Entrepreneurs Business Knowledge
Several studies show that entrepreneurial ventures are one of the primary contributors of new businesses (Storey 1994). A growing number of individuals in the UK are starting or are considering setting up their own business. They are commonly known as business owners. The term entrepreneur was of French source which changed into meanings such as people who take hazards, and founders of businesses (Hennessy 1980).
They have progressed from simple vendors to more advanced corporate men. Enterprisers can be defined as people who organise and take care of a business undertaking, assuming the chance for the sake of revenue (yourdictionary. com 2008), however there is a lot more to entrepreneurship than a simple explanation.
- Making tactical decisions predicated on limited data - good business people makes decisions predicated on 80% of the info they need to hands, as they recognize that waiting for more information could imply a overlooked opportunity.
- Learning from errors - this characteristic is often observed in serial entrepreneurs who have experienced a number of business failures, that they often find out more from that oversight than the success.
- Understanding their own weaknesses - the best business people understand their specialization, talents, and weaknesses. Despite the fact that they have an over-all knowledge of other disciplines they realise they lack knowledge in the areas for example, complex. In cases like this the successful entrepreneur would retain experts who are able to enhance their skills.
- Spot habits and key data - Kortschak (2008) identifies that the normal environment in which an entrepreneur enters is dynamic where in fact the structure of the industry, the type of the customer base, or they overall way to do business hasn't yet been motivated. Successful business owners who run their companies are generally comfortable in building structure where none of them is in place; in addition to identifying patterns they are able to divide relevant information from irrelevant data.
- Partnering efficiently with others - success in business is principally about partnership. It is important for an entrepreneur to connect well with others to utilize fellow associates in agreeing business decisions and also to communicate well using their team in accomplishing business targets. Poor communication and being struggling to use others results in an unsuccessful business.
It has been said often that there surely is a business owner behind every successful business. This is due to lots of reasons however the the one which many have a tendency to forget about is personalities. One of the known reasons for most successes is that the entrepreneur with the right personality and attitude was right for that particular business, for example, Bill Gates was seen as The Visionary for his ground breaking ideas, and Anita Roddick, founder of Body Shop was viewed as The Improver as she wanted to enhance the environment using natural ingredients in her products and ridding harsh chemicals and pet animal testing of beauty products.
- The Improver - with this personality type the entrepreneur is more focused on using their company as a means to enhance the world / environment. They have an ability to run their business with high integrity and ethics. Example of an entrepreneur, Anita Roddick, creator of The Body Shop.
- The Consultant - this business personality types offers a advanced of assistance and advice to customers. The motto with this personality type is the client is right and everything must be achieved to please them. This personality types build their companies to become customer focused. Exemplory case of a business owner, John Nordstrom, Creator of Nordstrom.
- The Superstar - with this personality type the business enterprise is generally centred throughout the charisma and high energy of the superstar CEO and much more than usually the business is built around the business people own personal brand. Example of an entrepreneur, Donald Trump, CEO of Trump Hotels and Modern casino Resorts.
- The Artist - with this personality type the entrepreneur will have a tendency to build their business around the unique skills and creativities they posses for other businesses requiring imagination such as web design. Example of businessman, Scott Adams, inventor of Dilbert.
- The Visionary - a business owner with the visionary personality type will likely be based on the future eye-sight and thoughts of the creator. This personality type will have a high degree of interest to comprehend the world around you and setup programs to avoid the issues. Example of businessman, Bill Gates, Founder of Microsoft Inc.
- The Analyst - this personality type is usually the basis for knowledge, engineering, or computing firms that are well known for problem fixing. The businessman possessing this personality type will run their business as an analyst and always focus on correcting problems in a reasonable way. Exemplory case of businessman, Gordon Moore, Intel Founder.
- The Fireball - the businessman with this personality type will be full of life, energy, and optimism. Their company would make customers feel the firm has a get it done attitude in a fun way. Exemplory case of businessperson, Malcolm Forbes, Publisher, Forbes Journal.
- The Hero - the business run by the hero personality type could have an unbelievable will and potential to lead their company through any obstacle and can assemble great companies. Exemplory case of entrepreneur, Jack port Welch, CEO GE.
