ENTREPRENEURSHIP

APPLYING ENTREPRENEURIAL CONCEPTS

Definition of entrepreneurship
Entrepreneurship is the art of creating or developing a
business through innovation, creativity, progressive
imagination and risk taking initiative.
The key terms in this definition are discussed below.
(a) Art – this is the subject of study that is not scientific. Is
mans that two people can use two different methods
but achieve the same result. An entrepreneur must have
an artistic mind.
(b) Creating – this involves coming up with a new or original
business that did not exist before.
(c) Developing – this involves making an already existing
business bigger and more successful.
(d) Business – this is a legal activity created with the
purpose of making profit.
(e) Innovation – this is the application of better solutions
that meet new requirements or needs/wants. It is the

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 coming up with something original, new, and important
that breaks into market or society. This leads to having
more effective products, services, processes,
technologies, or ideas.
(f) Creativity – this is the ability of coming up with
something new and valuable by combining already
existing ideas or items.
(g) Progressive imagination – this is the ability to think of
clever and original ideas, possibilities, or solutions that
will gradually or steadily develop the business.
(h) Risk taking – this refers to the tendency to engage in
behaviours that have the potential of loss resulting from
a given action, but at the same time have the
opportunity to make profit or a gain.

The key words in this definition already represent the

fundamental characteristics of an entrepreneur. In summary,
the concept of entrepreneurship calls for an individual to:
● have an artistic mind;
● being focused on development;
● being innovative, creative, and imaginative; and
● having the ability to take calculated risks.

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Definition of entrepreneur
An entrepreneur is a person who, upon identifying a viable
business opportunity uses innovation, creativity, progressive
imagination and risk taking initiative to start a new business
enterprise or develop an existing one.

Definition of intrapreneurship and intrapreneur

Intrapreneurship is the act of behaving like an entrepreneur
within a large organisation. The intrapreneur is a highly
motivated, proactive and action-oriented person who is
comfortable with taking the initiative within the boundaries
of the organisation in pursuit of an innovative product or
service.

Differences between an entrepreneur and an intrapreneur

Entrepreneur Intrapreneur
Owns the business Is employed by an
organisation
Fruits of success (e.g. Fruits of success (e.g.
profits) belong to the profits) belong to the
entrepreneur organisation rather than
the intrapreneur
(although he/she may be
rewarded)
Failure has a personal cost. Failure is borne by the
Losses are borne by the organisation (although
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 entrepreneur he/she may be punished)

Types of entrepreneurs
There are two main types of entrepreneurs.
(a) Pulled entrepreneurs
These are individuals who go into establishing their own
businesses because they have either associated
themselves with successful entrepreneurs or have
admired certain entrepreneurial role models and are
emulating them. This could be because their parents
have been entrepreneurs, or their friends run
businesses.
These entrepreneurs generally prepare adequately
before starting their enterprises and, therefore, have
higher rates of success. Examples of pulled
entrepreneurs are Zambians of Asian origin.
(b) Pushed entrepreneurs
These find themselves staring their businesses due to
circumstances beyond their control. This may be due to
the fact that they have been retired, retrenched,
declared redundant, and so on. They resort to starting
their own businesses as the only means of survival.
Because of this, they respond to unplanned
circumstances, starting their businesses through trial-
and-error. Hence their rate of success is generally low.
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 Examples include a number of Zambians who were
retrenched or retired during the 1990s.

Ways in which entrepreneurs operate

Entrepreneurs operate in different ways, such as the
following:

1 Soloist – this is an entrepreneur who owns and run the

business alone, and therefore does not have anyone to
assist him/her.
2 Acquirer – this is an entrepreneur who buys a business
or inherits it and improves it to prosperity.
3 Grouper – this is an entrepreneur who identifies
different talents in people and brings them together to
form a vibrant group for his/her business.
4 Professional – this is an entrepreneur who uses his/her
professional competences to establish a business.
5 Inventor – this is an entrepreneur who invests
something that he/she discovers that it is needed by
many people and sets up a business based on his/her
discovery.

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6 High-tech – this is an entrepreneur who uses state-of-
the-art technology to improve his/her business and give
it a strong appeal.
7 Speculator – this is an entrepreneur who is a chancer
who becomes an entrepreneur through trial-and-error
and speculation.
8 Manipulator – this is an entrepreneur who manipulates
other stakeholders and get things going.
9 Workforce builder – just like a grouper, this type of
entrepreneur identifies and mobilises a workforce and
develops it into a skilled and experienced team that
contributes to the success of his/her business.
10 Committed manager – this type of entrepreneur uses
his/her managerial skills and experience to develop a
committed entrepreneurial management approach to
business.
11 Conglomerator – this is an entrepreneur with highly
diversified skills and believes in building business
conglomerates (many different types of businesses).
12 Capital aggregator – this is an entrepreneur with
insatiable desire for mobilising capital which is then
ploughed into enterprise development.
13 Key partner – this is an entrepreneur who may not be
directly involved in the running of an enterprise but

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 provides key resources to the continued survival of an
enterprise.
14 Lifestyle – this is an entrepreneur whose lifestyle
(typical way of life) is generally doing business.

Forms of business
An entrepreneur who wants to establish a business has four
possible options to choose from:
● Sole proprietorship
● Partnership
● Limited company
● Cooperative

Criteria for comparison of the four forms of business

1 Will this form help the enterprise to easily access
capital?
2 Will the form of business have continuity?
3 Is the liability of the owner(s) limited?
4 How does management participate?
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5 Is it easy to transfer ownership?
6 What are the record keeping requirements?
7 How do the tax burdens compare?
8 What is the cost of starting and registering the business?
9 What is the simplicity of starting the business?

Sole proprietorship
A sole proprietorship is a business owned by one person who
has all the authority to make decisions about the business.
The owner is called a sole proprietor.
The procedure for starting a sole proprietorship is simple and
the cost is low. However, it is the most risky form of business
because the owner is personally responsible for all the debts
of the business. If the business borrows money or gets items
on credit and fails to pay its debts, the creditors can force the
owner to pay from his/her private money even if this would
require the owner to sell his/her personal property in order
to pay off the debts. The business has unlimited liability.
Once the profit of the business has been calculated, the
owner may pay tax on the profit.

Advantages of sole proprietorship

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● All the profits from the business belong to the owner.
● The cost of starting this form of business is low.
● It is easy to start and register a sole proprietorship.
● The owner makes all the decisions.

Disadvantages of sole proprietorship

● The owner is personally liable for all the losses and
debts of e business.
● It is difficult to borrow from banks as the
owner/business may not have collateral.
● There is no continuity. The death or illness of the owner
can end the business.
● The owner suffers alone (in terms of making decisions
and sometimes in running the business alone).

Partnership
A partnership is a business formed by two or more people,
with a maximum of twenty people, who enter into a
partnership agreement (also called partnership deed). The
owners of a partnership are called partners. The partnership
agreement can either be verbal or written. However,

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partners are usually advised to put their partnership
agreement in writing to avoid unnecessary disputes in future.

A partnership agreement may include the following:

● Name and line of business
● Date of commencement of the partnership
● Capital to be contributed by ach partner
● Duties of each partner
● Profit sharing ration – how the profits will be
shared among the partners.
● How to resolve conflicts
● How to create a new partnership in the event of
death or departure of a partner (e.g. automatic
method)
● How to share the assets if the partnership is
dissolved.

Advantages of a partnership
● All the business profit is shared by the partners.

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 ● It can bring together people with different skills,
experience and knowledge which can be needed
for the business to succeed.
● The cost of starting the business is low as partners
share this cost.
● It is easy to raise more capital from many people.
● The risk of running a business is shared by many
partners (in terms of losses and business failure, if
any).
● If one partner falls ill, other partners can fill the
gap.

Disadvantages of a partnership
● Just like a sole proprietorship, a partnership has
unlimited liability. Partners can lose their personal
property if the business fails to pay its debts.
● there is usually conflict of interest among partners.
● There is a lot of mistrust among partners.
● Decision making is usually slow and this delay in
making decisions comes about because all partners
have to be consulted and have to agree.

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 ● The sharing of profits makes ach partner go with
less money than if it was to be taken by one
person.
● The death of a partner can end the business.

Limited company
A limited company is created by two or more people through
a process of incorporation. The owners of a limited company
are called shareholders.
A limited company has the following characteristics:
● It has a perpetual existence. The death or retirement of
a shareholder does not end the business.
● The owners (shareholders) have limited liability. They
cannot lose personal property to pay for the debts of a
company. They can only lose the money they have put
in the business.
● It is incorporated at registration. The business is a
separate person/entity which can employ people, own
businesses, can sue and be sued in its own name.

For an entrepreneur to register a limited company, he/she

may require help from a legal expert or practitioner.

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Advantages of a limited company
● It is easier to finance this form of business. A
limited company can sell shares and raise money or
it can easily borrow from banks since it is likely to
have collateral.
● A limited company has greater status and
credibility which helps it to easily do business with
various stakeholders.
● Shareholders are not personally liable for the debts
of the business. They cannot lose their personal
money or property for the settlement of the
company’s debts. All they can lose is the amount
they have put into the business.

Disadvantages of a limited company

● The cost of starting a limited company is high, and
it has the greatest complexity of legal
requirements.
● Profits are shared among the many shareholders,
and each on may go with less money than if it was
all taken by one owner.
● The tax burden is high. The business pays tax on
profits and shareholders also pay tax on dividends

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 (dividends are part of the profits that shareholders
are given to take home).

Cooperative
A cooperative is a voluntary association of a group of people
who decide to work together for a common goal or purpose.
The owners of a cooperative are called members.
A cooperative has a democratic form of governance where
the members own and control it. There is equitable
distribution of earnings in a cooperative. Cooperatives are
formed for economic gains, marketing or other strategic
reasons such as cost sharing. In a cooperative, all the
members have one vote each in the decision making process.
Usually, a management committee is elected to oversee the
day-to-day operations of a cooperative.
Cooperatives around the world operate according to the
same core principles, which are as follows:
● Voluntary and open membership – they are
voluntary and open to all without gender, social,
racial, political or religious discrimination.
● Democratic member control – they are controlled
by their members who actively participate in
setting policies and making decisions.

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● Members’ economic participation – members
contribute equally to, and democratically control,
the capital of the cooperative.
● Autonomy and independence – cooperatives are
autonomous, self-help organisations controlled by
their members. If a cooperative enters into an
agreement with other organisations or raises
capital from external sources, it is done so based on
terms that ensure democratic control by the
members and maintains the cooperative
autonomy.
● Education, training and information – cooperatives
provide education and training for members,
elected representatives, management and
employees so that they can contribute effectively
to the development of their cooperative. Members
also inform the general public about the nature and
benefits of cooperatives.
● Cooperation among cooperatives – cooperatives
serve their members most effectively and
strengthen the cooperative movement by working
together through local, national, regional and
international structures.
● Concern for community – while focusing on
members’ needs, cooperatives work for the
sustainable development of communities through
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 policies and programmes accepted by the
members.
There are different types of cooperatives that have been
formed, serving in different industries. These include
consumer, producer, purchasing, services, or a hybrid of
these.
NB:
● Cooperatives are owned and democratically
controlled by its members, who also have to buy
from it or participate in is activities – the members
are owners, workers, and customers.
● Cooperatives return surplus revenue to members
proportionate to their use of a cooperative (e.g.
how much they bought from it).
● Cooperative business is motivated by service to
their members, not by profit.
● Cooperatives pay tax on income kept within the
cooperative for investment and reserves. Surplus
revenue from the cooperative are returned to
individual members wo pay taxes on their income.

Advantages of cooperatives
● They tend to enjoy favourable taxes.

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● The liability of members may somehow be said to be
limited to the extent of their members’ contributions.
● The cost of registering a cooperative is low.
● Members share losses and risks.

Disadvantages of cooperatives
● Cooperatives are said to have poor performance
records.
● There is a lot of political interference and internal
politics.
● Decision making is rather slow since every decision
requires the participation of all members.
● The procedure for its formation and registration is
rather slow.

Registration procedure
In Zambia, registration of business name and incorporation of
limited companies is done by the Patents and Companies
Registration Agency (PACRA), whose headquarters are at
PACRA House along Haile Selassie Road in Longacres, Lusaka.

Registration of business names

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 For the registration of a sole proprietorship or a partnership,
the procedure is simple and straightforward. An applicant is
required to pay a fee for the forms and name search. The
filled-in forms are then submitted to the Patents and
Companies Registration Office. The officers at Patents and
Companies Registration Office can actually assist an applicant
fill in the forms appropriately. Once the forms have been
submitted to PACRA, they are scrutinised and, if successful,
the applicant is informed of the approval and issued with a
Certificate of Registration.

Incorporation of a limited company

The incorporation of limited companies goes through the
following stages:
• Submission of proposed business name to PACRA
• Approval of proposed name by PACRA
• Preparation of Articles of Association for submission to
PACRA [Articles of Association should be submitted in four
(4) copies]
• Issuance of Certificate of Incorporation and shares

Registration of co-operatives

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Usually co-operatives are registered with the Registrar of
societies whose offices are within the same premises as the
National Archives Headquarters, along Government Road,
near Ridgeway Post Office. The procedure for registration is
rather long and follows the following steps:
• Submission of proposed name and constitution, and
filing in forms
• Clearance with the Zambia Police and the local
municipality
• Submission of duly endorsed forms to the Registrar of
Societies
• Issuance of Certificate of Registration

TYPES OF ENTERPRISES
An enterprise is a business undertaking that is created to
offer goods and/or services to the satisfaction of the
customers whilst offering its owners a livelihood
(employment) and profits for its growth and sustainability.

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There are many forms that enterprises take, and the
following are just some of the types of enterprises.
(a) Manufacturing/production enterprise – this is an
enterprise that combines various raw materials
and/inputs to come up with an end physical product. For
example, a tailoring shop, a bakery, a carpentry shop,
etc.
(b) Construction enterprise– this is an enterprise that
builds something, mainly a large structure. Examples
include enterprises building houses, schools, hospitals,
stadiums, factories, roads, rail lines, airports, bridges,
etc.
(c) Service operation enterprise – this is an enterprise that
produces an intangible product referred to as a service.
A service is produced as it is consumed. Examples
include telephone service providers, transport
enterprises, health care service providers (hospitals and
clinics) financial service organisations (banks, insurance
companies, building societies), secretarial service
providers, internet service providers, educational
institutions, etc.
(d) Retail or wholesale enterprise (trading enterprise)–this
is an enterprise that buys already produced goods from
manufacturers and resell them to consumers.

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(e) Mining enterprise–this is an enterprise involved in
extracting metals and minerals from the ground,
quarrying of stones and lime, etc.
(f) Agriculture enterprise – this is an enterprise involved in
cultivation of the soil to grow crops, fruits, vegetables,
flowers, the rearing of animals and poultry, as well as
fish farming.

DIFFERENCES BETWEEN AN EMPLOYEE AND AN

ENTREPRENEUR
The following are the major differences that exist between an
employee and an entrepreneur.
(a) Ownership
An entrepreneur owns the business where he/she has
invested money, and therefore is his/her own boss who
is not answerable to anyone but to himself/herself.
On the other hand, an employee is hired to work for the
entrepreneur and is not the owner of a business, and is
answerable to his/her employer (the entrepreneur)
(b) Security
Since an entrepreneur is his/her own boss, he/she is
much more secure than an employee. An entrepreneur
creates jobs for him/her and others, and is therefore
assured of employment and income.
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 An employee is less secure as he/she can lose
employment and income at any time.
(c) Independence in decision making
An entrepreneur makes decisions independent of any
outside influence in the running of his/her business.
An employee is dependent on his/her employer for
instructions and thinking.
(d) Uncertainties
An entrepreneur controls all the resources in an
enterprise and makes his/her own decisions. As such,
he/she determines his/her destiny and is more certain
of the future.
An employee may not control all the resources of the
business and may not participate in all decision making
processes of the business, and is therefore not certain of
his/her future.
(e) Income
An entrepreneur, as the owner of the business, will get
an income (salary) as he/she is likely to be working for
his/her business, as well as all the profits made in the
business.
An employee, on the other hand, is only entitled to
his/her salary and any bonus that may be given.

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(f) Gender
Any person, male or female, can start any business of
his/her choice and become an entrepreneur.
However, there are certain jobs for certain employees
that are only given to persons of a certain gender.
(g) Age discrimination
Any person of any age can start a business and become
an entrepreneur. There are no age restrictions to
becoming an entrepreneur.
Employees, on the other hand, may be required to be of
a certain age if they are to be employed (minimum and
maximum age).

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ECONOMIC TRENDS IN ZAMBIA
Before independence and after independence, the Zambian
economy has gone through the following changes.

1 Pre-independence stage (1924 to 1964)

● The country was called Northern Rhodesia and was
under colonial rule.
● Most of the economic activities were modelled to
serve the colonial masters.
● Indigenous Africans were mainly used as cheap
labour.
● There was no attempt to promote
entrepreneurship whatsoever for indigenous
Africans.

2 Post-independence stage I: (1964 to 1980)

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 ● Zambia inherited a rich treasury and was among
the richest countries in Africa.
● Zambia also had rich copper reserves and obtained
good copper prices on the London Metal Exchange.
● At this time, oil prices were generally low.
● This led to massive infrastructural development
and the provision of free education, medical
services, water and sanitation.
● The Zambian government came up with the policy
of Zambianisation where almost all major
industries and companies were controlled by the
state and managed by indigenous Zambians.
● There was also the Leadership Code which did not
promote the culture of entrepreneurship.
● The state controlled the industries by creating
conglomerates such as:
○ Industrial Development Corporation
(INDECO)
○ Zambia Industrial and Mining Corporation
(ZIMCO)
○ Mining Development Corporation
(MINDECOI)

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 ○ Financial Development Corporation
(FINDECO)
● Each conglomerate had companies under it, and all
these conglomerate and companies were top-
heavy organisations that drained a lot of money,
although they created a lot employment for many
Zambians. Most of these enterprises were loss-
making organisations.

3 Post-independence stage II: (1980 to 1991)

● In the early 1980s, the Zambian economy started to
decline and the increase in unemployment made
the government start inculcating the culture of
entrepreneurship and self-employment. The
following organisations were created for this
purpose:
○ Small Industrial Development
Organisation (SIDO)
○ Village Industrial Service (VIS)
○ Small Enterprise Promotion (SEP)

During the period of 1964 to 1991, the following are a

summary of the economic policy pursued by Zambia:

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 ● The country pursued a commandist, socialist
economic policy.
● Industries were nationalised.
● The economy was controlled or run by the state
through INDECO, ZIMCO, MINDECO and FINDECO.
● The state controlled and protected monopolies
(Zambia Airways, United Bus Company of Zambia,
Postal and Telecommunications Corporation,
ZESCO, etc.).
● There were trade restrictions, price controls, and
foreign exchange restrictions.

This economic policy resulted in the following:

● No competition in the economy.
● Absence of creativity, innovation,
entrepreneurship, and initiative.
● High levels of inefficiency, ineffectiveness and poor
performance of state-run companies and the
economy in general.
● Poor quality goods and services.

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 ● Severe shortages of essential commodities and
constant queuing for essential commodities.
● Continued decline in economic performance.
● Zambians developed the dependence syndrome.

4 Post-independence stage III: (1991 to date)

After 1991, the Zambian economic policy changed, and
the following is a summary of this new economic policy:
● Zambia pursued a liberalised, free market
economic policy.
● There was a transfer of economic control from
state to private owned through privatisation.
● There were closures of organisations that were not
making profits such as UBZ, ZA, etc.
● There were massive retrenchments, liquidations
and redundancies.
● The public sector was down-sized, giving rise to the
need for inculcating entrepreneurship through
training curriculum charts.
● There was a rise in the 'survival instinct' in most
Zambians.
● This led to the rise in self-employment initiatives.

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 ● This led to the birth of entrepreneurship and
entrepreneurial tendencies.
● There has been an increase in innovation, creativity
and imagination in a free and liberalised economy,
and this has led to increased competition.
● There has been an increase in the need for
entrepreneurial skills training to cope with rising
levels of entrepreneurship.
● Therefore, the informal sector has grown.

NATURAL RESOURCES AS THEY RELATE TO

ENTREPRENEURSHIP
The extent to which a country is endowed with natural
resources may contribute greatly to a country’s level of
entrepreneurship. By their nature, natural resources are a
building block for entrepreneurial activities. There are several
entrepreneurial activities that arise from the efficient and
effective use of natural resources. Examples include:
● Land resources
○ Farming
○ Clay for pottery
○ Stone for masonry
○ Stone for minerals and gemstone mining
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 ○ Sand for glass
○ Stone for cement and ultimately for making
blocks

● Water resources
○ Fishing
○ Reeds for mats, baskets
○ Water for domestic use, construction, etc.
○ Irrigation

● Forest resources
○ Saw milling
○ Wood
○ Furniture manufacturing
○ Window frames, door frames, and doors
○ Curios, carpentry tools
○ Honey production
○ Wild fruits
○ Flowers
○ Herbal medicine

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 ○ Thatching

● Wildlife
○ Tourism and conservation activities
○ Food - meat

● Human resources
○ Mental labour
○ Physical labour

It can be observed from the above examples that the list of

entrepreneurial activities that emanate from natural
resources is endless. The learning point for an entrepreneur
is that natural resources must be critically examined and
exploited as sources of a variety of entrepreneurial activities.

ROLE OF ENTREPRISES IN ECONOMIC DEVELOPMENT AND

GROWTH
Enterprises, whether small or large, play an important role in
the economic growth and development of Zambia. The major
roles are as follows.
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(a) Creation of employment. Small and large enterprises in
the private sector have contributed to the creation of
employment in Zambia. The owner will create
employment for himself/herself and others that will be
needed to work in the enterprise. It is estimated that
80% of all jobs in Zambia are in the private sector.

(b) Contribution to the national treasury. Small and large

enterprises pay taxes, levies, rates and licensing fees to
both the central and local government, thereby
contributing to the national treasury. These include
direct income tax, Value Added Tax (VAT), market levies,
licensing fees, and so on. The money generated is used
to develop the country.

(c) Earning foreign exchange. Some enterprises export

their goods and services to foreign countries and bring
into Zambia the much needed foreign exchange (foreign
currency).

(d) Provision of goods and services. Enterprises provide

various goods and services needed by Zambians for their
livelihood.

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(e) Technology transfer. Enterprises buy machinery,
equipment, tools and bring skills from other countries
into Zambia. At the same time, they also take these
machinery, equipment, tools and skills to remote areas
of Zambia. Therefore, entrepreneurs help to transfer
technology into Zambia and also to rural parts of
Zambia.

(f) Supplementing government effort. Most enterprises

supplement government effort by providing facilities
such as private hospitals and clinics, private schools,
waste management, and so on.

(g) Inculcating a culture of entrepreneurship. Existing

entrepreneurs provide inspiration and act as role
models to future entrepreneurs. In this way, the culture
of entrepreneurship is imparted to upcoming
entrepreneurs in Zambia.

(h) Utilisation of local raw materials. Most entrepreneurs

add value to the available local raw materials which are
used instead of importing them from abroad.

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GOVERNMEN POLICY ON MICRO AND SMALL ENTERPRISE
DEVELOPMENT
Policy instruments supporting micro and small enterprise
development
A policy is a definite course or method of action selected
from among alternatives, and in light of given conditions, to
guide and determine present and future actions.
Government policy relates to industrial, trade and
commercial policies that date back to 1994. The policy has
specific objectives on various economic sectors such as the
following.

(a) Manufacturing policy

The major policy objectives for the manufacturing sector
are:
● To achieve efficient and sustainable growth and
development by focusing on value added linkages
which maximise the use of local raw materials to
foster long run inter-sectorial relationships
● To support and strengthen those potentially
internationally competitive industries that emerge
on the basis of stronger internal linkages

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(b) Commerce and trade policy
● To liberalise the sector by phasing out state
trading, reform company legislation, encourage
private sector participation with no interference on
the market mechanism
● To create a more competitive and dynamic
business environment, and establish a competition
commission with statutory powers to look at issues
such as pricing, mergers, takeovers and franchising
● To create and further develop a market economy
with a liberalised import and export regime which
will support enterprise growth by promoting the
export of non-traditional goods so as to diversify
and expand the export base
● To pursue the principles of fair trade, competition
and reciprocity of trade relations by using anti-
dumping and countervailing measures to counter
unfair trade practices
● To support the goal and ideas of African Economic
Integration

(c) Agricultural policy

● To encourage and empower farming as a business

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 ● To provide many initiatives among small-scale
farmers so that they can do better and improve
productivity for sustainable livelihood. Initiatives
include ASIP (Agricultural Structural Investment
Programme), credit schemes, etc

(d) Investment policy

● To create a dynamic, competitive, stable and
predictive environment in which the private sector
can make efficient investment decisions
● To attract both local and foreign investors to boost
the growth of the industrial sector
● To provide incentives in order to encourage
investment

(e) Small scale enterprises/informal/rural industries policy

● To encourage local government to review their
infrastructure services and licensing regulations to
support small scale enterprises
● To provide legislation and incentives that promote
rapid growth of the sector

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 ● To facilitate retraining of retrenched people in
entrepreneurial skills in order to accommodate
them in the small-scale sector
● To encourage the private sector to build industrial
estates
● To decentralise business registration process to
enable the sector operate efficiently and have
access to incentives
● To review and harmonise all existing laws and
regulations in order to remove impediments to
operations of the sector
● To promote measures which will make the informal
sector graduate into small-scale enterprises
● To encourage the diffusion of industries into rural
areas and provide appropriate incentives to
enterprises that locate in such areas

STATUTORY OBLIGATIONS RELATING TO ENTERPRISE

DEVELOPMENT
Every business or enterprise has specific obligations to
comply with as it runs its operations. These are rules of
conduct, regulations, social control, order, method,
procedure, systems, compulsions and provisionsfor

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individuals, collective and public interests enforced by
government through its institutions.

