.
 Improved welfare of members enhancing their participation in economic activities.
 Encourage savings enabling members to accumulate their capital.
 Extended credits to members at low interest rates improving their welfare.
 Limited liability protecting personal property.
 Flexibility in membership for entity and exit.
 Equality of the members in terms of rights irrespective of the number of shares held.
 Large capital base due to high membership.
Disadvantages of Cooperative Society
 Poor management caused by the system of choosing the managers I.e. AGM elections.
 Constant political interference causing unrest and mismanagement.
 Withdrawals are easy which may cause instability and discontinuity.
 Slow decision making due to over consultation.
 Lack of secrecy since all activities must be approved by all members.
 Large membership may cause management problems.
Dissolution of a Cooperative Society
 Disagreement among members or an agreement of members may lead to application of registration.
 Insolvency- Where the cooperative is unable to meet its debts.
 By a court order upon application by one or more members.
 An order of dissolution by the apparent ministry in the interest of its members.
 Withdrawal of members leaving membership to less than the minimum required.

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FACTORS TO CONSIDER WHEN STARTING UP A SMALL BUSINESS
1. A great idea
“No business can develop in the absence of a great idea. A great and a practical idea is the only thing on
which the development of your business will depend. Moreover, as a lot of companies are involved in the
market, you need to have a unique idea that stands out.”
2. Funding and budget
“The next important factor that should be considered involves the funding of your business. You need to
properly identify the sources through whichyou will be able to get the funding for your business. Moreover,
it is betterto have a plan so that the budget of a company can be properly maintained.”
3. Analysis of competitors
“You need to know what your competitors are doing and what are their strategies? With this knowledge,
you will be able to take appropriate decisions about your company. It will also help you in developing a
muchmore effective strategy for your business.”
4. An effective business plan
“No business can develop fully in the absence of a business plan. Writing a business plan can help you
determine if your idea is feasible and provide direction. With a business plan, you will be able to know
every next step that should be taken.”
5. Legal documentation
“The next factor that needs to be considered is the completion of legal documents. For the sale of some
specific products and services, there are some requirements for the preparation of legal documents. Make
sure youhave already done all the legal documentations for your business.”
6. Positive attitude
“It is one of the most important things that will help you in passing all the challenges and difficulties.
There will be a lot of risks and hurdles you will face in this process and the only thing that can save you
will be your positive attitude. You will have to work hard to develop a company of your own.”
7. Know when you need help
“The development of a business is not a matter of seconds, it will involve a lot of time that is spent with
hard work. However, in this process, you will be needing the help of some experts. Make sure you
already have anadviser who can provide you with the best advice at the hour of need.

BUSINESS LIFE CYCLE

The business life cycle is the progression of a business in phases over time and is most commonly
divided into five stages: launch, growth, shake-out, maturity, and decline. Every business goes through
four phases of a life cycle: startup, growth, maturity and renewal/rebirth or decline. Understanding
what phase you are in can make a huge difference in the strategic planning and operations of your
business.

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CHALLENGES FACED WHEN STARTING A SMALL BUSINESS
1. Cash Flow Issues
Money problems are often the ones that entrepreneurs are most afraid of, and for a good reason. There
are a lot of incoming and outgoing transactions that you need to take care of in order to sustain your
startup. At the same time you have to manage all of that whilst meeting deadlines.
2. Avoiding Burnout
If you are a small business owner, you probably want to do everything by yourself. You knew your
product or service; you can do it quicker and better than anyone else.
3. Finding And Retaining Customers
As you probably already know, the key to finding customers is to have a product that is unique and
that can satisfy their needs. So, do a littlemarket research, find you target group, and see what their pain
points are and how you can resolves this for them.
4. Relying Too Much On One Customer
Understandably, even one good, large, paying-on-time customer is great news for a new business, but it
can also be a problem. And that is the fact that it’s not making you a business owner as much as a
contractor. It can be very difficult to stop focusing on that single customer and try to find new ones that
might not be that reliable, butit is necessary.
5. Growth Vs Quality
There will come a time when your business is growing and it is growingat a pace that is not allowing
you to focus on every customer yourself. Hence, you will feel like the quality will start to decrease.
And that is a moment when you need to make some key decision to hire or even to outsource help.
Usually, it is that personal touch that made your business a success in the first place. But, do not
worry, not everything is lost. It is a challenging decision, but it does not need to mean thatthe game is
over. You can have both.
6. Motivating Employees
By now you are aware that good employees are needed for a successful business and they are not
found easily. It is not that hard finding the answer to what motivates a good employee. You are
thinking, it is either a good paycheck or some other form of incentive. But not many entrepreneurs
understand that there is so much more toit. It starts with you, the boss.
7. Too Many Overheads
Having too many overheads and not being able to deal with themaccordingly is what makes a lot of
companies fail.

