Success in Business

TEACHER’S GUIDE

SUBJECT : ENTREPRENEURSHIP EDUCATION

TOPIC : SUCCESS IN BUSINESS

SUBTOPIC : MEANING OF SUCCESS IN BUSINESS

CLASS : SENIOR ONE

TIME REQUIRED : MINIMUM 560 min (14 LESSONS), MAXIMUM 640 MINUTES (16 LESSONS)

Introduction

People often start a business expecting it to be successful. There are many reasons for opening up a new business. Some people desire to earn incomewhile others seek to be self-employed. However, the performance of business varies from one business to another. While one businessperson may be successful, another may be a poor performer or at worst a failure. The factors that affect the success or failure of a business are numerous. In this unit, we shall discuss the meaning of success in business, factors leading to success in business, benefits of a successful business to an entrepreneur and factors that lead to business failure. The unit will conclude with a discussion of the common management- related mistakes which cause business failure and indicators of a business that is not doing well.

Content and Concepts

• Meaning of success in business.
• Factors leading to success in business.
• Benefits of a successful business to an entrepreneur.
• Factors t leads to business failure.
• Common management-related mistakes that cause business failure.
• Indicators of a business that is not doing well.

By the end of this topic, students should be able to:

1. Define the meaning of success in business.
2. Discuss the factors leading to success in business.
3. Outline the benefits of a successful business to an entrepreneur.
4. Discuss the factors that lead to business failure.
5. Outline the common management mistakes that cause business failure.
6. Identify the indicators of a business that is not doing well.

Teaching/Learning Materials, Activities and Guidance

• Markers
• Flip charts

Job Related Life Skills

Demonstrate through activities the necessary job related life skills, namely:

1. Personal attributes – self confidence, self awareness, hard work, enthusiasm, being imaginative,
2. Communication – ability to read, write, listen and speak in appropriate ways to different audiences. Learn and apply general and specialised vocabulary.
3. Team working – task oriented, Problem solving – Budgeting and decision making
4. Application of Number – Numerical skills.
5. Information skills – Record keeping

1.1 Meaning of success in business

Success is the realisation of a worthy intention. This means that one becomes successful each time he/she takes a step towards achieving a predetermined goal, objective or target. For example a business can be said to be successful if it is expanding its market share and increasing its profits.

The indicators of success in business are the signs or measures that can be used to show the level of achieving the business goals. They enable an entrepreneur to measure or assess the achievement of the set objectives of the business. Some of the indicators that can be used to measure or assess the success of a business include:

• Increase in assets

A successful business will have its production or volume of operations increasing significantly overtime. The increase in the volume of business operations calls for additional assets to handle the increased volume of operations.

• Increased profits

If the profits of a business have been persistently increasing, it shows that a business is successful. A business whose volume of operations is increasing is likely to have its profits also increasing (if the expenses are not increasing).

• Expansion of business

A business that is successful will have the volume of the business operations and profits growing and expanding overtime.

The following may reflect the expansion of business operations:

• Market share
• Production lines e.g. number of products being produced
• Quality of products
• Increased number of employees
• Number of assets e.g. in case of a farmer, number of cows on the farm

• Recognition in the business as well as social community.

How much respect and recognition an entrepreneur and her/his business receive from the community, other entrepreneurs, government, customers etc., reflects how well the business is doing.

Activity 1

Field study

Learners may be grouped into 8-10 and sent out to find the following information about businesses of their choice.

1. What is the name of the business?
2. When did it start?
3. What type of business is it? Is it sole proprietorship or a partnership?
4. How much money (Seed Capital) was used to start this business?
5. How was this capital raised?
6. How much is the current working capital?
7. How much are the average daily or monthly sales?
8. How much are the monthly expenses?
9. Kindly list down those expenses or tell why you don’t have any?
10. What control measures are put in place to control expenses?
11. Account for the success or failure of this business.
12. What are the most significant tangible gains from this business since inception?