Purpose of law on business compliance

Law providing for legal compliance of business are provided
to serve various purposes:
● Auxiliary function (additional, supplementary)
● Regulatory function
● Restrictive/protective function
● Creative function

Types of law
The following is a summary of laws and regulations that
require compliance by a business in Zambia.
(a) The income Tax Act (Cap. 323)
This law provides for the following:
● Tax obligations of a business on both income and
profit
● A grace period within which a business may not pay
tax
● Proper accounts to be kept by a business

38
 ● Registration of partnership/company with the
income tax
● Tax on income for employees (PAYE)
● Social insurance: Pension, NAPSA

(b) The Companies Act (Cap. 388)

The Act sets out the following:
● Annual returns and names of directors of a
company
● Advice to the Registrar of Companies
● Advice of changes that occur during the course of
company’s operations, such as change of company
name, directorship and share capital

(c) The Customs and Excise Act (Cap. 322)

This Act provides for the following:
● Items on which customs and excise duties are
chargeable on imported and locally produced
goods
● When, in the process of business transactions, the
duty is chargeable and payable

39
 ● Specification of goods or classes of goods to be
imported into and exported from Zambia, and
which goods are prohibited

(d) The Trades Licensing Act (Cap. 393)

TheAct provides for the following:
● Specification of various trading activities and
regulation of hours of business
● Licenses and permits to be held for operating
businesses in certain categories, e.g., bottle stores,
transport contractors, mines, etc.

(e) The Employment Act (Cap. 268)

TheAct provides for the following:
● Individual contractual obligations between the
employer and employee
● Enforcement of contact of service
● Appointment of officers in the labour department
● Protection of wages of employees and control of
employment agencies

(f) The Factories Act (Cap. 441)

40
 The Act provides for safety and health standards for the
welfare of employees in factories and related
undertakings

(g) The Workers’ Compensation Act (Cap. 271)

The Act provides for the following:
● Provisions for group insurance schemes for
specified categories of employees in the course of
their employment
● Defines obligations of employees for such schemes

(h) The Zamia National Provident Fund Act (Cap. 273)

The Act provides for the following:
● Assurance and pension schemes for specified
categories of employees as a social security scheme
● Sets out the obligations of the employer in the
scheme
● Makes provisions for several financial aspects
covering business operations of all sizes, including
the recent provisions on the crdi guarantee scheme

41
(i) The Bank of Zambia Act (Cap. 360)
The Act provides for the following:
● Provisions for several financial aspects covering
business operations of all sizes
● Provision on the credit guarantee scheme covering
small-scale business enterprises, in conjunction
with commercial banks and other financial
institutions

(j) The Small Enterprise Development Act (Cap. 425)

The Act provides for the following:
● Definition of micro and small enterprises
● The creation and objectives of the SED (Small
Enterprise Development) board
● The kind of assistance
● Industrial relations court
● Settlement of collective disputes
● Industrial action
● Workers participation in decision making in the
enterprise through works councils

42
(k) The Industrial and Labour Relations Act (Cap. 269)
This Act provides for the following:
● Collective relations between the employer and
employee
● Collective bargaining
● Trade unions and employer associations
● Industrial relations court
● Settlement of collective disputes
● Industrial action
● Workers participation in decision making in the
enterprise through works councils

(l) By-laws
By-laws are specific regulations enacted by a civic
authority (municipal council) to organise and regulate
the conduct of certain activities and business
operations, and which apply in a certain area.

SUPPORTSYSTEMS FOR ENTREPRENEURS

Every enterprise, no matter its size, requires some form of
support system to enable it operate effectively and

43
efficiently. The support system consists of various
stakeholders in the enterprise’s environment.
A support system is a network of personal and professional
contacts available to an enterprise for practical and moral
support when needed.
Some of the key stakeholders that make up the support
system for an enterprise in Zambia include the following.
(a) Financial institutions
An enterprise may, during the course of its existence,
require some financial support from both the micro-
financial institutions and commercial banks. For
example:
● CETZAM Micro Financing Limited
● Pride Zambia
● AMZ (Angora Microfinance Zambia Limited)
● Finca Zambia
● Women’s Co-operative Trust
● ECLOF (Ecumenical Church Loan Fund)
● Micro Bankers Trust
● E-MFI (Empowerment Micro Finance Institution
Limited)
● Pulse Financial Services Limited
● Several commercial banks

44
(b) Business associations
A lot of non-governmental organisations are emerging.
These associations are support groups for enterprise
development as they constitute resource centres
through which enterprises can get business counselling,
marketing, training and consultancy support services.
These associations have the capacity to even organise
donor support in terms of grants. These associations
include the following:
● District Business Associations
● Centres for Informal Sector Employment
Promotions (CISEP)
● Zambia Chamber of Small and Medium Business
Association

45
DEVELOPING ENTREPRENEURIAL COMPETENCES AND
ATTITUDES
In this discussion we will cover the following:
● Developing self-motivation
● Developing business ideas
● Identifying business opportunities
● Mobilising resources
● Networking for enterprise development
● Implementing business decisions
● Communicating in various business situations

DEVELOPING SELF-MOTIVATION

Entrepreneurial traits and characteristics

A trait is a distinguishing genetically determined attribute of
an individual. A characteristic is also a feature belonging to
an individual and which is typical of a person and serves to
identify that individual, and which has been acquired through
social learning.
To be an entrepreneur is a lifestyle, and is more than a job or
career. As such, entrepreneurs tend to have certain traits and
characteristics which include the following:
46
(a) Initiative. An entrepreneur does things before being
asked or forced by events. An entrepreneur does this so
as to extend the business into new areas.

(b) Seeing and acting on opportunities. An entrepreneur

seizes unusual opportunities to obtain an order,
financing, equipment, land, work space, or assistance.
(c) Persistence. An entrepreneur takes repeated or
indifferent actions to overcome obstacles.

(d) Information seeking. An entrepreneur does personal

research on how to provide a product or service. An
entrepreneur also consults experts for business and
technical advice. An entrepreneur will also personally
undertake market research, analysis or investigation.

(e) Concern for high quality work. An entrepreneur has a

strong desire to produce or sell a better quality product
or service than his/her competitors.

(f) Commitment to work. An entrepreneur puts in a lot of

effort to complete a job, and accepts full responsibility

47
 for problems in completing a job for a customer. An
entrepreneur has a strong concern for satisfying a
customer.

(g) Efficiency oriented. An entrepreneur looks for or finds

ways to do things fast and at less cost. An entrepreneur
uses information or business tools to improve efficiency.

(h) Systematic planning. An entrepreneur plans by breaking

a large task down into smaller sub-tasks. He/she
evaluates alternatives and takes a logical and systematic
approach to activities.

(i) Problem solving. An entrepreneur generates new ideas

and innovative solutions to solve problems facing the
enterprise.

(j) Self-confidence. An entrepreneur has an attitude that

allows him/her to have positive but yet realistic view of
himself/herself and his/her situation. He/she trusts in
his/her ability to complete a task or meet a challenge,
and sticks with his/her judgement in the face of
opposition or lack of early success.

48
(k) Recognising own limitations. An entrepreneur
acknowledges his/her own limitations and engages in
activities that will improve his/her own abilities.

(l) Expertise. An entrepreneur seeks to possess strong

technical know-how and skills in the area of his/her
business.

(m) Persuasion. An entrepreneur has strong confidence in

the products or services that are made and provided by
his/her enterprise and communicates to positively
influence others, without duress, about the enterprise
and its products or services.

(n) Use of influence strategies. An entrepreneur uses

influential people as agents to accomplish his/her
objectives.

(o) Assertiveness. An entrepreneur confronts problems

with others directly and reprimands or disciplines those
failing to perform as expected.

49
(p) Monitoring. An entrepreneur personally supervises all
aspects of a project to ensure that work is completed as
planned or that it meets standards of quality.

(q) Credibility, integrity, and sincerity. An entrepreneur

acts to ensure honesty or fairness in dealing with others.

(r) Concern for employees’ welfare. An entrepreneur takes

action to improve the welfare of employees.

(s) Recognising the importance of business relationships.

An entrepreneur acts to build rapport or friendly
relationships with customers and other business
stakeholders.

(t) Building capital. An entrepreneur develops a tendency

to save money in order to plough it back into the
business and build a strong capital base.

(u) Concern for the image of products or services. An

entrepreneur expresses awareness that clients spread
knowledge of the products/services or the enterprise by

50
 word-of-mouth and these clients can be useful
'ambassadors.'

(v) Time conscious. An entrepreneur sets goals for

himself/herself and tries to accomplish them within the
set time framework.

(w) The need to achieve. This is evident in an

entrepreneur’s desire to achieve some standard to
excellence and success in performance. An entrepreneur
has a strong desire for significant accomplishments,
mastering of skills, control, and to have high standards.
An entrepreneur exhibits prolonged and repeated
efforts to accomplish something difficult.

(x) Risk taking. An entrepreneur has an inclination to take

calculated, moderate and intelligent risks. An
entrepreneur tends to avoid both excessively high risks
as well as low risks.

(y) Hopeful about the future. Even in a situation where

there a lot of disappointment and frustration, an
entrepreneur does not lose hope and expects the future
to be better.

(z) Independence. An entrepreneur exhibits a great deal of

independence in his/her day-to-day behaviour. An
51
 entrepreneur does not want to work for another person
or organisation.

Discovering oneself and positive thinking

To succeed in business, one ought to be positively and
constructively ambitious. To be positively ambitious means to
have that personal conviction that you can make it if you
have the right attitude and psychological preparedness (“If
others have made it, why can’t I”?).
On the other hand, to be to be constructively ambitious
means setting very realistic and achievable targets. With
increased competition and liberalisation of most economies,
business has increasingly become very difficult to run and
manage, and constantly different problems keep coming.
This, therefore, means that entrepreneurship calls for the
need to persevere during difficult times. Perseverance is the
art of looking at problems and difficulties as challenges and
seeking to find solutions to those challenges.
Entrepreneurship calls for positive thinking. Only those
entrepreneurs who are positive about whatever they do and
always seek to find solutions to any problems and difficult
they encounter will eventually succeed in whatever they
spire to do. Perseverance builds a strong character which

52
normally leads to the generation of a variety of ideas from
which solutions to any problems or difficulties may be
sought.
Perseverance and positive thinking are, therefore, very
essential to business success. It is difficult to discover one’s
full potential if you do not try. It is, therefore, only by trying
and trying again, even in the face of poor results, that one
discovers themselves and forge ahead. These are critical
requirements in entrepreneurship.

Imagination, innovation and creativity of an entrepreneur

Goal setting
A goal or objective is a quantified statement of what an
entrepreneur wants to achieve over a specified period of
time.

53
A critical requirement in developing entrepreneurial
competences and skills is to forecast into the future and set
goals or objectives. An entrepreneur will only succeed in
business if he/she can set goals and objectives that are
SMART (specific, measurable, achievable, relevant, and time
bound). Objectives must be:

● Specific – stating exactly what has to be achieved

(although not how the job should be done).
● Measurable – the objective must be quantified so
that it can be known if the objective has been
achieved.
● Achievable – the objective should be set such that
it requires more effort to attain it, but not which is
impossible to attain.
● Relevant – he objective must relate both to the
roles of those who are to achieve it and to the
wider purpose of the enterprise.
● Time bound – there should be a target deadline
and time frame for achieving the objective.

Purpose of goals and objectives

When you set goals and objectives, they enable you to:

54
  Be aware of what you want to achieve
 Add to what you already have
 Improve performance and increase results in whatever
you may be doing
 Influence others to achieve
 Create a sense of pride and satisfaction of yourself
 Build confidence in yourself
 Think positively
 Be imaginative, creative and innovative

DEVELOPING BUSINESS IDEAS AND OPPORTUNITIES

All businesses we see today came from ideas that some
people had somewhere.
A business idea is a concept or response to a particular
problem which, if properly worked on and planned for, can
translate into a business enterprise.

Sources of business ideas

There are various sources of business ideas, some of which
are discussed below.
(a) Your own job, trade or experience

55
 This involves an entrepreneur coming up with a business
based on the job he/she is doing, or based on an area in
which he/she specializes and has experience. For
example:
● A nurse or doctor can start a clinic, home-
based care centre, a drug store, an old-aged
care centre, and so on.
● A teacher can start a school/college, publish
books, a tuition centre, and so on.
(b) Shortages in your area
An entrepreneur can come up with business ideas by
looking at those products and services that are not
readily available in the area in which he/she lives or in
any other areas of interest. An entrepreneur can then
conduct a simple survey to find out if there is demand
for these products or services which are not found in
that area. Once the survey has shown that there is
demand for such products or services, an entrepreneur
must act promptly and strategically to provide them.
(c) Shortcomings in existing products or services
This involves an entrepreneur observing and identifying
those products or services that are being provided by
others in the area in which he/she lives but have
shortcomings (the product or service has a fault or there
is failure to meet a certain standard), and then use
56
 his/her imagination to improve and change the quality,
image or nature of the product or service. The changes
made to the product or service may be as follows:
● Improve its appearance, function, colour, or
packaging
● Offer a better service of the current services
you pay for
● Modify and existing product into a new one by
making it look luxurious, make it simpler, or
make it smaller, change the shape
● Add or subtract a few features to the product
or service to make it suitable in terms of use
or price. For example, selling cooking oil from
a pump, or selling mealie meal in smaller
packages (Pamela).
(d) Your own hobbies, talents and interests
An entrepreneur may require to identify his/her
hobbies, talents and interests and develop them so that
a business is created around that. Therefore, one’s
hobbies, talents and interests can be sources of viable
business ideas. For example:
● A person with the hobby or interest in baking
can start a bakery, or bake cakes for weddings,
birthdays or other events.

57
 ● A person with a football talent can play
professional football and generate money to
establish a football academy where upcoming
players can pay to be developed into
professional footballers.
(e) Extraordinary use for ordinary things (Somebody’s
waste is another person’s treasure)
This involves the entrepreneur examining common
products which are used daily, or those items that
others want to throw away, and figuring out how these
could be put to special or extraordinary use. It means
turning waste into something useful for someone. For
example:
● Foam mattresses or rubber can be used to
make duvets
● Cut pieces of cloth at the tailor’s shop can be
used to make a mat or carpet
● Soya meal can be used to make vegetarian
products like vegan sausage.

(f) Man’s basic needs

Man’s basic needs include the need for food, clothing
and shelter. These are daily needs that people must

58
 satisfy. Therefore, an entrepreneur can identify business
ideas based on the daily needs of people. For example:
● For the need for food, one can start bee
keeping and making honey products,
gardening, farming, bakery, restaurant, animal
husbandry (rearing goats, cows, etc.) and so
on.
● For the need for clothing, one can start making
traditional attire, make tie and dye clothes,
start a tailoring shop, or sell second hand
clothes, and so on.
● For the need for shelter, one can establish a
hardware shop, electrical installation, selling
cement, block making, construction business,
and so on.
(f) Establishing an agency or becoming a middleman
This may require an entrepreneur identifying a local or
international firm that may want an agent for their
products. Therefore, the entrepreneur will establish an
agency and sell goods made available to them and earn
commission.
Information on companies looking for agencies could be
gotten from the Zambia Investment Centre, Export
Board of Zambia, Ministry of Commerce and Industry,
and the Internet.
59
 Alternatively, an entrepreneur can start his/her own
wholesale or retail shop where goods could be sold to
the local businesses or final consumers and earn a
profit.
(g) Changes in social customs
This requires an entrepreneur to observe any society
and see how it is changing and capitalise on these
changes to start a business. For example:
● Changes in women’s role in society (educated
and working) has brought about the need for
maids, kindergartens, fast foods outlets, and
so on.
● Changes in dressing
● Changes in health care
● Changes in diet (e.g. towards vegetarian diet),
and other social and cultural changes
(h) Necessity, the mother of invention
Some individuals, when faced with uncommon problem
or special problem have always sought special answers,
and come up with an invention or solution to the
problem. This then inspires this person to venture into
entrepreneurship by using the invention or solution to
solve other people’s problems. For example, the
Sondashi Formula for HIV/AIDS.

60
(i) Government incentives
This requires an entrepreneur to keep an ear to the
ground to learn about any government incentives that
may present business opportunities, and taking
advantage of them by establishing a business based on
these incentives. For example, the government of
Zambia once removed customs duty on imported buses
and many proactive entrepreneurs went into passenger
transport business.
(j) Listening to complaints
Listen to complaints consumers are making to other
businesses or your business and create a solution to
those complaints.
(k) Research
This involves an entrepreneur finding out special needs
or wants of certain groups of customers and coming up
with the business that would satisfy these identified
needs or wants. This may require an entrepreneur to
prepare a questionnaire and collect relevant data about
the needs and wants of potential customers.
(l) Reproduce the idea
The entrepreneur here would require to apply a
successful idea that was implemented by others to new
settings.

61
(m) Create new value for a product
This requires the identification of what other uses can
the already existing assets be put to. For example, using
one’s taxi vehicle for advertising.
(n) Brainstorm
This involves generating as many ideas as possible from
a group of people without initially checking the
usefulness of these ideas. Afterwards, these generated
ideas are carefully assessed for their potentiality, and
one may turn out to be a gold mine.
(o) Commercialise research recommendations and
inventions
This requires an entrepreneur to identify any research
ideas from research institutions and turning them into
business. It may also involve identifying any inventions
that might or might not be patented and translating
them into business.
(p) Combine uses into one product
This involves an entrepreneur thinking of ways in which
he/she can combine two or more products into one for
the convenience of customers. For example:
● Creating a pen with functions of a musical
instrument
● Creating a pencil that has an eraser
62
 ● Combining a broom and a mop into one product
(q) Visualisation
This requires an entrepreneur to use his/her imagination
to create a picture of a product, service or business in
his/her mind, and then working hard to ensure it is
realised. This may mean coming up with completely new
inventions that have not existed before.
(r) Time framing
This requires an entrepreneur to identify those services
others are offering in a relatively long period of time and
then figuring out how the same services can be offered
by the entrepreneur in a shorter time without affecting
the quality of that service.
(s) Technology application
Technological developments these days are so fast and
abundant that one can come up with so many ideas of
unique applications.
(t) Creation of opposites
If a product is small make it big, if it is long make it
short, if it is slow make it fast, if it is for very one make it
for one person, if it is tall make it short, and vice versa.
(u) Travel

63
 This involves coming up with a business idea from other
places where the entrepreneur travelled and saw or
used that product or service. The product or service
would then be offered to the local people probably for
the first time.

Selecting the business ideas

Having prepared a reasonable list of ideas, you must examine

each business idea so that you end up with a short list of
business ideas with the highest chance of success. You can
use the scoring suggested below.

Simple Scoring Method for Business Ideas

Score: Yes = 1 and No = 0; Allocate scores to each question. If
the answers to all the questions is YES the total score is 12
and 0 if all your answers were No. You may select a business
idea if it scores above 5 and review it or reject it if it scores
below 5.

64
Business Idea Assessment Form
Name of the Business Idea:
……………………………………………………………………………….
No. Focus Question Yes No Score
1. Personal Does the business suit
characteristics your personal
characteristics?
2. Knowledge Do you have
and skills knowledge and skills
that will help you run
this type of business?
3. Experience Do you have
experience that will
help you to run this
business?
4. Business Do you know about the
Knowledge products and services
in this business?
5. Business Do you know where to
Support get advice and

65
 information about this
business
6. Customers Are you
knowledgeable of the
potential customers
for this particular
business?
7. Competition Will this be the only
business of this kind in
your area?
8. Profitability Do you have reasons
why you think this
business will be
profitable?
9. Human Do you know the type
Resources, of equipment,
Premises, materials, premises or
Equipment qualified staff required
and Materials for this business?
10.Finances Are you sure you will
be able to get the
finances to provide
what is needed in the
business?
11.Resources Do you know where

66
 will you get the
resources to start this
type of business?
12.Business Do you know whether
Growth this business has
potential for growth?
TOTAL SCORE

After the business ideas identification, listing and

assessment, you are now ready to go further to develop this
business idea into business opportunities through spending
time assessing, researching, developing and planning.

ENVIRONMENTAL SCANNING or IDENTIFYING BUSINESS

OPPORTUNITIES
Environmental scanning is the process of obtaining and
analysing all important information about the environment in
which the business is or want to get into.
Once an entrepreneur has come up with a business idea, the
idea must be subjected to some scanning in order to
determine whether it is workable and suitable.

The Importance of Environmental Scanning

67
Environmental scanning is important for the following
reasons:
 It enables an entrepreneur to spot important economic,
social, cultural, environmental, health, technological, and
political trends, situations, and events in the country and
outside that may have an effect on the business.

 An entrepreneur is able to identify potential opportunities

and threats for the business arising from these trends,
situations, and events.

 It allows the entrepreneur to achieve an accurate

understanding of the business’s strengths and
weaknesses.

 It presents a support for the study of future opportunities.

Techniques of Environmental Scanning

There are a number of techniques an entrepreneur can use
to carry out an environmental assessment. This discussion
will cover the following techniques:
 BPEST Analysis
 Porter’s Model of Five Competitive Forces
 SWOT analysis
 Value Chain Analysis

BPEST Analysis
68
BPEST analysis is concerned with the environmental
influences on a business.

The acronym stands for the Business, Political, Economic,

Social and cultural, and Technological issues that could affect
the strategic development of a business.

Identifying BPEST influences is a useful way of summarising

the external environment in which an enterprise operates.
However, it must be followed up by consideration of how a
business should respond to these influences.

The discussion below lists some possible factors that could

indicate important environmental influences for a business
under the PEST headings:

BPEST

(a) Business

● Sate of industry: known or projected

● Market: current and projected demand, Buyer

behaviour
● Competition: Market share; New comers, New
products
● Suppliers: Reliability; Alternatives
● Bank Funds, Donor Funds
● Business Associations

69
(b) Political / Legal
● Environmental regulation and protection
● Taxation: corporate; consumer
● International trade regulations
● Consumer protection
● Employment law
● Government organisation/attitude
● Competition regulation

(c) Economic
● Economic growth (overall; by industry sector)
● Monetary policy: (money supply; interest rates;
exchange rates)
● Fiscal policy: (taxation, public borrowing; public
spending)
● Government spending (overall level; specific
spending priorities)
● Policy towards unemployment (minimum wage,
unemployment benefits, grants)

70
 ● Taxation (impact on consumer disposable income,
incentives to invest in capital equipment,
corporation tax rates)
● Exchange rates (effects on demand by overseas
customers; effect on cost of imported components)
● Inflation (effect on costs and selling prices)
● Stage of the business cycle (effect on short-term
business performance); boom, recession,
depression, recovery
● Economic "mood" - consumer confidence

(d) Social and cultural

● Income distribution (change in distribution of
disposable income)
● Demographics (age structure of the population;
gender; family size and composition; changing
nature of occupations)
● Labour / social mobility
● Lifestyle changes (e.g. Home working, single
households)
● Attitudes to work and leisure
● Education

71
 ● Fashions and fads
● Health & welfare
● Living conditions (housing, amenities, pollution)

(e) Technological
● Government spending on research
● Government and industry focus on technological
effort
● New discoveries and development
● Speed of technology transfer
● Rates of technological obsolescence
● Energy use and costs
● Changes in material sciences
● Impact of changes in Information technology

Porter’s model of Five Competitive Forces

Michael Porter's famous model of Five Competitive Forces

provides a simple perspective for assessing and analysing the
competitive strength and position of an enterprise.

72
The five competitive forces influence the level of competition
in an industry which finally will have a say on the level of
profit in a particular industry.

The five competitive forces are:

 The threat of new entrants to the industry
 The threat of substitute products or services
 The bargaining power of customers
 The bargain power of suppliers
 The rivalry of current competitors (industry rivalry)

Porter’s Model: Five Competitive Forces

Threat of new entrants

Bargaining power of Industry rivalry Bargaining power of

suppliers buyers/customers

73
 Threat of substitutes

Source: Michael Porter, How Competitive Forces Shape

Strategy, Harvard Business Review, March/April, 1979

(a) The threat of new entrants to the industry – a new

entrant into an industry will bring extra capacity and
more competition, hence reducing the profits earned by
current businesses in the industry.

(b) The threat of substitute products or services – a

substitute is a product or service produced by another
industry satisfying the same needs of the customers.
Customers may switch to substitutes and reduce the
profitability of the industry.

(c) The bargaining power of customers - customers want

better quality products or services at lower prices.
Meeting this want may result in the lowering of
profitability.

(d) The bargain power of suppliers – suppliers can apply

force to obtain higher prices for their products and
74
 services and erode profits made by businesses in the
industry.

(e) The rivalry of current competitors – the higher the

rivalry, the more likely the possibility of lowering prices
and high investment in marketing to beat competition
which may results in low profitability.

SWOT analysis

SWOT Analysis is a common strategic planning tool

developed to compare internal strengths and weakness with
the external opportunities and threats.
S = Strengths
W = Weaknesses
O = Opportunities
T = Threats

Sample SWOT analysis

STRENGTHS WEAKNESSES
● Good product image ● Insufficient financial
● Effective decision making resources

75
● Strong leadership ● Lack of management
● Committed and caring staff systems and
● Qualified and experienced policies
staff ● Unclear communications
● Office equipment is and linkages
available ● Too reliant on donor funding
● Availability of transport ● Lack own premises
● Uncommitted staff
OPPORTUNITIES THREATS
● Cause-related organisations  Increasing competition
are trendy  Government trend toward
● Ageing population will privatisation of public
increase clients services
● More opportunities for  Law suits in courts
collaboration
● Current era of partnership
networks

Simple rules for successful SWOT analysis

 Be realistic about the strengths and weaknesses of your
business when conducting SWOT analysis.

 SWOT analysis should differentiate between where your

business is today, and where it could be in the future.

 SWOT should always be specific.

 Avoid vague areas.

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 Always apply SWOT in relation to your competition i.e.
better than or worse than your competition.

 Keep your SWOT short and simple.

 Avoid complications and too much analysis.

 SWOT is subjective.

