Documentos de Académico
Documentos de Profesional
Documentos de Cultura
NIGERIAN INSTITUTE
OF MANAGEMENT
(CHARTERED)
ENTREPRENEURSHIP
(SMPE 104)
STUDY PACK
ENTREPRENEURSHIP
(SMPE 104)
STAGE 1
ENTREPRENEURSHIP PAGE
3
STUDY PACK
Website: www.managementnigeria.org
E-mail: mgtedu@managementnigeria.org
ENTREPRENEURSHIP PAGE
4
FOREWORD
This study pack covers all the topics and all the basic materials necessary for adequate grasp of the
subject for the Proficiency Certificate in Management Examination of Nigerian Institute of
Management (Chartered).
While expecting candidates to read as much as possible on their courses, the Institute's role in
preparing this study pack is to treat in one publication all the topics covered by syllabus for the
particular course.
This will enhance focused study on the part of the candidate. This pack is written by an expert(s) on
the subject. The writing is reader-friendly while the issues discussed are current, with the general
treatment of topics having the contemporary time.
The topics are treated in a way not only to provide general and theoretical knowledge but to
enhance practice.
We wish to express our utmost appreciation to our faculty of experts for their invaluable
development and writing of these study pack series.
MANAGEMENT
ENTREPRENEURSHIP PAGE
5
TABLE OF CONTENTS
Pages
FOREWORD 5
TABLE OF CONTENTS 6
Lesson 1 The concept of entrepreneurship 7
Lesson 2 Book keeping and basic financial management 16
Lesson 3 Purchasing 23
Lesson 4 Production planning 26
Lesson5 Sales management 30
Lesson6 Office organization and basic personnel management 37
Lesson 7 Organizing resources. 44
Lessson8 Dealing with legislative institutions, government and
non-governmental Support agencies. 46
ENTREPRENEURSHIP PAGE
6
LECTURE ONE
1.10. Learning Objectives: At the end of the lecture students should be able to
l Define the term entrepreneur and mention some of the characteristics and roles of
entrepreneurs.
l Describe the history of entrepreneurship in Nigeria.
l Identify business opportunities and explain how to properly exploit them
l Identify business risks and state how to minimize them
l Mention the social and personal rewards of entrepreneurship
l Explain how to carry out feasibility studies and write feasibility reports
B. Other names for an entrepreneur: businessman, tycoon, magnate, impresario (in the
entertainment industry) or an industrialist.
C. An entrepreneur can operate a micro, small, medium or large enterprise and function
effectively.
l A micro enterprise has a full-time labour force of not more than 10 and a total cost and
working capital, less cost of land, of not more than #1m.
l A small enterprise has a full-time labour force of 11- 25 and a total cost and working capital,
less cost of land, of more than #1m but not more than #40m.
l A medium enterprise has a full-time labour force of 26- 100 and a total cost and working
capital, less cost of land, of #40- #200m.
l A large enterprise has a full-time labour force of more than 100 and a total cost and working
capital, less cost of land, of more than #200m
ENTREPRENEURSHIP PAGE
7
1.21B. The functions of an entrepreneur
He or she
l Decides on what to produce or the business to operate.
l Is an innovator who develops a new product, market or way of doing things
l Searches for and develops business opportunities and ideas.
l Bears the risk of a business operation
l Spearheads the setting up of a business
l Finds means of making a profit from a business
l Acquires and organizes capital and other resources to run a business
l Motivates and uses human resources to work optimally.
l Coordinates all aspects of a business to run it well
In the north, rich merchants/entrepreneurs sponsored trans-Saharan business trips. Traders took
hides, ivory, ostrich feathers, kola nuts, gum etc to North Africa and Arabia and imported salts,
horses, swords, spices, perfumes, brocades, silks and so on. The volume and value of the trans-
Saharan trade was very huge. The trade was organized in a sophisticated way, bearing in mind the
geographical and security dangers associated with desert journeys. The capital (finance) for the
trade was provided by wealthy North African merchants who owned large numbers of camels and
had the resources to purchase the goods required as well as to pay guides and protection money to
desert tribes. The journey across the Sahara desert usually took about three months. So, a merchant
was only able to make one trip a year and so he maximized his business activities. The system
depended on mutual trust which our people did not betray. In the Hausa states, both agriculture and
trading involved a large labour force and a hierarchy of participants.
Both had the labourers (or carriers), supervisors or head men and the entrepreneur or financier of
the venture. In crafts, there were the artisan/entrepreneur and his apprentices. In all cases, trust was
important and it was on it that the conduct of business depended.
When the British came they brought companies that traded in Nigerian raw material or European
finished products. Such companies included Societe Commerciale de Quest African (SCOA), GB
Olivant (GBO), United African Company (UAC), Barclays Bank, Standard Bank and others that
fuelled the entrepreneurial spirit in Nigerians. They saw and appreciated what individuals working
independently of government could do. Nigerians themselves set up trading and crafts making
industries. Independence in 1960 encouraged the regional governments in the North, East, West
and later Midwest (in1963) to roll out policies and development plans that boosted small scale
businesses. The north boomed with groundnut, benniseed, tin, cotton and gum Arabica; the East
flourished with palm oil and coal while the West and Midwest blossomed with rubber, palm oil,
timber and cocoa. Individual entrepreneurs actively partnered with the various governments in the
exploitation of natural resources and the setting up of agric processing firms.
The civil war slowed down entrepreneurial development especially in the East. After the war, the
Federal government promulgated the Indigenisation Decree and facilitated the transfer of
ownership of many foreign owned businesses to Nigerians. The then oil boom and special
government financial assistance to Nigerians who wanted to buy out foreigners from their
businesses, made that period the golden age of entrepreneurship in Nigeria.
ENTREPRENEURSHIP PAGE
9
Since then Nigerian businesspeople have continued to excel and are now to be found in all parts of
the globe, trading or manufacturing, fuelled by the globalisation of business.
Like life, business has some interest risks. To overcome the risks, entrepreneurs should:
i. prepare properly before starting a business and
ii. have viable alternatives when a particular business venture fails.