Note that:

• Learners should be taught how to introduce selves and cause rapport with their respondents before embarking on information gathering.
• They should be encouraged to take notes as they gather the information.
• Each group should have a team leader and a secretary.
• Each group should be given time to make a presentation to their classmates.
• The teacher should moderate and evaluate learners’ presentations and findings.

1.2 Factors leading to success in business

There are a number of factors that lead to success of a business. These are:

(a) Personal and entrepreneurial qualities of the business owners and senior management staff

For any business to be successful, the owner and the senior management staff must possess certain entrepreneurial qualities or characteristics. Qualities or Personal Entrepreneurial Characteristics (PEC) of successful entrepreneurs refer to the desired traits, which enable an entrepreneur to do what is expected of her/him and succeed in business. It is the combination of these characteristics that is required to enable any one to perform effectively as an entrepreneur. It is possible for people to develop these characteristics and succeed in their careers as entrepreneurs. Successful entrepreneurs have common characteristics, which are divided into three clusters namely achievement, planning and power.

(a.i) Achievement Cluster

• Opportunity seeking

This refers to the quality that enables the entrepreneur to see and act upon new business opportunities even in situations where other people see nothing but problems/hopelessness only. It also encourages her/him to seize unusual opportunities for obtaining the necessary resources such as financing, equipment, land, workspace, technical assistance, etc, which will enable her/him to implement her/his business ideas.

• Commitment to the work contract

This is the ability to accept final responsibility for completing a job for the customers. Customers expect entrepreneurs to perform and honour their commitments. It follows therefore that the entrepreneur should do everything possible to ensure that s/he fulfils the commitment with her/his customers. If it means joining the workers to work with them to ensure that contractual commitments are fulfilled, the entrepreneur will do it.

• Persistence

This is the quality, which enables the entrepreneurs to develop determination to have a thorough job done at any cost in terms of personal sacrifice. By doing this, the entrepreneur remains working towards the achievement of her/his set goals.

• Risk taking

Entrepreneurs are people who prefer taking moderate risks. Before they commit themselves and their resources, they assess the risks that are associated with a business opportunity that they have selected, and their ability to manage them, the benefits that they will realise and the challenges that they will face from the venture to be undertaken.

Entrepreneurs can earn profits as a result of taking risks and the higher the risks, the higher the profits. However, entrepreneurs will always prefer to take on those risks that they can manage.

• Demand for efficiency and quality

This is the quality that enables an entrepreneur to do things that meet or surpass existing standards of excellence or improve on performance by striving to do things faster, better and cheaply. By doing this, the entrepreneur remains ahead of others, makes more profits and retains a growing market share.

(a.ii) Planning Cluster

The planning cluster is made up of the following characteristics:

• Goal setting

This refers to the ability of an entrepreneur to set clear and specific goals and objectives. These goals and objectives are normally high and challenging but at the same time, realistic and can be attained, given the resources that one has got at her/his disposal.

• Information seeking

This is having the urge to look for the required information in order to make an informed decision, for example, selecting, starting and successfully managing the desired business. This calls for the concerned person to personally seek and obtain information regarding customers, suppliers, competitors as well as any other relevant information that is required to enable the entrepreneur make decisions and improve knowledge on her/his business.

• Systematic planning and monitoring

This is the ability to develop plans that will be used in monitoring and evaluating the progress of the business. This helps the entrepreneur to carefully monitor her/his business’ actual against desired performance and turn to other alternatives whenever the need arises, so as to achieve her/his set goals.

iii) Power Cluster

• Persuasion and networking

This is the ability to link, convince and influence other individuals, agencies and other groups in order to maintain business contacts at a high level. This will help or work for the cause of the business in a positive manner to accomplish own objectives.

• Self-confidence

This refers to having a strong belief or confidence in oneself and the ability to complete a difficult task or meet a challenge.