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Value Chain Analysis

Value Chain Analysis is a tool for working out how an

entrepreneur can create the greatest possible value for
his/her customers, as well as the best route to profit
maximisation.

In business, an entrepreneur pays to take raw inputs and to

“add value” to them by turning them into something of
worth to other people. In manufacturing, where the
manufacturer adds value by taking raw material of little use
to the customer (house wife/husband) for example, maize
and turning it into something that customers are prepared to
pay money for, for example mealie meal. This idea is also
important in service industries such as training, where people
use inputs of time, knowledge, equipment and systems to
create services of real value to the person being served - the
customer in this case the learner.

The Value Chain Analysis helps an entrepreneur identify the

ways in which to create value for his/her customers, and
then helps the entrepreneur to think through how he/she
can maximise this value: whether through nice products or
useful services.

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Michael Porter suggested that the activities of a business
could be grouped under two headings:

(a) Primary activities - those that are directly concerned

with creating and delivering a product (e.g. component
assembly); and

(b) Support activities which, whilst they are not directly

involved in production, may increase effectiveness or
efficiency (e.g. human resource management). It is rare
for a business to undertake all primary and support
activities.

Value Chain Analysis is one way of identifying which activities

are best undertaken by a business and which are best
provided by others (outsourced).

Linking Value Chain Analysis to competitive advantage

What activities an enterprise undertakes is directly linked to

its achieving the competitive advantage. For example, an
enterprise that wishes to outperform its competitors through
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differentiating itself through higher quality will have to
perform its value chain activities better than the opposition.
By contrast, a strategy based on seeking cost leadership will
require a reduction in the costs associated with the value
chain activities, or a reduction in the total amount of
resources used.

Primary activities are as follows:

● Inbound logistics – are all activities dealing with
receiving and storing externally obtained materials.

● Operations – this involves the manufacturing of

products and services - the way in which resource inputs
(e.g. materials) are converted to outputs (e.g. products).

● Outbound logistics – these are all activities connected

to getting finished goods and services to buyers.

● Marketing and sales – these are activities involved with

informing buyers and consumers about products and
services (benefits, use, price etc.).

● Service – are all activities related to maintaining product

performance after the product has been sold.

Support activities are as follows:

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 ● Procurement -This covers how resources are acquired
for a business (e.g. sourcing and negotiating with
materials suppliers).
● Human Resource Management - activities concerned
with recruiting, developing, motivating and rewarding
the workforce of a business.
● Technology Development - activities concerned with
managing information processing and the development
and protection of "knowledge" in a business.
● Infrastructure - Concerned with a wide range of support
systems and functions such as finance, planning, quality
control and general senior management

Steps in Value Chain Analysis

Value chain analysis can be broken down into a three orderly

steps:
(a) Break down a market/organisation into its key activities
under each of the major headings (primary or
secondary).
(b) Examine the potential for adding value via cost
advantage or differentiation, or identify current
activities where a business appears to be at a
competitive disadvantage.
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(c) Develop strategies built around focusing on activities
where competitive advantage can be sustained.

Process of Environmental Scanning

Steps to conducting the environmental scanning:
 Clearly state the purpose of collecting information.

 Decide on how the information will be collected: desk or

field study or both.

 Identify who is responsible for the process.

 Decide who will collect information.

 Identify the sources of information.

 Identify methods of collecting information.

 Assemble existing information on issues and needs.

 Reflect on the strengths and limitations of that

information.

 Select data gathering techniques to fill in information or

audience gaps, detect emerging issues, and verify existing
information.

 Collect: scanning information from other organisations.

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 Assemble the information.

 Analyse and translate the information into actionable.

Questions to ask in an attempt to scan the environment and

select a viable business idea
• What products or services does your business idea
entail?
• Do you have the necessary competencies, management
ability, experience and know-how to run a business that will
produce these products or services?
• Who are the proposed target customers for these
products and services?
• What makes you feel your proposed target customers
need those products or services?
• Are you capable of making, through consultations, to
determine the demand patterns for those proposed
products or services?
• Is the demand for the proposed products or services
high and continuing?
• What will it cost you to produce those products or
services?
• Are the prices of those products or services going to be
affordable to your customers?

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• What is the level of competition pertaining to the
proposed products or services?
• If the level of competition is high, what will be your
proposed competitive advantage?
• What will it take (resources) to run such a proposed
business?
• Are you capable of mobilising the required resources?
• Is the political environment conducive for that business
idea?
• Is the economic environment conducive for that
business idea?
• Is the social and cultural environment conducive for that
business idea?
• Is the technology for the proposed business there?
• Is the legal environment conducive for that business
idea?
• Where will the resources be mobilised from, and at
what cost?
• Can you afford to mobilise these resources at a cost?
• Will the business be profitable and sustainable?
• Are there so many people entering or exiting this type of
business?

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• Are suppliers of raw materials and other inputs for the
business readily available?
• Does the proposed business idea have close substitutes?
• Where will the business be located, and is the area
conducive?
If 70% of the above questions can be answered with relative
ease and objectively, it can safely be assumed that the
environment is ripe for such a business idea to be translated
into an actual business enterprise.
After successfully undertaking an environmental scanning
exercise, the next step would entail doing a detailed
feasibility study.

FEASIBILITY STUDY
Feasibility study is an examination to see whether the
selected business idea is viable or practical. The feasibility
study aims at answering question of “should I continue with
the proposed business idea?” All the feasibility activities are
aimed at answering this question. The feasibility study
outlines and analyses several alternatives or methods of
achieving business success.

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A feasible business is one where the business will generate
adequate cash flow and profits, withstand the risks it will
encounter, remain viable in the long-term and meet the goals
of an enterprise. The business idea can be a new start-up
business, the purchase of an existing business, an expansion
of current business operations, or a new enterprise for an
existing business. A feasibility study is conducted before
preparing the business plan. Once an entrepreneur has
carried out a feasibility study, then he/she can proceed to
write a business plan.

Conducting a Feasibility Study

You have in your hands a business idea that you like. Casual
observations, discussing with other people indicate that it is a
good business idea. You have done good by further reading
more about it, but can it work?

Investment Assessment Techniques

Feasibility study can be achieved by using investment
techniques. These include:
● Payback period

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 ● Net present value
● Internal rate of return

Payback period
This determines the number of years required to recover the
original cash outlay invested in a business project. If a
business generates constant annual cash inflows, the
payback period can be computed by dividing cash outlay by
the annual cash inflow.

Cash Investment
Payback period=
Annual Cash Inflow

For example:
A business project requires an investment of K 50,000,000
and generates an annual cash inflow of K 12,500,000. The
payback period is as follows:

Payback period = K50,000,000/K12,500,000 = 4 years.

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Net Present Value
The method is a process of calculating the present value of
cash inflows and outflows of an investment proposal using
the cost of capital as the suitable discounting rate and
finding the net present value by subtracting the present
value of cash outflow from the present value of cash inflows.

For example:
A business project costs initially K25,000,000 and generates
year end cash inflows of K9,000,000; K8,000,000; K7,
000,000; K6,000,000 and K5,000,000 from year one to year
five. The required rate of return is 10%.

Net Present Value

Year Cash Inflow Discounting Present
Factor at 10 Value of
(ZK)
% Cash Inflow
(ZK)
1 9,000,000 .9091 8,181,900
2 8,000,000 .8264 6,611,200
3 7,000,000 .7513 5,259,100
4 6,000,000 .6830 4,098,000
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 5 5,000,000 .6209 3,104,500
Total Present Value Cash Inflow 27, 254, 700
Less Investment (Initial Capital Expenditure) 25, 000, 000
Net Present Value 2, 254,700

Internal Rate of Return (IRR)

IRR is the rate which equates the present value of cash
inflows with the present value of cash outflows of an
investment. It is the rate at which the net present value
(NPV) is zero. This method may require iterations (repeated
calculations until the IRR is found).

For example:
A project costs K 16,200,000 to start and the project is
expected to generate cash of K 8,000,000; K 7,000,000; and K

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6,000,000 over a three year period. The enterprise’s cost of
capital is 13%. What is the IRR?

Cash Inflows Present Value at 20% Discount Rate

Year Cash Inflows Discount factor at Present
20% value (PV)
1 8,000,000 .8333 6,666,400
2 7,000,000 .6944 4,860,800
3 6,000,000 .5787 3,472,200
Total Discounted Cash Inflows 14,999,400
Less cash outlay 16,200,000
NPV (- ) -1,200,600

Note this is a higher rate; we try at a lower rate.

Cash Inflows Present Values at 18%, 16%, and 14% Discount

Rate

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Ye Cash Discou Presen DF PV DF @ PV
ar Inflows nt t Value @
14%
Factor
16%
(18%)
1 8,000,0 0.847 6,780,0 0.86 6,896,8 0.877 7,017,600
00 5 00 21 00 2
2 7,000,0 0.718 5,027,4 0.74 5,202,4 0.769 5,386,500
00 2 00 32 00 5
3 6,000,0 0.608 3,651,6 0.64 3,844,2 0.675 4,050,000
00 6 00 07 00 0
Total PV 15,459, 15,943, 16,454,10
000 400 0
Less cash outflow 16,200, 16,200, 16,200,00
000 000 0
NPV - - +254,100
741,00 256,60
0 0

The rate we are looking for lies between 14% and 16%.

So lets us try to calculate the Present value at15%.

Year Cash Inflow Discount Factor @ Present

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 15% Value
1 8,000,000 0.8696 6,956,800
2 7,000,000 0.7561 5,292,700
3 6,000,000 0.6575 3,945,000
Total Discounted Cash Inflows 16,194,500
Less cash outlay 16,200,000
NPV -5,500

Let us try once more to calculate the present value at 14.98%

Year Cash Inflow Discount Factor @ Present

14.98% Value
1 8,000,000 0.8697 6,957,600
2 7,000,000 0.7564 5,294,800
3 6,000,000 0.6580 3,948,000
Total Discounted Cash Inflows 16,200,400
Less cash outlay 16,200,000
NPV 400

It can therefore be concluded that the IRR is about 15%.

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Acceptance Rules
No Method Acceptance Rule
.
1 Payback Period Accept business project if the payback
period is shorter than one set up by
management
2 Net Present Value Accept a business project if the
present value of cash inflows over a
number of year is positive
3 Internal Rate of Accept business project if the internal
Return rate of return is higher than or equal
to the cost of capital

NB: Cost of capital = minimum required return on new

investment.

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RISK TAKING
One of the major requirements in entrepreneurship is that an
entrepreneur should take risks.
A risk is the probability that the actual result is negatively
different from the planned event. Risk arises when an activity
has two possible outcomes (such as profit and loss).
In business, there are several cases when the actual results
are not as good as planned and in such cases losses may
occur. When an entrepreneur knows that there are chances
of failing to produce good results but he/she goes ahead to
try, then such an entrepreneur is said to be taking a risk. In
business, it is said that the higher the risk, the higher the
returns.

Entrepreneurs who succeed are those who take risks because

in the process of taking risks, they begin to learn from their
mistakes and eventually take calculated risks, which even
produce higher results. It is, therefore, clear that taking
calculated risks is a very crucial ingredient for successful
entrepreneurship.

A calculated risk is a chance taken by an entrepreneur after a

carful estimation of the probable outcomes. It is planned
with forethought.

Types of risk
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Risks in business come in many forms. The following are the
main types.

(a) Business risk

Business risk is largely associated with the choice of

enterprise that an entrepreneur makes, and in which
he/she is to make an investment. There are various
enterprises taking so many forms and each one of them
has different profitability levels, advantages and
disadvantages. The choice of investing in one of them
carries its own risk that an entrepreneur takes. For
example, starting a farm has different type of business
risk as compared to emerald mining.

(b) Operating risk

Operating risk arises from the operating activities of an

enterprise in terms of material resources, time
management, human resource used and type of
management applied.

This type of risk includes such things as the possibility of

poor management of finance, poor marketing skills,
poor planning skills, incorrect pricing, which are are high
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 risks areas for businesses especially for small and
medium sized businesses.

Operating risk also includes staff turnover, sudden

changes in technology, and materials supply disruptions.

(c) Financial risk

Financial risk refers to the extent to which an enterprise

has been financed using borrowed resources, or an
enterprise’s use of borrowed funds in its operations.

It also includes the chance of loss of cash, loss of a

financial investment, high taxes and high interest rates
due to borrowed funds.

(d) Environmental risk

Environmental risks are those risks arising from fire,

riots, weather, thefts and sudden government policy
change.

(e) Entrepreneur’s Risk

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 This type of risk refers to how committed an
entrepreneur is to his/her own business. Many budding
entrepreneurs backslide to job seeking when this type of
risk seems to be high. Lack of experience in the business
is another cause of high entrepreneur’s risk and
business failure.

(f) Market Risk

Market risk relates to the emergence of competitors in

the industry, inflationary pressures, exchange rate
instability, low demand for locally produced goods, and
poor distribution systems. These are risk areas that an
entrepreneur should manage under market risk.

Types of entrepreneurs based on risk

Entrepreneurs come in three forms in terms of risk, namely:

(a) Risk averse – are those entrepreneurs who avoid taking

risks anyhow. These entrepreneurs tend to prefer to
take on the projects with the lowest risk even if the
returns are low.

(b) Risk indifferent – are those entrepreneurs who take

risks depending on the projected return. When the
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 projected return is high, they are ready to take risks.
When the projected return is low, they do not take the
risks.

(c) Risk takers – are those entrepreneurs who are always

prepared to take risks no matter what. Because of their
tendency to take higher risks, these entrepreneurs tend
to be more successful than other types of
entrepreneurs.

MOBILISING RESOURCES FOR AN ENTERPRISE

An entrepreneur is required to mobilise all the resources
needed for his/her enterprise to start its operations or for it
to continue to run smoothly, effectively and efficiently and be
able to make a profit.

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The following are the resources that an entrepreneur would
require to mobilise for the enterprise:
(a) Human resources (labour)
The human resource is the most important resource
because this is the resource that combines other
resources in the right proportions in order for the
enterprise to be able to produce the required results.
The human resource, therefore, must be mobilised by
the entrepreneur through the following tips:
● An entrepreneur must always employ the right
number of workers – not too many and not
too few. Where there is overemployment of
workers, production suffers because there is
too much idling and expecting the other
workers to do the work, and the wage bill is
unnecessarily high. Where there are few
workers than needed, there is work overload,
frustrations, too many mistakes, low morale
and consequently poor quality of goods made
or services provided.
● An entrepreneur must ensure that each
worker has clearly defined responsibilities and
roles.

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● An entrepreneur must always seek to provide
a highly motivating environment. Workers are
normally motivated by:
○ Interesting work
○ Full appreciation for work done
○ Promotion and growth
○ Good wages
○ Good working conditions
○ Fairness and understanding
○ Job security
○ Being informed of the goings-on
● An entrepreneur must always seek to keep
his/her workers constantly updated with the
best ways of doing work through constant
training both internal (on-the-job training) and
external (outside training).
● An entrepreneur must involve his/her workers
in decisions that directly affect them so that
decisions made are collectively binding and
accepted. A culture of teamwork must be
cultivated.
● An entrepreneur must ensure that at
recruitment stage, the right workers with the
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 right skills, training and experience are
employed for the right job.
● An entrepreneur must match the worker and
the job.
● An entrepreneur must set high standards of
performance.
● An entrepreneur must ensure that there is
communication among and with all the
workers.
● An entrepreneur must maintain good
supervision.
● An entrepreneur must reward people for
performance.
(b) Financial resources
Financial resources are the means by which an
enterprise acquires and sustains the other resources for
smooth, effective and efficient operations. For example,
human resources have to be paid for through salaries
and wages; capital resources like land, buildings,
machinery, fixtures and fittings, and motor vehicles have
to be purchased and maintained using financial
resources; raw materials and other inputs in production
are paid for using financial resources.
(c) Natural resources

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 Natural resources constitute an enterprise’s source of
raw materials and inputs. For example, a carpentry
enterprise requires raw materials such as wood/timber
(which come from forestry resources), nails, vanish,
steel bars, paint, and so on. All these material inputs
come from natural resources.
(d) Capital resources
Capital resources in an enterprise comprise fixed assets
like land and buildings, fixture and fittings, machinery
and equipment, and motor vehicles. All these are capital
resources which are needed in different quantities and
forms depending on the size of the enterprise.
(e) Entrepreneur (enterprise resource)
An entrepreneur is the most important resource in the
business. It relates to the creativity, innovativeness,
progressive imagination and taking calculated risks that
is required from the owner(s) of the enterprise in
relation to staring it and making it develop and succeed.

RESOURCE MOBILISATION
To be able to acquire the best talent in terms of human
resources, effectively and efficiently utilise financial
resources, natural resources and capital resources, there is
need for an entrepreneurial way of mobilising and sustaining

102
resources. This means that an entrepreneur as the head of an
enterprise must exhibit highly innovative, creative and
imaginative management skills. Resource mobilisation also
calls for proper leadership coupled with the following skills:
● Drive for success
● Negotiation skills
● Risk taking initiative
● Being influential and having wide contacts
● The ability to communicate with resource suppliers
● Networking abilities
● The act of perseverance
● The ability to solve problems
Once a business plan has been developed and all the financial
needs of an enterprise determined, it is the responsibility of
an entrepreneur to mobilise funds either internally or
externally. Resources may be mobilised from the following
sources:
(a) The internal source
For a business that is just being created, internal source
implies the owner making personal savings until the
amount needed to start the enterprise has been raised.

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 For an already existing enterprise, internal source
mainly comprise the retained earnings. That is, the
entrepreneur ensures that not all the profits made by
the enterprise are paid out to shareholders, or to
partners, or to himself/herself as a sole proprietor. A
portion of the profit is kept and ploughed back into the
enterprise.

(b) Individuals
Individuals like family members and friends may provide
finance to an entrepreneur. However, these sources
tend to have limited amounts of funds to give out but
they can form a starting point for further sourcing of
funds from other sources. For example, an entrepreneur
can hold a “Career Change Party”. It is party where you
ask friends and relatives to make pledges to your career
change from being unemployed or employed to self-
employed.

(c) Venture capital

Venture capital are funds that are put by wealthy
individuals. These wealthy individuals have professional
managers who manage the funds as an investment
group. Once an entrepreneur has obtained funds from
this source, the venture capital firm will either acquire a
104
 percentage of shares in an enterprise and/or provide
management assistance to the young enterprise.
Examples of venture capital firms in Zambia include
Meanwood Venture Capital, Kukula Capital Plc, Cavmont
Finance Services. In general, Venture Capitalist
companies are not common in Zambia.

(d) Joint venture

This is an arrangement entered into between two or
more already established businesses to form a new
business entity for a specified time and perform a
specified activity. The partner firms contribute some
needed funds and assets or in kind. All the firms in a
joint venture will participate in the management of a
new firm. Once the objective of a joint venture has been
achieved, the joint venture is discontinued, and the
assets of a joint venture are either sold and money
shared or one of the partners takes over the activities.

(e) Commercial banks

Commercial banks are one of the traditional sources of
finance. Banks normally lend to existing businesses.
They have stringent credit requirements, and many
start-up businesses fail to meet these requirements.
Banks tend to limit their lending to working capital and

105
 also require the owner to provide collateral/security
before they can lend. This means the owner has to
pledge an asset (personal or business) as a guarantee to
a bank loan. Commercial banks include Barclays Bank
Plc, Zambia National Commercial Bank Plc, Stanbic Bank
Plc, and Standard Chartered Bank Plc, to mention a few.

(f) Development Banks (or investment banks)

Development banks are specifically created to assist
investors in financing their projects. They sometimes
require collateral, but may also lend based on the
viability of the project, or on national priorities. The
banks employ their own personnel who evaluate project
proposals/business plans. Development banks lend to
both start-up businesses and to existing businesses. An
example of a development bank is the Development
Bank of Zambia (DBZ).

(g) Government sponsored agencies

There are a number of government programmes that
provide financing to small and large businesses. The
availability of these funds varies with the economic
condition in the country. Examples include the
following:

106
 ● Cooperatives
● Small Enterprise Development Board (SEDB)
● National Savings and Credit Bank
● Citizen Economic Empowerment Commission
● Constituency Development Fund
(h) Leasing companies
Leasing companies offer an enterprise a lease
agreement where the leasing company offers to obtain
new equipment or purchase of existing equipment. The
enterprise is then allowed to use the purchased asset.
The leasing company is called the lessor, whilst the
enterprise is called the lessee. The enterprise (lessee)
has to pay rent for the use of the asset bought by the
leasing company (lessor). The lease agreement is for a
specified period of several years, after which the lessee
may buy the equipment or return it back to the lessor.
Examples of leasing companies include Alios Finance (Z)
Ltd, ALS Capital Ltd, Commercial Leasing (Z) Ltd, Leasing
Finance Company Ltd, and a few others.

(i) Non-governmental organisations (NGOs)

There are some NGOs that support small businesses in
the community. They can be individually sponsored or

107
 group sponsored. Examples include YWCA, YMCA,
Women’s Trust Fund, and so on.

(j) Floating of shares/securities

This source is only available to businesses registered as
limited companies that are listed on the stock exchange.
Listed companies can raise capital by floating shares or
securities at the stock market. In Zambia the stock
market is the Lusaka Stock Exchange, and some listed
companies include Zambia Breweries Plc, Lafarge Plc,
Zambia Sugar Plc, Shoprite, Zambeef, and others.

(k) Selling in advance

An entrepreneur who is short of working capital can Let
customers buy in advance, and this would allow him/her
raise enough cash to finance short-term activities.

NETWORKING FOR ENTERPRISE DEVELOPMENT

A network is a group of individuals/entrepreneurs and
organisations sharing resources (e.g. information) and
supporting each other to develop their businesses.
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Networking is a skill to seek and provide resources to a
grouping with similar goals.
Networking is a must have skill for a business person, but
especially for entrepreneurs. It is very profitable to establish
contacts with individuals whose help you will need in future.
Simply put, networking is meeting people who can be of help
to you and being a help to them.
Networks support an enterprise in various areas as such
market information, production techniques and management
tips.
An enterprise does not operate in isolation. Every enterprise
(whether small, medium, or large) operates in an
environment that has various players or stakeholders. An
entrepreneur must identify these business stakeholders and
establish effective and efficient networks and relationships
with all of them. These stakeholders include the following:
● Customers
● Suppliers
● Employees
● Competitors
● Business associations
● Government
● Family

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 ● Financial institutions

Enterprise network web/map

The following is a depiction of an enterprise’s network web.

Customers
Suppliers
Family

Financial Business Business

institutions enterprise associations

Government Employees
Competitors

From this diagram, it should be pointed out that an

entrepreneur can create an efficient and effective network
using the following tips on each strategic stakeholder.
(a) Customers
● The customer is the most important person to the
business and deserves respect. Therefore, an
enterprise must network with the customer in
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 order to understand his/her needs and wants
better.
● The business should sell products and services
based on customer needs and wans
● The customer does a favour to the enterprise by
buying from it, and not the business doing a favour
to a customer by selling.

(b) Employees
● Workers must be motivated and looked after
properly for them to put in their best.
● There must be teamwork and consultations
between the business owner and the workers and
among the workers themselves in order to create
good networking system within the enterprise.
(c) Suppliers
● Suppliers are also in business and need a
continuing source of business.
● An entrepreneur must identify good suppliers with
whom to network.
● An entrepreneur must establish good working
relationships with their preferred suppliers.

111
 ● An entrepreneur must keep his/her promises and
make prompt payments to suppliers in order to
keep these good suppliers.

(d) Competitors
● Competitors are not rivals but partners with whom
very good networks can be established.
● An entrepreneur must study his/her competitors’
businesses in order to identify their strengths,
weaknesses and also the opportunities and threats
facing the industry in which the business operates.

(e) Family
● The business owner and his/her family must
separate business matters and family matters.
● Family members and the business owner who are
working for the business must be treated as
employees.
● The business owner and his/her family members
working for the business must be on salary to avoid
unnecessary cash drawings.

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 ● Products and services obtained from the business
by the owner and family members must be paid
for, even when they are for family use.
● Family members must network with and support,
and not destroy, the entrepreneur running the
enterprise.

(f) Government
● An enterprise, no matter how small, must abide by
government requirements and regulations such as
payment of levies, taxes and license fees, and
registration of the enterprise.
● An enterprise must network with government in
the provision of quality goods and services.
● An enterprise must supplement and compliment
government’s efforts.
● An enterprise must network with government in
bringing about economic and national
development.

(g) Financial institutions

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 ● The enterprise should develop a habit of banking its
money in order to develop a culture of prudent
financial management.
● An enterprise that has a business account stands a
better chance of getting financial assistance in
times of need.
● Financial institutions need enterprises just like
business enterprises need financial institutions. The
two should, therefore, create financial networking
links.
Every individual can be associated with any of these
networking types:
1. The loner – likes to work alone.
2. Socialiser – tries to make friends with everyone. The
contacts established are done randomly.
3. User – regular collector of business cards. This
network quickly forgets the face behind the business
cards. This type focuses on his/her own agenda. The
need for gathering information is not important.
4. Builder – Very generous individuals. The Builder is
well organised net worker, good listener and learner.
This type is collector of information that others can
benefit from.

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What is the importance of networks and networking in
enterprise development?
Networks are important for the following reasons:
 It helps you market yourself and your business at the
least cost;
 Every person you meet has other people who also
know others who can assist you?
 A link to a network is connection to a resource base at
a low cost;
 Creates goodwill and trust in the business circles;
 It provides you with potential opportunities

The role of networks and networking in a business

environment
The role of networking in networks is mainly business
development. Business networking serves many purposes:
 Sales promotion,
 general marketing,
 recruiting,
 knowledge exchange, and
 Business development

Principles of networking

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 To successfully network you must apply the following
norms:
 Giving and receiving – as much as you want to receive
you must also be ready to give;
 Contributing and accept support – you expected to
contribute support to others as well as being ready to
accept support;
 Offering and requesting – you will be offering on
regular information and you should also request for
information;
 Promoting other needs and yours – you may have
received information that someone in the network
needs some support and it is your responsibility to
inform others of that need. You must, when needs
arise, mention the needs to members of the network.
 Trust and persistence – in a network you must
develop trust because mistrust can create conflict.
Steps to establishing a network
1. Start with your family and friends;
2. Attend social gatherings;
3. To be prepared to communicate quick,, brief and
focused information about you;
4. Get to know yourself well;
5. Prepare informative business cards;
6. Carry business cards to all gatherings, meetings and
travels.