ENTREPRENEURSHIP PAGE
10
D) Personal rewards to entrepreneurs
l Great financial rewards
l Popularity and prestige
l Personal fulfilment and satisfaction
l An enhanced opportunity to help others
l Freedom from paid-employment and all its tears and pains
l Enhances personal recognition
l A control of the business and its decision making
l The satisfaction of helping to reduce societal, social and financial problems.
Entrepreneurs should be alert and broadminded enough to see, hear, read about or perceive a
business opportunity in their near or far environment. And exploit them.
ENTREPRENEURSHIP PAGE
11
l A gap between activities and products in our environment and in other environments.
Copying good things, positive emulation or bench marking is allowed in business.
l Accidental stumbling on good ideas without conscious search. Luck and serendipity still
exist.
l Ideas of business experts and consultants.
l Patronising academic and professional institutions
l News media, the internet and books
l Trade and product exhibitions and launchings
l Hobbies, particular interests and special abilities. These can be converted to money-
spinning machines
l Good training, interactive and brainstorming sessions
l Individual and group problem solving sessions
l Mistakes and errors.
Equipment and materials for initial production. This can be hired or borrowed from friendly co-
entrepreneurs and other sources recommended by the feasibility report.
5. Choose a suitable location and site for the business: The location ( state or town of the
business should depend on ease of getting land, approvals, support facilities,
infrastructures, market, suppliers and other determinants of business success. The site of the
business also depends on the above factors plus health considerations, population and
traffic density and government regulations. Can you cite a poultry or piggery in a densely
populated place?
6. Choose the business format (form of ownership): it could be a sole-proprietorship, a
partnership or a limited liability company. Each of them has its specific uses, advantages and
disadvantages. They should be considered carefully before a choice is made.
7. Register the business and get all other necessary approvals. Registration is done by the
Corporate Affairs Commission (CAC) while special approvals are needed for specific
business operations e.g. from NAFDAC (foods, drugs, beverages etc) and Standards
Organisation of Nigeria (manufacturing of industrial inputs and output).What specialised
agency should approve an application to start a security outfit?
ENTREPRENEURSHIP PAGE
12
1. Start the business with the necessary policies and procedures in employment, training, staff
rewards and motivation, inventory, purchasing, marketing, accounting and public relations.
These policies and procedure may be borrowed from other organisations or recommended
by a consultant. They could be summarised in policy handbooks, pasted on the notice
board, read to workers or put in circulars and memos depending on the size and nature of the
organisation and its business.
B) A feasibility report is the formal result of a feasibility study, and can be defined, for example,
as the result of an analysis of a business venture to determine its viability, profitability and
future performance.
ENTREPRENEURSHIP PAGE
13
l Gather data on the proposed product types, sizes, quality and packaging.
l Find out relevant sales and marketing data for example how the products shall be
distributed, priced and promoted. Actual details on product warehousing, distribution
methods and routes and the types and levels of promo tools to be employed are stated.
Carry out a suitable analysis of the direct and indirect competitors on the business and
outline clear steps to overcome them and win in the market place.
l Proposed cost, productivity and revenue data are gathered and used to calculate expected
profit figures return an investments, and relevant financial ratios. The proposed cash flow
projection and sensitivity analysis are also generated.
l Honestly summarise all the information and data into a feasibility report.
l Find out the expected impact of the business on the environment and how any negative side
effects will be overcome.
ENTREPRENEURSHIP PAGE
14
point, balance sheet, income statement, cash flow statement and control measures to
prevent unnecessary costs and losses.
Possible risks and challenges: e.g. expected risks and problems inherent in the business and
its environment and how they will be overcome. For example in sourcing raw materials,
meeting planned production schedule and customer demand, neutralising security issues,
addressing government policy, import, export and license issues that affect the business, the
challenge of competitors, problem of funds and the risk of budget overruns and fraud.
Evaluation: showing an evaluation of the worth, profitability, feasibility, productivity, cost
benefit ratio, present value of future cash flow, the number of years needed to recoup the
initial investment. Some methods of financial evaluation include pay back period, average
rate of return, discounted cash flow and sensitivity analysis (to test what happens to
proposed financial returns when certain project assumptions e.g. the project out put or price
of the product turn out to be inaccurate. Use the different assumptions to calculate the
financial returns)
Conclusion: possible contributions of the business to the local and national economy
especially in the areas of employment generation, raw material production for larger
industries, reduction of rural-urban migration, export, government revenue etc.
Appendices- any relevant photograph, diagram or blueprint.
ENTREPRENEURSHIP PAGE
15
LECTURE TWO
BOOK KEEPING
2.20. Introduction
Even though entrepreneurs may hire accountants, they should be familiar with the what, why and
how of bookkeeping as explained in this lecture. This will at least help them perform minor
accounting duties and understand records of transactions with banks, tax authorities, creditors,
debtors and other stakeholders. A bookkeeping-ignorant businessperson is more prone to
accounting deceptions and frauds.
2.21A. What is bookkeeping? It is the part of accounting concerned with recording financial
data and transactions in manual and electronic accounting books.
B. Who are the users of accounting information? The firm's management, existing and
potential investors, financial institutions, tax authorities, workers, the entrepreneur, the general
public etc.
C. What are transactions and accounts? Financial events like the purchase of assets or the
sale of products which result in balance sheet changes are called transactions. The transactions are
recorded in accounts in accounting books like ledgers. An account is a place in an accounting book
where the information about a particular asset or liability is recorded e.g. an account for buildings, an
account for loans, an account for taxes etc.
Any transaction about this asset or liability is recorded in its proper account in the accounting book.
Each account is on a separate page in the accounting book with each page divided into the credit
(right) and debit (left) halves.
ENTREPRENEURSHIP PAGE
16
Eg Cash Account
Debit credit.
th
Each transaction e.g. starting a business with #250,000 on the 5 of December means debiting the
cash account and crediting the capital account with that amount in the two different accounts in the
accounting book on that particular day. Each entry of the account should have a date, the narrative
(a reference to the title of the other account) and the money worth involved.
If a piece of equipment (a hair dryer) was bought for #24,500, start an equipment account. Debit the
equipment account with that amount with the narrative, 'cash' and credit the cash account with the
same account with the narrative ' hair dryer'. Consult a good business accounting book to increase
your proficiency in bookkeeping to prevent been confused by accounting records.