- The Healer - the healer personality provides nurturing and tranquility to their business and an ability to endure with an internal calm. Exemplory case of businessman, Ben Cohen, Co-Founder of Ben & Jerrys Snow Cream.
An entrepreneurs business personality types and attributes are some of the key success factors that blend with the needs of the business. With this combo businesses stand out further.
The media gives a great deal of focus on those who start their businesses with nothing and making it large successful organisation. An increasing range of entrepreneurs are young people with fresh ideas and an energetic attitude. However an entrepreneurs era, educational qualifications, and prior business-related experience is much less nearly as important as his or her wish to learn and willingness to jump again from the obstacles associated with creating a new business endeavour (a trait that successful internet marketers share).
A typical entrepreneur begins their business by utilizing their savings, re-mortgaging their residence, or borrowing from friends or family at a low or interest free rate which can be beneficial when getting started. Eventually the business enterprise starts to grow or the financing sources start to dry up, in any event the business enterprise is in need of funding, which is thought as money to execute a project; it will always be used to imply money lent, or collateral provided (mos. gov 2008).
When smaller businesses have actually become successful and have a background then venture capital firms and finance institutions will consider funding the business. Project capitalists are thought as professionally supervised organisational traders (Harrison and Mason 1992). Despite the fact that banks are a popular and major source of fund for new and growing businesses, they have grown to be less prepared to provide money to new endeavors (Mason and Harrison 1995, business angel reserve).
Research from Oates (1992) suggests that major retail banks are apprehensive to funding new ventures after the losses in the first 1900s. Ahead of this banks had been prepared provide high levels of funds to finance start-up and increasing businesses, this is during the macro-economic boom of the middle 1980s (Murray 1994 business angel reserve). However the recession third, growth resulted in a considerable increase in the number of small businesses declining.
The loan company of Englands quarterly bulletin in Feb 1994 reported that throughout the tough economy (1992 - 1993) business failures experienced risen to 55, 000 per year. This in comparison to a more normal rate in the 1980s experienced more than doubled, and the vast majority of these failures were in the small business sector. Thus the result of this was a considerable increase in bad debts suffered by banking institutions. The strain of such debt and their negative influences on profits resulted in banks being hesitant to financing businesses which have just began.
Smith (1994 business angel reserve) shows that many banks would prefer to use short-term overdraft finance somewhat than long-term, fixed-rate financial packages. It is because shorter-term packages aren't as damaging when the business enterprise experiences financial problems, however banking institutions will cater for new businesses which have an extremely strong and promising proposal. It has led banking companies to avoid funding small / medium sized firms, thus going out of a gap in the market for funding smaller businesses.
The venture capital industry in the united kingdom is perfectly developed but does not adequately cater for young businesses. Murray (1994, business angel booklet) views the capital raising industry as not being truly a major source of finance for entrepreneurial projects. Among the explanations why most endeavor capitalists avoid small business investments is basically because they aren't happy with administrative tasks that come with these investments, particularly when the likely return is not substantive and will not compensate the amount of work necessary for young entrepreneurial endeavors.
According to Smith (1994 business angel e book) capital raising firms target more a great deal on management buyouts and the introduction of proven existing businesses, alternatively than new projects. Because of this stance of endeavor capitalists it offers led them from the tiny / mid-sized firms, which also offers resulted in a difference for new entrepreneurial endeavors. The stand ? below highlights a few of the main dissimilarities between business angels and venture capitalists.
Table ? - Business Angels vc Enterprise Capitalists
Source: www. 1000ventures. com
As it can be seen from desk ??? there are extensive differences between business angels and opportunity capitalists. The stand highlights an very important point discussed earlier of business angels making an investment at the start-up / early on stage of a tiny business whereas project capitalists spend at a later stage of medium to large organisations. The table also implies that business angels are more active and hands on in their assets (productive angels) whereas the project capitalists are definitely more strategic.
The gap between family/friends and banks is often referred to as an collateral distance. Financial Times interviewed Peter Jones (an exceptionally successful businessman and entrepreneur) who rates that there surely is a funding space out there for enterprisers starting out which finance is available for them but very hard to find and at this time for a business owner it is probably the solo most biggest hurdle (Moules, Financial Times, 2006).
