An Entrepreneur to Understand the Lessons of Enterprise and Entrepreneurship - Case Study Example

Introduction: The aim of the paper is to study an entrepreneur to understand the lessons of enterprise and entrepreneurship. The study will include the selection of an entrepreneur who is not from a traditional entrepreneurship background, in other words, first generation entrepreneurs. By including a semi structured interview of the entrepreneur the paper discusses the various aspects of the business, and of 'entrepreneurship' in detail. Further the paper will substantiate key issues associated with the enterprise like Finance, management, customer service, technology, marketing and operations to explain the business process and identify key issues faced by the entrepreneur in any of the above areas. At the end the paper will carefully evaluate the accumulated data and establish the extent to which the entrepreneur conforms to the conventional entrepreneurship mentioned in the textbooks. The word entrepreneur stems from the French word 'entrependre' meaning one who undertakes or one who is a 'go-between' The Father of Modern Management Peter F Drucker has defined entrepreneurship as "a systematic innovation, which consists in the purposeful and organized search for changes, and it is the systematic analysis of the opportunities such changes might offer for economic and social innovation.' (Jyotsna 2008) Therefore entrepreneurship can be described as the process of action an entrepreneur undertakes to establish and enterprise. Drucker's statement of entrepreneurs and innovation is widely accredited and truly reflect the vital elements of any successful enterprise he states "Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or a different service. It is capable of being presented as a discipline, capable of being learned, and capable of being practiced. Entrepreneurs need to search purposefully for the sources of innovation, the changes and their symptoms that indicate opportunities for successful innovation. And they need to know and to apply the principles of successful innovation." (Drucker, by Jyotsna 2008) The enterprise chosen for our study is a small baby gift business called 'LittleSyd Gifts & Celebrations' The owner and proprietor of the business is a 28-year-old Michelle Yoxall. She is some one who saw an opportunity and developed the same into a progressive business. Her choice of business is an innovation that rose from a need or from her difference in thought process. In the last four years Ms Yoxall has found herself in a strong position with a healthy books of accounts and capable of expanding further. Let us look at the some the vital aspects of her business namely finance, management, customer service, marketing and operations. An interview with the young entrepreneur (The exact text of the interview mentioned in the appendix) gave rich insights about her business and the total framework. Exploring the essentials of the business also educates us on the key issues facing her and the challenges and opportunities ahead of her. The start up: Ms Yoxall started the baby gift business due to her fashion-designing job that turned redundant. She was inspired when she wanted to gift something special to her friend who had a baby and found bouquets to be boring and of no value. So she decided to give a baby bouquet one that is filled with baby products and that which would be a treat for the Mother and the child. - A bouquet made of baby products with flowers that are functional. The entrepreneur stated that her family had been a huge support for her by offering her the outhouse and backing her emotionally to try this new venture. She received help from Creative bias and Train 2000 an organization that helps women start up their own business. Finance: Finance for a small firm is explained in the Book 'Entrepreneurship as "Smaller firms that in a midst of a strong growth stage will probably be unable to finance all of the growth from the initial capital and internally generated funds. Consequently they will be forced to pursue external sources in order to maintain orderly growth" (Krueger 2002.) Finance of the LittleSyd business is similar as financing the entrepreneur's idea was partly from her savings grants from the government and a small loan. Train 2000 had helped in predicting the cash flow required and budget costs, as she had no idea regarding the financials of the enterprise. Therefore investment consisted of 5000 of her savings and 4000 from Train 2000 and 500 from Creative Bias as grants and loans. With an investment of 9500 in the year 2004 she started procuring materials, built the website and also engaged in sales and marketing activities. Currently her profit and loss statement for the past three years shows a healthy progress in net profit percentages. Though she did break even in the year 2005, after a year for initialization and losses in 2004 she galloped to an astounding 31.36% Net profit in the year 2006. After the year 2006 her progress has been slow and steady with an