Business Essays Entrepreneurs Business Knowledge

trade Essays Entrepreneurs ancestry acquaintanceEntrepreneurs Business KnowledgeLiterature ReviewSeveral studies pick appear sh testify that enterpriserial groom believes be genius of the main contri scarceors of natural firms (Storey 1994). An increasing result of people in the UK argon bolt downing or argon considering starting up their own crease. These individuals atomic number 18 leafy veget up to(p)ly know as entrepreneurs. The word entrepreneur was of cut origin which evolved into averageings much(prenominal) as people who take essays, and founders of transacti anes (Hennessy 1980).They chip in evolved from simple(a) merchants to to a greater extent sophisticated corporate men. Entrepreneurs sess in any case be delimitate as people who organise and manage a traffic undertaking, assumptive the risk for the sake of profit (yourdictionary.com 2008), however at that place is much more(prenominal)(prenominal) to entrepreneurship than a simple defin ition.There argon varied symbols of entrepreneurs who possess true traits that sour them in(predicate) in stemma. Research carried out by Kortschak (2008) discusses cardinal traits that successful entrepreneurs subaltern and modal(a)-sized companies sh beMaking strategical decisions ground on limited data good entrepreneurs scarper to profess decisions found on 80% of the data they find to hand, as they recognise that waiting to learn more could mean a missed opportunity. instruction from shifts this trait is much seen in serial entrepreneurs who discombobulate experienced 1 or more commerce failures, which they often learn more from that mistake than the success. Understanding their own weaknesses the best entrepreneurs understand their atomic number 18a of expertise, strengths, and weaknesses. Even though they meet a general understanding of otherwise disciplines they realise they insufficiency knowledge in other aras for example, technical. In this ca se the successful entrepreneur would hire experts who bum complement their skills.Spot patterns and key data Kortschak (2008) identifies that the rough-cut surround in which an entrepreneur enters is dynamic where the bodily structure of the industry, the nature of the guest base, or they overall way of doing art has non yet been determined. favored entrepreneurs who run their companies are generally confident in building structure where none is in place in augmentition to identifying patterns they are subject to separate relevant in earnation from irrelevant data. Partnering success profusey with others success in employment is mainly about partnership. It is important for an entrepreneur to communicate salutary with others to exert with fel dispirited partners in agreeing product line organisation decisions and to communicate sanitary(p) with their team in accomplishing stemma objectives. Poor communication and being unable to act as with others results in an unsuccessful line of work. It has been said m each cartridge clips that in that location is an entrepreneur behind e very(prenominal) successful channel. This tail be due to a number of reasons except the one that galore(postnominal) lam to overlook is individualisedities. ace of the reasons for roughly successes is that the entrepreneur with the effective temper and attitude was right for that grumpy byplay, for example, Bill Gates was seen as The Visionary for his innovative ideas, and Anita Roddick, founder of ashes Shop was seen as The Improver as she desireed to improve the environment using natural ingredients in her products and ridding harsh chemicals and animal testing of cosmetics.Zahorsky (2008) identifies that there are nine personality types of entrepreneursThe Improver with this personality type the entrepreneur is more foc employ on using their company as a means to improve the world / environment. They have an susceptibility to run their wrinkle with high integrity and ethics. Example of an entrepreneur, Anita Roddick, founder of The Body Shop.The Advisor this crinkle personality types provides a high level of fiscal aid and advice to customers. The motto with this personality type is the customer is right and everything must be done to enrapture them. This personality types build their companies to construct customer focused. Example of an entrepreneur, John Nordstrom, offend of Nordstrom. The Superstar with this personality type the cable line is regulationly centred round the personal appeal and high energy of the superstar CEO and more than often the business is built around the entrepreneurs own personal brand. Example of an entrepreneur, Donald saddle horn, CEO of Trump Hotels and Casino Resorts.The Artist with this personality type the entrepreneur entrust tend to build their business around the unique talents and creativities they posses for other businesses demanding creativity much(prenominal) as web design. Example of entrepreneur, Scott Adams, creator of Dilbert.The Visionary an entrepreneur with the prophesier personality type will close to liable(predicate) be based on the future vision and thoughts of the founder. This personality type will have a high degree of curiosity to understand the world around you and set up plans to avoid the paradoxs. Example of entrepreneur, Bill Gates, Founder of Microsoft Inc. The analyst this personality type is often the basis for science, engineering, or computing firms that are well known for problem solving. The entrepreneur possessing this personality type will run their business as an analyst and always focus on fixing problems in a logical way. Example of entrepreneur, Gordon Moore, Intel Founder.The Fireball the entrepreneur with this personality type will be full of life, energy, and optimism. Their company would birth customers get the firm has a get it done attitude in a fun way. Example of entrepreneur, Malcolm Forbe s, Publisher, Forbes Magazine.The Hero the business run by the hero personality type would have an incredible will and exponent to lead their company through any challenge and can patch great companies. Example of entrepreneur, Jack Welch, CEO GE.The Healer the healer personality provides nurturing and harmony to their business and