By possessing and practicing the above entrepreneurial qualities, business owners and senior management staff will be able to provide their businesses with good, efficient and effective leadership and management, which will enable their businesses to succeed.

(b) Clear objectives

If a business is to be successful, it is necessary that it should have clear and definite objectives. Once set, the entrepreneur should ensure that the business is operating and management guidelines set to achieve objectives are closely followed.

(c) Efficient and effective business planning

Planning is a very important factor for successful operation of a business. This is because planning enables a business to set its targets, methods of achieving them and resources to use in the process. This therefore enables it to operate within a known and provided framework, which saves it from crisis, straying off course and the associated losses.

(d) Proper location and plant layout

The success of a business may depend to a great extent on its location and layout. Appropriate location helps a business in securing the required inputs, for example, materials, labour, power, etc., at minimum possible costs. The location also helps it to secure and access markets at low costs.

(e) Availability of business support services

Businesses thrive and succeed in an environment where there are business support services such as financial services, business information, transport, communication, water, power, etc. For example, where there are banks that can lend entrepreneur money to expand her/his business, then such a business is likely to succeed.

(f) Availability of market

Production of goods and services is meaningless unless there are customers who will buy them at prices that will yield profits to the enterprises. Enterprises produce their goods and services to meet the needs of their customers. Where the volume of the customers is large and growing, and the customers can, and are willing to buy the enterprises’ products at profitable prices, then the enterprises will have a very good market and high chances of succeeding.

(g) Conducive government policies

If the government policies are conducive for business growth, then businesses will thrive and succeed. Examples of conducive government policies include fair taxation, controlled inflation, a well functioning financial system (i.e., banks that can lend businesses money at fair interest, liberalised prices and foreign exchange rates), good security and political stability, etc.

Activity 2

You may invite a resource person (business proprietor) from any of the recognised successful business around the school or in the country to class to share her/his experience with the learners.

Ensure that the learners take notes of what the resource person is presenting and freely interact with her/him through question and answering.

1.3 Benefits of a successful business to an entrepreneur

By running a successful business, an entrepreneur gets a lot of benefits, which include:

a) Self reliance and fulfilment

When an entrepreneur operates a successful business, s/he gets to do things for him/herself, maintain self-confidence and make independent decisions. The entrepreneur will also be in a position to produce or meet some if not all of her/his basic needs.

b) Increased income and further investments

A successful business generates more/increasing profits part of which the entrepreneur can use for personal purposes. The entrepreneur can also use part of the increasing profits to make further investments.

c) Recognition in the community

A successful business and its owner are highly respected in the community because of the goods and services being provided. This will further help to attract more customers to the business.

d) Improved standards of living

A successful business generates a lot of profits, which is the entrepreneur’s income. With this, the owner may be in position to meet most of her/his needs such as improving on the standards of living.

e) Permanent address for the entrepreneur and the workers

A successful business is one well established and permanent. It therefore provides a permanent address for the owner and the workers.

Activity 3

1. Visit a successful entrepreneur in your community.

2. Interview her/him on the benefits s/he gets from running a successful business.

3. Write a report of not more than 500 words on your findings.

1.4 Factors which lead to business failure

It is common that the majority of businesses that are started in a given period fail and disappear before they celebrate their first anniversaries. This business failure is due to a number of factors which include:

a) Lack of market for the business products

If nobody wants to buy the products (goods and services) of a business then the business will fail and close. While there are several reasons for the lack of market, the most common ones include competition, changing customer tastes, uncompetitive prices, etc.

b) Poor handling of customers

A dissatisfied customer will tell between five and ten people about the negative experience while a positive customer will tell between one and five people about her/his positive experience. This therefore underpins the importance of satisfying a customer. No business can afford to survive with dissatisfied customers. A business whose owner or employees are rude to customers and do not bother to listen to them and attend to their individual needs cannot take long before it collapses. Customers will simply withdraw from the business and go to its competitors. Without a market, the business will fail.