encouraging pace. The current financial crisis in the UK does pose a problem however will definitely not leave her in negative returns. Pro Forma Profit and Loss FY 2006 FY 2007 FY 2008 Sales 8,640.00 9,960.00 11,640.00 Direct Cost of Sales 700.00 775.00 825.00 Other Production Expenses 600.00 672.00 715.00 Total Cost of Sales 1,300.00 1,447.00 1,540.00 Gross Margin 7,340.00 8,513.00 10,100.00 Gross Margin % 84.95% 85.47% 86.77% Expenses Payroll 0.00 0.00 0.00 Sales and Marketing and Other Expenses 1,050.00 990.00 850.00 Depreciation 500.00 615.00 705.00 Leased Equipment 0.00 0.00 0.00 Utilities 550.00 525.00 495.00 Insurance 300.00 300.00 300.00 Rent 0.00 0.00 0.00 Payroll Taxes 0.00 0.00 0.00 Other 0.00 0.00 0.00 Total Operating Expenses 2,400.00 2,430.00 2,350.00 Profit Before Interest and Taxes 4,940.00 6,083.00 7,750.00 EBITDA 3,720.00 5,250.00 7,700.00 Interest Expense 1,716.00 1,716.00 1,716.00 Taxes Incurred 514.75 633.85 807.55 Net Profit 2,709.25 3,733.15 5,226.45 Net Profit/Sales 31.36% 37.48% 44.90% Management: The management of the enterprise solely rests with the entrepreneur itself and "Entrepreneurship management demands innovation, as well as the marriage of profitability and growth."(De Bono &Heller 2006) Ms Yoxall runs her business single- handedly. The success of the business for the past four years stands testimony to the above statement. She however comments it is of no difficulty to her. She uses the courier service for long distance delivery and the does the local delivery herself. The business is an online business hence does not require showroom or floor attendants and staff to handle sales. The customers view the online catalogue request online and pay online. This keeps the entire process automated and well managed leaving her with the only responsibility of ensuring a website that is up- to- date and responsive. Customer Service: This aspect of the business is facing many challenges in today's scenario let us look at the Kauf Centre for Entrepreneurial Leadership quotes on this "As one-to-one marketing takes hold, it is fast becoming essential. It is what people will demand in the future. To assure your future as an entrepreneur, you must learn to listen, probe, and touch. These steps will enable you to gather information about your customers. That, in turn, will enable you to serve your customers as individuals. (Corlett 2009) The LittleSyd Gifts and Bouquets business has a customer mix ranging from Corporates to individuals. Corporates, who gift for their employees and Grandparents who gift their sons and daughters. The business has grown through word of mouth and this is due to the excellent service and innovative products offered by the business. Her customers range from the ages of 20-60 and servicing this wide range of customer mix does pose a challenge for her. However, she admits she has to pay more attention to the proper functioning of her website as it is the root of her business. The entrepreneur poses many challenges in this aspect of entrepreneurship as she runs the show single- handedly. Marketing: According to Kotler "Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering, and freely exchanging products and services" For managerial definition marketing has often been describes as the art of selling products"(Kotler 2004) The relevance of marketing in this business is yet to gain momentum. Ms Yoxall markets her products mainly through baby magazines and baby shows and trade shows arranged by Train 2000. The marketing strategy for the LittleSyd enterprises comprises of anything ranging from emails, posters, phone calls, trade shows, the packaging in which the gift is sent, networking with existing customers, trying to get free newspaper coverage. Ms. Yoxall strongly believes in earning a reputation for a business through word of mouth and maintains excellent relationship with customers and corporates. However, if the business is run with importance on marketing on the lines of Kotler it is capable of reaching greater heights. Key issues faced: Some of the key issues facing small and medium sized entrepreneurs in today's business are detailed in the HSBC knowledge website in simple and plain terms they are: 1. Your permanent priorities 2. Improving efficiency 3. Strategic planning 4. Getting help and advice (HSBC 2009) The business of Ms Yoxall is currently under pressure from present "credit crunch which is narrowing her market." Her advertising budget is also small which gives her very little choice of where and when to advertise. People join together to get one combined gift that leaves her losing on revenue. Moreover, the demand for low priced or single gifts and bouquets are increasing and she has to widen her product range of low priced ones. She is also suffering on the technology front due to the improper functioning of her new website. Grants and loans from the government are only available for new businesses and not for businesses that are a few years old, and this leaves her quizzing about her expansion plans. Reflecting on the above mentioned