ENTREPRENEURSHIP PAGE
17
C. Fig 2: Example of a balance sheet
Asset #
Shop 64,000
Stock of goods 12, 000
Debtors 1,200
Cash at bank 50,800
128,000
Less creditors (8,000)
120, 000
Capital 120,000
A. Definition: This is a special account that summarises our expenditures and incomes in
order to show us our business performance for example profit in a particular period of time, usually
annually.
B. Purposes:
l Helps us calculate our profit or loss.
l It is used to compare current performance with a past or planned one or with the
performance of competitors.
l Helps to plan for the future
l Helps us to calculate tax payable
l Helps us to obtain loans and financial assistance from financial institutions and individuals
ENTREPRENEURSHIP PAGE
18
Expenses are
i) costs of goods sold (overheads, materials and labour costs),
ii) operating expenses (selling, advertising, office supplies, depreciation, and administrative
costs) and
iii) fixed expenses (taxes, interest, legal and audit fees insurance premium paid).
l Total revenue less COGS = gross profit.
l Gross profit minus operating expenses = net operating income.
l Net operating income minus other expenses = net income.
B. Importance:
l It shows the sources of the funds in a business
l It also explains how the funds where disbursed
l it helps to prevent cash shortages
l It helps fraud prevention and cash control mechanism
Step ii: note all possible reasons for cash outflow e.g. business losses, purchase of fixed assets,
payment of loans, granting of credits, purchase of stocks or goods etc (cash outflow statement)
Step iii: note that all minus figures are bracketed and subtracted from the earlier figure to give the net
figure.
ENTREPRENEURSHIP PAGE
19
Step iv: reconcile or adjust the inflows for each item or month with the outflows to give a cash flow
statement for the business venture.
ENTREPRENEURSHIP PAGE
20
D. SOME FINANCIAL RATIOS
1) Liquidity ratios determine how well a firm is able to meet current obligations and how easily
its current assets are converted to cash.
l Current ratio is current assets current liabilities. A current ratio of 2: 1 is recommended.
l Acid test or quick ratio is current assets less inventories current liabilities. An acid test ratio
of 1: 1 is satisfactory.
l Working capital is total current assets. It indicates how much assets an organisation has to
settle its creditors as quickly as possible.
l Net working capital is current asset less current liability.
2) Activity ratios determine how well an organisation can manage its current and fixed assets.
l Inventory/stock turnover ratio is cost of goods sold (COGS) average inventory. It shows
how effectively a business is managing its inventory. The higher the inventory turnover, the
better, up to a limit. Why?
l Total Assets Turnover indicates how effectively a firm uses existing assets to generate sales
3) Profitability ratios show how efficiently a firm invests and makes profits from its business and
assets.
l Gross profit margin is gross profit or (sales less COGS) annual sales
l Net profit margin is net profit or operating income less financial expenses Annual sales
l Return on investment (ROI) is earnings before interest and taxes total assets.
4) Leverage ratios determine how effectively an organisation uses long term financing options.
l Total debt ratio is total short and long term liabilities total assets. A high ratio shows a
preponderance of external liabilities and debts in the corporate financial structure, a highly
un-recommended situation.
l Debt to equity ratio is total long-term debt total owner's equity. A high ratio shows that a lot
of liabilities are owed other people, a risky state of affairs. Why?
ENTREPRENEURSHIP PAGE
21
2.40 Revision Questions.
i. List any three financial statements necessary in Accounting. Which of them do small
businesses need to prepare? Why?
ii. A company, Bivbere Tivere Ltd has a current ratio of 1: 2. What is the implication of this?
What will you advise the management to do?
iii. What are the differences and similarities between i) a balance sheet and a profit and loss
account and ii) between a profit and loss account and an income and expenditure account?
iv. From the following trial balance of Ozzie Idoye Farms, extracted after one year's trading,
prepare a trading, profit and loss account and a balance sheet for the year ended 31
December, 201X.
Sales ------------------------------------------------------381,152
Purchases----------------------239,664
Salaries-------------------------113,054
Motor vehicles------------------ 33,188
Rent------------------------------3,788
Insurance------------------------- 744
General expenses------------------ 170
Premises----------------------------- 190, 840
Motor expenses----------------------4,832
Debtors--------------------------------53,480
Creditors---------------------------------------------------------33,038
Cash at bank---------------------------- 33,038
Drawings-------------------------- 16,850
Capital--------------------------------------------------------- 276,132.
690,332 690,332
Stock at 31 December 201X ----------# 24,816.
v. Mallam Lemu Ibn Yakassai bought a corner shop for #64,000, paying by cheque from his bank
balance of # 120,000. The effect of this transaction on the balance sheet is that the cash at bank
decreased while a new asset, building was added. Graphically show the balance sheet of Mallam
Lemu.
ENTREPRENEURSHIP PAGE
22
LECTURE THREE
PURCHASING
3.20. Introduction.
An entrepreneur should be involved in purchasing, at least initially. He or she should be able
to purchase or assist others in purchasing initial corporate fixed assets like fixtures and
machines, goods for resale or raw materials for production. This lesson will turn the average
businessperson into an efficient purchaser.
B. What is purchased? Raw materials, machines and equipment, spare parts, tools, stationery,
finished goods for use or resale, lands, buildings, various services like security, auditing,
cleaning, fumigation etc.
C. Aim of effective purchasing: To purchase the right items at the right price, from the right
place, at the right quantity and quality, at the right time and delivered to the right place. The
right price may not be the lowest price. Why? Seek for right prices that are most economical
in the long run.