The challenge of overcoming this equity space is amidst one of the topmost known reasons for small businesses not reaching their full probable. According to articles inside the Guardian most internet marketers overcome this obstacle by obtaining funding from Business Angels (Kollewe 2007, Guardian). Business Angels are successful enterprisers jogging successful businesses, they spend money on budding entrepreneurs in substitution for a share of the business enterprise and tend to invest in businesses that contain the potential to come back a healthy revenue.
The term angel was originated by Broadway insiders in the first 1900s to spell it out rich theatre-goers who made high risk assets in theatrical productions (Mason 2005). The word business angel was given to those individuals who perform fundamentally the same function in a company context (Benjamin and Margulis 2000). However, this type of business financing has only become significant since the 1950s and 1960s.
Business angels are actually defined as private, wealthy those who invest their own money as well as their time in small, young, unquoted companies with whom they have no family contacts (Deakins and Freel 2003).
BNET. com (2007) defines business angels as an affluent person that provides capital for an enterprise, typically an collateral investment. It is popular that angels hardly ever loan money with no strings fastened (i. e. buying return for a percentage of the business equity); they frequently support enterprisers and new businesses.
Landstrom (1993) states that most business angels have the same characteristics overall. He profiles them as heterogeneous group, as almost all business angels are or have been entrepreneurs from different backgrounds.
However research completed by Coveney and Moore (1998) suggests that you can find more to a business angel than simply wanting to earn cash. Coveney and Moore (1998) discuss that there are six different types of business angels. (See table 1 - stand of different angels in publication site 11).
- Entrepreneur Angels - these are the most active angels and experienced shareholders. They generally have been successful business people and now looking for ways to diversify their stock portfolio or increase their current business. They can be well known to make frequent and large scale investments, not only for financial gain but also for satisfaction of earning investments and interacting with the founders/managers. Also, they are extensive wealthier than other specific business angels.
- Corporate Angels - they are companies that make angel type investments. These kinds of angels have been found to invest larger cash than other business angels and have commercial resources at their removal (Coveney and Moore 1998). They have a tendency to spend mainly for financial gain.
- Income Seeking Angels - are dynamic business angels who make few and small opportunities for financial gain and to create income/job for themselves.
- Wealth Maximising Angels - are several lively business angels who have made several assets in new and growing ventures, they make their investment funds primarily for financial gain. They are usually wealthy however, not as wealthy as entrepreneur angels.
- Latent Angels - these angels are inactive angels who have made one or two investments before but not within the last three years. Latent angels are self made private those who are very rich and have great amounts of cash to get. When seeking to spend latent angels will get worried with location of the venture as they would prefer to purchase opportunities near to home, as shown in table (ba v svc)?.
- Virgin Angels - are angels who've not made an investment by yet but are looking to finance new and growing businesses to set-up an income for themselves also to increase the go back on their investment around they can. Virgin angels have fewer funds to invest than productive angels. Matching to Mason and Harrison (1995)(business angels reserve) there are usually more virgin angels than lively angels and this if 50 % of the virgin angels became active then your total informal venture capital market would develop to ten times how big is formal capital raising market.
Most of that time period angels choose to be productive angels as they like to invest in ventures and keep an eye on their investments to have success. Similarly they favor to invest in new young companies that are at their start-up stage and within close proximity to their home or workplace (Harrison et al 2003). However research shows that although angels opt to be energetic angels there are usually more virgin angels than lively. (please see graph below).
Chart ? - Business Angel market could become 10 times larger
Source: www. 1000ventures. com
Chart ??? (above) implies that in 2000 there have been more virgin angels registered than dynamic angels, this suggests that there are reasons for business angels not being active in buying entrepreneurial ventures. In case the virgin angels could find the right endeavor to invest in then your business angel market may potentially increase significantly. Could this be solved by angels den?
Mason and Harrison (1995)(business angel book) declare that most small / medium sized businesses are successful because of the right angel that has supported the business. This could also suggest that the wrong angel could indicate failure of the business enterprise which is false as business angels have experience in all areas of running an organisation but are experts in certain areas, thus this does not mean the business enterprise would be unsuccessful.