points and keeping her business priorities intact would help her survive the crisis. Conclusion & Evaluation: From the above let us reflect on the entrepreneurship phenomenon and whether the entrepreneur conforms to the conventional form of entrepreneurship. According to the book " The Entrepreneur in Focus" conventional form of entrepreneurship "is about start - up business", entrepreneurship and small business management are one and the same, and entrepreneurship is about ideas." It further states " age, family background, education and experience are deciding factors, entrepreneurs are individuals who work alone, inventors are entrepreneurs, entreprenueurs are only found in the world of business, and anyone can be an entrepreneur." (Bolton and Thompson 2003). Reflecting on the above statements of conventional entrepreneurship "LittleSyd Gifts and celebrations" definitely conform to the characteristics. It is a start up business, it was the idea of the entrepreneur that enabled the business and it is a small business management. However, there is a contradiction in the statements of the book itself when it comes the characteristics of a conventional entrepreneur where it states Age, family background, education and experience are traditional factors and anyone can be an entrepreneur. Ms Yoxall certainly falls in the latter category, as she is someone who is the first in her family to start a business and her education and experience are not much related to her current business. On evaluating the business in terms of its General Business Viability, Investment readiness, Industry, Leadership and Management skills (venturenavigator.com) we can conclude on the following General Business Viability: The business is definitely is viable as it is based on simple mechanisms of concept, development and service delivery. The workings of the concept and development rest with the entrepreneur itself and the service delivery outsourced. Investment Readiness: The business certainly had attractiveness for investment and did not involve considerable risk or any high investment in fixed assets. Industry: The business belonged to the gift production industry with its potential customers as newborn babies, which is certainly not redundant. The gift industry is all about uniqueness and attractiveness. Leadership and Management skills: The leadership skill of the entrepreneur is yet to be tested and proved as she is running the business single handedly. However, her management skills have proved well as the business is on the successful fourth year. References: 2009, 'Key issues in running your business' HSBC knowledge centre Available from: http://www.knowledge.hsbc.co.uk/run/operations/strategy/key+issues+in+running+your+business [07 April 2009] Allen Scott, 2009, 'Quotations from famous Entrepreneurs on Entrepreneurship' About .com New Time company Available from: http://entrepreneurs.about.com/od/famousentrepreneurs/a/quotations.htm [5 April 2009] Bono & Heller 2006, 'Entrepreneurship' Thinking Managers Available from : http://www.thinkingmanagers.com/business-management/entrepreneurship.php [07 April 2009] Bolton & Thompson, 2003, 'The Entrepreneur in focus' 1st edition Cenage Learning EMEA London. Available from: http://books.google.co.in/booksid=KxTN68uZKGkC&pg=PA40&lpg=PA40&dq=what+is+conventional+entrepreneurship&source=bl&ots=--EYEUwjZs&sig=QFnJ8Dd9f5aJLQewQf3vl1XmT7A&hl=en&ei=UFXgSd29J4-GkAWnlsnSCw&sa=X&oi=book_result&ct=result&resnum=5#PPA37,M1 Corlett, 2009, 'Listen, Probe, Touch: When Small Business Owners Sell to Customers as Individuals' SCORE Available from: http://customerservicezone.com/cgi-bin/links/jump.cgiID=5905 [06 April 2009] Dollinger, 2006. Entrepreneurship, Strategies and Resources. Pearson, Low priced edition, New Delhi, Third Edition Dr. Sethi Jyotsna, 2008, 'Entrepreneur and Entrepreneurship' Small industry India Available from: http://www.du.ac.in/hindi/course/material/ug/ba/esb/Lesson_1.pdf [4 April 2009] Kruger F. N 2002, Entrepreneurship, 4rd Edition, Taylor and Francis, London and New York. Philip Kotler, 2004, Marketing Management, 11th Edition, New Delhi, Pearson Education Shirai, S 2005 'Banking Sector Reforms in the People's Republic of China' United Nations Economic and Social commission for Asia Pacific Available from http://www.unescap.org/drpad/publication/fin_2206/part3.pdf [14 March 2009] 2007, 'Venture Navigator- assessment' The business Edge consortium Available from http://www.venturenavigator.co.uk/assessment [10 April 2009] Yoxall Michelle 2005, 'LittleSyd Gifts and Celebrations' Available from: http://www.littlesydgifts.co.uk/about.html [6 April 2009] Appendices: Personal Reflection: The LittleSyd Gifts business does possess everything from innovation to execution. It is typical of small entrepreneurs who have grown to great heights we also hear the entrepreneur say that her inspiration was a business by the name of Red or Dead fashion brand that was built from a tiny market stall. This reflects the attitude of the entrepreneur who though small and has began from