ENTREPRENEURSHIP PAGE
23
3.22. Objectives of purchasing
l To help the organization acquire all the items needed for effective production
l To examine the economy and environment for information that can affect purchasing and
bring such to the notice of management.
l Searching for more economic substitutes for the items bought and better purchasing
procedures and suppliers.
l Keep good record of details of supplies and suppliers
l Cooperate with the engineering, production and other departments to identify needed items
and generate clear specifications
l Carry out purchasing procedures like requisition for items, analysing quotations and
proposal, selection of vendors, checking supplies etc.
ii) Check the store or cupboard for the item. Decide to buy out- of- stock items.
iii) Specifications. With the aid of the user-units, clearly describe items to be bought in terms of
their properties, use and acceptable variations. Entrepreneurs can specify materials and
equipment by the following means:
a) a description of their properties and appearance.
b) A statement of the use they will be put into.
c) Required SON, NAFDAC or other acceptable certifications.
d) Appropriate colours or composition e.g. of foods and some raw materials.
e) Drawings or plans of machines, building.
f) Method or place of manufacture- some places of manufacture denote more quality than
others.
iv) Required items are supplied from the store or if outof-stock, bought by the purchasing
authority or a contractor depending on corporate policy.
v) To purchase the items, the internal buyer visits the market to assess the prices and quality of
different items or requests for quotations and proposals from contractors.
vi) The quotations and proposals are assessed on the basis of current prices and brands and the
most appropriate contractor and a standby one as a 'plan B' are selected.
ENTREPRENEURSHIP PAGE
24
vii) The successful contractor is given a purchase order (LPO) specifying details of agreement to
purchase the item including specifications, prices, and minimum delivery date.
viii) It is also important to follow up and monitor the activities of the supplier to ensure an
adherence to the LPO.
ix) Delivered items should be inspected for quantity and quality.
x) Accepted items should be promptly sent to the requesting person and unit.
xi) The vendors or contractors should be promptly paid. A delay here is demeaning and
counterproductive. How?
ENTREPRENEURSHIP PAGE
25
LECTURE FOUR
4.1. Learning objectives: At the end of the lecture, students should be able to
l Define the terms production planning, production control and production planning and
control
l Mention and describe the determinants of production planning and control.
l Explain the process of production planning and control in an SME.
l Describe how a production control is actually done
l Explain the importance of routing, scheduling and dispatching.
4.20. Introduction:
Production of goods should not be done haphazardly to avoid all the problems associated
with poor planning and control e.g. over or under production. Entrepreneurs should take
time to carry out planning tasks and control production to meet the goals and objectives of
the organisation.
B. What is production planning? It determines the how, where and when of a production
and issues the order to manufacture and directs the use of facilities, materials and labour to meet
sales requirement.
ENTREPRENEURSHIP PAGE
26
4.22 The tasks in Production Planning and Control
Inventory control- Ensuring a steady supply of inventory for production.
Routing- Specifying the methods and sequence of operations for manufacturing
Scheduling- Deciding on the timing and rate of every operation.
Dispatching- The commencement of production through the issuance of work orders,
requisition orders, control sheets, delivery note, progress chart, e.t.c.
Production control- Following up production to ensure that things work according to plan.
Check output rate and completion time.
ENTREPRENEURSHIP PAGE
27
2. Routing: this is the sequence of production as specified in a route sheet, in line with the
production layout and established materials handling procedures. Any routing should
change when products are modified, new ones introduced or when machines and processes
are changed. In custom-made production, the routing is modified for each production.
3. Scheduling: This determines the priority of production and the rate of output of the products
and the timings. It establishes a steady, economic rate of output to allow for a minimum
processing time and a rapid turnover of inventories.
a) Pre-scheduling- forecasts the sales figure and the necessary buffer to determine the overall
production output and determine the scheduling period (a year, a quarter or half a year).
The scheduling period should allow for a specific, ideal quantity of products to be in the store
to service future customer needs. This quantity should be consistently replenished by new
production.
b) The master schedule: this shows the overall or total production required to be produced and
the total production that can be done in the plant. Any gap between both is noted and dealt
with. This can be done by acquiring more workers, new machines, more training etc. The
master schedule also determines the order of priority of producing the various items or
products in a multi- product plant.
c) Production schedule: this gives a breakdown of the data in the master schedule. It
specifically sets the order of work of each machine or stage in the production process, the
starting date for each lot and the weekly or daily output for each item to match the master
schedule. In a plant producing a simple product in a continuous process, a production
schedule may not be necessary. The master schedule is detailed enough.
4. Controlling process: It aims at monitoring supply of production tools and inputs, the priority,
sequence and rate of production to ensure they are in line with the master and production
schedules. Controlling of inputs prevents shortages that can disrupt production or surpluses
that can tie-up capital. The control procedure shows production lags caused by machine
failure, input or tool shortage, defective work, absenteeism, substandard raw materials,
power failure etc. Such lags should be corrected by appropriate measures e.g. standby
equipment, more staff, overtime work, subcontracting, staff discipline, etc
4.26. Production report: The PPC unit should regularly write and submit a production report to
the general manager or CEO. The report should include
I) the size of production requirements
ii) current rate of output
iii) the capacity of the plant
ENTREPRENEURSHIP PAGE
28
iv) any production lag and causes of the lag and action taken or recommended to alleviate it.
v) the percentage of rejects, scraps or substandard products
vi) the problem of raw material quality and supply
vi) the number of overloaded or unused machines
vii) any other production activity or decision that would interest top management or require
their endorsement.
ENTREPRENEURSHIP PAGE
29
LECTURE FIVE
SALES MANAGEMENT
5.20 Introduction: SMEs are in business to meet the needs of their customers. Money is made
while meeting needs of customers. This will require the marketing and sale of their goods. A
successful entrepreneur therefore, should possess knowledge and skills necessary to
exchange his goods and services for the money of customers.
5.21 Definitions:
A. Marketing is a process by which a product originates and is then priced, promoted and
distributed to customers.
It is also the planning, organising, directing and coordinating efforts towards developing,
pricing, promoting and developing products for different customer groups.
B. Salesmanship is the skill required to sell or persuade people to buy a particular product.
C. Personal selling is a face to face encounter between a sales person and the customer aimed
at convincing the latter to buy the product on offer.
It is the aspect of marketing that involves the actual meeting with and selling to the customer.
SMEs can never prosper without marketing and salesmanship. Why?
D. Sales management is the planning and control of all aspects of salesmanship or sales, from
the product generation to the delivery to customers.