an ability to survive with an inner calm. Example of entrepreneur, Ben Cohen, Co-Founder of Ben Jerrys Ice Cream. An entrepreneurs business personality types and traits are whatsoever of the key success particularors that blend with the needs of the business. With this combination businesses excel further.The media gives a great count of attention to those who start their businesses with nonhing and turning it into bad successful organisation. An increasing number of entrepreneurs are young individuals with fresh ideas and an strenuous attitude. However an entrepreneurs age, educational background, and previous business-related experience is non as n earliest as important as his or her propensity to learn and willingness to bounce back from the obstacles associated with creating a unsanded business feat (a trait that successful entrepreneurs share).A typical entrepreneur starts their business by using their savings, re-mortgaging their house, or borrowing from friends or family at a low or interest free rate which can be dependable when starting out. Eventually the business starts to grow or the finance sources start to dry up, either way the business is in need of financial support, which is specify as detonator to implement a project it is usually used to mean money lent, or candour provided (mos.gov 2008).When little(a) businesses have rattling become successful and have a track record and then menace keen firms and banks will consider financial backing the business. Venture with child(p)ists are defined as professionally managed organisational presentors (Harrison and mason 1992). Even though banks are a popular and major source of finance for new and maturation businesses, they have become less willing to lend money to new judges (Mason and Harrison 1995, business paragon book).Research from Oates (1992) suggests that major retail banks are discerning to financing new ventures after the losses in the early 1900s. antecedent to this banks had been willing provide high levels of specie to finance start-up and stretch outing businesses, this was during the macro-economic boom of the middle 1980s (Murray 1994 business ideal book). However the recession interest this ontogenesis led to a considerable append in the number of small businesses failing.The bank of Englands quarterly bulletin in February 1994 reported that throughout the recession (1992 1993) business failures had risen to 55,000 a year. This compared to a more normal rate in the 1980s had more than doubled, and the vast majority of these failures were in the small business sector. Thus the effect of this was a substantial add-on in bad debts suffered by banks. The strain of these bad debts and their negative impacts on profits led to banks being reluctant to finance businesses that have upright started out.Smith (1994 business nonsuch book) suggests that many banks prefer to use short overdraft finance rather than ache-term, fixed-rate financial packages. This is because shorter-term packages are non as negative when the business experiences financial difficulties, however banks will give for new businesses that have an highly strong and promising proposal. This has led banks to avoid financing small / medium sized firms, thus leaving a gap in the mart for financing smaller businesses.The venture capital industry in the UK is very well developed but does not adequately cater for young businesses. Murray (1994, business angel book) views the venture capital industry as not being a major source of finance for entrepreneurial ventures. One of the reasons wherefore around ventu re capitalists avoid small business locatements is because they are not pleased with administrative tasks that come with these come outments, e supernumeraryly when the worryly croak is not substantial and does not compensate the issue forth of work required for young entrepreneurial ventures.According to Smith (1994 business angel book) venture capital firms focus more a great deal on management buyouts and the development of established existing businesses, rather than new ventures. Due to this stance of venture capitalists it has led them away from the small / medium sized firms, which also has resulted in a gap for new entrepreneurial ventures. The dodge ? below highlights some of the main differences betwixt business angels and venture capitalists.Table ? Business apotheosiss vc Venture CapitalistsSource www.1000ventures.comAs it can be seen from hedge there are many differences between business angels and venture capitalists. The table highlights an imperative point discussed earlier of business angels spend at the start-up / early stage of a small business whereas venture capitalists empower at a later stage of medium to large organisations. The table also bespeaks that business angels are more active and hands on in their aimments (active angels) whereas the venture capitalists are more strategic.The gap between family/friends and banks is often referred to as an justness gap. Financial Times interviewed jibe Jones (an extremely successful entrepreneur and investor) who quotes that there is a patronage gap out there for entrepreneurs starting out and that finance is available for them but very hard to find and at this stage for an entrepreneur it is probably the maven most biggest hurdle (Moules, Financial Times, 2006).The challenge of overcoming this equity gap is amongst one of the topmost reasons for small businesses not achieving their full effectiveness. According to an article in The Guardian most entrepreneurs overcome this o bstacle by obtaining finance from Business Angels (Kollewe 2007, Guardian). Business Angels are successful entrepreneurs running successful businesses, they invest in budding entrepreneurs in return for a plowshare of the business and tend to invest in businesses that have the potential to return a healthy profit.The term angel was originated by Broadway insiders in the early 1900s to describe flush theatre-goers who made high risk investments in histrionics productions (Mason 2005). The term business angel was given to those individuals who perform essentially the equivalent function in a business context (Benjamin and Margulis 2000). However, this type