MBA assignment about Management Skills & Entrepreneurship

London School of Commerce
MBA for Executives
_____________________________________________________
Management Skills & Entrepreneurship
Yousef Hamad
L0009SBSB0913
Tutor: Dr. L. Massingham
April 2014
1
Report words: 4462

 Executive Summary
 Introduction
 Why new business start-ups fail
 The importance of sound Business Model
 Managerial Skills required over first two years to achieve
Break-even
 Sources of evidences from literature and local context
 Conclusion
 References
 Appendixes
2

Executive Summary
This report aims to discuss the supportive elements and gives advices that help people and
potential entrepreneurs in understanding how to start-up small businesses, and what are the
main stations on the way from the idea to the Break-Even.
The report highlights the most common reasons behind business start-up failures. It covers
the majority of financial aspects which have tremendous impact on the business. Failing in
controlling costs/cash. Failing in building solid-base of customers and deliver product/service
that satisfy their wants, needs and values, and keeping them. Fail to establish robust
relationships with customers and suppliers. Failing in offering superior value proposition and
fulfilling a sustainable competitive advantage. Failing in terminating accounting fraud. Fail to
measure and manage the risk and having contingency plans for unforeseen events.
It illustrates the business-model as a roadmap and its importance, and how it functions as a
torch illuminates the path to a successful business-plan. Business-model Canvas with nine
building-blocks has been discussed in addition to important component “Identity” which is
the authority-source and the platform from where the business speaks. Who the prior
customer is, and what segment the competitive-value created for. What unique the venture
offers to bond customers. What and how product/service be delivered to acquire the total
customer experience. These valuable goods/services need to be communicated and delivered
to the customer through channels. What key channels that more convenient to approach the
market, and how to protect this road. Channels as touch-points with customers and as they
deliver product, they receive customer feedback. Business without customers is dead. How to
create firm and evolving relationships with customers, and how satisfying and exceeding
their needs can augment these relations. Business-model considered the revenue streams and
how significant to offer continuously-consumed goods/services that recur and revolve
revenues. Business-models does not function without resources those needed to create
supreme-values to maximize customer sales gaining profits. It also cannot function without
set of actions those are the key-activities to work-out the above elements. Who are the key
partners and suppliers those are major stakeholders and they affect the business. What are the
substantial costs that venture incurs to run its business-model.
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Sound Business-Model makes companies through one-comprehensive approach realise the
value-proposition, identify the target customer segments and customer effective touch-points
(distribution channels), what type of customer-relationships to establish/maintain, what in-
house and partners capabilities, how creating value, how structuring costs and how flowing
revenue streams.
The report highlights the essential managerial skills entrepreneur should have for the first two
years to attain the break-even. How to raise money to start and run the business and form
where; self-financing, banks, investors, partners, angles and family. How to monitor and
control the cashflow and money What needed to achieve the break-even as early as possible.
What needed and how to manage the risk positive and negative, anticipated and unexpected.
How to manage time as it is costly by all means. How to manage people including employees
and the other stakeholders. What quality of staff needed for success.
The author sees that managing change is not necessary for the first two years, as this period is
a start-up which does not need and cannot afford the change that is resisted by staff, and the
innovation. Both consumes time and money and usually needed after a period of production
from which customer feedback is extracted and accordingly venture management can decide
whether the organisation needs change and the product/service needs innovation.
Last part provided some evidences and statistics from the Libyan context of entrepreneurial
market.