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 7. Present your skills not your job;
8. Develop a tracking systems of contacts;
9. Create relationships with the business cards;
10. Listen more and talk less;
11. Develop and use your ability to ask questions;
12. Conduct follow up actions decisively, timely and
consistently;
13. Do not make empty promises;
14. Look for unique opportunities;
15. Establish long term business contacts and referrals;
16. Develop a data bank;
17. Conduct follow ups on contacts;
18. Ask for who, places, how to do it, steps,
recommendations, connections, contacts and timings,
19. Socialise at gatherings and be visible,
20. Listen, learn, persist, and maintain contact

Here are the Dos of Net Working

 Be patient – nobody grew into an adult in a day;

 Focus on you goal – unless you aware of your
destination networking will a uncomfortable affair;
 Be sensitive to cultural differences – preconceptions of
people will make you unwanted element in the network;
 Follow on given leads;
 Contact people even when you do not need their help;
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  Aim for quality in the network relationships;
 Be selective on what you can do;
 Let your style fit your networking.
EFFECTIVE BUSINESS COMMUNICATION IN AN ENTERPRISE
Communication is a process of transmitting facts, ideas,
thoughts, opinions or emotions from one party to another so
that there is common understanding between the parties.
Effective communication is a two-way process involving the
sender and the receiver.

CHANNEL
SENDER ENCODING DECODING RECEIVER
● Information ● Verbal (written ● Sense of
● Ideas or oral)
MEDIUM words/symbols Understanding
● Attitudes ● Non-verbal ● Interpretation of message and
● Desired action Eg letter, report, gesture, phone meaning and/or
(pictures, of
call, email action
number, body understanding
language) or meanings
Eg postal system, telecommunication system,
noticeboard, ICT

Feedback

An enterprise operates in an environment where there are

various stakeholders. In order to operate effectively and
efficiently, it needs to effectively communicate with these
various stakeholders. These stakeholders include customers,
suppliers, intermediaries, employees, financial institutions,
the government, competitors, and so on.
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Types of communication
An entrepreneur may communicate through, and using, the
following:
(a) Symbols – these are written letters, numbers, signs or
pictures which are a representation of something.
Advantages
● Easy to remember
● Can carry more information

● Can be stored for a very long time;

Disadvantages
● Slow
● Too costly

(b) Non-verbal signs – this is the using of body language or

posture, gestures, facial expressions, and eye contact
Advantages
● Fast communication (instantaneous)
● Better expression of feelings than words
Disadvantages

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 ● Possibility of misinterpretation
● Cannot be sored
● Cultural differences create problems

(c) Spoken words (oral communication) – this involves

talking to employees, customers, suppliers and other
stakeholders.
Advantages
● Fast communication (instantaneous)
● It is cost effective

● It allows for immediate reaction ad clarification

Disadvantages
● Relying on oral communication may not be
sufficient as business communication is formal and
much organised
● Can be time consuming (in case of meetings)
● Possibility of misunderstanding
● No record may be kept
Barriers to communication
An entrepreneur must overcome the following barriers to
effective communication.

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(a) Low self-esteem (Low self-image)
Self-esteem is a realistic respect for oneself, or a
favourable impression of oneself, or a feeling of pride in
yourself, or self-respect.
Low self-esteem makes a person o have inferiority
feelings, a lack of confidence and feelings of inadequacy.
This leads to one not being able to adequately converse
with others, failing to express one’s feelings, failing to
accept constructive criticism, failing to admit that you
are wrong.
As such, an entrepreneur must ensure that he/she has
high self-esteem which leads to a feeling of being self-
worthy, confidence ad adequacy. With high self-esteem,
one can be able to express both positive and negative
feelings, handle criticism, can challenge and confront
others, and manage conflict.
(b) Poor clarity of expression
This involves the failure to present the message in
words and language that conveys the intended meaning,
or failing to communicate audibly and clearly, or being
unclear about what he/she is really trying to
communicate.
To overcome this barrier, he communicator must know
what he/she wants to say and how to say it. As such,
he/she must be sensitive to the psychological signals in
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 the environment, and must be clear about what he/she
wishes to communicate.
(c) Failure to listen
Failure to listen effectively is a barrier to
communication. Listening is more than hearing. Hearing
is merely the receiving of auditor information. Listening,
on the other hand, is an intellectual and emotional
process that decodes physical, intellectual and
emotional input in a search for meaning and
understanding.

Effective listening occurs when the listener correctly

understands the sender’s meaning. As such, it is not a
passive process but an active process. To be an effective
listener, you need to:
● Have a reason for listening
● Demonstrate a skill in giving attention
● Encourage the other person to talk
● Suspend judgement
● Be able to repeat what the speaker says
● Wait before responding
● Be able to say in your own words what was said

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 ● Be able to look behind words for deeper messages
(d) Failure to manage feelings
Human beings experience a change in their emotions
and feelings. Poor communication tend to suppress their
emotions.
(e) Blocks to self-disclosure
This occur when an entrepreneur fails to talk truthfully
and fully bout himself/herself. This may arise from
having fears and doubts about whether they can be
accepted by others, fearing to be rejected or
misunderstood.
An entrepreneur must be free to disclose
himself/herself in order to be known by others and
know others. He/she must freely share experiences,
emotions, thoughts and ideas.
(f) Unwilling to learn
This occurs when an entrepreneur is not able to learn
from others and from himself/herself.
Effective communication entails receiving two sorts of
messages:
● Messages from others
● Messages from within oneself

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 An entrepreneur must be willing to learn from these two
types of feedback.

Planning for effective communication

Effective communication requires both the words and body
language to be congruent.
● When both words and body language are positive,
the communication is congruent
● When both words and body language are negative,
communication is congruent
● When words are positive but body language is
negative, or vice versa, the entrepreneur is sending
a confused message
Effective communication requires an entrepreneur to plan for
the following:
● Know and prepare for what is to be communicated
– this is planning for the message to be sent
● Know and prepare for who to communicate to –
the target audience of the message must be
understood
● Know and prepare for why you want to
communicate – this involves understanding the
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 objectives or purpose of communication, that is,
what you want to achieve with the communication
● Know and prepare for when to communicate – this
relates to the appropriate time to communicate
● Know and prepare for where to communicate –
this involves the place or venue to be used to
communicate the message
● Know and prepare for how to communicate – this
requires selecting methods to be used to
communicate the message

Application of information and communications technology

(ICT) in an enterprise
Information and communications technology (ICT) refers to
the unified communications and the integration of
telecommunications (telephone lines and wireless signals),
computers as well as necessary enterprise software, storage,
and audio-visual systems, which enable users to access,
store, transmit and manipulate information.

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In this modern world, every business enterprise, large or
small, must put in place equally modern information and
communication systems by investing in it. Because there are
different interests, specialties, and levels in an enterprise,
there should be equally different kinds of ICT systems.

Department Information generated and

stored
Marketing and Sales ● Order tracking
● Order processing
Manufacturing/production ● Machine control and
maintenance
● Plant scheduling
● Materials movement
control
Finance ● Cash management
Accounting ● Payroll
● Accounts payable
● Accounts receivable
Human Resources ● Compensation
● Training and development
● Employee record keeping

From the above illustration, it can be seen that Transaction

Processing systems (TPS) are the basic business systems that
serve the operational level of an enterprise. A TPS is a
computerised system that performs and records the daily
routine transactions necessary to conduct business. An

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entrepreneur needs TPS in an enterprise in order to monitor
the status of internal operations and the enterprise’s
relations with the external environment. As the enterprise
grows, other type of systems become necessary, but the TPS
would remain the major producer of information for the
other type of systems. It is, therefore, of paramount
importance that an entrepreneur, whether emerging or
existing, puts in place an Information and Communication
Technology which is affordable and also up to date.

Information systems in organisations consist of transaction

processing systems, expert systems, decision support
systems and executive information systems.

● Transaction processing systems do the essential

number crunching (basic data entry and making many
numerical calculations).

● Expert systems are used principally at the operational

level and assist in structured problems that can be
solved by applying the relevant business rules. It deals
with any business problem that can be broken down
into a series of well-defined steps.

● Decision support systems are used by middle managers

for routine modelling, but also to analyse unstructured
problem situations where there is no precedent that can
be used as a universal guideline. It deals with problems
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 that require the use of intuition, reasoning and memory.

● Executive information systems are used at strategic

level, for unstructured problems, or to identify new
opportunities.

DEVELOPING ENTERPRISE MANAGEMENT SKILLS

(MANAGERIAL AND LEADERSHIP SKILLS IN AN ENTERPRISE)

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Definitions of management
Rovert Kreitner defines management as follows:
Management is the process of working with and through
others to achieve organisational objectives in a changing
environment, central to this purpose is the effective and
efficient use of limited resources.
Other definitions include the following:
Management is the process of planning, organising,
motivating, directing, coordinating and controlling al
resources in order to achieve stated goals.
Management means ‘to be in charge’ of drawing up and
implementing programmes that achieve success
continuously.

Duties and functions of management

An entrepreneur in an enterprise has to perform certain
management functions properly and objectively in order to
steer that enterprise to prosperity.
Every entrepreneur who ventures into business has certain
functions which he or she must perform orderly and correctly
in order for the business to run smoothly and profitably.
These functions are called management functions, and are as
follows:

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• Planning
• Organising
• Motivating
• Directing
• Coordinating
• Controlling

Planning
The most important function of management is planning.
This is because it is the starting point for every manager of
any enterprise. Large organisations employ specialised
managers in all departments who will be involved in
planning. For macro and small enterprises, planning will be
done by the owner alone who will also perform all the other
key management functions. This makes planning a very
critical ingredient in the success of an enterprise.
What then is planning? In simple terms, planning may be
defined as the process of deciding what should be done,
when it should be done, where it should be done, why it
should be done, who should do it, and how it should be
done. The famous acronym for this is 5Ws + 1H. Planning
involves looking critically at the following:
• What – the list of required activities

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• When – the time frame for each activity
• Where – the strategic location for each activity
• Why – the rationale or reason for doing each activity
• By Whom – division of labour or responsibilities based
on the right skills, experience and qualification for the right
job
• How – the methodology to be used for each activity

Importance of planning to an entrepreneur (why should an

entrepreneur plan?)
• In order to define clearly a path to follow in his or her
business operations, knowing very well that there are
several options
• In order for him or her be able to allocate scarce
resources effectively and efficiently so that the returns
(profits) are maximised
• In order for the entrepreneur to put in place
contingency factors for the uncertainties in future
• In order for the entrepreneur to explore all possible
alternatives available to him or her and pick the best
• in order for the entrepreneur to understand the
environment in which he or she is going to operate from, so

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that he or she is aware of his or her obligations, any
threats and opportunities

Organising
It is generally accepted that planning is the most complicated
and involving function of a manager. After planning, the rest
of the functions become routine and obvious.
After planning, the manager is now required to organise all
resources for proper implementation of the plan.
Organising is simply charting out an organisation structure or
arrangement which stipulates who will do what, when, how,
where and why.
Here is an example of a simple organisation structure for a
small scale farm:

Farm Manager

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 Farm Marketing Procurement
Supervisor Officer Officer

Farm Security
Workers Guard

A close look at the above chart shows you that when there is
some form of organisation in a business, it is easy to trace a
mistake and/or anomaly because everybody knows what is
expected of them, where, how, when, why, and who to
report to. When there is no organised way of doing things,
the manager may not know, for instance, where the problem
is, who caused it, how it was caused, and when it was caused.
But where the manager performs the function of organising,
there is always a co-ordinated way of doing things in such a
way that a common goal is achieved, which in business
involves effective, efficient and profitable operations.

Motivation
Another function of a good manager is that of providing
motivation in the work environment. Every manager must be
inspiring in nature, learning to give rewards, praises and
encouragement to deserving workers within the enterprise.
Assuming that workers are performing their respective roles
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very well, a god environment demands that a manager must
motivate these workers in order to continue getting from
them even more of the desired results. Motivation can come
in many forms and varies from one manager to another. It is
up to each manager to determine the best method of
motivating the workers.
Where employees are putting in their best but management
is not creating a highly motivating environment, the following
may result:
• Increased cases of theft and pilferage
• Low morale and lack of interest among workers
• Low productivity and poor quality product or service
resulting in poor sales and low or no profits
• Possibilities of sabotage of assets by the employees or
workers
• Frustrations among workers which may lead to poor
customer services and care
• Increased labour turnover (high rate of resignations)

Directing (coaching)

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In directing, the role of a manager is to ensure that he is
always alert and following closely all the activities going on in
the business operations in order to give the enterprise some
guidance, direction and focus based on the original intended
objectives and goals. In directing, the manager is providing
the required leadership and sense of goal-achieving
responsibility.
Directing entails constant check and monitoring of all
functional departments within the enterprise, to ensure
conformity with plans.
Coordinating
Just like directing above, the manager has to coordinate the
different functions of his or her enterprise’s different
departments to ensure that all departments are bent on
achieving a common goal. It is the function of a manager in a
restaurant, for example, to ensure that the one who buys
supplies has bought the right type and those who prepare
the meals may require right quantities of supplies. And those
who prepare meals have them ready in the right quality and
quantity, at the right time as may be required by those
serving customers.
Controlling
Another critical and important function of a manager is to
control all the activities within the enterprise to ensure that
mistakes are corrected and any deviations from the original

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 plan are checked. In control, the manager ensures that the
enterprise is always following the path originally made and
reviewing progress to incorporate new ideas and discard
outdated ideas, if any.
All these aspects that have been discussed in this
presentation may be summarised in what is referred to as a
Business Plan.

Leadership skills
Leadership is defined as the ability to inspire others to seek
clearly articulated goals and objectives enthusiastically.

Types of leadership
The most common leadership styles are the following:

Transformational
Democratic
People Emphasis

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L

Laissez-faire Autocratic

Low High

Task Emphasis

• Autocratic style – this type of leadership entails high

task and low relationship behaviour characterised by
one-way communication in which the leader defines the
roles of the subordinates. The leader makes the decisions
and imposes them on his or her subordinates by telling them
what, how, when and where to do the various tasks. Power
is centralised in one person who issues out orders and
directives.
• Democratic style – this involves high relationship and
high task behaviour as the decision making process is
participatory and s shared between the leader and the
subordinates through tow-way communication and more
facilitating behaviour from the leader. The leader uses
subordinates’ ideas and opinions constructively. Criticism
and praise are given constructively. When a leader is forced
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to make a decision alone depending on the situation, he or
she explains to the group.
• Laissez-faire style - this entails low relationship and low
task behaviour as the decision making process is
characterised by delegating so as to let the subordinates
‘run the show’. The leader delegates as subordinates are high
in readiness, being both willing and able to take
responsibility for directing their own behaviour.
• Transformational style – this entails high relationship
and low task behaviour where the leader portrays himself or
herself not limited by the followers’ perceptions of the
leader. The main objective of the leader is to work to change
or transform their followers’ needs and redirect their
thinking. Leaders who follow the transformational style of
leading challenge and inspire their followers with a sense
of purpose and excitement.

Good leadership qualities

• Keeping commitments – keeping commitments or a
promise is a major aspect of leadership. People tend to
build their hopes around promises, particularly promises
about their basic livelihood. If you cultivate the habit of
always keeping the promises you make, you build the
necessary trust between you and your employees.

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• Showing personal integrity – one of the most important
ways to show integrity is to be loyal to those who are not
present. When you defend those who are absent, you retain
the trust of those present. Integrity also means avoiding
any communication that is deceiving, full of lies or looking
down upon the dignity of other people.
• Having a sensitive spirit – a leader must be sensitive to
the needs of the people and compassionate in his or her
dealings with them. One thing he or she must do above all
else is: get to know them as individuals. People hunger to
be recognised. The leader must also be able to deal with
people according to their individual characteristics.
• Having a vision – your vision is your plan, your goal,
your hope, your destiny, and your picture of the future –
where you want your enterprise and your people to go.
You will also plan and communicate to your people your
vision and how you intend to achieve it. The people will
need to agree with you before you can hope to implement it
because you need their support to do it. Having a vision
means having a mind that always plans.
• Living with reality – reality means you know your
customers and your suppliers – that you understand the
environment in which you do your business. It also
means that you are not out of touch with the people you are
leading and that instead of complaining, you find
solutions or help your people find solutions to their

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problems. Reality also includes focussing on what is right
for your customers and not what is convenient for the
business.
• Having moral principles (ethics) – this mainly means
developing the attitude where people matter to you more
than things. It means that you can be and are interested in
seeing the world from another person’s point of view. It
further means that you have the responsibility to
develop, train and make your subordinates more
marketable. Ethics means teamwork, understating that
effective leadership involves accomplishing tasks through
people working together in a harmonious environment.
• Having courage – courage is the ability to exhibit
independence of thought, to take the initiative, to be a self-
starter. Courage means you are willing to stand alone. You
are responsible for who you are. Courage in leadership is the
use of power and power is to be used only for the benefit
of others, never for yourself.
• Ability to communicate effectively – “seek first to
understand, then to be understood”. This principle is the
key to effective interpersonal communication.
Communication is the most important skill in life and the
leader needs to learn it properly. If you want to interact
effectively with someone, you first need to understand
him or her.
Key differences between a leader and a boss
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A leader A boss
A leader guides A boss instructs
Applies wisdom Applies what he or she has
learned
A leader will normally consult A boss will normally impose
A leader believes in A boss is always right
consensus
A leader normally assumes A boss assumes power and
power by selection or authority by appointment
election
A leader looks at others as a A boss looks at subordinates
team as helpers
A leader communicates to A boss communicates to
seek others’ views inform
Where there is a mistake, a Where there is a mistake, a
leader will seek to teach, boss will seek to punish or
correct and harmonise discipline
A leader will normally retire A boss feels he or she is
when he or she feels he or indispensable
she is tired
Team building
A team is a group of like-minded people working together in
harmony for the purpose of achieving a common goal, which
will benefit all the members in the team.
An entrepreneur must bear in mind that the managerial
position is a position of special privileges, but carries with it
very taxing responsibilities. Cardinal among these is the
requirement that the enterprise must achieve its work
targets. If this is done, then every member of the enterprise
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shares the praise, but when targets are not achieved, it is
normally the manager that gets the blame.
Sadly, this development sets off a multiplier effect, where the
manager will also blame his or her immediate subordinate,
possibly until it reaches the last person who may have no one
to blame. Every manager’s preoccupation, however, is that
work must be done and done to the highest level of
perfection.
It is an acknowledged fact that the manager’s success
depends mainly on the cooperation not only between him
and his or her subordinates, but also cooperation among the
subordinates themselves. The manager is better placed to
ensure that this cooperation is enhanced.

The process of team building

The process of team building goes through forming,
storming, norming, performing, and adjourning.

Forming
In this stage, most team members are positive and polite.
Some are anxious, as they have not fully understood what
work the team will do. Others are simply excited about the
task ahead.
As leader, you play a dominant role at this stage, because
team members' roles and responsibilities are not clear.

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This stage can last for some time, as people start to work
together, and as they make an effort to get to know their
new colleagues.

Storming

Next, the team moves into the storming phase, where people
start to push against the boundaries established in the
forming stage. This is the stage where many teams fail.
Storming often starts where there is a conflict between team
members' natural working styles. People may work in
different ways for all sorts of reasons but, if differing working
styles cause unforeseen problems, they may become
frustrated.
Storming can also happen in other situations. For example,
team members may challenge your authority, or jockey for
position as their roles are clarified. Or, if you haven't defined
clearly how the team will work, people may feel
overwhelmed by their workload, or they could be
uncomfortable with the approach you're using.
Some may question the worth of the team's goal, and they
may resist taking on tasks.
Team members who stick with the task at hand may
experience stress, particularly as they don't have the support
of established processes or strong relationships with their
colleagues.

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Norming

Gradually, the team moves into the norming stage. This is

when people start to resolve their differences, appreciate
colleagues' strengths, and respect your authority as a leader.
Now that your team members know one another better, they
may socialize together, and they are able to ask one another
for help and provide constructive feedback. People develop a
stronger commitment to the team goal, and you start to see
good progress towards it.
There is often a prolonged overlap between storming and
norming, because, as new tasks come up, the team may lapse
back into behavior from the storming stage.

Performing

The team reaches the performing stage, when hard work

leads, without friction, to the achievement of the team's
goal. The structures and processes that you have set up
support this well.
As leader, you can delegate much of your work, and you can
concentrate on developing team members.
It feels easy to be part of the team at this stage, and people
who join or leave won't disrupt performance.

Adjourning

Many teams will reach this stage eventually. For example,

project teams exist for only a fixed period, and even

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permanent teams may be disbanded through organizational
restructuring.
Team members who like routine, or who have developed
close working relationships with colleagues, may find this
stage difficult, particularly if their future now looks uncertain.

Requirements for an effective team

The following are some of the primary requirements for an
effective team:
• The whole group and its goals should take precedence
over the prominence of any single member
• Individual members’ conflicts likely to obstruct progress
should be avoided
• Team members should be encouraged to support each
other especially when one of their members runs into
difficulties
• Team members should be receptive to new ideas and
changes
• Team members should be willing to stand in for those
that may be absent so that operations of the enterprise are
not paralysed

Team building enhancing factors

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• Ensure that the objectives and goals are well defined
and understood by all team members
• Encourage and provide time for group discussion
• Make allowances for the airing of discouragements and
differing points of view among subordinates, employees,
and group members
• Encourage frank and open criticism
• Provide an atmosphere where subordinates are free to
express their feelings
• Ensure that only one team member assumes a
dominating role

Effective team building

For any team to be effective, the team leader must pay
attention to the following points:
• Set clear objectives for the team
• Be aware of strengths, weaknesses, threats, and
possibly opportunities of each team member
• Develop an effective way of working together as a team
• Create an atmosphere of openness and trust
• Ensure individual participation and contribution
• Avoid a few individuals dominating the whole show
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• An effective group should have the same ideas, because
people with different ideas cannot function as a team
• Members of the group should depend on one another
for success
• One person cannot make a group
• Teamwork means working together towards one goal
and to interact among group members

MARKETING
Marketing is the management process responsible for
identifying, anticipating and satisfying customer
requirements profitably.
Marketing is finding out what your customers need and want
and then figuring out a way to profitably meet these needs
and wants of customers.

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To satisfy your customers and make a profit, you require the
5Ps:
• Products – providing the selection of products or
services needed. A product is anything that can be offered
to the marketing for their attention, acquisition, or use
and which has power to satisfy a need or want.
• Price – involves setting the prices customers are willing
to pay. The price is a quantity of payment (amount) given
by a customer to an enterprise in return for one unit of a
product or service.
• Place – involves the movement of goods or services
from the enterprise (point of production) to final
customers. This involves locating where you can reach
customers.
• Promotion – informing and attracting customers,
through advertising, personal selling, sales promotion
and public relations.
• Procurement – buying or producing products or
providing services at prices that can make a profit.

Importance of marketing in an enterprise

Customers are the most important people for your business.
If it were not for your customers, you would not be in
business. If you do not provide what our customers want, at

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prices they are willing to pay, and do not treat them with
respect, hey will buy somewhere else (they will buy from
your competitors). Without customers, there will be no sales
and your business will have to close eventually. Satisfied
customers will come back and buy more from your business.
They will begin to be your business ambassadors, going
round spreading the good news about your business’ good
products or services, your good customer care and reception,
and so on. They will tell their friends and other people about
your products and business. More satisfied customers mean
large sales and bigger profits.
What is a market?
The term ‘market’ has two different meanings:
• A market can be a place where people meet to sell and
buy vegetables and related merchandise. For example, a
vegetable market like Soweto Market in Lusaka.
• I marketing, a market means a group of customers,
people, or other businesses which want your products or
services and are willing to pay for them. For example,
Zambia electricity Supply Corporation (ZESCO) is found
throughout the country, but its market is NOT the entire
people of Zambia; its market are the households and
institutions which have electricity installation.
In most areas, there is a large market for school uniforms.
The school-going children use school uniforms but they are

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not the market. The parents buy the uniforms for their
children. Therefore, the market for school uniforms consists
of parents and guardians of school-going children who are
willing to pay for the uniforms.
In Kanyama township of Lusaka, there are about 370,000 but
the market for all bottle store owners is the number of
people who drink beer, which may be a very small fraction of
the total population.

Marketing concepts
• The production concept holds that consumers will
favour products that are available and highly affordable,
and that management should therefore focus on
improving production and distribution efficiency. The focus
on increasing output will lead the enterprise to achieve
economies of scale and lower unit cost of production,
and therefore charge lower prices which will attract more
people to buy the product which is widely distributed. In
this way, the organisation will become profitable and
successful.
• The product concept holds that consumers will favour
products that offer the most quality, performance and
innovative features, and that an enterprise should therefore
devote a lot of energy to making continuous product
improvements. The entrepreneur using this concept

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believes that technical superiority is the key to business
success. High quality products with many features will
satisfy customers and therefore more customers will buy the
products, and this will lead to more profits and success
for the enterprise.
• The selling concept holds that consumers will not buy
enough of the enterprise's products unless it undertakes a
large-scale selling and promotion effort. The entrepreneur
must embark on more promotional activities and assist
sales people to be very aggressive in order to ensure higher
sales for the enterprise. In this way, the enterprise will
become profitable and successful.
• The marketing concept holds that the enterprise should
concentrate on firstly identifying what customers need
and want, and then adjust the entire enterprise effort and
activities to satisfy those needs and wants of customers as
efficiently as possible, and better than other competing
enterprises. This concept lays emphasis on making the
customer the centre of all activities whilst making some
reasonable profits for the enterprise.
• The societal marketing concept holds that the
enterprise should concentrate on firstly identifying what
customers need and want, then adjust the entire
enterprise effort and activities to satisfy those needs
and wants of customers as effectively and efficiently as
possible, in a better way than other competing enterprises,

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and in a way that preserves and enhances the customer’s and
society’s wellbeing.