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CHAPTER SEVEN: ENTERPRISE SOCIAL RESPONSIBILITIES
Social Responsibility
Refers to the roles undertaken by business organization on the surrounding environment. It is the liability
the organization undertakes to be called upon to account for the conduct that affects communities or the
society at large. Organizations are constraint in their conduct by legislation which in essence affects their
relationship with stake-holders, employee’s suppliers, customers the society at large and the environment.
Some of the social concerns of an enterprise include:
 Green Ideas for Manufacturing Companies.
 Corporate Electronic Recycling.
 Manufacturing & Pollution.
 About Human Rights & Free Trade.
 Environmental Influence on Business
Benefits of Social Responsibility
 Better brand recognition.
 Positive business reputation.
 Increased sales and customer loyalty.
 Operational costs savings.
 Better financial performance.
 Greater ability to attract talent and retain staff.
 Organizational growth.
 Easier access to capital

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CHAPTER EIGHT: ENTERPRISE MANAGEMENT.
Enterprise management is a term used to mean the management of vital day-to-day processes such as
inventory management, accounting,human resources and customer relationship management (CRM).
WAYS OF MANAGING AN ENTERPRISE
1. Lead with knowledge and confidence.
To build your leadership skills, find a more experienced manager willing to mentor you. Use
networking to connect with managerial staff from other companies that can give you wisdom. In this
ever-changing world, it is crucial that you stay current and informed on any technology, products and
practices that relate to your company.
2. Delegate effectively.
No matter how skilled you are, you will not be able to manage everything on your own. However,
delegating can create more work for you if you do not do it well. Make a list of things that you know
you mustdo yourself and things that could successfully be accomplished by another. Your time should be
spent in the areas in which you excel, but be careful not to over-delegate. If you have given too many
tasks away, you will spend all of your time monitoring their progress, leaving you unable to accomplish
your own tasks.
3. Hire the right employees and manage them with care.
Interview and screen every candidate, performing background checks and credit checks, especially if
they will be handling money. Be purposeful about job descriptions so that the eventual employee will
know of your expectations and be clear about what is required of them. Set clear expectations in
employee manuals and be prepared to consistently enforce those expectations. Consequences for
unethical or inappropriate behavior should be labeled in employee manuals.
4. Motivate and train your employees.
As business practices and technology change, it is important educate your employees. Motivate them
with bonuses and rewards for specific achievements. Building employee morale will benefit you and the
business. Share the company’s success with the employees to give them a sense of ownership and
belonging.
5. Meet the needs of your customers.
Your employees should be well-trained in customer service, but you should lead as their best example.
Make it a priority to truly listen to the needs of your customers. Ask appropriate, open-ended questions
about the customer’s needs and desires.
6. Market your company effectively.
Although the business owner may have a paid marketing staff, you must still be willing to use your own
skills and those found in your own department to market your company. You may be required to
coordinate and create marketing activities, including print media, target market research, advertising and
customer communication.