c) Poor management of business stocks

Failure to maintain the adequate quantities of stocks in the shop will drive away customers, since other competitors will always be more than ready to serve them. When customers miss to get a particular kind of commodity more than once, from a business, which used to supply them, they will look elsewhere for alternatives, and with time, such customers will be attracted to those businesses from which there is always ready supply of commodities.

d) Misuse of business funds

One very big factor that can lead to the failure of a business is the diversion of the business funds to other purposes that may not necessarily be in line with the operations of the business. This will inevitably reduce the working capital, which is the lifeblood of the business. As a result, there will either be little or no funds left to finance the business operations like purchasing raw materials, and meeting the daily expenditure of the business enterprise.

e) Poor or low quality of products for sale

Another possible factor that may lead to the failure of a business enterprise could be poor or low quality of the products in terms of customer’s expectations as well as the competing products. This will reduce the number of customers as they withdraw and go to other businesses, which are producing better quality products. Faced with a declining number of customers and increasing competition, the business will inevitably fail and close.

f) Unsuitable business location

A lot of importance is attached to the location of the business if that business is to succeed. This is particularly true if the nature of the business products is sensitive to the location of the business vis a vis its market. When choosing the location for a business, the following factors should be taken into consideration:

• Nearness to the source of raw materials especially if the raw materials are too expensive to transport or are perishable
• Nearness to the market particularly if the products are expensive to transport
• Availability of land or business premises at cheaper rates
• Availability of labour, i.e., if the business requires a lot of labour
• Availability of transport and communication facilities such as water, electricity, etc.

g) Poor management of the business

Businesses which are poorly managed for example when they are inefficient in the use of their resources, do not keep proper records, use wrong costing and pricing methods, will inevitably make big losses and in the end fail and close up.

h) Mistakes made by the entrepreneur

In some instances, entrepreneurs loose interest in business because it does not suit their personal characteristics and as such, they slacken in their commitment to it in terms of supervision, funding, initiative and creativity. As a result, the business looses direction and collapses.

Activity 4

Read the following case study and answer the questions that follow:

John, the shopkeeper

John, lives in Makindye one of the five divisions of Kampala city. He trained as a carpenter but later decided to open up a shop in one of the busy markets in his area. John was initially very successful in his business and many people wondered how he had made his riches.

John used to wake up at 5:00 am in the morning and go to buy products to stock in his shop. He stocked a variety of high quality goods and he was always the first to open his shop, which gave him an advantage over his competitors. John had many customers whom he handled very well and they often refereed others to his shop.

As time went on, John became arrogant, probably because he was very rich. He stopped waking up early in the morning and he would open his shop after 10:00 am. He started stocking low quality goods and was no longer good at handling customers. John also used business funds to entertain his friends every evening at a local club.

It was not long before John closed his shop. By this time the shop shelves were empty, he had no customers and he did not have money to re-stock the business. The friends whom John used to entertain every evening had abandoned him and his relatives could not assist him because he never helped them while he was still rich.

Answer the following questions

1. Why was John initially successful in his business?

2. What attributes did John possess which enabled him to succeed?

3. What factors led to John’s business to fail?

4. What lessons do you learn from John’s story?

1.5 Common management mistakes that cause business failures

Most businesses have failed because they have not been managed well by their owners and employees. It is therefore important that one becomes aware of the most common management mistakes that lead to business failures. This will enable one to avoid them and therefore save her/his business from failing due to similar reasons. The following are some of the common management mistakes which cause most businesses to fail:

a) Mistaking cash for profit

Some business owners at times tend to mistake the cash received from the sale of goods and services to be profit. Under this mistaken belief, they take and use it for purposes that may not be related to the business. As they do this for a long time, the business funds get used up and the business fails to meet its financial obligations, including purchasing raw materials, stocks, paying salaries, etc. As a result, the business fails and is closed.