Marketing plan for an enterprise

A marketing plan is a written document which provides
details regarding a proposed marketing strategy or strategies.
It describes the company’s internal environment, its
competition, the microenvironment, the marketing
objectives, the product mix, the intended timescale of the
marketing department. It is the road map to success in an
enterprise.
Format of the marketing plan
• Title page – the title page must be planned and
presented logically. Systematic explanation is important
in the presentation of the plan.
• Executive summary and table of contents – the
executive summary is probably the most important part of
the plan because it gives a very good, short overview of the
business. It is the last to be written after the rest of the
plan has been completed. The table of contents should
follow the executive summary and should clearly state
what is contained where within the marketing plan.
• The current marketing situation

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 ◦ This section presents relevant background data on
sales, costs, profits, the market, competitors,
distribution, and the macro environment
◦ The facilities, offices, and personnel required to
perform marketing activities must be detailed
◦ This section should also discuss why the specific
form of business was chosen and the advantages for
the business
◦ The competitive strategic situation must be
included and should discuss Porter’s five competitive
forces determining industry attractiveness
(namely, threat of new entrants, threat of substitutes,
bargaining power of suppliers, bargaining
power of customers, and industry rivalry)
◦ The section should also talk about how
segmentation will be done
◦ The section should briefly discuss the macro
environment situation (namely, political and legal
factors, economic factors, social and cultural
factors, and technological factors) as they relate to the
proposed business
• Opportunity and issues analysis – this section should
identify the major Strengths, Weaknesses, Opportunities
and Threats facing the proposed product line

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• Marketing objectives – this section should spell out the
financial and marketing objectives of the proposed
business. The objectives must be SMART (Specific,
Measurable, Achievable, Realistic, and Time bound).
• Marketing strategy
◦ This section should clearly state the target market
after evaluating each market segment’s
attractiveness and selecting one or more of the
market segments
◦ this section should talk about the marketing mix
(namely, the Product, Price, Place, and Promotion).
Additionally, it could also discuss the People to
be used (human resource), the Process (the technology to be
applied) and the physical evidence if the plan is for
a service.
◦
• Action programmes – the marketing plan must specify
the brad marketing programme for achieving the
marketing objectives. Each marketing strategy element
must take note of the following question:
◦ What will be done
◦ When it will be done
◦ Who will do it
◦ How much it will cost
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• Projected profit and loss – there should be a supporting
budget which should show the following:
◦ Forecasted revenue showing sales volume in units,
value and average price
◦ Expenses which should show the cost of
production, physical distribution and marketing
costs
◦ The difference between revenues and costs should
be the projected profits
• Controls – this relates to how management will monitor
the marketing activities stated in the marketing plan to
ensure that actual results are achieved as planned.

Buying
Buying is the process through which the customer goes from
the time of identifying a need to the actual purchase of a
product or service
The customer’s buying process goes the following stages:
• Problem identification – this is the stage where the
customer identifies a problem that requires to be
attended to. For example, the customer’s problem may be
that of feeling hungry.

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• Problem definition – this involves determining the
general characteristics and quantity of the needed good or
service, such as the need to find some food.
• Solution specification – this involves identifying who can
provide the product or service that has been defined. For
example, the need to get to a restaurant to purchase
food; looking different restaurants to see what is on offer.
• Assessment – comparing the different offers from
different restaurants.
• Selection – this involves setting for the best offer.
• Agreement – this involves finalising the deal in terms of
quantity of purchase, price, and other accompanying
services.
• Feedback – measuring the value of what was purchased
against what was paid for and the expectations.

In real life situations, the buying process is usually

influenced by so many factors in a consumer’s life. These
factors may include
• The type of friends and family that a given customer
associates with (peer pressure)
• The level of income of a given customer. Usually the
higher the level of income, the shorter the buying process

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and; and the lower the level of income, the longer the
buying process
• How attractive the product’s features and
characteristics are. The more attractive the product’s
features and characteristics are, the shorter the buying
process and vice versa
• The ability to control impulses. Some people buy things
they do not necessarily need, because of impulse buying
• The amount of promotion by the seller. The higher the
amount of promotion, the higher the sales

Selling
Selling is the part of marketing that involves directly or
indirectly contacting, convincing and contracting with
customers to purchase your product or service.

How to increase customer sales

• Sell the solution the product provides to the customer,
not just the product
• Sell the benefits of the product to the customer, and not
just the features it has
• Build relationships with the customers, not just a sales
transaction
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What an entrepreneur ought to know about a customer
• A customer is the most important person in any
business
• A customer is not dependent on an entrepreneur, but
the entrepreneur is the one who is dependent on a
customer
• A customer is not an interruption of the entrepreneur’s
work. A customer is the purpose of an entrepreneur’s
work
• A customer does an entrepreneur a favour by calling. An
entrepreneur does not do a customer a favour by serving
• A customer is part of an entrepreneur’s business, and
not an outsider
• A customer is a human being like an entrepreneur, with
the same feelings and emotions, but it is the entrepreneur
who must exercise the highest form of tact, diplomacy and
courtesy because he or she needs to sell
• A customer is not someone to argue or match wits with
• A customer takes his needs and wants to an
entrepreneur, and it is an entrepreneur’s job to fulfil
(satisfy) those needs and wants

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• A customer always deserves the most courteous and
attentive treatment an entrepreneur can give
• A customer is the person who makes it possible for an
entrepreneur and his or her workers to earn their salaries. A
customer keeps the entrepreneur and the workers in
employment

Principles of excellent customer care

• Always assure the customers that you are there for
them
• Promptly greet customers by name, if you know them
• Listen to the customer and clarify needs and wants
through questions
• Always ask customers for suggestions to improve your
business
• Have a positive attitude – be encouraging and helpful,
smile and do not be negative or defensive
• Treat customers the same way irrespective of their
status
• Stress to all employees the need for excellent customer
service

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• When there are many customers, employ the ‘first come
first served’ strategy
• Remember: The Customer I Always right

How to retain good customers and keep sales high

• Properly execute the sale – get it right the first time
• Offer improved value
• Be flexible to solve the customer’s problem
• Service the customer before, during and after the sale
• Quickly follow-up and attempt to resolve complaints
• Provide room for customers to always suggest to you
possible improvements

Tips for improving appeals to customers

• Smiling and neat sales persons
• Clean and tidy store both inside and outside
• Selling the right product or service always
• Bright and well-lit store
• Shelves stocked, neatly stacked and easy to reach
• Signs on specials and new items

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• Inviting entry way, not crowded by rowdy youth playing
games
• Well displayed price tags

Market research in an enterprise

To understand your market and customers better, ask
yourself the following questions:
• Which different kinds of customers am I trying to sell to?
• What products or services do they usually want?
• Why do they want them?
• What price are they willing to pay?
• Where are these customers, and where do they usually
but from, and when?
• How often and how much do they buy?
• Who are my competitors, that is, other businesses
selling products and services similar to mine?
• How good are my competitors?

Finding answers to these kind of questions is called market

research. Market research is very important for your
business. It means getting information about your market.

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The more information you have about your market and your
competitors, the better the decisions you can make about:
• What product or services to sell (Product)
• What prices to charge (Price)
• How to get your products or services to your customers
(Place)
• How to inform and attract customers (Promotion)
Some practical ways of doing simple market research
• Learn to talk to your customers. This must be in such a
way that you extract a lot of genuine information from
them about how they feel about your business
• Listen to what your customers say to each other about
your business and goods and services. You must be alert to
get your customers’ comments
• You must sometimes learn to find out why some
customers keep bypassing you to buy from competitors
• Study your competitors’ businesses
• Learn to ask suppliers, other business associates which
goods sell well in their businesses; what they think about
your products or services
• Check your order books, your sales records, and your
stock records to know which goods or services sell well

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• Learn to get a lot of information by reading newspapers,
catalogues, trade journals, and magazines to get
information and ideas on new products or services
• Learn to belong to associations like Small and Medium
Sized Business Association, Farmers’ Union, etc. these
are normally information centres, with very useful
information which can help you improve your marketing
• Learn to attend trade fairs, trade shows, exhibitions, etc
• Learn to attend seminars, workshops and other related
training programmes
• Develop a habit of visiting some libraries that stock
information on trade and commerce

COSTING AND PRICING OF PRODUCTS

Costing is the process of calculating how much will be spent
to produce a product or offer a service, before a product or
service can be priced for a profit.

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Importance of costing
If an entrepreneur knows the cost of a product or service, it
will enable him or her to:
(a) set prices in such a way that the enterprise makes a
profit;
(b) identify which items are most costly and find ways of
reducing certain costs;
(c) avoid overpricing the enterprise out of competition.
Overpricing is charging prices which are well above the
average market price; and
(d) avoid underpricing the enterprise to bankruptcy.
Underpricing is charging prices which are well below the
average market price.
The information an entrepreneur uses to effectively cost
a product or service comes from the records of all
transactions of an enterprise. This is one of the reasons
why an entrepreneur is required to have a good record
keeping system.

Types of costs
There are two main types of costs:
● Direct costs
● Indirect costs

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1 Direct costs
Direct costs are those costs which become part of the
product or service which is being produced or provided.
These costs can be directly and completely attributed
(traced) to the production of a specific product r service.

Direct costs can further be divided into two sub-costs,

namely:
(a) Direct labour costsis the money spent on salaries
or wages for the people who actually make a
particular product or provide a particular service.
(b) Direct material costsis the money spent on the raw
materials used to make a particular product or
provide a particular service. In other words, direct
material costs are the costs of direct materials
which can easily be identified with the production
of one unit of a product or provision of one unit of
a service.
2 Indirect costs
Indirect costs are the cost of all other items and
payments for people needed in running an enterprise
but are not in a way easily traced to a specific product or
service. This may include costs such as:

165
 ● Rent
● Electricity
● Water
● Telephone
● Transport
● Salaries and wages for employees not directly
involved in production (e.g., owner, security guard,
secretary, cashier, etc.)
● Stationery and postage
● Repairs and maintenance
● Insurance
● Depreciation

Fixed assets
Every business uses fixed assets in its production process.
Fixed assets are categorised as follows:

● Land and buildings

● Fixtures and fittings
● Machinery and equipment

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 ● Motor vehicle
Fixed assets are used in the production process over a long
period of time. These fixed assets do not become part of the
total cost of making a product or providing a service but their
rate of wear and tear, known as depreciation, is included as
an indirect cost.

Example of costing a loaf of bread of Tilyenji Bakery

(a) Direct material costs (per loaf)

ITEM QUANTITIES UNIT COST TOTAL

REQUIRED COST
(Raw (K)
materials) (K)
Flour 3 cups 0.50 per cup 1.50
Yeast 3 teaspoons 0.10 per cup 0.30
(2.5 ml)
Sugar 3 teaspoons 0.08 per 0.24
(2.5 ml) teaspoon
Salt ¼ teaspoon 0.04 per 0.01
(0.625ml) teaspoon
Vegetable 1 tablespoon 0.20 per 0.20
oil (10 ml) tablespoon
Milk ½ cup 1.00 per cup 0.50
Egg 1 167 0.90 per egg 0.0
Total material costs 3.65
(b) Direct labour costs
Tilyenji Bakery has four (4) production workers who
make bread and each employee gets K2,000 as salary
per month. The bakery produces 50,000 loaves of bread
per month.
The formula for calculating direct labour costs per unit
produced is as follows:
Number of employees X salary
Unit direct labour costs= Qantities produced

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 4 X K 2,000
Unit direct labour costs = 50,000

K 8,000
= 50,000

= K0.16

(c) Indirect costs per month

ITEM MONTHLY
COST
(K)
Rent 1,500
Electricity 400
Water 500
Salaries for non- 5,000
production workers
Transport 1,500
Office expenses 1,000
Repairs and maintenance 1,200
*Depreciation 2417
Total indirect costs 13,517

*Depreciation is calculated as follows:

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 ITEM BOOK DEPRECIATION DEPRECIATIO
VALUE RATE PER N COST PR
ANNUM ANUM
(K)
(K)
Land and - 5% -
buildings
Fixtures and 20,000 10% 2,000
fittings
Machinery and 200,000 10% 20,000
equipment
Motor vehicles 70,000 10% 7,000
Total annual depreciation 29,000

Total annual depreciation

Monthly depreciation= 12 months

K 29,000
= 12 = K2,416.6 =
K2,417.00
To calculate indirect cost per loaf of bread:
Total indirect csts
Unit indirect costs = Quantities prodced

K 13,517
= 50,000

= K0.27034
= K0.27

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(d) Total production cost (per loaf of bread) or Unit
Production Cost (UPC)
The formula for calculating total production costs per
unit is as follows:
Total production cost per unit =DMC + DLC + IC
Where:
DMC = Unit direct material costs
DLC = Unit direct labour costs
IC = Unit indirect costs

Therefore:
Total production cost per unit = DMC + DLC
+ IC
= K3.65 + K0.16 + K0.27
= K 4.08
PRICING
Pricing is the process of determining how much a product or
service will be sold for after carefully calculating the cost of
producing one item.
The price charged for a product or service should cover all
the costs and give an enterprise some profit to ensure its
sustainability and growth.

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A price is a figure which is arrived at after adding a profit
margin to the unit production cost.
Selling price = Unit Production Cost
+ Mark-up
SP = UPC + MU

In our example of producing bread by Tilyenji Bakery, if the

mark-up (or profit margin) is 25%, the price would be
calculated as follows:
Selling price = Unit Production Cost + Mark-up
SP = UPC + MU
25
= K4.08 + ( 100 x K4.08)

= K4.08 + K1.02
= K5.10

MANAGEMENT OF FINANCE

What is finance?
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Finance is the means by which transactions in an enterprise
are expressed and measured.

What is financial management?

Financial management is a business management function
that is connected with managing finances of an enterprise.
It refers to the application of financial management tools and
techniques to coordinate all financial functions in a business
enterprise. This involves:
● Setting of financial objectives
● financial analysis, planning and control
● Management of the acquisition and application of
funds
Financial management utilises information from financial
accounting system. Financial accounting is concerned with
proper record keeping and the production, analysis, and
interpretation of financial statements.

The role of finance in an enterprise

Finance plays the following critical roles in an enterprise:
● Procurement of inputs
● Procurement of raw materials

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 ● Payment of operational expenses
● Payment for capital investment
● Payment for human resources

Importance of good financial management

The management of financial resources in an effective and
efficient way is vital for any enterprise to achieve its business
goals and objectives. Every entrepreneur wants to earn a
good return on his or her investment. To achieve these goals
and objectivesin an ever changing and competitive
environment, an entrepreneur has to make strategic
decisions that allow him or her to earn a good return on hisor
her business investment. Financial management enables an
entrepreneur to:
● maximise the use of financial resources
● evaluate new business opportunities
● measure he objective factors that affect the
performance of a business
● utilise financial information to make sound
business decisions

Source of finance

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This aspect has already been covered in the syllabus when
we were discussing resource mobilisation. The major sources
of finance for an enterprise include the following:

(a) The internal source

For a business that is just being created, internal source
implies the owner making personal savings until the
amount needed to start the enterprise has been raised.
For an already existing enterprise, internal source
mainly comprise the retained earnings. That is, the
entrepreneur ensures that not all the profits made by
the enterprise are paid out to shareholders, or to
partners, or to himself/herself as a sole proprietor. A
portion of the profit is kept and ploughed back into the
enterprise.

(b) Individuals
Individuals like family members and friends may provide
finance to an entrepreneur. However, these sources
tend to have limited amounts of funds to give out but
they can form a starting point for further sourcing of
funds from other sources. For example, an entrepreneur
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 can hold a “Career Change Party”. It is party where you
ask friends and relatives to make pledges to your career
change from being unemployed or employed to self-
employed.

(c) Venture capital

Venture capital are funds that are put by wealthy
individuals. These wealthy individuals have professional
managers who manage the funds as an investment
group. Once an entrepreneur has obtained funds from
this source, the venture capital firm will either acquire a
percentage of shares in an enterprise and/or provide
management assistance to the young enterprise.
Examples of venture capital firms in Zambia include
Meanwood Venture Capital, Kukula Capital Plc, Cavmont
Finance Services. In general, Venture Capitalist
companies are not common in Zambia.

(d) Joint venture

This is an arrangement entered into between two or
more already established businesses to form a new
business entity for a specified time and perform a
specified activity. The partner firms contribute some
needed funds and assets or in kind. All the firms in a
joint venture will participate in the management of a
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 new firm. Once the objective of a joint venture has been
achieved, the joint venture is discontinued, and the
assets of a joint venture are either sold and money
shared or one of the partners takes over the activities.

(e) Commercial banks

Commercial banks are one of the traditional sources of
finance. Banks normally lend to existing businesses.
They have stringent credit requirements, and many
start-up businesses fail to meet these requirements.
Banks tend to limit their lending to working capital and
also require the owner to provide collateral/security
before they can lend. This means the owner has to
pledge an asset (personal or business) as a guarantee to
a bank loan. Commercial banks include Barclays Bank
Plc, Zambia National Commercial Bank Plc, Stanbic Bank
Plc, and Standard Chartered Bank Plc, to mention a few.

(f) Development Banks (or investment banks)

Development banks are specifically created to assist
investors in financing their projects. They sometimes
require collateral, but may also lend based on the
viability of the project, or on national priorities. The
banks employ their own personnel who evaluate project
proposals/business plans. Development banks lend to
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 both start-up businesses and to existing businesses. An
example of a development bank is the Development
Bank of Zambia (DBZ).

(g) Government sponsored agencies

There are a number of government programmes that
provide financing to small and large businesses. The
availability of these funds varies with the economic
condition in the country. Examples include the
following:
● Cooperatives
● Small Enterprise Development Board (SEDB)
● National Savings and Credit Bank
● Citizen Economic Empowerment Commission
● Constituency Development Fund

(h) Leasing companies

Leasing companies offer an enterprise a lease
agreement where the leasing company offers to obtain
new equipment or purchase of existing equipment. The
enterprise is then allowed to use the purchased asset.

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 The leasing company is called the lessor, whilst the
enterprise is called the lessee. The enterprise (lessee)
has to pay rent for the use of the asset bought by the
leasing company (lessor). The lease agreement is for a
specified period of several years, after which the lessee
may buy the equipment or return it back to the lessor.
Examples of leasing companies include Alios Finance (Z)
Ltd, ALS Capital Ltd, Commercial Leasing (Z) Ltd, Leasing
Finance Company Ltd, and a few others.

(i) Non-governmental organisations (NGOs)

There are some NGOs that support small businesses in
the community. They can be individually sponsored or
group sponsored. Examples include YWCA, YMCA,
Women’s Trust Fund, and so on.

(j) Floating of shares/securities

This source is only available to businesses registered as
limited companies that are listed on the stock exchange.
Listed companies can raise capital by floating shares or
securities at the stock market. In Zambia the stock
market is the Lusaka Stock Exchange, and some listed
companies include Zambia Breweries Plc, Lafarge Plc,
Zambia Sugar Plc, Shoprite, Zambeef, and others.

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(k) Selling in advance
An entrepreneur who is short of working capital can Let
customers buy in advance, and this would allow him/her
raise enough cash to finance short-term activities.

Financial statements
Financial statements are summaries of the transactions of a
business presented in a structured manner to give
information concerning the business.
Financial statements reflect the following key pieces of
information:
● Financial position – what does the enterprise own? How
much does it owe? How healthy is it?
● Financial performance – is the enterprise profitable? Is
the enterprise growing?
● Cash flow – does the enterprise generate enough cash
to finance its operations and growth? Where does

The Profit and Loss Statement (or Income statement)

● The Profit and Loss Statement is an extremely important
statement that summarises the flow of income and

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expenses for an enterprise for a period of time, normally
monthly, quarterly and annually.
● As its name suggests, the Profit and Loss Statement
measures the profit or loss and provides a standard format
to assess your business and compare with prior years or
other businesses.
● The Profit and Loss Statement is also the basic tool used
to plan for the future. Every enterprise should maintain a
Profit and Loss Statement.
● The totals from the transactions for the year are
transferred to the Profit and Loss Statement.
● Sales minus the cost of goods sold (direct material and
direct labour or the cost of acquiring goods for resale)
equals the gross margin.
● Gross Profit minus expenses equals profit before tax
● Net profit before tax minus tax equals profit after tax.

Sample Profit and Loss Statement (for a manufacturing

enterprise)
K K
Sales revenue XXXXXX
Less: Direct material costs XXXX
Direct labour costs XXXX
Total direct costs XXXX

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 Gross profit XXXX
Less Expenses:
Rent XXXX
Electricity XXXX
Water XXXX
Telephone XXXX
Postage XXXX
Interest XXXX
Transport XXXX
Depreciation XXXX
Marketing expenses XXXX
Repairs and maintenance XXXX
Total expenses XXXXX
Net profit before tax XXXXX
Less tax XXX
Net profit after tax XXXX

Balance sheet
• The balance sheet lists the value of all assets the
enterprise owns or owes to others at a specific date,
normally at the end of the year. (Note the contrast: Profit
and Loss Statements are flows for a year, whereas Balance
Sheets are snapshots).
• The Balance Sheet measures the financial strength at a
specific date. A business that owes more than it owns is

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in jeopardy; it probably is broke. It cannot sell enough to
pay off the debts.
• A business that has more assets than liabilities has
“equity”, also sometimes called net worth.
• The basic accounting equation is:
Assets – Liabilities = Equity
• Sometimes the equation is expressed as:
Assets = Liabilities + Equity
Equity = Assets - Equity
• Equity is what the owner has left over after all debts are
paid. It is the net worth of the owner.
• A financially strong business has high equity relative to
assets. Many lenders will only give loans to businesses
that have more of equity.
• A weak enterprise with low equity has more difficulty in
obtaining credit and pays higher interest rates because it
is considered more risky.
• Equity is built by making and retaining profits or selling a
share of the business.

Types of assets

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• Current assets are those that can normally be converted
to cash within a year. Examples include stocks of products
held for sale, credit extended to customers (called accounts
receivables or debtors), and cash (at hand and at bank).
• Fixed assets include land and buildings, fixtures and
fittings, plant and equipment, and motor vehicles. These
are more permanent part of the business and are less liquid
– more difficult to convert to cash.

Types of liabilities
• Current liabilities are short term debts which must be
paid within a year. They include accounts payable (creditors)
to suppliers, short term loans, bank overdraft, and taxes
due to government.
• Long term liabilities are long term debts such as
mortgages and loans of more than a year.

Cash flow statement

The cash flow statement is a statement of sources and
application of funds. The cash flow statement makes the
bridge from the income statement to the net cash
movements for the same period. This statement is designed
to highlight how cash is generated by the normal business
operations; how much of this cash is re-invested in such

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items as buildings, machinery, office equipment, vehicles, to
enable the desired growth of the business. The statement
also shows the source of such funds such as additional
owner’s funds, bank loans, etc.

Budgeting
Budgeting is the process of preparing a financial plan which
shows how money will be raised and spent in the projected
future.
A budget is a financial plan which shows how money will be
raised and spent in the projected future.
Some key aspects about budgeting are:
• Budgeting involves preparing projections of major items
on financial statement such as sales, expenses, assets,
liabilities and cash flows
• Budgets are normally on a monthly basis which is
totalled for the year
• The budget is what management believes can
realistically be achieved

Importance of budgeting
• A budget is a management tool for planning and then
checking progress
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• Budgeting provides a systematic way to spell out future
plans
• If performance deviates from the budget, it provides an
early warning of problems
• Budgets for one or more years are likely to be required
by lenders

Types of budgets
There are two key types of budgets, namely:
• Operating budgets – operating budgets usually take
care of the day-to-day activities, sales plans and functional
plans of various units or departments in an enterprise. An
operating budget will normally cover items like marketing
activities and costs, operations and production activities
and costs, human resource activities and costs, and general
administrative activities and costs.
• Capital budgets – these are budgets that take care of
capital investment for business growth, acquisitions,
mergers, etc.

Steps in preparing a budget

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• Establish planning parameters, including the expected
conditions during the planning period, as well as the goals
and structure established in the strategic plan
• Prepare budget segments for various units such as Sales,
Production, Administration, selling, and distribution
• Combine and coordinate the individual segments of the
budget and check whether they are feasible and well
integrated
• Produce the final budget

Business records
Record keeping is the recording of business transactions
especially those concerning money going out of the business
and money coming into the business.
Record keeping is concerned with collecting and recording of
financial information for the purpose of maintaining reliable
financial records and preparing reliable financial statements
for all stakeholders of the enterprise.

Types of business records

Source documents – these are documents in which the
transactions of the business are first entered or recorded in a
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systematic manner. For a small enterprise, some basic source
documents that need to be kept are as follows:
• Receipt book – this where an entrepreneur enters all
the money coming into the business.
• Paying In slip (Deposit slip) – this is where an
entrepreneur enters all the money being banked into the
enterprise’s bank account. To ensure that all the money is
being banked intact, an entrepreneur should quote on the
deposit slip the range of receipt numbers whose money is
being banked.
• Cheque book – the cheque book is used by an
entrepreneur to draw out money from the bank account.
An entrepreneur should ensure that the counterfoil to
the cheque is properly filled in with relevant details (i.e.
name of payee, purpose of payment, amount, and date),
as it is used to enter details in the cashbook.
• Payment voucher – this is any piece of paper used to
pay out money. It is a written document used as proof that
a monetary transaction has occurred between two parties.
The one preparing the document, the one authorising
the payment, and the payee (the one receiving the
money) must sign this document.
• Letter of appointment, or contract forms, or wage
books – these documents cover the areas relating to
employees’ conditions of service – thus, payroll matters.