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CHAPTER NINE: COMMUNICATION TECHNOLOGY IN ENTERPRISE

MANAGEMENT
E-Commerce
 Communication: is the art of sending and receiving messages orinformation from one person to another
via a channel
 Information: this is a product of data which has been given a structure and put into a context. In order
for people to design and make what is needed to solve a problem, they first need information.
 Technology: this is the generation of knowledge and process to develop systems that solve problems
and extend human capabilities. Other words, people create technology to solve problems and to make it
possible to do new things. E.g. people needed a way to keep cold during hot weather so, they invested
the refrigerators
 Communication Technology: is the knowledge, tools, machines and skills that to into communicating.
In other words communication technology is all the things people make and do to send and receive
messages. Telephones, radios, television and computers are all examples of technologies that help us
communicate with one another. In addition to communicating with other people, communication
technology can be used to communicate with machines and to help machines communicate with each
other. Information is the knowledge and skill needed in order to take a particular action.
 ICT (Information and Communication Technology): refers to the developed knowledge, skills and
ideas that pertain to human communication process and the information they handle. It is the new
science of collecting, storing, processing and transmitting of information.
Benefits of ICT to a Business Enterprise
 We make use of information to such a great extent in our daily lives that we probably do not realize
how much we are relying on it. Although information is itself invisible and intangible, the information
may have to use repeatedly will have been recorded in a paper or prepare for display on a computer
screen; though we can also find whether forecast on radio,convenient at times.
 Turning to the world of business, we can see that obtaining and using information effectively is vital.
Business makes decisions, at all levels, more or less continuously; and the quality of those decisions
depends almost entirely on the quality of the information on which they are based. Businesses complete
with one another and thrive or wither according to how sound their decisions have been.
 Business thus needs accessible information that is accurate, up-to- date and sufficient.
Benefits of ICT to Enterprise
a) Improved accuracy, internally and externally
b)Services to customers that are more comprehensive than before
c) Faster processing, leading to prompter responses to customers
d)Information for management, not previously available, or available tools are to be useful; and tighter

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financial control.
e) New customer services previously not possible
f) New sources of information to allow improved product design and marketing
g) New customer services previously not possible
h)New sources of information to allow improved product design andmarketing
i) Reduced costs arising from the greater productivity of staff who supported and assisted by appropriate
computer services
j) A more attractive, cleaner working environment in some cases, helping recruitment and retention of staff.
Benefits of E-Business
1. Consumers have a much wider choice available on the cyber market
2. Consumers can compare products, features, prices and even look upreviews before they select what they
want
3. Consumers also have the convenience of having their orders deliveredright to the door step.
4. Consumers are driven to e-shopping in holders as even branded goodscost less on the net.
5. It minimizes inventory costs to the organization. They do this by adopting just in time- system enhancing
the firm’s ability to forecastdemand more accurately.
6. It improves customer services
7. It reduces distribution costs
8. It helps business globalize. This is done through the interest bymaking information about certain products
available on the net.
9. It helps market products move quickly.

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CHAPTER TEN: BUSINESS PLAN

Planning for the Business Venture
 Planning is a predetermine cause of action. It is a statement outlining an organizational mission and
future direction, short and long term performance, targets and strategies
 Planning as a formal document contain a mission statement description of the firm’s goods and services,
a market analysis, financial projections and description of management strategies together with policies
for attainthe goals.
 Planning is a process of determining the goals and objectives of the enterprises for a future period of
time developing the strategies guidingthe firms operational and utilizing the available resources towards
achieving the set goals and objectives.
 Planning involves;
 Predicting into the future by defining the enterprise mission statement
 Determining the organizational goals and objectives
 Formulating strategies towards achieving and objectives.
 Assigning of responsibilities and functions
 Allocating resources
 Monitoring and evaluation
 Taking corrective action or re-designing the original.
Need for Planning
 Planning is the cornerstone and backbone of management.
 It covers all the functional levels and activities of the entrepreneurs/enterprise.
 It involves predicting and projecting the future and making adequate arrangements on how to reach
there.
 Planning helps entrepreneurs in the following ways.
 To develop the most effective way of achieving maximum growth.
 To properly informed about the competitors and the able to predict their next cause of action
 To meet up with the consumers needs and income
 To meet up with the frequent changes in the market
 To be acquitted with the market forces of fluctuations.
 To have adequate knowledge of the financial requirements of the business.
The Planning Function
 The planning function covers all activities of the business i.e. finance, sales, marketing, personnel
management, research and development.
 Planning functions involve formulation of the enterprise goals, objectives, strategies, policies standards,
budgets, procedures and programmes to be embarked upon towards fulfilling the business mission
statement.
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The Components of Planning Function