of business financing has only become significant since the 1950s and 1960s.Business angels are now defined as orphic, wealthy individuals who invest their own money as well as their age in small, young, unquoted companies with whom they have no family connections (Deakins and Freel 2003).BNET.com (2007) defines business angel s as an affluent individual who provides capital for a business, typically an equity investment. It is well known that angels rarely loan money without any strings attached (i.e. investment funds in return for a parting of the business equity) they most often conduct entrepreneurs and new businesses.Landstrom (1993) nations that most business angels have the same characteristics overall. He profiles them as heterogeneous group of people, as almost all business angels are or have been entrepreneurs from different backgrounds.However look for carried out by Coveney and Moore (1998) suggests that there is more to a business angel than serious wanting to make money. Coveney and Moore (1998) discuss that there are six different types of business angels. (See table 1 table of different angels in book page 11).Entrepreneur Angels these are the most active angels and experienced investors. They tend to have been successful entrepreneurs and now feel for ways to diversify their portfo lio or expand their current business. They are well known for making frequent and large scale investments, not just for financial gain but for satisfaction of making investments and interacting with the founders/managers. They are also considerable wealthier than other individual business angels.Corporate Angels these are companies that make angel type investments. These types of angels have been found to invest bigger funds than other business angels and have corporate resources at their disposal (Coveney and Moore 1998). They tend to invest mainly for financial gain. Income Seeking Angels are active business angels who make few and small investments for financial gain and to generate income/ dividing line for themselves. Wealth Maximising Angels are a group of active business angels who have made several(prenominal) investments in new and growing ventures, they make their investments primarily for financial gain. They are generally wealthy but not as wealthy as entrepreneur ang els. Latent Angels these angels are passive angels who have made one or two investments in the ultimo but not in the last three years. Latent angels are self made private individuals who are very wealthy and have vast amounts of funds to invest. When looking to invest latent angels will be concerned with location of the venture as they would prefer to invest in opportunities close to home, as shown in table (ba v svc)?. gross(a) Angels are angels who have not made an investment as of yet but are looking to finance new and growing businesses to create an income for themselves and to subjoin the return on their investment as much as they can. Virgin angels have fewer funds to invest than active angels. According to Mason and Harrison (1995)(business angels book) there are more sodding(a) angels than active angels and that if half of the virgin angels became active then the total informal venture capital market would grow to ten times the size of formal venture capital market.Mo st of the time angels prefer to be active angels as they like to invest in ventures and monitor their investments to ensure success. Similarly they prefer to invest in new young companies that are at their start-up stage and deep down close proximity to their home or work place (Harrison et al 2003). However research shows that although angels prefer to be active angels there are more virgin angels than active. (please see chart below). map ? Business Angel market could become 10 times largerSource www.1000ventures.comChart (above) shows that in 2000 there were more virgin angels recorded than active angels, this suggests that there are reasons for business angels not being active in investing in entrepreneurial ventures. If the virgin angels could find the right venture to invest in then the business angel market could potentially increase significantly. Could this be solved by angels den?Mason and Harrison (1995)(business angel book) tell obscure that most small / medium size d businesses are successful because of the right angel that has backed the business. This could also suggest that the wrong angel could mean failure of the business which is not the case 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 would be unsuccessful.As mentioned earlier Business Angels fulfil an increasingly important financial backing niche, as banks only loan capital at interest, and venture capitalists invest relatively large sums generally when businesses wish to expand (see appendix I), which leaves the angels to support numerous new businesses each year.The critical issue for young vibrant businesses is finding sufficient funding for start-up and growth (Southon, Financial Times, 2008). Most entrepreneurs outgrowth look to banks, and venture capitalists for funding, these sources however can fund only a small pctage of businesses. It is now common for young businesses to find funding from business angels as they cater for this funding niche.The mesh of banks investing in entrepreneurs is lower than the venture capitalist investments (Fiet and Fraser 1994). Some of the benefits of banks entering venture capital finance are discussed by Fiet and Fraser (1994). One of these benefits suggests that the participation of banks would contribute to the exclusion of the widely reported capital gap that may exist for funding new ventures.However due to the low involvement of banks investing in new and young entrepreneurs this has increased the involvement of business angels.There have been surprisingly few attempts to compare business angels with non-investors (banks). This is largely due to the fact that their exact population is unknown, however as mentioned earlier a number of studies show that there has been a significant increase in late(a) years.It is evident from Fiet and Frasers (1994) research that business angels provide much more funds for new bus inesses than venture capital firms and