ENTREPRENEURSHIP PAGE
30
B. Duties of sales persons
Prospecting and scouting for customers, persuading all levels of customers to purchase
company products, distribution and delivering products, monitoring the performance of the
company's products on the market, study the needs and characteristics of the market and
customers, monitoring the performance and features of competitive products, explaining
new products and policies to customers, and reporting customers' problems to office
managers,
ENTREPRENEURSHIP PAGE
31
E. Sales Training. Training should be based on corporate training objectives, the nature of the
customer and the type of product to be sold.
The content of the training should include company history, structure, vision and mission;
product features; prospecting for customers; planning to meet customers; how to approach
customers; presentation techniques; handling sales objections and problems; how to close
sales; customer service skills; customer -follow up skills; communication including report
writing; territory and time management; sales accounting; basic vehicle driving and
maintenance techniques etc.
Training methods include lectures, problem solving, case study, visiting customers in the
company of more experienced salespersons and listening to customer suggestions and
problems.
5.23 A PRODUCT
A. Definition: Business persons sell products to customers. A product is a bundle of physical
and symbolic characteristics offered to the customer. It can be a good (tangible) or a service
(intangible).
iv. It is important to always incorporate cost reduction and quality into every aspect of product
development and management.
ENTREPRENEURSHIP PAGE
32
5.24 PROMOTION:
This involves all activities designed to influence and persuade customers to act in a
particular manner beneficial to the organisation.
B. IMPORTANCE OF PROMOTION
l Reduces selling efforts to make selling easy.
l Sales promotion actually helps customers make immediate purchase decisions.
l It can be used to introduce new products.
l It is used to inform consumers about changes in product, price or distribution techniques
l It can be used to build corporate or product image and counter negative publicity about
the product or company
l Promotion can also be used to build a positive brand name and customer image
ENTREPRENEURSHIP PAGE
33
5.25. PRICING
A. Importance of pricing in SMEs.
l It affects sales volume
l It affects profit
l It affects product competitiveness
l It influences the customer's perception of quality.
l It can influence sales effort. A low price, at least initially, can reduce the efforts put into selling
a product.
5.26 DISTRIBUTION
Definition. This is the total process or mode of transporting and moving goods and services from the
primary source to the final consumer. It involves the design and use of a network of available
channels for moving raw materials, components and parts, fixtures, machines internally (within the
organisation) or externally. Important aspects of physical distribution are warehousing, channel
design, communications, transportation, inventory control and materials handling.
A) Warehousing. This encompasses all the operations involved in storing goods safely and
filling orders from customers.
Some warehousing tips.
l Receive and keep goods safely with due consideration for cost, security, lighting, ventilation
and protection from rain and dust.
l Use tags with date and product type to identify and label goods
l Store similar items and products in the same area or place.
ENTREPRENEURSHIP PAGE
34
l Tidy and clean store and storage area
l Fill orders smoothly and fast.
A) Determining the individuals and organisations that act as go-betweens between the product
manufacturer and the consumer. These go-betweens are channels like retailers (hawkers,
department stores) and wholesalers. A producer may opt for direct marketing to the
consumer without a middle person or go-between.
B) Using communication and other means to ensure an efficient flow of goods and services to
the final consumer. For example coordinating distribution activities by telephone, the
internet or sophisticated tracking devices.
C) Means of transportation include airways (aeroplanes, helicopters); waterways (boats,
ships); motor vehicles (lorries, cars, trailers); pipelines; beasts of burden (donkeys, horses);
bicycles and tricycles; railways (trains). An entrepreneur should consider the under listed
factors to chose a means of transportation for his products:
l Nature of product, whether bulky or light, perishable, liquid or solid
l Cost of the means of transport, railways, waterways and motor vehicles are cheaper than air
transport.
l Urgency, how long it takes to transport the goods to particular destinations. Aeroplanes and
motor vehicles are faster than ships, animal carriage and bicycles.
l Distances to be covered
l Accessibility of producer or market to different modes of transportation.
In summary, an entrepreneur should weigh the costs and benefits of different means of
transport before taking appropriate decisions.
D) Inventory control
l Make right decisions as to when to order raw materials and other items, for example to what
level should the stock of items fall before new items are ordered?
l What quantities should be ordered?
l These two factors depend on the cost of ordering (cost of the labour used in ordering,
personal visits etc) and holding costs (cost of capital tied down, cost of wear and tear, risk of
the goods becoming obsolete, pilferage, insurance costs. Cost of providing security, light etc)
l Entrepreneurs should balance both factors to avoid under stocking or over stocking. Which
is worse?
ENTREPRENEURSHIP PAGE
35
F) Materials handling- Raw materials or products may be handled manually with bare hands or
mechanically with the aid of fork lifts or trolleys. Which one do you prefer? It depends on the
nature and cost of the materials and the nature of the businessperson (some people like to
use the best means to do business and serve the customers while others don't)
ENTREPRENEURSHIP PAGE
36
LECTURE SIX
6.20. Introduction: No enterprise is too small to require good organisational and personnel
procedures and strategies. In fact one persistent flaw in many small businesses is the lack of
formal administration and personnel management. Students are enjoined to thoroughly
ingest and digest this lesson before venturing into business.
6.21A. Definitions;
Organisation (in this context) is defined as arranging mutually related and independent
parts into a functional whole that works smoothly.
An office is a place or room for carrying out work or business. It can be in a person's
residence or in a building different from the residence.
Office organisation therefore means arranging different parts of an office or organisation to
form a smooth system that effectively achieves corporate objectives.
B. Functions of an office
- Gathering of information from different units.
- Keeping records in registers, ledgers, and computers
- Disseminating information to different units e.g. price list,
- Protection of data
- Receiving visitors
- Doing official work
C) Office layout this is the physical arrangement of workers, furniture and machines in the
work place. It is a part of office organisation.
ENTREPRENEURSHIP PAGE
37
- Total space available
- The business to be transacted
- Total labour size
- Equipment and facilities available
2) Use of an open office; this is an open hall or space with chairs and tables for the workers.
Advantages;
- It is cheaper than closed offices
- It leads to better staff interaction and communication
- It is easier to supervise
- The layout is flexible and can be easily modified.
Disadvantages;
- It may be noisy
- It would be hard to concentrate in an open office
- Privacy is very difficult to achieve.