Introduction
This piece of work focuses on the individual entrepreneur and the small business milestones;
start-up, business-model and the essential managerial skills. It provides a toolkit without
which the entrepreneur cannot move step ahead towards business start-up.
It describes where to start and how, and what obstacles, risks and even failures that may
object the entrepreneur while proceeding with the business. Through the business-model, the
report emphasizes the key aspects and the entrepreneurial market components reflecting their
roles and importance, and what each of them represents to the business process.
The familiarity with the context where the enterprise runs is significant, since it functions as a
reference that guides the entrepreneur on the business way.
The work consists of PowerPoint presentation highlighting the major issue, integrated with a
detailed discussion report. This report has four main parts followed by the conclusion and the
appendixes. Appendix-4 contains the MEMI business-plan generated during the lecture
workshops by a group of MBAe students, the author is one them.
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 Poor Accounting, Cashflow and Financial Management
 Loss of Customers & Poor Customer Acquisition
 Loss of Key Supplier
 Unsustainable Competitiveness
 Employee Fraud & Misuse of money inflows
 Unforeseen Events
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Poor Accounting, Cashflow and Financial Management
Neglecting accounting system leads to failure, as it provides very important information
inclusive balance-sheet, profit-statement, stock-level, debts and credits. However most small
ventures can be controlled through financial-drivers (Cash, Sales, Profit-margins and Break-
Even) monitored on-timely-basis. (Burns, 2011)
Cash is vital without which bills are unpayable hence failure. Despite enough cash for start-
up, business can fail due to shortage in working-capital. Entrepreneur needs to have enough
cash reserve at least for the first two years staying away from being worried about it. Sales
reflects the activity volume business is experiencing which always drive cashflow and
profitability. Profit-margins should be as high as possible by meeting the sales target at
appropriate prices. Break-Even is a significant reference-point that must be watched, as it is
linked directly to the costs and the contribution-margin. Cashflow forecasts -once business is
progressing- shall be transformed into cashflow budget targeting not just to correspond the
budget but better than that. Over-investment in fixed-assets could result in poor cashflow
therefore an assessment for the asset necessity/usefulness is important before purchasing, as
leasing could be a good alternative (Williams, 2014 and EBIS, 2013).
Loss of Customers and Poor Customer Acquisition
Losing customer, and poor customer acquisition mean losing sales and hence losing profit
which causes failure. It also leads to jeopardise the brand, as the lost customer may criticise
the business creating bad reputation. Entrepreneur to avoid this should strive to establish
robust relationships with customers and target their experience by satisfying their needs. It is
essential to know/understand the customer, customer location, and to bond customer to buy.
Entrepreneur should consider the marketing-mix to develop a superior-competitive value
proposition acquiring the total-customer-experience and resolving his/her problems.
(Williams, 2014; Burns, 2011 and Lancaster & Massingham, 2011)
Segmentation is core in building-up a real customer base. Lancaster & Massingham (2011)
insisted on the segmentation significance; who is the customer, where is located and what
motives him/her to buy.
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Loss of Key Suppliers
Losing key suppliers means losing raw material, energy, parts and other services that severely
impact the production ending-up with failure. Instead of taking unauthorised-extended credit,
it is important to negotiate with suppliers for improved credit terms. Frequent delays in
payment can impose the supplier/creditor to release a writ which could affect the venture
future credit. This may end-up with screening process done by the supplier seeking trade and
bank references, balance sheet, and credit reference to check the venture’s credit rate. It does
not stop there but it harms the business goodwill in the market and breaks the relationship.
Those suppliers will approach the competitors and talk to potential suppliers meaning a big
loss and at-the-end leads to collapse. (Williams, 2014)
Unsustainable Competitiveness
A successful competitive-advantage needs the entrepreneur to develop over-a-period-of-time
a competitive-advantage that can be sustainable which is one of the business critical success
factors. Market-entry is deemed the first critical step in attaining that advantage and remains
important along the business lifecycle, however, this entry will be attacked by the
competitors protecting their market-shares. Winter (2004) argued that promoting a
competitive-advantage requires to create customer-value that must be realized by the
customer (superior), and the necessity of using a business tactics that hard for competitors to
imitate (hard copying provides sustainable competitive-advantage).
Bressler (2012) linked the sustainable competitive-advantage with the marketing mix mainly
(Price, Product differentiation, Place by superior distribution/delivery, differentiated
Promotional programme and People) where people represent ‘the employees’ as they are the
direct contact-point with the customer; as well as the key role played by costs. According to
Porter (1985) small business should be careful about controlling costs; also creating greatest
competitive-advantage can be through entrepreneurship which defines and utilizes
interrelationship. Managers have big role in developing competitive-advantage by motivate
staff for higher performance, and building leadership-team. Porter (1996) stated that realising
competitive needs leadership. Oosterhout (2012) confirmed that innovation is the best route
to attain sustainable growth.
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Bressler, (2012) added; for a successful competitive-advantage qualified technical-team with
the industry-knowhow and considering the business associated-risk are required.
Lancaster & Massingham, (2011) centred the sustainable competitive-advantage on a group
of strengths represented in ‘core competence’ that is useful in promoting successful strategy
against competitors, and a must for a firm current/future success and for creating supreme
value.
Scarborough & Zimmerer, (2000) cited that M. Porter defined three competitive strategies:
firstly Cost Leadership where a firm struggles to be the lowest-cost producer, secondly
Differentiation by delivering unique product/service aspiring customer loyalty, and finally
Focus on selecting one or more customer segments targeting their satisfaction.
Consequently, defeating the above achieves unsustainable-competitiveness, thus leads
directly/indirectly to business failure.
Employee Fraud and Money Misuse
Using the venture funds/inflows and credit-cards for personal expenses financially affects the
business and may result in bankruptcy (EBIS, 2013).
Johnson (2014) argued that accounting abuse hurts the business and often causes profit loss
and tarnish goodwill. Accounting embezzlement as an abuse type arose when trusted staff
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tamper accounting records to thieve assets from the firm. Embezzlement influences directly
the firm’s bottom-line which costs a lot and may continue for years. Most firms engaged in
accounting-fraud endeavour to conceal serious financial problems reflecting unreal-healthy
situation to investors. Investors when discover such problems withdraw and run-off.
Accounting-fraud and money/inflows misuse can create serious-irreversible detriment by
damaging the firm reputation, thus business fails. Employee can abuse his/her power with-
respect–to suppliers which affects negatively the firms’ funds, and ruin the firm-supplier
positive relationship.
Long (2009) stated that businesses must repel several threats: competition, cost increasing
etcetera. But one big-silent threat, looming-killer is the fraud.
Unexpected Events
Brice (2010) argued that apart from the natural disasters and economic crises, unexpected
risk can generate from uncontrolled cash, un-forecasted/unplanned expenditures, staff,
customers and key suppliers. Having no sufficient cash reserve or credit-line to last further
could lead to failure with sudden financial crises/bubble. Venture may lose key competencies
by unanticipated resignation or death. One of the key suppliers may bankrupt, also customers
may runoff to competitors. All these unexpected events are risky and could lead to business
failure.
If entrepreneur is not prepared for unexpected-events/natural-disasters, relevant consequences
could collapse the enterprise. Applying Risk management (Massingham, 2014), and
developing a contingency plan among other provisions must be considered (Makin, 2011).
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“A business model describes the rationale of how an
organization creates, delivers, and captures value.”
(Osterwalder & Pigneur, 2010, p.14)
 It is a system of integrating facilities and resources, for
entrepreneurs, to utilise a business opportunity and
transform it into competitive product/service delivered to
customer with satisfaction and created value (Hisrich et al.
2013)
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The Business-Model Building Blocks
1. Identity
 Platform from where business and brand speak and
source of authority
 A significant starting-point into the Business-Model
from which entrepreneur will leverage to build business
not just a logo
 Why people buy from particular venture
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2. Customer Segmentation
 Whose this business for and who are the priority
customers
 Customer is the business-model heart for whom the
value is created
3. Value Propositions
 The reason behind customer’s decision to run to
particular product or service
 What value a venture delivers to customers
 What customer’s problems a venture solves
 What customer needs a venture satisfies
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4. Channels
 Which most efficient-effective channels integrate with
customer routines
 How to reach and approach customers & protect road to
market
 How to maintain robust relationships with distribution
channels
5. Customer Relationships and Networking
 What kind of relationships should be establish with
customer
 Which ones to be maintained? 7