As mentioned before Business Angels fulfil an extremely important funding market, as lenders only loan capital at interest, and endeavor capitalists make investments relatively large amounts generally when businesses desire to extend (see appendix I), which leaves the angels to aid numerous new businesses every year.
The critical concern for young attractive businesses is finding sufficient funding for start-up and expansion (Southon, Financial Times, 2008). Most internet marketers first turn to banks, and opportunity capitalists for funding, these sources however can fund only a little percentage of businesses. It is now common for young businesses to find financing from business angels as they cater for this funding market.
The participation of banks buying entrepreneurs is lower than the endeavor capitalist opportunities (Fiet and Fraser 1994). Some of the benefits of bankers entering capital raising finance are mentioned by Fiet and Fraser (1994). One of these benefits shows that the involvement of lenders would donate to the elimination of the extensively reported capital distance that may are present for funding new endeavors.
However due to the low engagement of banks buying new and young entrepreneurs this has increased the participation of business angels.
There have been surprisingly few efforts to compare business angels with non-investors (banking institutions). This is largely because of the fact that their exact populace is mysterious, however as mentioned earlier lots of studies show that there has been a significant upsurge in recent years.
It is obvious from Fiet and Frasers (1994) research that business angels provide much more cash for new businesses than capital raising firms and lenders, yet their lifetime is not as well known as banking institutions. Mason and Harrison (1995)(business angel e book) state that the explanation for business angels not being well know as other ventures is because many of the investments created by business angels should go unrecorded by the federal government due to the scale of assets.
Research undertaken by Macht (2007) discusses the post-investment period of business angels and their engagement and impact after their ventures. This study concentrates exclusively on business angels where a study was administrated online and electronically to business angels to explore their engagement and impact on their investments following the investment have been made, hence post-involvement. This was a useful examination of why business angels spend and what motivates them.
However the research will not consider the business owners or any other investment when the analysis was completed. The analysis by Macht (2007) could add value to the research when assessing what factors business angels add in their investment and what models them aside from banks.
There are many banks offering lending options to entrepreneurs to either set up their business or support the growth of the business enterprise. Banks requires a in depth business plan submitted for them to evaluate whether the person is credit deserving, whether they will be able to pay their loan, and within what timescale.
According to Small Business Administration (SBA) the most typical way entrepreneurs finance their growing or widening business is through banks (SBA 2008). Banking companies provide the financing needed if the average person can demonstrate the ability to keep in business, and their capacity to settle the loan and meet the firms other responsibilities. SBA (2008) declare that a far more difficult path of obtaining funding is from business angels and opportunity capitalists as these individuals and firms assist companies to expanded in exchange for equity or partial possession. (make reference to appendix ?? - show a graph of an business life cycle, i. e. start-up, growth, maturity etc).
SBA (2008) declare that there is absolutely no such thing as one hundred percent funding and that it might be required from the businessman to invest some funds in to the business before a lender provides financing, especially banks. However research shows that business angels have financed entrepreneurial endeavors one hundred percent predicated on the business people idea / technology.
Dragons Den has become a popular show on television where a band of angels form a network to invest in budding business owners who pitch their business suggestions to the business enterprise angels. It is becoming apparent from this program that business angels have provided one hundred percent financing in entrepreneurial projects.
When applying for finance to business angels they often would like to know information on the entrepreneurs current economical situation and track record, however with bankers it is a lot more complex than this. There are many questions a bank or investment company would need answers to before they might consider any software for a company loan such as, the specific reason for the loan, the total amount you are requesting, when and exactly how long you would need the money, how the loan will be repaid, what guarantee will be used, and if the business owners provides a personal guaranty of some sort.
- Statement of goal - outlining your purpose of the loan, what it'll be needed for, and then for the length of time etc.
- Business plan - outlining what the business enterprise does and its brief and permanent goals.
- Financial statements - this will describe the financial capacity and performance of the business enterprise which is important as it'll give the lender an perception to how you will have generated revenue before and how you will continue to do so in the future.
