1.What are some of the characteristics of successful entrepreneurs? 1.Curiosity Successful entrepreneurs have a sense of curiosity that allows them to continuously seek new opportunities. Rather than settling for what they think they know; curious entrepreneurs ask challenging questions and explore different avenues. 2.Risk tolerance Entrepreneurship is often associated with risk. While it’s true that launching a venture requires an entrepreneur to take risks, they also need to take steps to minimize it. Successful entrepreneurs are comfortable with encountering some level of risk to reap the rewards of their efforts; however, their risk tolerance is tightly related to their efforts to mitigate it. 3.Acceptance of failure In addition to managing risk and making calculated decisions, entrepreneurship requires a certain level of comfort with failure. Successful entrepreneurs prepare themselves for, and are comfortable with, failure. Rather than let fear hold them back, the possibility of success propels them forward. 4.Innovative Innovation is a characteristic some, but not all, entrepreneurs possess. Fortunately, it’s a type of strategic mindset that can be cultivated. By developing your strategic thinking skills, you can be wellequipped to spot innovative opportunities and position your venture for success. 5.Ability to network The ability to connect with people and to recognize opportunities for partnership is crucial to successful entrepreneurship. Meeting new people might facilitate access to resources or knowledge that your business needs. It allows you to learn from the success of others, promote your services or goods and meet new clients. 2. Explain the term ‘creative destruction.’ Creative destruction is the dismantling of long-standing practices in order to make way for innovation and is seen as a driving force of capitalism. It describes the deliberate removal of established processes in order to make way for improved methods of production. It also refers to the incessant product and process innovation mechanism by which new production units replace outdated ones. This refers to the process of how capitalism leads to a constantly changing structure of the economy. Old industries and firms, which are no longer profitable, close down enabling the resources (capital and labour) to move into more productive processes. Creative destruction means that the company closures and job losses are good for the long-term well-being of the economy. It can be seen from both a negative and positive perspective. 3. What explains the increase in the number of small businesses around the world? 1. E-commerce Provision of continuous service Low cost model Easier to run and set up Limitless and boundless 2. Social media Free platforms Powerful marketing tools Increase brand awareness more easily Crisis communication 3. Technology Collaboration and sharing Flexible work environments Cost reduction Better communication with supplier/customers 4. Better access to finance Financial assistance such as loans from govts Existence of angel investors and VCs More commercial banks and financial institutions Interest rate favourably lower for entrepreneurs 4. Discuss the different stages of the life cycle of a business. Stage 1: Launch When sales are at their lowest, business risk is at its highest. Due to its unproven business strategy and questionable ability to repay debt, a company cannot finance loans during this phase. As sales gradually improve, a company's ability to finance debt improves as well. Stage 2: Growth Companies' business risks reduce as sales increase, while their ability to obtain debt grows. During the growth phase, businesses begin to make a profit and generate positive cash flow, demonstrating their ability to repay debt. The value of the firms' products or services has been demonstrated in the marketplace. Companies in the expansion stage need increasing amounts of cash in order to broaden their market reach and diversify their operations. Stage 3: Maturity When a company reaches maturity, sales begin to decline. Unlike earlier stages, when the business risk cycle was inverse to the sales cycle, business risk now moves in lockstep with sales until it no longer poses a business risk. The most mature and stable organizations have the easiest access to borrowed funding due to the removal of business risk. Stage 4: Decline Sales begin to fall at an accelerated rate in the latter stage of the funding life cycle. The companies' incapacity to adapt to changing business conditions and extend their life cycles is reflected in their revenue drop. 5.Discuss some of the reasons why businesses fail. 1.Poor cash flow management Even a profitable company can experience a cash flow crisis, which is frequently caused by inefficient debtor management, high stock levels, bad debt, and late invoicing. Inadequate funding – or choosing the wrong form of capital for your company – can also lead to its demise. Your company may not be able to grow if it doesn't have enough expansion capital, whether it comes from personal savings, private equity, or debt financing. 2.Bad planning and lack of strategy Long-term planning is essential for every company's success. A business owner must perform market research to determine who their customers are and what they require while planning the expansion of their company. To prevent being left behind, they must also recognize their competition and be proactive about trends. Consider the numerous brick-and-mortar retailers that failed to adapt quickly enough to shifting customer buying preferences and are now struggling or closing. 