b) Uncontrolled credit being given to customers

A business needs a regular flow of funds if it is to finalise its operations and succeed. If friends and relatives are allowed to take goods at will with only a promise to pay in future, the business will soon run out of cash. Unless an entrepreneur can find additional cash to put into the business, the business will fail and close.

c) Lack of record keeping

Without proper records, it is difficult for an entrepreneur to tell whether the business is in trouble or not. In such circumstances, s/he will know it when it is too late. The entrepreneur will not know who owes her/him what, how much money is in her/his business, how much profits s/he is making, etc. In effect, the business becomes chaotic and in the end fails.

d) Poor customer care

Businesses fail as a result of poor customer care by their owners or employees. If customers are not handled well, they will go to other businesses where they are treated better. As a result, the business loses its market, its products do not get bought while expenses continue being incurred, the goods get spoilt, the business runs out of cash and within a short time the business collapses.

e) Neglect

Some other businesses fail due to the little attention that is given to them by their owners. This may result because of some factors such as loss of personal interest, bad habits, poor health, change of priorities, etc. As a result, there is no supervision and guidance to business employees, the business loses direction and fails to take advantage of opportunities, experienced and good workers leave and customer care collapses. Eventually employees begin helping themselves to business funds, stock and in the end, the business collapses.

f) Incompetence

This is simply the inability of the business owners and employees to manage the business operations efficiently and effectively. This may be due to either of the following:

i) Lack of requisite technical skills that may be required to manage the business operations particularly if the business cannot hire the required staff.

ii) The entrepreneur may have chosen a business, which is too technical for her/his technical capacity.

iii) The owner passing away and his heirs not having the requisite technical capacity to manage the business.

g) Theft of business funds, stocks and assets

The business may suffer from loss of its assets (e.g., cash, stocks, etc) through theft either by employees, thieves from without, etc.

h) Interference of the family members in the running of the business

An example of family interference is with drawing business funds, taking credit, which they do not pay, chasing away business workers, etc.

i) Death of the business owner

If the owner dies and there is no one to take over the business or the business is subjected to family wrangles.

1.6 Indicators of a business that is not doing well

There are many indicators or signs, which can show that a business is not doing well. Taking an example of a shop, the following indicators may show that a business is not doing well:

a) Empty shop shelves

This indicates that the business does not have cash to buy fresh stocks to replace the ones sold.

b) Expired or obsolete goods

This means that the business has lost market and cannot sell the goods. It also does not have cash and cannot replace the expired or obsolete goods.

c) Low sales

This means that the business has lost market either because its products do not meet the needs of customers or it is being out competed or it has poor customer relations.

d) Low profits

This means that either the operating costs are very high or the prices have declined and business cannot do anything about it. Low profits mean that the business cannot re-invest to expand or replace old plant or pay income to its owners.

e) High expenses

The effect of high expenses is to reduce profits particularly so if business cannot increase the selling prices. This makes the business products uncompetitive and it looses market.

Activity 5

Use resources like magazines e.g. Business week e.t.c. and News papers like The Daily Monitor, New Vision e.t.c. which usually have plenty of information about success in businesses or why some of these businesses fail or collapse.

Alternatively avail a radio to learners to listen to talk shows Or recorded information about business success to enable the learners learn more. And ensure that each learner takes notes of the various issues being discussed over the radio. You may also use this talk show as an assignment where by you would award marks for such work presented by each learner. Examples of these may include the famous CBS and Simba radio talk shows commonly known as:

• Secrets of rich people “Ebyama bya baggagga”
• Where do rich people get money “Wa a baggagga gye bajja sente” 
  BY Pastor Evans Mayambala

Activity 6

The teacher may also organise a play entitled or on a theme “SUCCESS IN BUSINESS” This will enable the learners act out the conceptualised knowledge and put it more to reality (Bringing theory to practice). It may even be presented to the entire school community or parents say on a school special day.