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• Invoice book – this is a request for payment. An invoice
is given whenever an entrepreneur sells goods or services
on credit. Also, an entrepreneur will receive an invoice
whenever he or she buys goods on credit from other
organisations. To avoid disputes, the invoice should be
signed by both the seller and the purchaser.

Books of original entry – the information from the source

documents is entered in the books of original entry. These re
books in which the transactions are first entered. These are:
• Cash book – this is where the entrepreneur records all
the money coming into and all the money going out of the
enterprise. It is good accounting practice to ensure that all
money received is first banked intact before spending. In
such a case, an entrepreneur has to maintain a cash book
for each bank account in order to facilitate easy bank
reconciliation at the end of the month.
• Petty cash book – if an entrepreneur uses a system
where all the money received is banked intact, then it is a
good practice to introduce a system of Petty Cash Imprest.
Thus, first a fixed round sum is determined by the
enterprise, which should be spent on petty payments
such as transport, postage and other administrative issues
within one week. At the end of each week, the authorised
petty cash vouchers are reimbursed such that the
enterprise begins a new week with the same pre-
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determined cash float for the week. Authorised petty
cash vouchers are used to make out payments. The payee,
as proof of payment, may sign these petty cash vouchers.
Alternatively, documents such as receipts or invoices
may be attached.
• Debtors day book – this is where the entrepreneur
records individuals or businesses that owe the enterprise
money for goods and services provided on credit. The
information entered in this book is from sales invoices.
• Creditors day book – this is where the entrepreneur
records the individuals or businesses that the enterprise
owe money for the goods and services supplied to the
enterprise on credit. The information entered in this this
book is from purchase invoices.
NB: In addition to the above mentioned books of original
entry, if the enterprise handles stock of either raw materials
or finished goods, then it can maintain a stock book in
order to effectively manage the stock.

Ledger books
Revenues, expenses, assets and liabilities are recorded or
entered in double entry form in ledger books. These are:
• General ledger – tis book is maintained for all
impersonal accounts (accounts which are not held in the

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name of the persons or are directly related to the
customers or suppliers of an enterprise) in which
income property, income, expenses and capital are
recorded. Recorded in these accounts are the values of land
and buildings, fixtures and fittings, plant and equipment,
motor vehicles, inventory (stock), cash, etc.
• Debtors (or sales) ledger – this is the book where an
entrepreneur maintains individual accounts for creditors in
double entry.

NB: If you record and maintain the source documents

properly, it is easy to be assisted by an Accountant and in
matters relating to tax and interpretation of financial
results needed to assist you manage your business in line
with your intended objectives. However, the costs of an
Accountant who may be engaged at the end of each
month may be much lower if you prepare your books up to
Books of Original Entry.
Uses of business records
Business records are useful in an enterprise because they are
used in the following manner:
• To measure business performance
• To track money that the enterprise owes and is owed
• As evidence to financiers when there is need to borrow

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• To obtain credit from suppliers
• As a basis for plans for the future
• As a way of listing what is available for sale
• To meet tax and other legal requirements
• As a means of communicating to the following:
◦ Lenders
◦ Suppliers
◦ Government
◦ Shareholders, and
◦ Others

STOCK CONTROL
Stock control is the process of:
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• Identifying what stock to order
• In what quantities to order each stock
• How to receive the stock ordered
• How to record the stock ordered
• How to store the stock ordered, and
• When to re-order
Various businesses have different types and forms of stock
depending on the nature of their operations. For retailers
and wholesalers, for instance, stock to them means the
various goods and materials that they buy in order to resell.
For a manufacturer or producer, stock may include raw
materials and other inputs used in production as well as
work-in-progress and finished goods. Service operators also
have their own types of stock. For instance a training
institution may have stock in form of paper, writing pads,
pens, markers, and so on.

Importance of stock control in an enterprise

Stock control ensures that an enterprise:
• Has on hand the needed stock at the right time
• Has the right amount of stock – not too much and not
too little because little stock means you miss sales and too
much stock means excess costs and crowding
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• The enterprise stores its stock in an orderly and durable
manner
• Avoids unnecessary stock theft, damage and loss

Relationship between buying and stock control

The process of buying is what creates stock in an enterprise.
When an enterprise develops a good buying system, it is
most likely to have a good stock control system because
buying is dependent on what has been depleted or is about
to be depleted. A god stock control system enables the
enterprise to know what to buy, when to buy, how much to
buy, and where to buy from. This means, therefore, that
buying is a step in the stock control process just like stock
control facilitates proper buying.

Stock control techniques and procedures

Large companies have point-of-sale computers to track sales
to ensure proper billing and stocking. The computer
develops a suggested order based on sales forecast and stock
on hand. Most micro and small enterprises use manual
systems of stock control.
Here are some tips and techniques for managing stock in an
enterprise.

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• Keep the right amount of stock – an entrepreneur must
ensure that he or she keeps the right amount of stock in
his or her enterprise; not too little and not too much. When
an entrepreneur keeps too little stock, it means that he or
she will lose business to competitors who keep proper
stock. On the other hand, when an entrepreneur has too
much stock, it means that the enterprise may spend so
much on storage and most of the cash ends up being tied in
stock.
• Stock fast moving goods – an entrepreneur must ensure
that in the enterprise’s operations, he or she must
identify goods that sell quickly and concentrate on
stocking them in affordable quantities. Stock that move
slowly must be kept in small and manageable quantities.
• The art of skilful display of goods/stock – in stock
management, another technique is to ensure that the
enterprise skilfully displays its goods in such a way that
the various goods on offer can easily be identified and
selected by the target customers. Most customers are
very busy people who have very little time to search and
ask for commodities. It is therefore incumbent upon an
entrepreneur to manage his or her stock in such a way that it
is properly arranged and displayed and can easily catch
the eye of the customer. In arranging and displaying the
goods, an entrepreneur must ensure that the safety of
these goods is also guaranteed. In the same way, stock in the

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store room must be well displayed and arranged for easy
identification and picking.
• Regular stock check – an entrepreneur must develop a
system of regular stock check to ensure that he or she has
the right stock in the right amounts at the right time for the
right customers. Regular stock check ensures that missing
stock, damaged stock, and depleting stock are identified
and the necessary management action is taken at the right
time before any problems occur.
• Keeping stock records – an entrepreneur must ensure
that there is a system of keeping records, which clearly
show the stock movements in and out of the enterprise,
and ultimately guide the entrepreneur in terms of what to
order, when to order, and how much to order.

Steps to follow when doing stocktaking

• Make sure your stock is well arranged
• Prepare your stocktaking list
• Count the stock and write down the quantities on the
stocktaking list
• Copy your information from your stock cards to your
stocktaking list
• Compare your stock cards with the stock taking list

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• Write the correct quantities on your stock cards

MANAGING HUMAN RESOURCE IN AN ENTERPRISE

The human resource refers to people who make up the
workforce an enterprise. They can be employed or engaged
in some activities to do something. Thus, they are engaged to
provide both physical and mental labour to an enterprise,
under a contract, for a reward of a wage or salary.
An enterprise are formed for a purpose. In trying to achieve
this purpose, an enterprise uses or engages a combination of
human and non-human resources. The human resource make
up the personnel or employees engaged by an enterprise.

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Non-human resources refers to all other resources such as
materials, finance, etc.

Human resource management

Human resource management describes the function that
are concerned with people; the employees. Human resource
management is the function performed in an enterprise that
facilitates the most effective use of people (employees) to
achieve organisational ad individual goals.

Human resource practice in an enterprise

The human resource practice in an enterprise will normally
begin with human resource planning. This is the process of
matching long-term demand and supply of labour. The
essence of human resource planning is to have the right
people in the right numbers with the right skills and
experience at any particular time.
Human resource planning can be looked at as involving three
stages.
• Stage 1 – at this stage, you start with compiling the
talent inventory in an enterprise. This involves looking
inside an enterprise for the various types of skills, abilities,
potentials, etc of the current employees. Then you look at
the activities within the enterprise which need to be

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performed. The talent inventory and the activities needed
to be performed in an enterprise are then compared in
order to ascertain the gaps that exist in terms of surplus or
deficit of labour. This results in either downsizing r hiring
of labour.
• Stage 2 – this stage calls for predicting or forecasting
future human resource skills requirements. This involves
carrying out the needs assessment for each unit or section of
an enterprise. At this stage, one asks questions such as “Do
we downsize or hire more labour?” This, however, is
done in relation to the long-term business plan of an
enterprise.
• Stage 3 – this stage looks at the human resource
functions to take care of the outcomes from either stage one
or stage two. The functions performed will include among
others the following:
◦ Staff recruitment and selection
◦ Employee training and development
◦ Performance management which would result into
actions such as transfers, promotion and
discharge
◦ Compensation, which includes the remunerations
and motivation of employees

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Industrial and employee relations
The industrial and employee relations relate to how the
stakeholders interact with each other. The stakeholders
comprise the employees (union), employers and the
government. This is referred to as the tripartite relationship
or arrangement. To be able to handle industrial and
employment relations, an entrepreneur needs to familiarise
himself or herself with the Industrial and Labour Relations
Act and the Employment Act.

• Industrial and Labour Relations Act Cap 269 of 1995,

amended in 1997 - this Act deals with organisational
structures of industrial labour relations, that is, the
tripartite arrangement comprising employees (union),
employers, and the government. It explains how unions
are financed, formation of joint councils, the way
collective agreements proceeds, and the settlement of
disputes. It also looks into the consultative labour
councils, and the role of industrial courts.

• Employment Act Cap 268 No 15 of 1997 - the Act deals

with appointments and duties of labour officers. It is
concerned with oral and written contracts, breaches, and
disputes of contracts. At the same time, it looks at the
administration of salaries, housing and staff welfare. It

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also considers the power of courts and offences that can be
taken to court.

Elements in the conditions of service

The conditions of service document should always be
outlined as it gives the boundaries of the employment
contract entered into between the employer and the
employees. The main elements in the conditions of service
are outlined below:
• Authority and interpretation
• Definitions
• Applications
• Appointment and probations
• Housing
• Allowances
• Human resource development and training
• Loans and advances
• Death or injury on duty
• Retirement, retrenchment, and redundancy
• Employees’ obligations
• Disciplinary code and grievance procedure

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• Industrial and labour relations

FORMULATING STRATEGIC PLANS

Strategic planning process

Strategic planning is a process of mapping out ways and
means by which an enterprise organises and positions itself
in order to gain a competitive advantage over other
enterprises in a competitive business environment. The
business environment in which enterprises operate can be
likened to a battlefield. It is therefore enterprises with proper
and good strategic plans that will emerge as winners. And
without a strategic plan an enterprise cannot survive the
competition in the business environment.

Steps in strategic planning

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• Formulation of mission statement – the mission can be
defined as the purpose or rationale for an enterprise’s
existence.
The economic success and survival of an enterprise is
the result of identifying a mission to satisfy customer needs.
Developing a good strategy would be easier if an
enterprise’s mission is clearly defined.
• Formulation of goals and objectives – an objective is an
incremental step towards achieving a goal. A goal on the
other hand is something one aims at achieving in the short,
medium, or long-term. A business enterprise, however
small, would have a set of objectives. These may not be
clearly defined but they will be there. For a well-established
enterprise, these objectives must always exist in well-
defined form and be available at least down to the middle
management, if not supervisory levels.
• Formulation of strategies – a strategy is the action
taken to achieve long-term results that an enterprise has
set for itself. Strategies exist at corporate, divisional or
departmental levels of an enterprise. The goals at one level
change at another level in the hierarchy below it. For
example, a corporate strategy changes to become a
departmental goal.

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Importance of strategic planning
Strategic planning is actually very important for the success
of a business enterprise. Without it, the chances of business
failure increase. The importance of strategic planning can be
seen from the following:
• Mission statement – an enterprise would only come up
with its mission during strategic planning. The mission
statement acts as guiding star to give direction to the
enterprise. Therefore, without outlining the mission
statement, an enterprise would go round circles,
meaning the enterprise would not experience the required
growth.
• Goals and objectives – the goals outline the set targets
for an enterprise. The objectives are the benchmarks set
up to signal the attainment of the desired position.
Without objectives, one would not know whether desired
growth has been achieved. Goals and objectives are
developed during strategic planning.
• Strategies – a strategy is the action taken to achieve
longer-term results that an enterprise has set for itself. When
the action plan is not in place, activities carried out will
be in a haphazard manner. The strategic plan is a powerful
tool in a competitive business environment, meant to help
gain competitive advantage over other enterprises. It is
also used in the monitoring and evaluation of the
enterprise’s operations.
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• Internal and external use - the strategic plan is
important for internal use within an enterprise, as well as
for external use by stakeholders. It also draws its inputs
from, or takes into account, the PEST (political, economic,
social and cultural, and technological factors) and the
SWOT analysis.

ENTERPRISE AND TECHNOLOGY

Technology may be defined as all scientific knowledge
deliberately and purposefully used for production,
distribution, consumption and utilisation of goods, services
and information especially that which concerns mechanical
apparatus and systems.
The machinery and equipment used by an enterprise in the
production of goods and services makes up the technology of
an enterprise. Machinery and equipment can be categorised

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into light and heavy duty, depending on the scale of
operation for which it has been intended.

Sources of technology
There are basically two main sources of technology, namely,
internal and external sources.
• The internal source is referred to as the local, domestic
or one found within a particular set up. This is usually one
identified and designed for a particular set up or
environment.
• External sources of technology would mean the
technology that is imported from outside one particular set
up. This could mean a country or nation.

Selecting suitable technology for an enterprise

There are many factors taken into account when selecting
the suitability of the technology to be acquired. Among these
factors are the following:
• Cost – the cost it takes to purchase the technology is
one factor to be considered. You consider an enterprise’s
budget meant for acquiring technology. Some technologies
can be cheap while others are quite expensive. It must be
noted that rushing for cheap technology may not be

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 advisable because that would compromise the quality of
products made or services provided by the enterprise.
• Efficiency – the effectiveness with which the desired
technology brings in the operations of an enterprise is
another factor to be considered. This will relate to how
faster and cost effective the new technology will be in the
activities of an enterprise.
• Suitability – not all technologies are suitable for an
enterprise. The technology selected should be able to suit
the scale of operations in a given enterprise.
• Benefits – the technology to be employed should also
be looked at in terms of the benefits that it brings to an
enterprise.
• Spare parts – the technology to be considered should be
one with availability of spare part supplies for the
continuity of operations.
• Maintenance – the ease with which maintenance is
carried out and the cost of maintenance is considered in
the selection of technology for an enterprise.
• Productivity – the rate of increase in production
expected from the specific technology is also taken into
account when considering the suitability of technology for
an enterprise.

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Relationship between technology and enterprise size
An enterprise will normally be with the scale of its
operations, such as macro, micro, small, medium, and large.
In the same vein, technologies developed for enterprises also
comes in sizes such as macro, micro, small, medium, and
large scale. Therefore, the scale of technology is matched
with the size of an enterprise; otherwise the mismatch has its
own problems and complications.

Inventions and technical innovations

Invention can be referred to as the designing or creation of
something that did not exist before. This can be in form of
technology designed or created which did not exist before.
Machinery and equipment, which did not exist before, made
to serve some purpose is actually an invention.
Technical innovations is referred to as the adaptation,
modification or changing of the technical aspect of
technology. It is concerned with making changes to
something that is already in existence and those changes are
in technical aspects, or introducing new things.

Importance of inventions and technical innovations to

national development

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Inventions are quite important to national development in
that technology is intended to help bring about increased
production in a national economy. Not only that, if the
invented technology is exported, the country will earn
foreign exchange. Inventions also accelerate the rate of
industrialisation of a country. Equally, technical innovation is
important to national development in terms of saving foreign
exchange, which could have been used to acquire new
technologies from other countries that only export
technology. This becomes the starting point for inventions. It
also brings about reduction in the cost of production thereby
resulting in experiencing economies of scale.

Barriers to commercialisation of inventions and technical

innovations
Whereas inventions and technical innovations are important
to national development, they are also important to bring
out the barriers that are encountered in the process of
commercialisation. Among the barriers encountered are the
following:
• Government policy – when government does not have a
policy concerning invention and technical innovation, very
little help is given to this effect. As a result, this becomes a
barrier to commercialisation.

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• Bureaucracy – when bureaucracy is too long and
cumbersome to follow, it discourages venturing into
commercialisation of inventions and technical innovations.
• Costly and lengthy patenting process – the whole
exercise of commercialisation is quite costly and at the
same time has long patenting process, which is a source
of discouragement.
• Finances – financiers are also hesitant to finance the
commercialisation venture, as they are not sure that their
investment would yield them anything, when they look
at other complications involved

BUSINESS ETHICS AND VALUES IN MANAGING AN

ENTERPRISE

Cultural values and business ethics

Cultural values are the generally accepted ways of living that
characterise a set of people. They can be referred to as the
intrinsic worth or goodness of thoughts or actions of a group
of people of the same cultural background. They are
characterised by the dos and don’ts of a set of people.

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The term “Ethics” comes from a Greek word “Ethos” which
means character or custom. It deals with the rights and
wrongs. In business, business ethics therefore can be said to
be a systematic study of morals or matters pertaining to
business, industry or related activities.

The influence of culture and ethics on an enterprise

• Cultural values – cultural values shape people in a
certain way. That is to say people’s characters behaviours
and conduct are determined by cultural values. An
enterprise is influenced by culture through two ways namely;
by employee’s character, behaviour and conduct and the
culture in the environment in which the enterprise operates.
• Business ethics – the ethics are concerned with the
rights and wrongs in business. Giving guidance within
which it should operate therefore influences an
enterprise in terms of dos and don’ts.

The influence of family on an enterprise

The family is seen to influence an enterprise when there is no
separation between family and business. When this happens,
an enterprise fails to operate the way it should, and as a
result growth is adversely affected. Below is a detailed
explanation of how to separate business from family:

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• Separation of business from the owner and family - in
modern business management, any business no matter
how small must be separated from the owner. His or her
family too, must be separated from the business altogether.
The owner and his or her family must treat the business
as an employer. All business issues and matters must be
separated from family issues and matters.
• Payment of salary to the owner – in modern business
management where the owner has been separated from
the business, it means that the business must pay the
owner a salary at a specified date every month just like an
employee of Bank of Zambia is paid monthly on a
particular agreed date. If the owner has an urgent personal
problem, which has occurred before the pay date, then
he or she must go to business (employer) and apply for an
advance which, if approved, must be deducted from the
owner’s salary at pay time. This salary advance must be
clearly recorded in the business record books for future
reference just like the case with finance department in any
big company.
• Use of family members in business – if the owner
decides to use some members of his or her family in the
business, they too must treat the business as their own
employer and must be on a salary, which they must get only
at a specified date of every month. At home, the owner and
his or her family are members of one family, but at the

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business the owner and his or her family are just workers
employed by the business and can easily be fired if they do
not follow laid down rules and procedures just like a
father and a son working in, say, Bank of Zambia can be
fired by management if they do not follow laid down
procedures.
• No free products or services from the business – if
anyone gets any product or uses any services from the
business, they must pay for that product or service because
it took money to have that product or service on the shelves
in the business. Any product or service going out of the
business must equally mean money into the business.
There is no free product or service for anybody in modern
business management unless and until it is meant for
business promotion or marketing. If anyone gets any
product or uses any service from the business without
paying for it, they must be entered in the business records
as debtors who must eventually pay just like employees in
Bank of Zambia have to fill an I.O.U form each time they
get something from, say, the petty cash.
• There must be conditions of service in the business –
every business no matter how small must have a simple but
very specific but deliberate “conditions of service”
document which must clearly state the different conditions
of service which each employee or worker shall enjoy and
any accompanying benefits such as leave pay, funeral grant,

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amount of advance, etc. this is to ensure that there is a
well-tabulated system of managing eventualities in the
business. No organisation is too small to have a system.
There is always a starting point to instil discipline.
• Business bank account must be separate from personal
bank account – since there is separation of the owner
from the business, there must equally be separation of the
business bank account from the owner’s personal bank
account. No personal monies must be found deposited
in the business bank account unless the owner is trying to
increase the capital of his or her business, and no business
money must be deposited in the personal account unless
it is a recorded drawing which the owner is prepared to pay
back at a later stage.
• Financial discipline – the success of any given business,
especially small-scale business, largely depends on how
financially disciplined the owner or manager of such an
enterprise is. In fact, the basis of a strong foundation in the
area of financial discipline are the factors that have already
been discussed above. A financially disciplined
entrepreneur will always seek to find the most effective
and efficient ways of cost minimisation and profit
maximisation without necessarily compromising the
quality of his or her products or services or unfairly pricing
himself or herself out of competition. Financial discipline can
also be viewed as an attempt to ensure that only what

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may be termed as very necessary expenses are incurred
whilst maintaining very acceptable and high standards in
the provision of goods and services.
Financial discipline is more pronounced where an
entrepreneur can withstand the temptation of unnecessary
personal drawings, living beyond his or her means and
abilities, and allowing uncontrolled and unaccounted for
outflows of cash.
• Hard work - anther critical ingredient to success in
business is hard work. The term business is derived from
being constructively and productively ‘busy’ just like laziness
is derived from lazy. A serious entrepreneur will dedicate his
or her time and energy to discovering the most
constructive and productive ways of doing business.
• Perseverance – with increased competition and
liberalisation of most economies, business has increasingly
become very difficult to run and manage and constantly,
different problems keep coming up. This, therefore, means
that people running businesses must continuously learn
to persevere during difficult times. Perseverance is the
art of looking at problems and difficulties as challenges
and seeking to find solutions to these challenges. Only those
entrepreneurs who seek to find solutions to any
problems and difficulties they encounter will eventually
succeed in whatever they aspire to do. Perseverance builds
a strong character which normally leads to the generation of

215
a variety of ideas from which solutions to any problems or
difficulties may be sought. Perseverance is, therefore, very
essential to business success.
• Positively and constructively ambitious – to succeed in
business, one ought to be positively and constructively
ambitious. To be positively ambitious means to have that
personal conviction that you can make it if you have the
right attitude and psychological preparedness (“if others
have made it, why can’t I”). On the other hand, to be
constructively ambitious means setting very realistic and
achievable targets, that is being SMART with your goals and
objectives. (The term SMART means:- S = Specific. M =
Measurable, A = Achievable, R = Realistic, T = Time
bound).

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BUSINESS PLAN
A business plan is a structured and systematic outline of your
idea and the information needed to transform the idea into
an enterprise.
After identifying a business opportunity, selecting the
product or service to be supplied and collecting relevant
market information, one needs to write down everything in a
structured plan in order to establish if the business idea can
work as a profitable enterprise. This will enable you
determine if you should take the risk to start.
The business plan is a proposal on how you plan to
implement your business activities; it takes into account all
the key factors to be considered before starting an
enterprise. A business plan gives a description of your
business and provides details about:
• The product or service you will offer
• Who your target customers are
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• What marketing strategies you will use to reach the
customer
• How much money you need to put your idea into
practice
After preparing a business plan, one is able to estimate how
viable and profitable the planned business will be.

Importance of a business plan

It is important to prepare a business plan before you start
business activities because the plan will guide you when you
actually start implementing your ideas. The business plan
helps the owner to clarify what the objectives of the business
are and to identify the strategies needed to achieve those
objectives. A business plan helps to ensure that one has
thought through all the crucial aspects of the business
venture.
A business plan is the entrepreneur’s most useful document
because it gives direction and is a yardstick that can be used
to measure whether you are on course or not. It can
therefore help one to review results of business activities and
to make adjustments where necessary. In particular, the
business plan will help you to:
• Organise your ideas and to decide on how best you can
get started

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• Present your idea to other people who can help you to
get started, such as financial institution
• Decide on whether it is financially worthwhile to start an
enterprise based n your idea
• Determine if it is practical to start the enterprise

When to write a business plan

A business plan should be written:
• After deciding to get into business and before starting
operations
• When situations and circumstances concerning the
business have changed and the old plan needs updating

Once a business plan is written, it becomes a functional

document which the owner can use:
• As a reference document to check consistency between
operations and the plan. In this case, a business plan acts as a
guide as one operates the business, by counterchecking
what is happening with what was planned. This helps one to
make adjustments where necessary so that the objective set
out in the plan can still be achieved and the purpose for
the business can be realised.

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• As a document to submit to financing institutions. A
business plan is a document that gives a detailed outline of
your proposed business venture and how you plan to
implement it, in order to achieve set objectives (profit). It is
therefore a document that you can submit to a bank or
any other financial institution to source for financing for the
planned venture.
• As a discussion document with relevant interest groups.
A business plan can also be used as a discussion
document with various interested parties such as
potential partners, the council, and business advisers. It
can help clarify issues and can make it easy to convince
other parties that the business idea is viable.

Contents of a business plan

A business plan is a guide that helps you not to overlook
anything in the process of starting your new business.
A business plan must effectively express your idea and be
able to convince others of the viability of your business idea
in your absence. For the business plan to effectively do that,
it has t contain certain basic information upon which
someone can make a decision.
The contents of a business plan are as follows:

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Executive summary
Although this section appears first in the business plan, it is
written last. This section is a summary of all the important
aspects contained in the plan. It gives the reader a quick
snapshot of what the business idea is all about.
Most readers (especially financial institutions) use the
executive summary of the business plan to decide whether
the whole plan is worth reading. The way the executive
summary is written will therefore determine whether your
business stands a chance to be considered. It is worth
investing a lot of effort in making sure that the executive
summary is well written.

The business idea description

This is where you put your thoughts and ideas regarding
what business you intend to start. It is the introduction to the
business plan and the basis upon which all other sections will
be developed.
It gives basic information about the type of business, the
target customers, and the demand that the business will be
addressing.

Marketing aspects

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In this section, you provide marketing information about your
business. You present an outline of how you will market your
products or services. The marketing plan should contain
details of what services or products you will provide, what
prices you will charge, where your business will be located,
and how you are going to promote your products or services.

Legal form of business

Under this section, you write down what legal structure your
business will hold. This will be after examining the different
legal forms of business available and after analysing the
advantages and disadvantages of the various forms.