3.Weak leadership A competent leader recognizes the talents they lack or the jobs they don't have time for and fills those gaps by hiring, outsourcing, or seeking professional guidance. They'll also interact with, direct, reward, and provide opportunities for personal growth to their employees, resulting in a happy, productive, and loyal workforce. Poor leadership, on the other hand, results in demotivated and unproductive teams, which can easily bring a company to its knees. 4.Overdependence of few big customers Overdependence on a few large customers can easily lead to business failure if one of them abruptly withdraws - both cash flow and profit will be impacted. The temptation may then be to offer the customer a discount; however, this will simply result in lower profits in the long run. Increase your customer base, diversify your product line, and encourage your consumers to sign contracts with a suitable notice period to reduce your risk. 5.Losing control over finances Any business owner must be informed of their financial situation and cash flow at all times. While proper income and cost forecasting may result in a few shocks, it will ultimately help sustain your cash flow. Business owners should also be aware of and control their costs, as well as dangers and opportunities, in order to avoid unpleasant surprises. Hiring an experienced accountant or investing in a reliable cloud-based accounting solution can help alleviate the financial management strain, allowing you to focus on day-to-day operations. 6. Are endogenous or exogenous factors more important in explaining small business failure? There are both internal and external reasons why businesses fail and these are mainly classified as either financial or non-financial. Internal reasons-financial Liquidity – poor financial management, and lack of forward planning, may lead to cash flow problems and bad debts occur. Poor accounting – poor procedures can lead to insufficient resources since money/cash flow is not closely monitored or used wisely. In addition, failure to budget for substantial capital and/or unusual expenses. Internal reasons-non-financial Management error – in a fast-moving market, clear and skilled leadership is crucial – poor management can be fatal. Communication – lack of it means the business cannot co-ordinate production or forward planning. Poor quality – in the digital economy poor quality or service can be quickly exposed. Poor marketing – getting all aspects of the marketing mix right is crucial; incorrect pricing, advertising or poor distribution are just some of the causes. External reasons-financial Lack of finance – finance can be hard to obtain from many financial institutions, without it many otherwise healthy businesses/start-ups may fail. Exchange rate – a floating exchange rate means the value of the currency changes constantly and can have a negative impact on those businesses that export or import. Interest rates - can alter and increase borrowing expenses, as well as effect customer spending, despite being relatively stable and low. External reasons-non-financial Structural change – over a longer time period the demand for some products and services decreases; those that cannot adapt or find new markets where sales are rising, will fail. Competition - Customers' preferences change, and competitors develop new or better-value items, businesses who do not adapt will see demand decline. Government regulations — laws and regulations that limit the activities of businesses. Supplier problems – if the supplier has to close down, the receiving business may encounter problems, particularly if it operates JIT system. Therefore, both the endogenous and exogeneous factors can equally contribute towards business failures. For any business to succeed, it must necessarily be able to contain the internal and external factors that are crucial to its survival. 7. Explain why an ‘exit’ can be viewed as either a successful exit or a failure. An entrepreneur's business exit strategy is a strategic plan to sell his or her company's ownership to investors or another company. An exit strategy allows a business owner to reduce or liquidate his ownership in a company while still making a significant profit if the company is successful. An exit strategy allows the entrepreneur to limit losses if the business is not successful. The ideal exit plan is determined by the sort of business and its size. A medical office partner may gain from selling to one of the other partners, whereas a lone proprietor's optimal exit strategy may simply be to make as much money as possible before shutting down the business. If the company has several founders or significant shareholders in addition to the founders, the interests of these other parties must also be considered when choosing an exit strategy. Successful strategies arise whenever entrepreneurs have been able to exit business operations with the maximum possible gains or with the minimum losses. When the exit strategy is successful, entrepreneurs will have correctly been able to chart their progress and enhance the value of their business before moving out of business activities. There are different strategies available to achieve these objectives, depending upon the nature of the enterprise. In contrary situations where, the business has closed down or entrepreneurs have left the business activities with the least gains or maximum losses then the exit strategy can be viewed as a failed one.