A complete complete loan application alone would not suffice when borrowing cash from a standard bank. Further evaluation would need to be done by using an individuals financial backdrop to see if they are credit valuable, this differs to the evaluation of the business enterprise financials. Regarding to Barclays Plc bank, there are three aspects of credit in making loans decisions which are specified below.
- Character - the on your financial position and personal credit history.
- Capacity - having sufficient cash flow to pay off the loan.
- Collateral - providing guarantee to lenders as a final resort should the business not prove profitable.
Collateral is a key aspect when applying for financing to a bank or investment company. Banks would want to lower the risk of lending whenever you can in order that they would feel more confident the loan would be paid on time and completely, which is why they require security on property, i. e. house, car.
Majority of banking companies offer various loan packages for those wishing to start out up or increase their business. This is with the goal to match the loan to the needs of this business. For example, a typical loan that banking companies offer will be the small business set up loan bundle, which are just available on a guaranty basis. The small business loans are not fully guaranteed by the Government where normally if the payment default occurs; the federal government will reimburse the lender for its loss up to a certain percentage.
To be eligible for a little business loan the organization must not exceed one hundred employees in a low cost business, or generate more than $21 million in gross annual earnings (HSBC 2008). This varies for a creation firm (please make reference to appendix ? - SBA slides 15). In addition to this, assistance can't be proved to non-profit organisations, businesses involved in unlawful activities, or a monopoly situation or businesses engaged in pyramid sales. The small business loan can be utilized for most purposes such as, purchase of land and complexes, long or short term working capital needs, or purchasing an existing business.
Other loans made available from bankers are special goal loans, and basic micro-loans. The special purpose loans serve specific markets such as export market segments. The special goal loan is designed to be short lived that is merely required sometimes of market needs. The essential micro-loans are small loans for smaller businesses who struggle to obtain conventional funding but have good potential customers for repaying the loan back.
The micro-loans are under $35, 000 but typically the loan size is $13, 000, corresponding to Halifax loan provider plc. These lending options help finance the equity distance however are at the mercy of the business people potential in repaying the loan. (need to find accurate referencing for these lenders described, also change $ to £. P. s. select slide hyperlink for info).
As mentioned previously, if approaching a small business angel for finance then your business angel would have to know financial and background specifics of the businessperson and the business. For an entrepreneur, preparing a business plan is vital whether for banks, venture capitalists, or business angels. The hardest part to obtaining fund from a company angel is to actually finding business angels, as business angels are not as publicly known as banking companies nor are they known for funding as many assets as banking institutions do. Similarly it has been hard for business angels to funding investments scheduled to a lack of access to a range of assets.
Hughes (1996) found that business angels would make investments more frequently if they had usage of a better selection of opportunities; however he also stated that lots of potential ventures which meet the minimum requirements of business angels still should go unfunded. This shows that the right type of business angel cannot access the right type of venture.
Recent research shows that to be able to beat the hurdle of the angel get together the right investment, vice versus, business angels attended together to form networks (Foot Moules 2007). This enables several angels to incorporate their funds jointly to offer much larger investments for entrepreneurs needing larger financing.
Thus the business owner also advantages from having more than one business angel up to speed to supply the business using their skills and knowledge. As stated previously, Dragons Den is a group of business angels who invest in entrepreneurial projects that are brought forwards to them. There have been several situations where more than one angel has committed to the same project.
There has been further development of the traditional angel networks of meeting business people face to face. Angels Den has been one of many to launch an online networking website that specifically aspires to connect entrepreneurs with business angels (FT Moules 2007). How this works is that the users of the service would pay a little payment of around £100 to pitch a concept to the websites private investors. If the theory is liked then entrepreneur must pay a larger fee of around £400 to pitch a full business plan. From this point if the entrepreneur is interested in the pitch then a face to face meeting is organized.
The fees that are incurred for these websites should be said a small fraction of the cost of traditional marketing, relating to Financial Times 2007, Moules. Angels Den will not take equity stakes in funded businesses or a share chop from completed deals, and the service is free to business angels (angelsden. co. uk). The web site stimulates business angels to join which is free for them to do so; this is beneficial for internet marketers as it generally does not discourage business angels from getting started with hence increasing their chances of finding the right angel.