scratch has the passion to grow steadily and get established as a corporate. The growth of the business is clearly reflected in the books of accounts. The entrepreneur is well informed of her potentials, shortcomings opportunities and growth. With a healthy book of accounts the entrepreneur can confidently approach banks for a loan and fulfill her shortcomings on the advertising side and also employ marketing associates to tie - up with corporates for business. Her experience in handling finance has left her advising to get investments from grants, which are not repayable. If the entrepreneur employs professionals to take of the day-to-day activity she can indulge in the creation of a new product range and diversify her business and break into new market segments. The business, which has sustained itself for the past four years, stands testimony to the success of her innovation. The entrepreneur's knowledge of the market and customer segment is a huge strength besides her products are unique and are not available in big stores. The business if diversified and advertised in the right places is sure to develop into a renowned brand and get established as a leading corporate. Find below her responses to a set of questions regarding herself and her enterprise. Could you tell me about you and your business - in your own words, of course My name is Michelle Yoxall I'm 28 years old & I run a small baby gift business called Little Syd Gifts & Celebrations. My main product is The Baby Gift Bouquet which is functional flowers that are made up of baby bibs, socks, mittens & hats. There are lots of baby products inside the bouquet boxes too. Other products include The Potty Plant & the Sock Bud. 2. How long have you been in this business Almost 4 years 3. Did you start this business Is this your own business Or a family or with others Yes I started it 4. "what led to you starting ........................................... (the business name)" Being made redundant from my fashion design job 4.1. Is this your first business enterprise yes If yes, go to 4.1.1 4.1.2. Do you have a family background in business ownership no 4.1.3. Did that influence you choices - starting a business, starting this business 4.1.4. How 4.1.5. What was your first and other ventures 4.1.6. Are you still involved in these 4.1.7. What have you learned from this/these 4.1.8. How have any such lessons affected this business 4.1.9. Do you have a family background in business ownership no 4.1.10. Did that influenced your choices - starting a business, starting this business 4.1.11. How 4.2. What help and support, if any did you get in starting your business 4.2.1. From your family: My family supported me in my decision & gave me space in their outhouse to start the business. 4.2.2. From others: I also got business advice from Creative Bias & help with my business plan from Train 2000, who help women set up in business. I managed to obtain business funding through Train 2000 too. 4.2.3. Could you have started without this help: No the support from my family gave me self-confidence to take a risk & being able to use their outhouse saved on overheads. The business advice from Train 2000 was vital, as I didn't know where to start with a Business Plan or Cash Flow Forecasting. Also the funding from them really helped as I had only a small amount of redundancy to start the business with. Train 2000 actually still helps me today, by promoting my business & inviting me to take part in events & trade shows. 5. "what led to you acquiring ........................................... (the business name)" I chose the name Little Syd Gifts & Celebrations after my niece Sydni. 5.1. Is this your first business enterprise Yes If yes to question 5.1, go to 5.1.1 5.1.1. what prompted you to acquire this business 5.1.2. Do you have a family background in business ownership 5.1.3. Did that influenced your choices - running your own business Acquiring this business 5.1.4. How If no to question 5.1, go to 5.1.5 5.1.5. What were your first and other ventures 5.1.6. Are you still involved in this/these 5.1.7. What have you learned from this/these 5.1.8. How has it affected this business 5.1.9. Do you have a family background in business ownership 5.1.10. Did that influence you choices - running your own business 5.1.11. How 5.2. What help and support, if any did you get in starting your business 5.2.1. From your family 5.2.2. From others 5.2.3. Could you have started without this help 6. "What led to you getting involved in ........................................... (the business name)" 6.1. Were you happy or reluctant to take on this role in the family business 6.2. Do you have experience of other businesses no 6.3. If you what 6.4. If you were not involved in the family business, would you still want to be involved in your own business 7. Can you tell me something about the financing of the business 7.1. The sources - mix or person, family, bank or other sources e.g. public sector I put my own redundancy money into the business, the rest came from grants & start up business funding from government funded organisations & a small loan. 7.2. How has the financing changed over time Not really changed 7.3. Are you facing specific challenges now Yes 7.4. If so, what As with most businesses at the moment the credit crunch has affected business. I have noticed a change in what people buy. People are tending to club together to buy a gift from a group of people rather than singularly. Also the smaller gifts I offer have increased. 