- Cold and airborne diseases can easily spread
- Challenging interpersonal relations issues may occur when all staff constantly work in the
same open.
ENTREPRENEURSHIP PAGE
38
B. Determinants of how an office should be organised.
- Needs of the customers
- Type of business
- Finance
- Industry practice
ENTREPRENEURSHIP PAGE
39
ii) A desktop or laptop computer: A computer is a machine or a series of electronic machines
connected to a unit and capable of automatically accepting, processing and producing the
results of operations. It can perform all the jobs of an office e.g. accounting, stock control,
price listing, invoicing, credit control, hire purchase documentation, wages calculations and
administration, tax and staff records, production control, purchasing control and all types of
tabulations and mathematical computations.
iii) Adding machines- Simple accounting machines used in calculating figures. There are two
types:
a) Non-listing adding machines that add or subtract figures without showing a
permanent record of the results on the screen and
b) Listing adding machines that add, subtract and produce a printed result on a paper
attached to them. Before operating adding machines, clear their screens of previous
calculations.
They are used
l to calculate wages and salaries
l to calculate sales
l for budgeting and other planning calculations
iv) Electronic calculators; these show the result of operations or figures (addition, subtraction,
division and multiplication) on the dials in the form of lighted figures.
v) Cash register; this machine registers sales and cash and produces receipts
vi) Bank note counters; count and check notes
vii) Stapler; to staple documents
viii) A power generator is an inevitable office machine in Nigeria.
B. ORGANIZING A STORE/INVENTORY
- Keep a store of consumables in a room, cupboard or file cabinet
- Keep a record of all the items and equipment.
- Arrange items according to a particular order, for ease of retrieval
- Similar items should be kept together
- Items that are regularly in demand should be kept nearest the door or 'at hand'
- Protect items from dirt, water, sunlight, pilfering, e.t.c.
ENTREPRENEURSHIP PAGE
40
In large organisations the personnel function is performed by the Personnel/ Human
Resource Manager but in small businesses the owner or general manager does so.
ENTREPRENEURSHIP PAGE
41
l Find out and select the applicant whose qualifications most accurately match the job
specifications. This selection exercise should focus on the personal attributes, attitude to
work, work experience and interests of applicants. Selection tools include aptitude/
intelligence/ personality or proficiency test, interviews, actual work trials, medical tests and
verification of references and other data. Is a background check of potential employees
necessary? Would you employ an over-qualified candidate?
l Give the selected applicant a letter of employment with important pay and
work details. Why?
l Place the staff in the appropriate position after induction training. The induction programme
should expose inductees to basic facts about the organisation, management and the job to be
performed.
6.26. WELFARE
Some employers show interest in their staff beyond the payment of salaries. They give something
extra to workers to make them comfortable, happy and motivated to work to the best of their ability.
Welfare items include:
Canteen services for free or subsidised meals, free medical treatment , free means of transport or
transport allowance in lieu, free or subsidised products of the company, scholarship for employees
or their wards, a virile suggestion/ complaints scheme, recreational facilities etc.
Employers should select the payment scheme that best motivates staff and prevents unusual staff
exit, sabotage or fraud. Why do some employers pay their staff just enough to keep them alive to
work? Should small entrepreneurs have a sort of retirement or pension scheme?
ENTREPRENEURSHIP PAGE
42
l Commissions and bonuses can help to motivate workers and should be paid as agreed
l Deductions should be as agreed with employees and should conform to the law
l Visit the nearest tax office to learn more about individual and corporate taxes payable. Tax
evasion is a serious crime!
l A worker's salary is the taxable income minus liability ( e.g. tax and loan) plus any bonus
and allowance.
l If the workers are many, the use of a pay advice / pay slip format is advisable.
l Pay workers through their bank accounts for security reasons. It will also help some people
develop a savings culture. If you want to pay cash, put the money in individual envelopes.
Why?
ENTREPRENEURSHIP PAGE
43
LECTURE SEVEN
ORGANIZING RESOURCES
7.20 Introduction:
Resources are what entrepreneurs require to produce results. Resources like machines, materials,
money and manpower are necessary and should be procured by business persons. This lecture will
focus on how these resources can be acquired and organised.
B. Materials: These are inputs that are processed in machines and equipment or utilised to
generate products. They are also available for purchase internally or internationally. Local
versions also exist, for example, local fish and poultry feeds are popular substitutes of more
expensive (more nutritious?) foreign feedstuff.
C. Manpower: Employers are the centre of any business. Business persons may, at least initially,
use their skills and knowledge in their business to reduce manpower cost. The use of one or
more friends, family members, 'borrowed' staff or daily casual workers will also reduce
personnel costs. Later on, an entrepreneur may seek to employ formal workers as
enumerated in lesson 6. Entrepreneurs are advised to seek out and properly motivate good
employees, who should be technically and emotionally mature.
D. Business premises: It is clear that good business locations and premises greatly impact on
any business success. But entrepreneurs may need to start from home, share a relative's or
friend's business premises until he or she is stable enough to acquire a separate, choice,
business place. We should be careful not to over- invest in business premises and make our
business unprofitable. Can people use their motor vehicles or public places as offices?
ENTREPRENEURSHIP PAGE
44
Other Sources of Money for Business
l Borrowing from friends and relations.
l Borrowing from clubs and civil and religious associations.
l Borrowing from cooperative societies and microfinance institutions.
l Borrowing from commercial banks.
l Small businesses can approach the NDE for loans.
l Another source of capital for SMEs is to enlist one or more partners who will provide finance
in return for part ownership of the business (equity participation).
l Some of the agencies listed in the next lesson, give or direct SMEs to those who give financial
assistance.
l Leasing or hiring of equipment, land and materials from reputable organisations and
persons is one way to inject capital into a business.
i. What options are available for a new graduate who wants to acquire accommodation
for an internet caf?
ii. Despite government rhetoric, SME financing is still poor in Nigeria. Why?
iii. How can a potential poultry farmer with limited funds get very important
equipment and materials to start business?
iv. Counsel a jobless HND mechanical engineer who has been waiting for 2 years for
N5million to start a modern automobile repair shop in Lagos.