Management and organisation

In this section, you will outline the tasks that will be
performed in your business, and the skills and experiences
required to perform those tasks. You will then indicate how
many people are required to perform the identified tasks.
This will help you come up with the total number of staff
required for your business to operate.

Legal requirements

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Under this section, you record the legal requirements needed
for you to operate the business. These can include insurance,
tax registration, social security for your staff, and so on.

Costing of products or services

In this section, you determine the present calculations of
much it will cost to produce your product or service. This is
the basis upon which you will set the prices for your products
or services. Both the direct and indirect costs will have to be
presented.

Financial plan
In this section of your business plan, you will be able to
forecast your finances for a minimum period of at least one
year. Financial planning helps you to project both your profits
and your cash flow. The projected financial statements will
be presented in this section.

Projected costs and means of financing

Under this section, you will present calculations on how
much initial capital investment you will need to get your

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business off the ground. You will also outline how this start-
up capital will be financed.

Factors to consider when preparing a business plan

• Business opportunities – once you have identified a
business idea, it is worthwhile to assess and establish
whether this idea can be matched to a business opportunity.
A business idea is a mental conception and for it to be
implemented, it needs to be matched with a business
opportunity. Opportunities exist in various business sectors
and it takes an entrepreneur to identify these
opportunities. For example, uncollected garbage in a local
community is considered as a nuisance to many people,
but to an enterprising individual with an idea to start a
waste collection service, it is a business opportunity
worth exploiting.
• Market scan – before you can even consider putting
your business idea into a business plan, you need to scan
the market to establish whether the products or services
you will transact in have a market. Producing a product or
providing a service without an identified market can
result in the collapse of the enterprise because no one will
be willing to buy and, as a result, working capital will be
tied up in unsold goods.

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 A market scan is a general assessment of the market
environment to identify the potential customers for your
products or services and to determine if the demand for
your products or services is big enough for you to even
consider developing a business. The result of a market scan
can help you to decide whether to pursue the business idea
further and write a business plan for it or to determine
whether the idea is not practical.
• Environmental scan – one needs to conduct an
environmental scan to establish which other factors in the
surrounding environment will affect the business. The
external business environment includes consumers,
competitors and regulatory bodies. Results from this
environmental scan will have an impact on how one writes
the business plan in terms of what items to include. The
environmental scan exercise assesses external factors that
can affect the business. These include:
○ Political and legal factors, for example, laws and
regulations
○ Economic factors, for example, income distribution
and spending patterns of consumers
○ Social and cultural factors, for example, family and
household structures and people’s beliefs

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 ○ Technological factors, for example, new and more
modern products, better technologies and equipment,
and so on
• Market research – finally, before you write the business
plan, you need to have sufficient detailed information
about the market you are targeting. This is very important
because most of the financial estimates in the business plan
will depend on the volume of demand you will have
established during a market research study. A market
research is a process of getting information about your
customers and your competitors. To get information about
the market you want to deal with, you have to conduct
market research.
Results from a market research will help you determine
what share of the market you can secure and help you to
develop strategies of how to secure this market share. All
this information will help you to prepare a convincing
business plan.

Preparing the main body of the business plan

To prepare the main body of the business plan, you need to
put together all the information you gathered from the field
and the idea you have. To prepare the main body of the
business plan, you need to take step-by-step approach and

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follow the outline presented in the chapter on contents of
the business plan.
All costs and quantities must be based on factual information
collected during the field surveys. It is important to put as
much detail as possible in the individual sections of the
business plan. However, only relevant information should be
included. All information in the main body of the business
plan must:
○ Be clearly explained
○ Have logical sequence
○ Be interrelated

Preparing a business plan

Now that you know what should be considered in the
business plan and the factors to consider when preparing a
business plan, you can start preparing your own business
plan using the business idea that you have developed.

Information gathering for a business plan

Information used in the business plan must be factual and
current. It is therefore important that the entrepreneur
gathers information specifically for his or her business plan.
When writing the main body of the business plan, this outline

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must be followed because it provides a logical presentation
of information. Remember, the executive summary is written
last:
• Executive summary
• Business description
• Business objectives
• Business location
• Market aspects
• Management and organisation
• Total projected costs and means of finance

• Summary of assumptions
◦ Production programme
◦ Products or services
◦ Output
◦ Raw material requirements and other expenses
◦ Utilities
◦ Direct labour costs
◦ Overhead costs

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 ◦ Depreciation and fixed costs
◦ Selling price and projected sales revenue
◦ Initial working capital calculations
◦ Loan repayment schedule (where applicable)
◦ Production cost schedule
◦ Projected profit and loss statement
◦ Projected cash flow statement

NB: for the example of a business plan, refer to the end of

this module

Presenting a business plan

Presentations are a verbal and practical way of
communicating ideas and information to many people at the
same time. Effective presentations have the following
characteristics:
• Content – relevant information that the audience wants
to hear
• Structure – a logical beginning, main body and summary
• Style – a well prepared style of effectively putting the
information across

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• Human element – a confident and articulate
communicator with good understanding of the subject

To effectively communicate information during a

presentation, you need to have the right presentation skills.
Presentation skills are the abilities to effectively
communicate information to a group of people.

Importance of presenting a business plan

A business plan consists of information, which portrays a
positive picture of your potential business. This positive
picture has to be communicated to different stakeholders in
order for you to receive the support and assistance needed
for the business to succeed.
Presenting the business plan by personally communicating
the information in the business plan gives you the
opportunity to also communicate your abilities, level of
confidence, and to point out key areas of the plan which are
mutually beneficial to you and the stakeholders.

Presentation of the business plan

Before you consider presenting the business plan, make sure
that the plan is completed and that all the relevant
information is in place.
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Preparation
The first thing you have to do before making a presentation is
to prepare for it. Remember that a 15 to 20 minutes of
talking will decide whether your plan is acceptable or not.
Therefore, you need to prepare adequately. On average you
should spend a minimum of three hours of preparation for a
15 minutes presentation. What should you do?
• Establish the objective of the presentation so that you
can concentrate on conveying information needed for
you to achieve your objective. For instance, to obtain a loan
or to get a business plot.
• Identify the audience you will be addressing so that you
can understand what their interests are and what they are
looking for from your plan.
• Put a structure with a logical sequence to your
presentation to make understanding easy for the
audience. Make sure that your presentation has an
introduction, main body and a conclusion.

Process and management of the presentation

Once you are before an audience to communicate your
information, you need to know how you will proceed and

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how you will manage the process of the presentation. There
are at least five elements you have to consider:
• Get the attention of the audience
• Present the theme of the presentation
• Explain the structure of the presentation
• Win the audience over. Leave an impression
• select the appropriate visual aids
• Manage your body language
• Appearance

PROCEDURE FOR FORMALISING AN ENTERPRISE

Business documentation

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Once you have developed a business idea and prepared a
business plan, the next step is to formalise your business so
that you can start operating legally. As discussed earlier,
there are many options for you to choose from in formalising
your business.
It is however recommended that you start small by first
registering your business activity under Business Name
Registration before you can think of transforming your
business into a company. The advantage of registering your
business name is that no one can use it.
Documentation for formalising your micro/small business
includes:
• Information required by the Registrar of Companies for
registration of a Business Name, which includes:
◦ Proposed name(s)
◦ Nature of business activities
◦ Place of business operations
◦ Full names of owner(s)
◦ Nationality, sex and age of partners (owners)
◦ Residential address of partners (owners)
◦ Proposed date of commencement of business
• A Certificate of Registration, issued once your
application has been approved
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• A Certificate of Registration as a Small Enterprise
obtainable from the Small Enterprise Development Board
(SEDB)
• A Certificate of Tax Exemption obtainable through SEDB
from Zambia Revenue Authority
• Other documents – depending on what business
activities you will be undertaking, you might need
additional legal documents such as:
◦ For a restaurant business – clearance certificate
from the municipal council
◦ For food processing and medicines – clearance
from the Food and Drug Commission
◦ For basic training – certificate from the Ministry of
Education

Physical setup of an enterprise

You have gone through a step-by-step approach to
establishing your business. Up until now, the business is still a
plan on paper. The next step is to consider how and where
exactly your business will be located.
To determine how you will set up your business, you must
get back to the business plan and look at the marketing plan,
sub-section ‘location’. That is where you described where the
physical location of your business will be.
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• Location and building needs - assess the level of
operations and the number and size of machines and
equipment the business will need. This will help you come
up with the appropriate space requirements for your
business. Once you know the size of building you need,
consider the specific location your business will operate
from. The location must be attractive and easily accessible
to customers. The business must fit in with the existing
business environment. Do not, for example, locate a nursery
school next to a bar.

• Machinery, equipment and furniture

Identify the right machinery and equipment to suit the
level of your business operations. If the machinery is too
big or has too much capacity, it will only take up too
much space or it will not fit in your building. Remember also
that idle machines will be a cost to the business.
It is important to draw a diagram indicating where each
piece of equipment will be in relation to others and in
relation to existing facilities for example, if you are
establishing a hair dressing business, you need to ensure that
the washing equipment is near where the water drainage
system is.

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 Furniture must be bought to fit business requirements.
You need simple and presentable furniture which will last.
Fancy, costly furniture will increase your start-up costs.
• Essential facilities
Your business premises must be accessible to essential
facilities such as water supply, electricity supply,
telecommunications, and banking services.

Production or service process

Laws and regulations
In setting up the production or service process for the
business, you must consider the requirements of the law.
These include:
◦ The Factories Act requirements on safety measures
◦ Municipal council regulations from the health and fire
departments
◦ Zambia Environmental Management Agency’s
regulations on disposal of waste
The production or service process must be easy flowing with
no blockage of waterways. Exits must be easily accessible by
all workers. The operation areas must have sufficient
ventilation. There must be fire-fighting equipment in
operational areas. Raw materials, work-in-progress and

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finished products must have designated storage space and
must not take up passage space.
Production or service process organisation
Production or service process organisation is a process of
planning the physical layout for the operation of an
enterprise. The important information needed for planning a
production or service process are:
◦ The sequence of task/job
◦ The required space for each task/job
◦ The space needed for conveying
◦ The space needed for storage of raw materials, work-in-
progress, and finished goods
Process can be laid out in different ways depending on what
is convenient. The two basic methods are:
▫ Layout according to functions. For example, in a
carpentry workshop you can have cutting, planning, joining,
sanding, and so on.
▫ Layout according to objects (raw materials/inputs). For
example, in producing crafts, wood can be positioned at one
place for all wood-related crafts or reed for all woven crafts.
The layout of the production or service areas must be
planned in such a way that it gets maximum productivity

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from people and machines with the available resources. The
layout must have the objective to:
◦ Maintain quality
◦ Control costs
◦ Improve machine and equipment utilisation
◦ Allow flexible use of resources
◦ Control work-in-progress

Quality management
The operations sections, like other sections of the business,
has to contribute to the successful implementation of the
business plan. Quality management is one area that needs to
be carefully planned for. Quality management includes
quality planning and quality control. The objectives of quality
management is to ensure that:
◦ The products or services satisfy the customer needs
◦ The rate of failure and mistakes is minimised
◦ The cost of operation is contained within limits

Safety measures
The operations process must have well set out safety
measures. Safety measures must include:
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◦ Proper instructions of use on all equipment
◦ Unobstructed exits
◦ Fire fighting equipment
◦ First aid boxes
◦ well trained staff

Work procedures
All work procedures must be documented and must be
available to employees involved in the work process. New
employees must be oriented on how to do the work
processes assigned to them following laid down procedures.

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SUSTAINING AN ENTERPRISE
Appraising one’s enterprise
Enterprise performance
Appraising an enterprise involves doing what some
entrepreneurship experts refer to as “enterprise audit.” In
very simple terms, appraising an enterprise takes the form of
doing a very detailed SWOT Analysis. The term ‘SWOT’ refers
to:
• Strengths
• Weaknesses
• Opportunities
• Threats
Every enterprise, no matter what size, inevitably has its own
Strengths, Weaknesses, Opportunities, and Threats. In order
to survive and continue to grow, the management of an
enterprise must ensure that Strengths are maintained,
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Weaknesses are corrected and done away with,
Opportunities are taken advantage of and exploited, and
Threats are guarded against. To be able to establish an
enterprise’s SWOT, an appraisal of the entire enterprise
becomes very critical.
The SWOT analysis is, therefore, an important tool used to
establish an enterprise’s areas of Strengths, Weaknesses,
Opportunities, and Threats. SWOT analysis assists in
identifying what the enterprise is doing right or wrong and
what it can do well and what it cannot. Strengths and
Weaknesses are said to be internal to the business. This
means that an entrepreneur must look at his enterprise’s
internal operations to be able to determine the Strengths
and Weaknesses.
Appraising an enterprise’s performance to identify Strengths,
Weaknesses, Opportunities, and Threats would imply taking
the following steps:

Step 1: Internal appraisal

An enterprise’s internal operations require what are referred
to as the four (4) Ms of operations, namely:
Manpower (human resource) – critically analyse the
available human resource to determine areas of strength and
weaknesses (skills among staff, motivation level of staff,

241
areas of conflict, emoluments, staff development,
experience, etc.)
Machinery (technology in use) – critically analyse the
available type of production and operations technology to
determine areas of strengths and weaknesses (machine
breakdowns, operational level, material wastage, availability
of spares, etc.)
Materials (the raw materials and other inputs) – critically
analyse the types of raw materials and other inputs to
determine their suitability for the target market
Methods (the pattern of operations) – critically the manner
in which operations are conducted to determine areas of
strengths and weaknesses
The above four factors are the basis for an internal appraisal
for an enterprise.

Step 2: External appraisal

Under the external appraisal, an enterprise should analyse its
opportunities and threats from the point of view of the
following critical stakeholders:
Competition – What is the enterprise’s competitive position?
Does the enterprise have any competitive advantage? What
can be done to improve the enterprise’s competitive
position?

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Suppliers – Who are the enterprise’s suppliers? How reliable
are they? What has been the relationship like? Is there need
for changes?
Government regulations – What is the enterprise’s position
regarding government requirements and demands? How
compliant has the enterprise been? Is there any room for
possible penalties? What can be done to enhance
compliance?
Financial institutions – Does the enterprise require any
external funding? Is external funding readily available, and if
it is, at what cost and conditions? Can the enterprise afford
the terms?
Family situation – How do family members and the owner
treat the enterprise? Are there any areas requiring serious
attention? Has there been any serious conflict between the
owner or family members and the enterprise?
General economic condition – What are the general
economic trends as they relate to the enterprise’s
performance? How are factors like interest rates, inflation
rates, foreign exchange rates, and average household
disposable income affecting the enterprise?
The above listed factors may be used to appraise from the
external environment’s point of view.

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Life cycle of an enterprise
An enterprise, like a human being or a product, has a life
cycle. A human being is born and then goes through various
growth stages such as childhood, teenage, adolescence, and
adulthood. A product is introduced on the market, then it
goes through growth stage, then the maturity stage, and
finally the decline stage where it eventually phases out. In
the same way, an enterprise goes through a life cycle which
involves the following stages:
• Ideas generation – this is when the business idea is
conceived and subjected to an environmental scan,
market research, feasibility study, and finally the preparation
of the Business Plan.
• Business launch – this is the commissioning of the
enterprise to commence operations.
• Business growth and expansion – this reflects the
growth of the enterprise through increased sales
volume, increased number of employees, expansion in
terms of capital investments and increase in profitability
levels.
• Business maturity – this is where business operations
appear to have gotten to the highest levels and begin to
stagnate, meaning that no further growth is recorded.

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• Business decline – at this stage, the business begins to
show a downward trend in terms of sales and operational
capacity.
• Phase out or re-launch – with a continued downward
trend, the business may eventually phase out. Where the
entrepreneur has fresh ideas, a re-launch may occur,
meaning the business may take a different form or nature.

Some tips on enterprise performance

The critical thing to take note of during the different stages of
an enterprise are the issues that have been discussed
throughout this course. At every stage of an enterprise’s life
cycle, there is need for systematic, efficient and effective
planning and execution in order to lengthen the life span of
that enterprise. Just like a vehicle’s life span can be
lengthened through appropriate repairs, maintenance
services and use of appropriate and recommended spares, an
enterprise’s life span can be lengthened through the use of
appropriate and recommended entrepreneurial and business
management skills. An enterprise’s life cycle is in the hands
of the entrepreneur who owns it. The entrepreneur is like a
driver who must steer the vehicle in the right direction. It is
up to each entrepreneur to utilise the best entrepreneurial
skills and competences based on a sound understanding of
the following key business stakeholders:

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• God the creator and giver of all knowledge, skill and
wisdom
• The customer (the king and queen of any business)
• The employees (the people with whom the
entrepreneur runs the enterprise)
• The suppliers (the people who make it possible for an
entrepreneur to produce)
• The competitors (the people from whom an
entrepreneur may borrow various entrepreneurial ideas
and help him or her measure his or her performance
• The Government (the people who facilitate and create
an enabling environment for enterprises to flourish)
• The owner and family (the people on whom the survival
of the enterprise largely depends)

PRODUCTIVITY AND MANAGEMENT

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Productivity is defined using a ratio as output over input. This
means that productivity is measured by what comes out
(output) as a result of what goes in (input). The higher the
output, given a constant input, the higher the productivity.
For instance, if two (2) days produces five (5) bags maize and
another two (2) days of work produces seven (7) bags of
maize under similar circumstances, then the two (2) days that
produces seven (7) bags is more productive.

Factors that affect productivity

• The methods used – the more efficient the method is,
the more productive the result is bound to be.
• Capital – the more available and efficient use of capital,
the more productive the result is bound to be.
• Technology in use – the more updated and appropriate
the technology in use is, the more productive the result is
bound to be.
• Human resources in use - the more skilled, experienced
and knowledgeable the human resource is, the more
productive the result is bound to be.

How to improve productivity

Productivity in an enterprise may be improved by taking the
following actions:
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• Develop productivity measures for all operations and all
departments
• Develop methods for achieving productivity
improvements such as getting ideas from workers,
studying how other enterprises have improved productivity
and re-examining the way work is done
• Establish reasonable goals for improvement
• Ensure that there is a culture of teamwork
• Measure improvements and publicise them
• Offer incentives and rewards for productive work
Total quality management
Total quality management (TQM) is defined as a way of
thinking and working that is concerned with meeting the
needs and expectations of customers. TQM tries to move the
focus of quality away from being just an operations
department’s activity into a major concern for the entire
organisation. In short, through TQM issues of quality
becomes the responsibility of all employees in all the
departments of an enterprise.

Total quality management process

The process of total quality management is best achieved
through the following key concepts

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• Continuous improvement – TQM requires a never-
ending process of continuous improvements that embraces
people, suppliers, materials equipment, and procedures. In
TQM, the end objective is perfection.
• Employee empowerment – the concept of TQM
believes in the involvement of the workforce in every step
of the production process. It also believes in continuous
employee training and development.
• Benchmarking – TQM believes in benchmarking, which
is an approach where an enterprise compares with those
of other enterprises preferably the best enterprise
available.
• Just-in-time concept – TQM believes in systems that are
designed to produce or deliver just and when the
products and services are needed.

MANAGING SURVIVAL AND GROWTH

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Managing change
Every enterprise, no matter its size, operates in an
environment which is constantly changing. As a result of this
constantly changing environment, an entrepreneur must
ensure that the enterprise equally adapts to those changes.
Change may be defined as an alteration or difference in the
way things are done as a result of some developments.
Change comes in many forms: customers’ tastes, needs and
wants keep changing; workers’ demands, work patterns and
skills keep changing; technology keeps changing; the level of
competition keeps changing; government regulations on
commerce and trade keep changing; the supply chain may
change, and so many other factors in the business
environment may change. It, therefore, means that the
entrepreneur must keep his eyes and ears open to be able to
identify and understand the changes that are taking place
and how they relate to his or enterprise’s operations. This
calls for the ability to manage change.

What is managing change?

In very simple terms, managing change refers to an
enterprise’s ability to respond favourably and appropriately
to new problems, challenges and difficulties it encounters.

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Change management process
The process of change can be analysed and explained in
terms of the dynamics at work between the four major
elements of the change process. These four elements are:
• The present state of the enterprise – as was discussed
earlier under “Appraising an enterprise”, a SWOT analysis
may be used to measure essential aspects of the
enterprise such as its substructures and systems, its culture
and climate, its leadership and management, and its
performance and profitability in order to gauge the
enterprise’s all-round effectiveness and efficiency.
• The desired future state of the enterprise – again as we
examined earlier on, the “Strategic planning process” is
one of the most common approaches to achieving the
desired future state of the enterprise, which equally entails
change management.
• Change through (planned) interventions – sometimes
change occurs through some interventions in the course of
running an enterprise. Some of these changes can be
planned whilst others may not necessarily occur due to
planning. For instance, the abrupt resignation or even
death of an employee may result in certain interventions
which can bring about changes.

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• Strategies for managing change – the following are the
strategies an entrepreneur can use to manage change in his
or her enterprise:
○ Defining the vision as a reference point for the
change sought
○ Sensitising enterprise members about the eminent
change
○ Catalysing to fight resistance from employees,
overcome inertia, create support and re-affirm the
validity of the proposed change
○ Steering in order to focus on the system that will
guide the process of change and keep it on track
○ Delivering to effect the vision and actual transition
from the current situation to the planned state
○ Obtaining participation and active involvement of
all enterprise members as an essential element to
the success of the change process
○ Handling the emotional dimensions which come in
form of typical reactions to change
○ Handling power issues because change frequently
upsets the balance of power within an enterprise
○ Training and coaching in order to introduce new
ways of thinking and behaving as a result of change

252
 ○ Communicating actively and effectively as an
essential to successful change

Strategies for growth

Growth in an enterprise comes in many forms, common of
which are:
◦ Growth in terms of increase in sales volume
◦ Growth in terms of increase in profitability levels
◦ Growth in terms of increase in the number of employees
◦ Growth in terms of increase in capital investment levels
as a result of mergers and acquisitions
◦ Growth through joint ventures
◦ Growth through outsourcing
◦ Growth through subcontracting

Strategies for growth can therefore be crafted based on the

above critical areas s shown below:-
Growth through increase in sales volume
To achieve growth through increase in sales volume, an
entrepreneur could consider the following options:

253
• Market penetration strategy – market penetration
entails expanding the market share for existing products
by making existing customers buy more, attracting
customers currently buying from your direct competitors to
defect and buy from you, and attracting first-time
customers in the same market segment to buy from you.
• New product development strategy – this strategy
involves the development of new products to serve
existing customers.
• Market development strategy – this strategy involves
selling existing products to new markets or customers.
Market development strategy can be achieved by entering
new market segments that can be served with your existing
products, escaping a growth deadlock in saturated
markets, spreading business risk over different market
segments, and better satisfying the needs of clients who
operate in more than one market.
• Product diversification strategy – this strategy involves
an enterprise developing new products for new markets.
The strategy entails exploiting good business
opportunities outside the current boundaries of your
business activities, and spreading business risks over a broad
range of markets.

Growth in terms of increase in profitability levels

254
An enterprise can achieve growth by embarking on strategies
that increase profitability levels. The strategies that have
been discussed under “growth through increase in sales
volume” can, if properly executed, also result in in terms of
profitability levels. Additionally, the following strategies may
also contribute to growth in terms of increase in profitability
levels:
• Increased financial discipline in the enterprise
• Enhanced cost control measures
• Enhanced promotional and customer relations
technique

Growth through subcontracting

Another strategy for growth is subcontracting which entails
giving out extra business to outsiders when an enterprise’s
capacity cannot allow. For instance, a carpenter is requested
to supply one thousand (1,000) desks and his capacity can
only produce and supply five hundred (500) desks. Such a
carpenter can subcontract another carpenter to produce the
extra five hundred (500) desks.

Growth through mergers and acquisitions

Another growth strategy entail using mergers and
acquisitions. A merger means two different enterprises, A

255
and B, coming together to form enterprise C. on the other
hand, an acquisition is when a company, say company A,
acquires company B and maintains the name of company A,
and meanwhile company B ceases to exixt forthwith.

Growth strategies through joint ventures

Sometimes growth may be achieved through a joint venture
strategy, where company A and company B go into a joint
venture arrangement where company C is created but both
companies A and B continue existing in their own right.

256
A sample business plan

KAWIKU MILLING
COMPANY LIMITED

257
 BUSINESS PLAN FOR THE ESTABLISHMENT OF KAWIKU
MILLING PLANT AT KABBANDA IN MWINILUNGA

1.0 EXECUTIVE SUMMARY

1.1 INTRODUCTION
Kawiku Milling Company Limited is a small scale
enterprise which was incorporated as a private company
limited by shares, on 31 December 2002 and was issued
with a Certificate of Incorporation number 51415. Three
shareholders namely, Mr Kutenga Matoka, Miss
Mulemba Matoka and Miss Nsamba Matoka own the
company. The company whose principal business is
manufacturing of maize meal has its registered office on

258
the 8th Floor of Ikeleng’i Tower, along Kanong’esha Road
in Mwinilunga. In an attempt to commence maize milling
activities at Kabbanda Village, in Mwinilunga, the
company erected a factory building valued at Fifty
Million Kwacha (K50,000,000), an electronic scale valued
at Seventy Five Million Kwacha (K75,000,000), a bag
sticher valued at Three Million Eight Hundred and
Seventy Five thousand Kwacha (K3,875,000), an
electronic scale valued at Three Million One Hundred and
Twenty Five Thousand Kwacha (K3,125,000), and a tool
box valued at Two Million Six Hundred and Fifty Thousand
Kwacha (K2,650,000).
The company now seeks a loan amounting to Fifty
Million Kwacha (K50,000,000) to finance initial working
capital requirements of Thirty Million Kwacha
(K30,0000,000), and electricity installation at a cost of
Twenty Million Kwacha (K20,000,000).