banks, yet their existence is not as well known as banks. Mason and Harrison (1995)(business angel book) state that the reason for business angels not being well know as other investments is because many of the investments made by business angels goes unrecorded by the government due to the scale of investments.Research undertaken by Macht (2007) discusses the post-investment period of business angels and their involvement and impact upon their investments. This study focuses solely on business angels where a survey was administrated online and electronically to business angels to explore their involvement and impact on their investments after the investment had been made, then post-involvement. This was a useful analysis of why business angels invest and what motivates them.However the research does not consider the entrepreneurs or any other investment when the analysis was carried out. The study by Macht (2007) could add value to this resea rch when assessing what factors business angels contribute in their investment and what sets them apart from banks.There are many banks tossing loans to entrepreneurs to either start up their business or support the expansion of the business. Banks requires a thorough business plan submitted for them to evaluate whether the individual is extension worthy, whether they will be able to pay their loan, and within what timescale.According to Small Business Administration (SBA) the most common way entrepreneurs finance their growing or expanding business is through banks (SBA 2008). Banks provide the finance needed if the individual can demonstrate the ability to keep in business, and their ability to repay the loan and meet the firms other obligations. SBA (2008) state that a more difficult route of obtaining finance is from business angels and venture capitalists as these individuals and firms assist companies to grown in exchange for equity or partial ownership. (refer to appendix show a graph of a business life cycle, i.e. start-up, expansion, maturity etc).SBA (2008) claim that there is no much(prenominal) thing as one hundred percent financing and that it would be required from the entrepreneur to invest some funds into the business onwards a lender will provide financing, especially banks. However research has shown that business angels have financed entrepreneurial ventures one hundred percent based on the entrepreneurs idea / invention.Dragons Den has become a popular show on television where a group of angels form a vane to invest in budding entrepreneurs who pitch their business ideas to the business angels. It has become apparent from this program that business angels have provided one hundred percent finance in entrepreneurial ventures.When applying for finance to business angels they generally would want to know details of the entrepreneurs current financial website and background, however with banks it is much more complex than this. There are several questions a bank would need answers to before they would consider any practical diligence for a business loan such as, the specific purpose of the loan, the amount you are requesting, when and how capacious you would need the funds, how the loan will be repaid, what validatory will be used, and whether the business owners will provide a personal warrantee of some sort.A typical loan request involves the following componentsStatement of purpose outlining your purpose of the loan, what it will be needed for, and for how long etc.Business plan outlining what the business does and its short and long term goals.Financial statements this will outline the financial capacity and operation of the business which is important as it will give the lender an perceptiveness to how you have generated tax income in the past and how you will continue to do so in the future. A thorough complete loan application alone would not suffice when borrowing funds from a bank. gain military rank would need to be done on an individuals financial background to see if they are credit worthy, this is different to the evaluation of the business financials. According to Barclays Plc bank, there are three aspects of credit in making loans decisions which are outlined below.Character a check on your financial status and personal credit history.Capacity having sufficient hard currency flow to pay off the loan.Collateral providing assurance to the lenders as a last resort should the business not prove profitable.Collateral is a key aspect when applying for finance to a bank. Banks would want to lower the risk of lending as much as possible so that they would feel more confident the loan would be paid on time and in full, which is why they require security on assets, i.e. house, car.Majority of banks offer various loan packages for those wishing to start up or expand their business. This is with the intention to suit the loan to the needs of the particular business. For exam ple, a common loan that banks offer are the small business start up loan package, which are only available on a guaranty basis. The small business loans are not fully guaranteed by the organisation where normally if a payment default occurs the Government will recuperate the lender for its loss up to a certain percentage.To be bailable for a small business loan the firm must not exceed one hundred employees in a wholesale business, or generate more than $21 million in annual revenue (HSBC 2008). This varies for a manufacturing firm (please refer to appendix ? SBA slides 15). In addition to this, assistance cannot be proved to non-profit organisations, firms involved in illegal activities, or a monopoly situation or businesses engaged in pyramid sales. The small business loan can be used for many purposes such as, grease ones palms of land and buildings, long or short term working capital needs, or purchasing an existing business.Other loans offered by banks are special purpose loans, and underlying micro-loans. The special purpose loans serve specific markets such as export markets. The special purpose loan is designed to be short lived that is only required at times of market needs. The basic micro-loans are small loans for small businesses who struggle to obtain conventional financing but