ENTREPRENEURSHIP PAGE
45
LECTURE EIGHT
8.10. Objectives
At the end of the lecture, students should be able to
Mention some agencies and associations that can assist SMEs in solving their problems
State the functions of these agencies and associations
Advise entrepreneurs on how to assess them.
Find out the problems limiting the operations of some of the agencies and suggest solutions.
8.20 INTRODUCTION
Nigeria like many other nations is so interested in the development of SMEs that it
i) set up some agencies and
ii) encouraged the establishment of some associations and organisations to assist and support
SMEs. This lecture is a summary of the functions, operations and problems of some of these
agencies and associations.
ENTREPRENEURSHIP PAGE
46
Its functions:
It enlightens governments and the general public on the need to buy made-in-Nigeria
products.
It leads the battle against governments and their agencies to reduce interest rates, taxes and
levies for manufacturers in order to make our products affordable and competitive.
It runs an economic data and information bank for the use of its members
MAN provides professional advice to its members to help them overcome operational
problems
It liaises with NAFDAC, SON and other quality and standards enforcement agencies to
ensure that MAN members produce goods of the highest quality.
ENTREPRENEURSHIP PAGE
48
l NECA maintains regular contact with the International Labour Organisation, the
International Guild of Employers, SON, FEPA, FIRS and a host of international and local
organisations in order to properly brief its members on their activities and policies.
l NECA has a mechanism for monitoring and controlling its members to prevent
embarrassing gaffes, selfish and illegal activities.
Town unions and cooperative societies in Nigeria are not financial institutions. They operate
through banks.
Examples of such institutes are The Nigerian Institute for Oil Palm Research, NIFOR near
Benin City; Federal Institute for Industrial Research Oshodi; Industrial Research Council of
Nigeria, Matori, Lagos; Rubber Research Institute of Nigeria, Iyanomo near Benin City;
National Root Crops Research Institute, Umuahia; Cocoa Research Institute of Nigeria,
Ibadan; Projects Development Institute, Enugu, Nigeria Stored Products Research
Institute, Ilorin, National Cereals Research Institute, Minna, National Institute for Freshwater
Fisheries, New Bussa, etc.
ENTREPRENEURSHIP PAGE
49
8.30. Tutorial questions:
i. List three (3) the research institutes in Nigeria relevant to SMEs. State the functions of each of
them. Why do you think most of their objectives are yet to be realised?
ii. Which of the finance-support organisations listed in the lecture are of the greatest relevance
to SMEs? How?
iii. Find out how the National Directorate of Employment can assist graduate-entrepreneurs
start their own businesses. What are the conditions for such assistance?
iv. The Small and Medium Scale Development Agency of Nigeria (SMEDAN)is one of the
support agencies that have helped entrepreneurs overcome business challenges in Nigeria.
Find out the specific duties and achievements of SMEDAN.
v. Write down your personal assessment of SME support agencies in Nigeria. How can they
operate more effectively and efficiently?
vi. Check all available news media and mention at least five SME support organisations
omitted from this lecture. What are their functions?
ENTREPRENEURSHIP PAGE
50
LECTURE NINE
9.20. Introduction: Many people describe SMEs in Nigeria as endangered and disadvantaged
compared to their counterparts in other parts of the world. They cite the death of hundreds of
businesses and the exodus of many more to business-friendlier countries. Imported raw materials
and finished goods are far cheaper than their local equivalents. For example the cassava starch
imported from Vietnam is 50% cheaper than Nigerian starch. Vegetable oil from Thailand, textile
materials from India, Ghana, Cote d'Ivoire, China; are also cheaper than their Nigerian cousins.
What disadvantages and burdens do our SMEs bear?
ENTREPRENEURSHIP PAGE
51
l Multiple taxes, levies, tolls, rates, charges, tariffs, paid to Federal, State and Local
governments, development and district councils, traditional rulers, village and town unions,
touts and people with different shades of uniforms from black to white strangulate industries.
The approved list of taxes and levies are ignored. Tax consultants and armed personnel
illegally seal- up business premises with no regard for the rule of law to forcibly collect
regressive taxes and levies, (and their own commissions).
l Complexity and difficulty in obtaining licences and approvals to start and do business in
specialised areas like manufacturing, drugs, food and beverages, mining etc.
l Low levels of skills and education result in unskilled or half baked workers.
l Political, religious or social unrest in some parts of the country have crippled businesses there
and chased away SMEs.
l The low productivity and uncommitted attitude and behaviour of many workers bleed
business.
l Poor infrastructures have caused some firms to move to other countries or close down. The
effect on small businesses is better imagined. Infrastructures like good roads, power, security,
water supply are still a great challenge in many parts of Nigeria.
l Lack of self control on the part of some business men makes them over invest, take very high
risks, overspend beyond their profits and engaging in all kinds of frivolous spending. They
eat their seeds.
l Poor financial skills: Some SMEs ignore effective budgeting, feasibility studies, good financial
records, cash control, auditing, financial checks and balances, e.t.c. Some CEOs of limited
liability companies see company funds as personal funds.
l A wrong choice of business or a wrong selection of business location, associates and
employees can generate problems.
l Lack of the spirit of entrepreneurship and innovation: Many business persons are not
genuine entrepreneurs; they go into business just or the money they can make.
l Many funding problems may arise; inadequate funds to start or maintain a business
enterprise is an intrinsic and potential business killer.
l Poor customer and human relations: Poor interaction with customers, employees and other
stake-holders (e.g. host communities, government agencies) can blight a business.
l Poor management methods can cause problems: some businesses can be so informal that
they lack real management structure, inventory system, accounting procedure,
administrative system, e.t.c. Business requires structures to succeed.
l Some entrepreneurs neglect their businesses because of laziness, politics or other activities
completely unrelated to their business ventures. They 'pursue many rats' and catch none.
ENTREPRENEURSHIP PAGE
52
9.23. Some causes of the problems
l National and local corruption in various private and public organisations.
l A lack of entrepreneurial mindset among our leaders
l A lack of people-based leadership at all levels
l The availability of 'easy' money from politics and our petroleum resources
l The flourishing of the black economy- drug pushing, drug counterfeiting, internet fraud,
money laundering, bribe-taking, round-tripping by banks and juicy inflated contracts. Do
we add kidnapping and armed robbery?
l The national infrastructural framework is weak. How?
l Some Nigerians are entrepreneurship-ignorant and rely on dwindling paid employment.