This method is steadily becoming well known to the public thus increasing the visibility of business angels. It would therefore become easier for internet marketers to find business angels rather than feel finance institutions and business capitalists are the only accessible options for finance, especially for those that contain poor credit and no security to offer banks. It could also be easier for the government to gauge the investment activity on twelve-monthly basis and realise that business angels do make more assets than currently registered that fill the equity space (Foot Mason, 2007).
There had been attempts in the past to achieve similar objectives to the web networking sites as talked about above, these were referred to as business intro services. They had tried to act as communicators between business people seeking capital and interested potential shareholders; however this service did not exist online. Relating to Hughes (1996) these organisations was not very successful in conquering the problem of filling up the equity distance, which still is available to this day.
An article by the businesszone. co. uk expresses that certain of the most common errors that individuals getting started running a business make is let's assume that they can reach their full potential by themselves. Whereas Dragons Den angels Theo Paphitis, and Peter Jones declare that the biggest miscalculation business owners make is over-estimating the value of these company rather than having enough cash to sustain the business enterprise. As Theo Paphitis quotes cash is king.
Even though business angels seem to be more beneficial as shareholders than banks Drury (2008)(nzherald. co. nz) says that the vast majority of business angel offers do not carry on well. This is because companies can often take much more time than the angel had thought and also more cash than forecasted. This could also be because the angel that has made the investment is a first time angel investor and thus lack experience. Drury (2008) also claims that some angel buyers might not exactly know these are an angel yet as anyone moderately wealthy could potentially be an angel if indeed they find a venture to invest in.
There a wide range of ways to identify beneficial, prenhall. co. uk defines beneficial as producing or promoting a favourable final result. In conditions of buying entrepreneurs and which investment would be beneficial for entrepreneurial ventures this is measured by looking at what factors are advantageous for the entrepreneur and their business.
- Finance provided
- Interest rate
- Using business angel contacts
- Involvement from the entrepreneur to improve things
- No engagement from the trader, therefore less interference in the business
Studies have shown that business angels provides added value beyond financial capital (Ehrlich et al 1994). Having a business angel spend money on the enterprise can help support competitive gain, which is effective for the internet marketers, as the angels bring more than capital to the business; they can bring their experience, associates, and expertise to advance the business enterprise further.
- Human capital - described as attributes linked to production such as, skills, experience, features, etc.
- Social capital - a resource that flows by way of a relationship of sites. Majority of angels are uniquely positioned to help the business people to make needed social networks
- Physical capital - they are tangible goods such as materials, machinery, property etc. this kind of capital is bound at the start-up of a new business.
- Financial capital - this tool is the administrative centre invested by business angels. This investment initiates the start-up of endeavors. Venture capital or loans are often unavailable to the start-up scheduled to both thesmall size, lack of track record, and undiscovered future of the organization (Stinchcombe 1965).
To identify if business angels are definitely more beneficial than finance institutions, measuring the amount of engagement and contribution created by angels would be one of way of doing this.
However business angels do not seem to be to be well publicised as banks or other ventures, a number of studies have illustrated the reputation of project capitalists and the have difficulties of obtaining investment from banking companies, which has led to the thinking about are business angels more beneficial than banking companies? and why they are not as well known as finance institutions and other opportunities?
Osnabrugge and Robinson (2000) declare that opportunity capitalists get all the press, but the the greater part of entrepreneurial organizations are in fact funded by business angels. We have established that lots of investments made by business angels go unrecorded every year as it is difficult to measure, however Osnabrugge and Robinson statement can claim that business angels choose to conceal their true engagement with entrepreneurial organizations, are terribly publicised, or forgotten from the great amount of mass media that surrounds other investors. Nevertheless it would be impractical to expect this without further research.
- Advantageous, beneficial, helpful, valuable, etc - get into detail of defining this.
- Why you are exploring this matter?
- Say so and so has suitable knowledge in the field, however will not go further into such a such section. (epistemology is having acceptable knowledge, saunders pg 102).
- Philosophy - interpretivism,
- The aim of this dissertation is to research
- In terms of research done, post participation pdf disccuses other research carried out and lack of theory.
- Mention the post engagement pdf only looks at the post involvement
- Split research up into formal and informal
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