6. Revenue Streams
 What for customers pay now, and what for they will pay
 By how much each Revenue Stream contribute to total
revenues
 How to secure recurring and revolve revenue
 Make product/service continuously consumable for
sustainability
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7. Key Resources
 What key resources a venture should provide to meet
Value-Propositions, Customer-Relationships, Distribution-
Channels, and Revenue-Streams requirements
8. Key Activities
 What Key Activities to meet Value-Propositions,
Customer-Relationships, Distribution-Channels, and
Revenue-Streams requirements
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9. Key Partnerships
 Who are the venture’s Key Partners and key Suppliers
 Which Key Activities will partners execute for venture
10. Cost Structure
 What costs are most important in business-model
 What are the cheapest/most expensive Key Resources
 What are the cheapest/most expensive Key Activities
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The Importance of Sound Business-Model
One of the most-famous models is ‘Business-Model Canvas’ developed by Alexander
Osterwalde which defines a business objectives basically in terms of infrastructure, finance,
customers and values.
Business-Model creates values and captivates part of such value which needs determining a
set of activities that produce goods/services with added value through several activities. The
business-model then establishes a unique asset, resource or position within that set of
activities in which a competitive-advantage is acquired. Since business-model comprises
different-external notions, it helps in creating values via leveraging more ideas, and permits
superior-value capture suing the enterprise’s key resources, assets or positions also in other
organisations. (Chesbrough, 2007)
Business-Model Generation Process
The process will go through the nine building-blocks of Business-Model Canvas plus an extra
building-block (Identity) introduced by the tutor L. Massingham.
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Identity
It is the platform from where the entrepreneur speaks who cannot speak from the position of
needs. From an authority source, entrepreneur speaks to the market “who is he” and if does
not know, buying an identity and building a brand are necessary. Entrepreneur should ask
“why people buy from him” and “what different in his goods/services attract customers”. He
needs to know about the affinity factors of his venture. The answer is the ‘Heritage’ and the
‘Brand’ rather than the ‘Logo’. (Massingham, 2014)
People are drawn to a particular product/service for something special that is achievable by
innovation. Innovation is significant element for the Identity. Does the enterprise bring
something new to the global or local market? Innovation is a big need. (Massingham, 2014)
Perception is also an important factor here in. There may be a negative perception, people are
getting a bit dismissive about having a specific business because the perception has no sense
and people cannot see the value yet. It is the way in which people choose, arrange and
explain motivation (Lancaster and Massingham, 2011).
Personality is another element where there is one word describes the business. Entrepreneur
should create brand awareness to develop a personality in the prospective customers’
mindset. (Lancaster and Massingham, 2011)
It is important for entrepreneur to have external communications, visual identity
however/wherever that is, also communication with the venture stakeholders.
Communication is function in building-up brand image. (Lancaster and Massingham, 2011)
Customer Segmentation
Company cannot survive and maintain business without profitable customers those are the
core of any business-model. Profit is generated by sales. Sales are created by customers. The
organisation must define the customer group and aware of the relevant behavior and
attributes whether or not there are one or more customer segments, consequently decides the
target customer segment(s) hence aspire the customers-experience, satisfying their needs and
creating them value. The business-model can be formulated accordingly. Based on the
selected segment, the customer-relationship, value-proposition and distribution channels can
be determined. (Osterwalder and Pigneur, 2010).
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Value Propositions
It is the decisive motive that drives the customer to prefer a product/service to other. As it is
developed by the marketing mix, value-proposition satisfies the customers’ needs and
resolves their problems. It represents a set of benefits offered to customers that led to deal
with the venture rather than dealing with such venture’s competitors, as relative
product/service could be distinctive, innovative, improved or has added features (accessibility
and usability), less-risky and highly-efficient. There are qualitative values such as design,
performance and customer-experience, and quantitative values for example price, and extra-
free goods (Osterwalder and Pigneur, 2010).
What venture offers to the market in terms of competitive-value. This is where superior
value-proposition come-in. Compared to its rivals, the venture must be different and better at
something such as functionality (functional value-proposition), relationship, network, product
value-proposition, emotional value-proposition and others (Massingham, 2014).
Jensen, (2013) illustrated that it is deemed a value-proposition where a business offers
customisation by tailoring technological products to meet the client’s needs, for instance
Compal Laptops.
Key Channels
The direct/indirect venture-channels and partner-channels are the interface between the firm
