Chapter 1: Discovering entrepreneurship &
small business management
Introduction:
• This chapter provides essential information regarding the concepts of ‘entrepreneurship’,
‘entrepreneur’, intrapreneurship’ and ‘intrapreneur’.
• It also provides explanation of what it takes to be a business owner.
• The chapter will further engage with small business management for a wider perspective to
entrepreneurship as a broader and elusive concept.
• Subsequent chapters will provide more details about how to generate and screen business
ideas, how to assess feasibility and viability studies and other related business functions
associated with how to start and manage a business.
• The universal growth of interest in entrepreneurship is inspired by its potential for economic
growth and also for addressing unemployment.
• Entrepreneurs are people with a potential to identify opportunities in either a new or an
existing business and are capable of discovering market needs.
1.1 Entrepreneurs and entrepreneurship
1.1.1 Entrepreneurs
The entrepreneur is ‘a person who focuses on an opportunity in either a new or
existing business, to create value, while assuming both the risk and a reward in a
form of profit’ (Petty, Palich, Hoy & Longenecker, 2012). This suggests that:
An entrepreneur is someone who identifies a business idea, explores the feasibility
and viability of the idea, and then implements the idea by establishing a business
and managing it successfully (Strydom & Nieuwenhuizen, 2007).
1.1.2 Entrepreneurship
This concept is elusive in the sense that it can be vaguely described in a way that
draw from different views about what it involves. For the purposes of this course,
entrepreneurship is defined as ‘the process by which entrepreneurs pursue
opportunities without regard to the resources that they control’ (Strydom &
Nieuwenhuizen, 2007). This points to the ability of the entrepreneur to combine all
other production means (natural resources, capital and labour) for the successful
setting up of the business.
continued
1.1.3 Entrepreneurship and small business environment in South Africa
The development of the small businesses in the country is in terms of the National
Small Business Act (No. 102 of 1996). The department of trade and Industries
provide substantive support.
While the small business environment is considered to be conducive for growth,
challenges such as rigid government regulations and difficulty with which loans can
be secured from commercial banks are prevalent.
1.1.4 Small business management
In the S.A. context, a small business refers to a business that is independently
owned, managed and controlled which usually employs less than 50 people, with
its turnover not exceeding R5 million per annum (Co, Groenewald, Mitchell,
Nayager, Van Zyl & Visser, 2006). This business often operates locally. Its finances
are provided by few individuals and may be started by one person, and has a
potential of becoming a one-person business (sole trader).
1.2 Features of successful entrepreneurs
1.2.1 Skills, expertise and aptitudes
Skills entail manual work, craft or trade acquired though specialized training that
makes a person competent, e.g. auto-electrician
Expertise entail special skills and/or knowledge in a particular field of
specialization that could be acquired through work experience and knowledge
gained through training. A qualified auto-electrician may work for years in an
organization. Based on the qualification in combination with hands-on experience,
they develop expertise in such an environment after all these years.
Aptitudes entail innate talents that occasionally help people to succeed in their
individual persistent efforts, e.g. people with innate numerical insights become
good mathematicians.
A good combination of skills, expertise and aptitude will help entrepreneurs in
their business ventures.
1.2.2 Personal characteristics
Personal attributes and characteristics are necessary to supplement skills, expertise
and aptitudes. These characteristics are:
1.2.2.1 Ability to take risks
Taking risks is important when starting a business and is inspired by a significant
level of belief that makes entrepreneurs want to take this risk.
1.2.2.2 Need for achievement (Achievement motivation)
Entrepreneurs should be motivated by the desire to achieve, which allows them to
see opportunities and take action on them
1.2.2.3 Commitment to the business
Entrepreneurs should commit their skills, expertise and resources to establishing
their businesses. Commitment in ways such as working long hours in their
businesses, using their own money for the benefit of the business; and even
putting up personal assets, such as a house, as collateral for a loan.
Continued
1.2.2.4 Perseverance
Due to their skills and expertise, entrepreneurs should have confidence in what
they do, even when they encounter problems. Failure is no reason to quit.
1.2.2.5 Good personal relationships
Since entrepreneurs work closely with stakeholders such as banks, employees,
suppliers and consultants, it is important for them to have good relationships with
others while creating a favourable working environment to motivate employees.
1.2.2.6 Involvement in the business
Entrepreneurs’ involvement in their businesses increases the prospects for success
in their businesses. Knowing what is happening in their businesses at all times
enable them to prevent challenges before they occur or solve problems before
they blow out of proportion.
continued
1.2.3 Knowledge of functional areas
Entrepreneurs should be able to understand and execute the following functions:
• Operations: producing goods
• Marketing: transferring goods and services to customers to satisfy their needs
• Human resources: staff recruitment, training, compensation and retention
• Pubic relations: dealing with the business as a whole and promoting its image
• Procurement: purchasing and supply of all the production means the firm needs
• Finance: managing the financial affairs of the business, including efficient use of
funds and investment decisions
• General management: overarching activities that are important for the entire
enterprise including planning, organizing, leading and control
• Administration: obtaining data, keeping records, and analyzing them in order to
track results