a) Objective: is measurable, verifiable, specific and attainable. The objective gives focus and direction to a
business mission statement.
b) Strategies: are a scheme & methods which an entrepreneur hopes to deploy in order to move the
enterprises from its present position to arrive at its targeted goals
c) Policies: are overall guides to action which must be followed consistently for the
achievement of organization goals.
d) They act as rules & regulations which an entrepreneur imposes on the enterprise in order to
achieve the major objectives.
e) Standards: are a planning function that permit an entrepreneur to use values as forms (acceptable
standards) when certain things have been adopted as norms in the entrepreneur, they acts as control
measures for evaluation of performance.
f) Budgets: are quantitative expressions of future cause of action. They usually show cash flow of an
organization and act as a guide especially forthe entrepreneurial spending i.e.
 Sales budgets  Expenses
 Purchases  Cash
g) Procedures: help and entrepreneur to chart the sequence or related tasks to be performed for the
accomplishment of the enterprises objectives. It enables the entrepreneurship determine how a
particulartask will performed and when it should be done.
h) Methods: reveal the manner of performing specific tasks. It mainly prescribes how one step of a
procedure should be carried out.
i) Programme: is a set of activities undertaken to accomplish objectives e.g. a Production programme
may specify a production objective.
Business Plan
A Business Plan is a document that convincingly demonstrate that your business idea can sell enough of its
products and services so as to make products and services so as to make satisfactory profit and attractable to
potential financiers. In other words a business plan in a road map you can follow to start and manage a
successful business. It shows step by step on how to start, fund, manage, monitor, and evaluate a successful
business.
Business Plan as a Tool
1) Objective and goal creating tool 7) Monitoring and evaluating tool
2) Management tool 8) Business creation tool
3) Training tool 9) Weakness/ omissions identifying tool
4) Promotion tool 10) Measuring performance
5) Fund raising tool/capital 11) For motivation
6) Staffing tool

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Why Prepare a Business Plan
1. To avoid silly mistakes
2. It defines and focus business objectives and goals
3. As a tool for fundraising, marketing, monitoring, evaluation, staffing
4. To be realistic on our intentions
5. To clearly communicate your vision/ ideas to other within and outside.
Who should writes a Business Plan?
1. Should be written by entrepreneur since he/ she is the owner of the business idea and is the
custodian of the vision
2. Can be written by consultants and employees.
What is a “good” Plan?
1. A good plan should be dynamic document which should be available for reference for decision making
evaluation and future plans
2. It should clearly communicate visions and ideas
3. Should show the evidence of understanding of target customers
4. Appealing to the potential financier.
Benefits
1. It forces would be entrepreneur to establish written goals and objectives for their proposed
businesses.
2. It enables potential entrepreneur to assess the viability of theirbusiness opportunity on paper
3. It assist in identifying the potential customers, marketing opportunities, pricing strategy, promotional
activities, distribution strategy and a competitive conditions needed for business success.
4. It identifies the number of employees needed, the skills they should possess, the task they will
perform and the methods of remuneration tobe adopted.
5. It establishes the financial needs of a business and suggests thepossible sources of financing
6. It helps to identify critical factors for successful entry and growth of abusiness in a given market place.
Components of a Business Plan
Business plans include details under the following main sections;
1. Executive summary
2. Business description
3. Marketing plan
4. Competitor analysis
5. Management plan
6. Business operation (production/ service, delivery plan)
7. Financial plan
8. Appendices

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