and customers that facilitate delivering the value-proposition to the customer segments. As
they are the customer window on the business, the distribution and sales’ channels play key
roles in achieving customer-experience. Moreover the channels raise the customers’
awareness about the product/service helping them in assessing the value-proposition and in
buying certain goods/services and support the customer with aftersales-service. It is important
to evaluate and select the best channel(s) that best deliver ,qualitatively and quantitatively,
the product/service aiming the customer experience hence maximising profits, for instance
online-sales, retailer, wholesales etcetera (Osterwalder and Pigneur, 2010). For optimising
value-proposition and for future goods/services improvement and development, information
is needed which can be obtained through the channels that communicate the customer
feedback, complaints and suggestions (Jensen, 2013).
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Customer Relationships
Relationships and networking is significant in sustaining the business. Entrepreneur should
establish robust relations with all business stakeholders and be aware of the culture where the
venture is located and how to utilise relationships and networks in carefully handling the
business in proper ways. Keeping good relationships with partners and suppliers and
enhancing the networking are as important as customer relationship (Massingham, 2014).
Company needs to specify the relationship type based on the customer segment such as
personal-assistance through self-service or automated-service and co-creation relation where
customer participates in writing reviews about goods/services and contributes to new product
design and innovation. There are many stimuli drive the customer relationships like customer
acquisition and retention, upselling and customer support via post-purchasing. Relationships
are also important in creating a communication channel for customer feedback (Osterwalder
and Pigneur, 2010).
According to Marshall, (2014) business staff should speak/understand the customer’s
language by which sales-resistance melts hence the relationship is augmented.
Revenue Streams
This building block describes the money a firm generates from the customer purchases which
must be higher than the costs to create profits. As anticipated above that the customer is the
business-model heart, the revenue-streams are its arteries. Revenue–streams should be
determined for each customer-segment and can depend on the incomes generated from
customer-payment for one-time or from revolving revenues that originated from reiteratively
consumable product/service, for instance buying spare-parts, frequent check-ups and
providing continuous aftersales-service. Technology Licensing is another good example such
as GE and SIEMNSE those own the turbines technology/knowhow. Each revenue-streams
kind could have different pricing system (fixed/dynamic price), negotiation and vendue
where competitive-bidding defines prices. (Massingham, 2014 and Osterwalder & Pigneur,
2010)
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Key Resources
This component is the essence without which the business-model cannot function. Key
resources are a must for the venture to hit markets, deliver a superior value-proposition,
sustain customer-relationships, enhance networking and gain revenues. The resource type
depends on the business-model type. Production line design needs engineers, while its
erection needs also hardware and fixed assets (building). Key resources can be financial,
human-capital, tangible assets (equipment/buildings) and intangible (brands, technology,
patent and intellectual-property) which are either venture-owned, provided by partner or
leased. Nevertheless, firm should not possess all resources as this is enviable (Osterwalder
and Pigneur, 2010)
Key Activities
They are those activities required for value-proposition, customer-relations, distribution-
channels and revenue-streams. Key activities are the most significant enterprise taken-actions
to make the business-model successfully functions. Their types depend on the business-
model type. Activity could be consultation, production, service, design. (Osterwalder and
Pigneur, 2010)
Key Partnerships
Key partner is the business-model keystone. Organisations need to have partners in form of
strategic alliances or joint-ventures whereby risk decreased, business optimised, technology
bridged, knowledge exchanged and resources acquired. Partnership can also protect and
expand market-share and reduce costs. (Osterwalder and Pigneur, 2010)
As per the author (experienced-Oil&Gas-engineer), the partnership could be between buyer
and supplier or consortium among competitors to win giant project such as building an
Oil&Gas complex. In this industry, operators do partnership with their contractors, providers
and subcontractors to outsource the non-core businesses.
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Cost Structure
This component exhibits the substantial costs that venture incurs to run its business-model in
terms of competitive-value creation and delivery, revenue generation and customer-
relationship retention. By determining the key resources, activities and partnerships, these
costs can comparably be calculated. Depending on the business-model, enterprise can be
cost-driven such as EasyJet where cut-cost is the centric strategy. Other enterprises are value-
driven where quality, luxury and performance are considered rather than cost like in
Mercedes cars. Costs can also be reduced by buying big quantities of raw materials at once
and increasing the machinery efficiency. (Jensen, 2013 and Osterwalder & Pigneur, 2010)