7.5. Does your location affect this No, as I am a web based business & sell mainly through word of mouth/recommendations & through trade/craft shows. 7.6. If you were to give someone like me a single piece of advice on the financing of an entrepreneurial concern, what would it be To not borrow too much to soon. Try to get as much funding/grants from organisations as possible as you don't have to pay them back. 8. Can you tell me something about the sales and marketing challenges you face 8.1. The client mix My clients vary from corporate companies buying gifts for employees to grandparents buying for their daughters/sons etc. The ages vary from early 20's to late 60's. I also have a balanced mix of males & females purchasing gifts. This does produce problems, as it is such a varied mix. 8.2. Understanding the market: 8.3. Reaching the market :I reach the market through Baby Shows & Baby magazines. The most effective thing is word of mouth & customer recommendations. 8.4. How the clients or your marketplace changed over time The marketplace has become harder as more people now offer similar gifts. My clients have changed to include corporate companies buying gifts for employees. They have taken regular contracts with me as a result of my good reputation. 8.5. Are you facing specific challenges now no 8.6. If so, what 8.7. If you were to give someone like me a single piece of advice on Marketing in an entrepreneurial concern, what would it be Think of everything as marketing right down to emails you send, packaging you use, and telephone calls you make. First impressions count a lot. Also networking is very important & keeping contacts. Try & get free newspaper coverage either through an interesting article or competitions. Keep record of people who use your service as you can update them with new products etc at a later date. 9. Can you tell me something about the People, Personnel or Human Resource challenges you face I am the only one in the business. 9.1. The mix of people and skills 9.2. How your needs have changed over time 9.3. Are you facing specific challenges now 9.4. If so, what 9.5. If you were to give someone like me a single piece of advice on managing people in an entrepreneurial concern, what would it be 10. Can you tell me something about the technical or technological challenges you face 10.1. In producing or delivering your services: The only problems I face is when I am extremely busy & I am the only one who can make them. I haven't had any delivery problems I deliver myself locally & use a courier service for rest of UK & Ireland. 10.2. In reaching markets Having a small advertising budget restricts me in how & when I can advertise. 10.3. In your internal operations no 10.4. How these have changed over time no 10.5. Are you facing specific challenges now I am currently having trouble with my new web site shop 10.6. If so, what 10.7. If you were to give someone like me a single piece of advice on technology in an entrepreneurial concern, what would it be To always make sure your links work & are updated if you are a web business, and always make sure you have a back up or clear message if systems fail. Always have a point of contact so customers can talk to somebody rather than just email. Attend free courses run by business link etc to update your skills. 11. Are there other issues that affect your business that you'd like to tell me about, for example, 11.1. Supply Chain: Bigger chains are always a worry to smaller businesses as they can offer things a lot cheaper, however, my personalised products are not available within a bigger stores, so that is my unique selling point. 11.2. Government support: Support only seems to be there when you start up & not when your business is a few years old which seems to be when most businesses need it. 11.3. Tax: no really a issue effecting me 11.4. Competition: My main competition is larger companies like The Flower Stork who can deliver the same day & have a big budgets for advertising etc. 11.5. Your role models: Red or Dead fashion brand was built up from a tiny market stall. Add other issues are you (the interviewer) deem necessary Closing questions 15. What do you value or enjoy most about running your own business: The feeling of achievement & pleasure when I get positive feedback from customers. Also, the flexibility of my working hours. 16. If you were to give someone like me a single piece of advice on starting or running, what would it be Study your market & competitors well. & do lots of research/questionnaires before starting an idea. Products of LittleSyd: Read More