Are you among them?
ENTREPRENEURSHIP PAGE
53
LECTURE TEN
He visited two agricultural consultants to learn the basics of fish farming and fish feeds production.
Akinsefunmi then rented five old fish ponds, bought about 30,000 fingerlings, a diesel power
generator and bags of Coppens fish feeds, hired one support staff, called his religious leader for
success prayers and started what he called Akin Fish Farms. His aim was to make such wealth from
fish farming that decades of 'working for others' couldn't bring. Every morning Akinsefunmi would
be seen with his staff feeding the fishes, weeding around the ponds and doing other necessary things
to ensure that the fingerlings became healthy adults that would attract fishmongers and hotels in
Ikeja. He was an optimistic entrepreneur.
But when he later harvested and sold the fish, he made such a loss that made him decide to suspend
fish farming. He explained that the cost of the imported fish feeds mixed with their local alternatives,
lubricant and diesel for the power plant, rent for the five ponds, fingerlings, the staff, fish drugs and
vitamins and other miscellaneous expenditures surpassed revenue from the sale of the harvested fish
by 98%. Mr Akinsefumi vowed to return to fish farming later, 'fully prepared'
Questions:
i) Consult a fish farmer or agricultural expert to find out why Akin Fish Farms failed.
ii) How can Mr Akinsefunmi fully prepare to make a come back?
iii) In what ways can government make fish farming more attractive in Nigeria?
On returning to Zazzau after his graduation and NYSC, Hussein Bako set up a bee keeping
and honey production business, Zuma Mai Dadi Ltd near the Ahmadu Bello University.
ENTREPRENEURSHIP PAGE
54
He was the Chairman and Chief Executive Officer of the business. He employed staff with the
correct attitude and trained them how to use materials and machines from Dubai and Bahrain.
Within a year, health conscious middle class citizens of Zazzau and its environs made Zuma Mai Dadi
honey part of their breakfast, lunch and dinner. Sugar was overthrown by the company's honey
products. Hussein prospered and fully enjoyed the benefits of successful entrepreneurship.
Persuaded by friends, Alhaji Hussein Bako left his flourishing company in the hands of his younger
brother, entered partisan politics and became a state commissioner. But the new chairman/ CEO
ran Zuma Mai Dadi aground. Workers resigned. The product quality nose dived and customers
defected in droves to rival honey producers. Alhaji Hussein Bako visited his company one day, took
a look at the once vibrant bee farm, saw the broken down machines and broke down. Now he is in a
dilemma. Should he leave politics and return to revive Zuma Mai Dadi Ltd or consolidate in politics
and allow the company to die?
Questions:
i) What benefits of successful entrepreneurship did Alhaji Hussein enjoy?
ii) What are the pros and cons of employing close relatives and friends in a person's business?
iii) In your opinion, how can Alhaji Hussein resolve his dilemma?
Raw materials were mostly waste plastic materials collected from places as far away as Port Harcourt
and Lagos and some imports from China. Her initial plans were based on product distribution
through traders in the major markets of Aba.
But recently, the traders forced her to accept their prices, terms of payment and other decisions that
should be made by a product manufacturer. It was a clear case of the tail waging the dog. Ms
Amarachi has decided to change and liberalise her distribution and marketing beyond the powerful
market traders in Aba to major cities in Nigeria and later to Cameroon and Sao Tome.
Questions:
I) Suggest some distribution strategies Ms Amarachi can use to market her plastics ware nationwide.
ENTREPRENEURSHIP PAGE
55
ii) If she decides to employ sales persons, what qualities should guide her selection exercise?
iii) Describe different ways of motivating sales persons to superlative performance?
i) Prepare an income and expenditure account for the financial year, for Dame Kate Omon
Smile Train.
ii) If the organisation were profit making, the donations could become revenue from operations,
and subscription by members turned to owners' equity. How will the profit and loss account
then look like?
But how can our tailors compete with them on price, the main determinant of purchase to the
average Nigerian?
It is difficult for a Nigerian sewn suit to cost less than #6, 500. A good suit fabric costs at least #1,000
a yard or #4,000 for the 4yards required to sew a suit. The assistants who cut and sew the jacket and
trousers will be paid at least #2,000 and #1,500 respectively. The cost of finishing (sewing the
sleeves and collar, fixing the buttons etc) and ironing could be as high as #1, 500 per suit. How can
the finished Nigerian suit match the Asian price of # 4,000?
But Nigerian tailors need to improve their quality and skill. Some of the ladings in suits they sew
overhang. The filling they use to make the suit solid and thick is of a low quality and makes the body
of the suit fold. In summary suit by Nigerian tailors are of low quality.
ENTREPRENEURSHIP PAGE
56
How can they be compared with Asian or European tailors with their specialised skills, machines and
division of labour? There, two different persons or machines cut the fabrics for the body of the suit
and the trousers, different specialists fix different parts of the suit and trousers, and others do the
finishing and ironing.
That is not all. According to Microsoft Encarta, 'today, the tailoring industry relies heavily on
computers to aid in patternmaking and layouts. Digitized data is fed to computer-driven cutting
machines for either single- or multi-layer fabric cutting. Garment assembly may employ advanced
robotics for relatively simple operations, but more complex work is still done by the individual
worker. Industrial sewing employs hundreds of specialized seaming techniques as well as a wide
variety of specialized stitching techniques'.
A small or medium scale tailor may not use robotics but there is a need to use cost cutting, quality
enhancing and time saving technology for effectiveness and competitiveness and to retrieve some
lost business from abroad.
Questions.
i. What do you think is the origin of the present 'suit making challenge' in Nigeria?
ii. Discuss with tailors in your area what they consider to creative solutions to the problem of
suit tailors in Nigeria. What are they?
iii. What resources do Nigerian graduates need to commence an industrial tailoring
business?
ENTREPRENEURSHIP PAGE
57
BIBLIOGRAPHY
ENTREPRENEURSHIP PAGE
58