1.2 MARKETING CONSIDERATIONS

The project’s main product is maize meal, which is the
raw material for the country’s staple food, nshima. The
project’s main objective is to provide an easily accessible
market for local maize farmers as well as to bring packaged
maize meal closer to the people, particularly those in
Mwinilunga. Mwinilunga area currently has no producers
of quality packaged maize meal. The only main
259
competitors for packaged maize meal are Solwezi Milling and
Mutanda Milling, both of whom are within Solwezi Central
Business District. Kawiku Milling Company Limited shall
therefore be the sole supplier of quality packaged maize
meal in Mwinilunga area as well as provide a very accessible
market for maize farmers in the same area. The
project’s target customers include the following:
• Mwinilunga Mission Hospital
• Mwinilunga Secondary School
• Ikeleng’i Secondary School
• Kaleni Mission
• The Agricultural Camp
• Retail shops in Mwinilunga District

1.3 ECONOMIC BENEFITS OF THE PROJECT

The project has the following economic benefits:
• It will initially create ten (10) jobs, and the number
may increase as the project equally grows
• Utilisation of locally available raw material (maize)
thereby providing a ready market for maize farmers
and adding value to the raw material

260
 • The establishment of a milling plant shall
contribute to the growth of entrepreneurship in the
area
• The government shall benefit from the projected
taxes
• The project shall contribute to technology transfer
in the project area
• Provision of a very important product (maize meal)
to the local community

1.4 FINANCIAL ANALYSIS

Debt/Equity ratio
Whereas the project is seeking a loan amounting to
K50,000,000, the project promoters’ equity contribution
is valued at K134, 650,000. This represents a debt/equity
ratio of 1 to 2.69, which means that the project promoters’
contribution is 2.69 times more the loan requested for.
This also means that the loan amount is 269% secured by
existing assets.
Projected profitability
The projected profit and loss statement, which is based
on 80% capacity utilisation, shows that the project’s gross
profit margin is 34.8% and the net profit margin is
12.7%. This means that for every K100 of sales, the project’s
261
 gross profit is K34.80 whilst the net profit is K12.70.
Both margins are comfortably high and go to show that the
project is financially viable.

Cash flow balance

Throughout the 12 months, the projected cash flow
reveals positive cash balances which clearly shows that all
things being equal, the project would be able to repay the
loan with interest and still sustain its operations.

Debt service coverage ratio

The project’s debt service coverage ratio is 1 to 3. This is
an acceptable ratio, which shows that the project shall
make timely repayments without resorting to further
borrowing and shall remain sustainable during and after loan
repayments.

1.5 RECOMMENDATION
All projections at the feasibility study stage show that
the proposed activities of Kawiku Milling Company Limited
are financially viable, and economically and technically
feasible. On the basis of assumptions and projections made,
the sanctioning of a K50,000,000 loan to Kawiku Milling
Company Limited is highly recommended. This author is
262
ready to supply additional information and clarify any issues
contained in this Business Plan.

2.0 BUSINESS DESCRIPTION

2.1 Name of Business: Kawiku Milling
Company Limited
2.2 Company Shareholders: Mr Katen’ga Matoka
Miss Nsamba Matoka
Ms Mulemba Matoka
2.3 Business Address: P. O. Box 630227
Mwinilunga
2.4 Project Products: Product – Maize Meal
By-product – Maize Bran
2.5 Project Bankers: Finance Bank,
Mwinilunga
2.6 Legal Documents: Certificate of
Incorporation
No. 51415 of 31/12/2202
2.7 Company Lawyers: Lweendo & Company,
Livingstone

263
3.0 BUSINESS OBJECTIVES
3.1 Sort-term objectives
• To take quality packed mealie meal closer to the
local people, particularly those in Mwinilunga
area
• To provide a ready and easily accessible market for
local maize farmers
3.2 Long-term objectives
• To eventually diversify into stock feed production
for the local market

4.0 BUSINESS LOCATION

Kawiku Milling plant shall be located at the
headquarters of Chief Kanong’esha chiefdom, at
Kabbanda Village in Mwinilunga. The project’s site is along
Ikeleng’i Road, which is an all-weather road. The road
shall facilitate easy access to the project site by maize
suppliers and mealie meal customers.
On the project site is a workshop or factory which
comprises a production room, a warehouse for storage of
both raw materials and the output, an office, and an
ablution block. The factory building is fitted with piped
running water and is designed in such a way that it allows
for the smooth operations of the proposed business line.
264
5.0 PLANT AND EQUIPMENT
The project shall utilise the following plant and
equipment which have already been delivered to the site:

ITEM QUANTITY SOURCE

Roff MK3 mill 1 Snell Africa
(Zambia)
Bag Sticher 1 Snell Africa
(Zambia)
Electric Scale 1 Snell Africa
(Zambia)
Tool Box 1 Snell Africa
(Zambia)

The project shall be located in North-western Province

which is one of the largest producers of maize in the country.
It is therefore expected that there shall be a steady
supply of maize which is the project’s raw material.

6.0 MARKET ASPECTS

6.1 Target customers
As already stated in the Executive Summary, the
project’s target market comprises companies, individuals,
government institutions, and retail outlets in Mwinilunga

265
and the surrounding areas. Specifically, the targeted
customers are:
• Mwinilunga Mission Hospital
• Mwinilunga Secondary School
• Ikeleng’i Secondary School
• Kaleni Mission
• The Agricultural Camp
• Retail shops in Mwinilunga District

6.2 Competition
Again, as mentioned earlier, the key competitors are
basically Solwezi Milling and Mutanda Milling both of which
are located about 320 km away right in the Central
Business District of Solwezi. Kawiku Milling Company Limited
will therefore have a geographical advantage in the sense
that its target customers are mostly based in Mwinilunga.

6.3 Advertising and promotion

266
 Kawiku Milling Company Limited proposes to advertise
and promote its business activities using very simple and
practical methods such as:
• Ensuring that its products are continuously on
demand by trying as best as professionally possible
to always offer high quality products
• Ensuring that there is prompt fulfilment of
customers’ orders
• Ensuring that there is a policy of discount facilities
for bulk and repeat customers
• Extending credit facilities in some well examined
cases
• Ensuring that there is always a way of getting
feedback from customers through “personal selling”,
i.e. going round to all key customers to source
for orders and seek their comments
• The project promoters also intend to be sponsoring
an annual sporting event for schools within Mwinilunga
District under the financial support Kawiku Milling
Company Limited
• Billboards shall be erected in all strategic locations
of Mwinilunga District, indicating the existence
of the company

267
6.4 Distribution
Kawiku Milling Company Limited’s distribution strategy
shall basically be through its retail outlet customers. The
rest of the customers shall be served directly, especially
institutional buyers like schools and hospitals.

7.0 MANAGEMENT AND ORGANISATION

7.1 Proposed organisational chart

Board of
Directors

General Manager

Cashier/ Mill
Supervisor
Book-keeper

Gewneral Security Mill

workers Guards Assistants (2)
(3) (2)

268
7.2 Functions
The Board of Directors
This shall comprise the three company shareholders
who are also directors. This shall be the policy formulation
body of the company. Major tasks shall include
formulation of policies on procurement of raw materials and
direct expenses, marketing, finance, and human
resources.

The General Manager

The General Manager shall be in charge of the day-to-
day operations of the milling plant, ensuring that all the
requirements are sourced as and when needed, in the
right qualities, quantities, and at the right cost and time. The
General Manager shall make sure that operations are
efficient, effective and as per plan. The General Manager
will report to the Board of Director where he is also a
member. Mr Kuteng’a Matoka shall fill this position.

Mill Supervisor

269
 Directly responsible for the production process at the
milling plant. He will ensure that the mill is operated as
per machine supplier’s specification and is producing the
right quality product to meet customers’ expectations. He
will report to the General Manager.

Cashier/Book-keeper
Shall be directly responsible for cash takings, handling
and recording al business transactions in such a manner
that financial decisions and accounting can be enhanced. He,
too, shall report to the General Manager.

Mill Assistants
These shall assist the Mill Supervisor in the production
process. Duties shall, among other things, include:
• Checking the maize for any foreign matters before
milling
• Weighing
• Packaging
• Storage
Mill Assistants shall report to the Mill Supervisor.

270
 General Workers
Shall be responsible for the cleanliness of the workshop
and surroundings and will be assigned any other tasks as
and when need arises by the:
• General Manager
• Mill Supervisor
• Cashier/book-keeper

Security guards
Shall be responsible for the security of the entire milling
plant on a twenty- four hour basis, and these shall directly
report to the General Manager.

8.0 TOTAL PROJECT COST AND MEANS OF FINANCE

8.1 Total project cost
Existing Facilities Value
(ZK)
Factory Building 50 000
000
Roff MK3 mill 75 000
000
Bag Sticher 3 875
000
Electronic Scale 3 125
271
 000
Tool box 2 650
000
Proposed Facilities
Electricity installation 20 000
000
Initial Working Capital 30 000
000
Pre-production costs 500 000
10% contingency on 2 000
proposed facility 000
Total Project Cost 187 150
000

8.2 Means of finance

Fixed Asset equity 134 650
000
Cash equity 2 500
000
Loan 50 000
000
Total Finance 187 150
000

SUMMARY OF ASSUMPTIONS
272
1.0 PRODUCTION PROGRAMME
1.1 Working hours per day = 8 hours
1.2 working days per week = 51/2 days
1.3 Working days per month = 22 days
1.4 Working days per year = 264 days

2.0 PRODUCTS
2.1 Main Product - Maize meal packed in 25
kg bags
2.2 By-product - Maize bran

3.0 OUTPUT
3.1 Installed capacity (100% capacity)
• 450 kg of maize meal per hour
• 450 kg × 8 hours/day = 3 600 kg/day
• 3 600 kg/day × 51/2 days = 19 800
kg/week
• 19 800 kg/week × 4 weeks = 79 200
kg/month

273
 • 79 200 kg ÷ 25 kg = 3 168 × 25 kg
per month
• 3 168 × 25 kg per month × 12 months = 38 016 ×
25 kg per annum

3.2 Capacity utilisation envisaged

It is envisaged that the project shall be operating at
about 80% capacity during the first year of operations,
which is also the loan repayment period. Thereafter, it is
projected that the capacity utilisation will steadily rise to 90%
as the project gets established and begins to enjoy
economies of scale.
Below is the projected output of the maize meal and the
resultant by-product, maize bran, both of which have been
expressed in terms of 25 kg packaging bags:
Year 1 2 3 4 5
Capacity 80% 90% 90%
90% 90%
Maize meal 30 413 34 214 34 214
34 214 34 214
Maize bran 3 379 3 802 3 802
3 802 3 802

274
4.0 RAW MATERIAL REQUIREMENTS AND OTHER DIRECT
EXPENSES AT 100% CAPACITY UTILISATION
Raw Material Quantity per month Unit cost

Raw Quantity Unit Total Raw Material

Material per cost Cost Source
month (ZK) (ZK)
Maize 1 761 × 30 52 830Mwinilunga
50 kg 000 000District
25 kg 3 168 1 000 3 168Solwezi
Polythene 000industrial
bags Fabrics
Thread and - - 320 000 Snell Africa
Needles
Transport - - 1 000 Local
(inputs) 000 transporters

5.0 UTILITIES
Item Estimated Source
Monthly
cost
(ZK)
Water 50 000 N/Western Water and
Sewerage Company
electricity 1 000 000 ZESCO - Mwinilunga
Total utility 1 050 000
cost

275
6.0 DIRECT LABOUR COSTS
Designation Number Wage/month Total
(ZK) Cost
(ZK)
Mill 1 400 000 400 000
Supervisor
Mill 2 250 000 500 000
assistants
900 000

7.0 OVERHEAD COSTS

Item Estimated
Monthly cost
(ZK)
General Manager (1) 2 500 000
Cashier/book-keeper (1) 400 000
General Workers (3 @ K250 750 000
000)
Security Guards (2 @ K250 500 000
000)
*Marketing Expenses 1 215 000
**Repairs and Maintenance 2 120 000
Administration costs 125 000
Total utility cost 7 610 000

276
 *Marketing Expenses are made up of personal selling
expenses plus distribution of the final product
**Repairs and Maintenance costs have been calculated
at 1.5% of the total fixed assets

8.0 DEPRECIATION OF FIXED ASSETS

Item Book Depreciation Depreciation
Value Rate per cost/year
annum (ZK)
Factory 50 000 2% 1 000 000
Workshop 000
Maximill 75 000 20% 15 000 000
Roller 000
Bag Stichers 3 875 20% 775 000
000
Electronic 3 125 20% 625 000
Scale 000
Tool Box 2 650 33% 874 500
000
Total Annual 18 274 500
Depreciation

Monthly depreciation cost is therefore calculated as

follows:

Annual Depreciation Cost

12 months
277
 = K18 274 500
12

= K1 522 875 per month

9.0 PRE-PRODUCTION COSTS
Business plan preparation and other documentation
costs K500 000

10.0 SELLING PRICE AND PROJECTED SALES REVENUE

10.1 Selling Price

Item Price
(ZK)
25 kg Maize 28 000
Meal
25 kg Maize 7 500
Bran

10.2 Projected Monthly Sales Revenue at 80% Capacity

Item Quantity Price Total

(ZK) Sales
278
 25 kg Maize Meal 2 535 × 25 28 000 70 980
kg 000
25 kg Maize Bran 282 7 500 2 115
000
Total Revenue 73 095
per Month 000

INITIAL WORKING CAPITAL COMPUTATIONS

Item Number of Price Total
Days (ZK) Sales
Maize 30 28 000 52 830
000
Packaging Bags 30 7 500 3 168
000
Thread and 30 - 320
Needles 000
Transport (inputs) 30 - 1 000
000
Total Working 57 318
Capital required 000

279
Loan repayment schedule
Loan Terms
Loan amount: K50 000 000
Loan repayment period: 12 months
Grace period: 2 months (to be negotiated)
Interest rate applied: 40% per annum on Reducing
Balance Method
Monthly instalment: K4 166 667
Interest payable: Principal × Time × Interest Rate
100

Period/ Principal Interest

Month Outstanding Charge (ZK)
(ZK)
Month 1 50 000 000 1 666 667.00
Month 2 45 833 333 1 527 777.70
Month 3 41 666 666 1 388 888.80
Month 4 37 499 999 1 249 999.90
Month 5 33 333 332 1 111 111.00
Month 6 29 166 665 972 222.10
Month 7 24 999 998 833 333.20
Month 8 20 833 331 694 444.30
Month 9 16 666 664 555 555.40

280
 Month 10 12 499 997 416 666.50
Month 11 8 333 330 227 777.60
Month 12 4 166 663 138 888.70
Month 13 0 0

PRODUCTION COST SCHEDULE PER MONTH AT 80%

CAPACITY UTILISATION
Item Cost per
month (ZK)
Raw materials 42 264 000
Packaging bags 2 534 400
Thread/needles 256 000
Utilities 840 000
Direct labour 900 000
Transport (inputs) 800 000
Direct costs 47 594 400
Indirect labour 4 150 000
Marketing costs 1 125 000
Repairs and 2 120 000
maintenance
Administration 125 000
costs
Depreciation 1 522 875
Pre-production 500 000
Interest 1 666 667
Total operating 58 803 942
costs
PROJECTED PROFIT AND LOSS STATEMENT

281
 Monthly Annual (‘000)
Sales Revenue 73 095 000 877 140.00
Less Direct costs 47 594 400 591 132.80
Gross Profit 25 500 600 306 007.20
Less Indirect Costs 11 209 542 134 514.50
Net Profit before Tax 14 291 058 171 492.60
Tax (35%) 60 022.40
Net Profit after Tax 14 291 058 111 470.20

Gross Profit Margin 34.8%

Net Profit Margin 12.7%

282
283
 PROJECTED MONTHLY CASH FLOW STATEMENT

Month
Start 1 2 3 4 5 6 7 8 9 10 11 12
Up
CASH INFLOW
1 Cash equity - - - - - - - - - - - - -
2 Loan amount 50 - - - - - - - - - - - -
000
000
3 Sales - 73 73 73 73 73 73 73 73 73 73 73 73
095 095 095 095 095 095 095 095 095 095 095 095
000 000 000 000 000 000 000 000 000 000 000 000
4 Opening - 1 45 62 74 87 99 112 125 138 152 165 179
balance 310 814 267 693 257 960 802 783 903 162 560 096
000 333 556 001 335 557 668 668 557 335 002 558
Total Inflow (A) 50 74 118 135 147 160 173 185 198 211 225 238 252
000 405 909 362 788 352 055 897 878 998 257 655 191
000 000 333 556 001 335 557 668 668 557 335 002 558

284
 CASH
OUTFLOW
5 Installation of 20 - - - - - - - - - - - -
Electricity 000
000
6 Raw Materials 25 17 42 42 42 42 42 42 42 42 42 42 42
000 264 264 264 264 264 264 264 264 264 264 264 264
000 000 000 000 000 000 000 000 000 000 000 000 000
7 Packaging 2 - 2 2 2 2 2 2 2 2 2 2 2
534 534 534 534 534 534 534 534 534 534 534 534
000 000 000 000 000 000 000 000 000 000 000 000
8 Thread/Needles 256 - 256 256 256 256 256 256 256 256 256 256 256
000 000 000 000 000 000 000 000 000 000 000 000
9 Utilities - 840 840 840 840 840 840 840 840 840 840 840 840
000 000 000 000 000 000 000 000 000 000 000 000
1 Direct Labour - 900 900 900 900 - 900 900 900 900 900 900 900
0 000 000 000 000 000 000 000 000 000 000 000
1 Transport 400 400 800 800 800 800 800 800 800 800 800 800 800
1 000 000 000 000 000 000 000 000 000 000 000 000 000

285
1 Indirect Labour - 4 4 4 4 4 4 4 4 4 4 4 4
2 150 150 150 150 150 150 150 150 150 150 150 150
000 000 000 000 000 000 000 000 000 000 000 000
1 Marketing - 1 1 1 1 1 1 1 1 1 1 1 1
3 125 125 125 125 125 125 125 125 125 125 125 125
000 000 000 000 000 000 000 000 000 000 000 000
1 Repairs and - 2 2 2 2 2 2 2 2 2 2 2 2
4 Maintenance 120 120 120 120 120 120 120 120 120 120 120 120
000 000 000 000 000 000 000 000 000 000 000 000
1 Administration - 125 125 125 125 125 125 125 125 125 125 125 125
5 Costs 000 000 000 000 000 000 000 000 000 000 000 000
1 Pre-Production 500 - - - - - - - - - - - -
6 Costs 000
1 Loan - - - 4 4 4 4 4 4 4 4 4 4
7 Repayment 166 166 166 166 166 166 166 166 166 166
667 667 667 667 667 667 667 667 667 667
1 Interest - 1 1 1 1 1 972 833 694 555 416 277 138
8 Charges 606 527 388 249 111 222 333 444 555 666 777 888
667 777 883 999 111
Total Outflow 48 28 56 60 60 60 60 60 59 59 59 59 59

286
(B) 690 590 441 669 530 391 252 114 975 836 697 558 419
000 667 777 555 666 778 889 000 111 222 333 444 555
Closing Balance 1 45 62 74 87 99 112 125 138 152 165 179 192
(A – B) 310 814 267 693 257 960 802 783 903 162 560 096 772
000 333 556 001 335 557 668 668 557 335 002 558 003

287
1 With the available loan amount, the project promoters
propose to procure initial raw materials worth K25 000
000 after which the project will be self- financing. This means
that for the proposed capacity utilisation level, K17 264
000 will be generated from the initial sales revenue to
complete the raw material requirements for month 1.

2 Due to the injection of only K 25 000 000 to finance the

initial raw materials requirements, it is assumed that
only half of the transport costs shall be incurred to
transport the initial raw materials, before production
commences. Hence the use of K400 000 for transport costs
instead of the projected K800 000.
3 It can be clearly seen from the closing balances on the
cash flow statement that the project shall produce
positive cash balances throughout the projected period, so
much that the loan can even be liquidated during the first
three months without depriving the milling plant of any
working capital.

288
289
EVELY HONE COLLEGE MANAGEMENT BOARD
BUSINESS SUDIES DEPARTMENT
MARKETING SECTION
DIPLOMA IN BUSINESS ADMINISTRATION
290
 ENTREPRENEURSHIP
ASSIGNMENT 1 - TERM 2, 2015
QUESTION ONE

Briefly discuss the major environmental factors that an

entrepreneur needs to consider when scanning the
environment.

QUESTION TWO
You are the owner of K and B Enterprises, a sole
proprietorship in Lusaka. Recently you identified two
business projects which are mutually exclusive. The following
are cash flows for these two projects.

Yea Cash flow Cash flow

r for Project for Project
X Y
(K) (K)
0 (20,000) (20,000)
1 10,000 4,000
2 7,000 4,000
3 5,000 9,000
4 3,000 9,500

291
(a) What is the payback period for each of two projects?
Which project would you choose?
(b) If the required return is 11%, what is the net present
value of each project? Which project will you choose if
you apply he net present value decision rule?

(a) What is the internal rate of return for each of these

projects? Which one would you choose?

QUESTION THREE
You have identified three mutually exclusive projects that
you are interested to invest in. The projected cash flows for
these three projects are as follows.

Yea Cash flow Cash flow Cash flow

r for Project for Project for Project
A B C
(K) (K) (K)
0 (100,000) (150,000) (200,000)
1 50,000 95,000 60,000
2 30,000 60,000 70,000
3 30,000 35,000 60,000
4 20,000 35,000 160,000
5 20,000 20,000 40,000

292
(a) Calculate the payback period for each of these projects.
Your enterprise has historically used a three-year cut-off
for projects. Which one would you choose?
(b) Calculate the NPV for each of these projects if the
required return is 12%. Which one would you choose?
(c) Calculate the NPV for each of these projects if the
required return is 19%. Which one would you choose?
NOTE: You need to write an essay for Question One, with
at least 2 books of reference, 13 Calibri font size,
1.5 or 2.0 line space, and Harvard system of
referencing.
Formula for finding discount factor is: PVIF =
1
( 1+ i )❑n

Date due:18 June 2015

EVELY HONE COLLEGE MANAGEMENT BOARD

BUSINESS SUDIES DEPARTMENT
MARKETING SECTION
DIPLOMA IN BUSINESS ADMINISTRATION
293
 ENTREPRENEURSHIP

ASSIGNMENT 2 - TERM 2, 2015

Clearly discuss the various methods you would use to come

up with your business ideas.

NOTE: You need to write an essay with at least 4 books of

reference, 13 Calibri font size, 1.5 or 2.0 line space,
and Harvard system of referencing.

Date due: 29 June 2015

EVELY HONE COLLEGE MANAGEMENT BOARD

294
 BUSINESS SUDIES DEPARTMENT
COMPUTER STUDIES SECTION
TRADE CERTIFICATE IN COMPUTER STUDIES
ENTREPRENEURSHIP
ASSIGNMENT 1 - TERM 2, 2015
QUESTION ONE

Briefly discuss the major environmental factors that an

entrepreneur needs to consider when scanning the
environment.

QUESTION TWO
You are the owner of K and B Enterprises, a sole
proprietorship in Lusaka. Recently you identified two
business projects which are mutually exclusive. The following
are cash flows for these two projects.

Yea Cash flow Cash flow

r for Project for Project
X Y
(K) (K)
0 (20,000) (20,000)
1 10,000 4,000

295
 2 7,000 4,000
3 5,000 9,000
4 3,000 9,500

(a) What is the payback period for each of two projects?

Which project would you choose?
(b) If the required return is 11%, what is the net present
value of each project? Which project will you choose if
you apply he net present value decision rule?

(a) What is the internal rate of return for each of these

projects? Which one would you choose?

QUESTION THREE
You have identified three mutually exclusive projects that
you are interested to invest in. The projected cash flows for
these three projects are as follows.

Yea Cash flow Cash flow Cash flow

r for Project for Project for Project
A B C
(K) (K) (K)
0 (100,000) (150,000) (200,000)
1 50,000 95,000 60,000
2 30,000 60,000 70,000
296
 3 30,000 35,000 60,000
4 20,000 35,000 160,000
5 20,000 20,000 40,000

(a) Calculate the payback period for each of these projects.

Your enterprise has historically used a three-year cut-off
for projects. Which one would you choose?
(b) Calculate the NPV for each of these projects if the
required return is 12%. Which one would you choose?
(c) Calculate the NPV for each of these projects if the
required return is 19%. Which one would you choose?
NOTE: You need to write an essay for Question One, with
at least 2 books of reference, 13 Calibri font size,
1.5 or 2.0 line space, and Harvard system of
referencing.
Formula for finding discount factor is: PVIF =
1
( 1+ i )❑n

Date due:18 June 2015

EVELY HONE COLLEGE MANAGEMENT BOARD

297
 BUSINESS SUDIES DEPARTMENT
COMPUTER STUDIES SECTION
TRADE CERTIFICATE IN COMPUTER STUDIES
ENTREPRENEURSHIP

ASSIGNMENT 2 - TERM 2, 2015

Clearly discuss the various methods you would use to come

up with your business ideas.

NOTE: You need to write an essay with at least 4 books of

reference, 13 Calibri font size, 1.5 or 2.0 line space,
and Harvard system of referencing.

Date due: 29 June 2015

298
 EVELY HONE COLLEGE MANAGEMENT BOARD
BUSINESS SUDIES DEPARTMENT
MARKETING SECTION

DIPLOMA IN BUSINESS ADMINISTRATION

ENTREPRENEURSHIP

ASSIGNMENT 2

Clearly discuss the two main types of entrepreneurs that are

found in Zambia.

Date due:8 March 2015

299
EVELY HONE COLLEGE MANAGEMENT BOARD
BUSINESS SUDIES DEPARTMENT
MARKETING SECTION

DIPLOMA IN BUSINESS ADMINISTRATION

ENTREPRENEURSHIP

ASSIGNMENT 3

300
Briefly explain the following major options of business forms
of business that an entrepreneur can consider when
establishing his/her business:

(b) Sole proprietorship

(c) Partnership

Date due:8 March 2015

301
302