have good prospects for repaying the loan back.The micro-loans are under $35,000 but on average the loan size is $13,000, check to Halifax bank plc. These loans overhaul finance the equity gap however are subject to the entrepreneurs potential in repaying the loan. (need to find accurate referencing for these banks mentioned, also change $ to . P.s. click on slide link for info).As mentioned earlier, if approaching a business angel for finance then the business angel would need to know financial and background specifics of the entrepreneur and the venture. For an entrepreneur, preparing a business plan is vital whether it be for banks, venture capitalists, or busine ss angels. The hardest part to obtaining finance from a business angel is to actually finding business angels, as business angels are not as publicly known as banks nor are they known for financing as many investments as banks do. Similarly it has been hard for business angels to finance investments due to a lack of access to a come in of investments.Hughes (1996) found that business angels would invest more frequently if they had access to a better range of investments however he also stated that many potential ventures which meet the minimum criteria of business angels still goes unfunded. This shows that the right type of business angel cannot gain access to the right type of venture. recent research shows that in order to overcome the hurdle of the angel concussion the right investment, vice versus, business angels have come together to form networks (FT Moules 2007). This allows a group of angels to combine their funds together to offer larger investments for entrepreneurs ne eding larger finance.Thus the entrepreneur also benefits from having more than one business angel on board to provide the business with their expertise and knowledge. As mentioned earlier, Dragons Den is a group of business angels who invest in entrepreneurial ventures that are brought forward to them. There have been several cases where more than one angel has invested in the same venture.There has been further development of the tralatitious angel networks of meeting entrepreneurs face to face. Angels Den has been one of many to set an online networking website that specifically aims to connect entrepreneurs with business angels (FT Moules 2007). How this works is that the users of this benefit would pay a small fee of around 100 to pitch an idea to the websites private investors. If the idea is liked then entrepreneur must pay a larger fee of around 400 to pitch a full business plan. From this point if the investor is interested in the pitch then a face to face meeting is arra nged.The fees that are charged for these websites are to be said a fraction of the cost of traditional marketing, according to Financial Times 2007, Moules. Angels Den does not take equity venture in funded businesses or a percentage cut from completed deals, and the service is free to business angels (angelsden.co.uk). The website encourages business angels to join which is free for them to do so this is beneficial for entrepreneurs as it does not discourage business angels from joining hence increasing their chances of finding the right angel.This method is gradually becoming well known to the public thus increasing the exposure of business angels. It would and so become much easier for entrepreneurs to find business angels and not feel banks and venture capitalists are the only accessible alternatives for finance, especially for those that have poor credit and no security to offer banks. It would also be easier for the government to meter the investment activity on annual basi s and realise that business angels do make more investments than currently recorded that fill the equity gap (FT Mason, 2007).There had been attempts in the past to achieve similar objectives to the online networking sites as discussed above, these were referred to as business introduction services. They had tried to act as communicators between entrepreneurs seeking capital and interested potential investors however this service did not exist online. According to Hughes (1996) these organisations had not been very successful in overcoming the problem of filling the equity gap, which still exists to this day.An article by the businesszone.co.uk states that one of the most common mistakes that individuals starting out in business make is take for granted that they can reach their full potential by themselves. Whereas Dragons Den angels Theo Paphitis, and Peter Jones claim that the biggest mistake entrepreneurs make is over-estimating the value of their company and not having comme il faut cash to sustain the business. As Theo Paphitis quotes cash is king.Even though business angels seem to be more beneficial as investors than banks Drury (2008)(nzherald.co.nz) states that the vast majority of business angel deals do not proceed well. This can be 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 states that some angel investors may not know they are an angel yet as anyone moderately wealthy could potentially be an angel if they find a venture to invest in.There are many ways to define beneficial, prenhall.co.uk defines beneficial as producing or promoting a favourable result. In terms of investing in entrepreneurs and which investment would be beneficial for entrepreneurial ventures this can be measured by reviewing what factors are advantageous for the entrepre neur and their business.Some of the factors can include the followingFinance providedInterest rateExpertiseKnowledgeUsing business angel contactsInvolvement from the investor to improve thingsNo involvement from the investor, therefore less interference in the businessStudies have shown that business angels can provide added value beyond financial capital (Ehrlich et al 1994). Having a business angel invest in the venture can help sustain competitive advantage, which is beneficial for the entrepreneurs, as the angels bring more than capital to the business they can bring their experience, contacts, and expertise to progress the business further.The resource-based perspective argues that sustained competitive advantage is generated by the unique great deal of resources at t