Raising Money
 One of the major challenges for new enterprises
 How much money needed, when, what for needed and for
how long
 Who financer(s) can be approached
 How much money entrepreneur will put, and what
collateral can secure
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Funding sources
 There is money around but how to sort it out
 What best sources of money and what best borrowing
ways to keep venture under control
 Is business eligible for grants or free-cash loans from
government or other bodies
 Is there money provided by family, partners or other
angels
 What sort of bank loans is the best
12

Money Control
 Cash is king and business’s lifeblood that keeps business
running
 How to attain and match among having liquidity, break-
even, paying suppliers, credit control, cash budget and
cashflow, and taxation
 How to cut costs, decrease break-even and maximize
profits
 How to control cash and credit, and how important the
financial bookkeeping
13

Managing Risk
 Entrepreneur will be ready for any unexpected risk
 How strategically manage financial and operational risks
 How to manage risk to keep business running profitably
and avoid failure
 What types of risk and upside/downside consequences,
how to predict, monitor, control, assess, analyze and
mitigate them
 Is the entrepreneur risk-taker or risk-avers
 How possibly transferring the risk to third party
14

Managing Time
 Time is the most valuable resource
 How to use time effectively and assess attitude and
disposition to it
 Where the time orientation resides
 Time awareness, measurement and control hence
allocation to tasks is substantial
 Plan ahead, set priorities and Do-it-Now
15

Managing Meetings
 Meetings consume valuable time and money
 Start on time and state aims having clear agenda
 Hold meetings when needed ensuring productivity and
concision
 Conclude and communicate agreements
16

Managing Presentations
 Effective presentation is crucial and part of survival
toolkit
 Entrepreneur voice to staff and stakeholders
 What message to be conveyed and what priorities are
 More outcome expected with effective and convening
presentation
 Presentation needs considering subject familiarity,
planning and audience.
17

Managing People
 Deals with employees and other stakeholders is most
challenging
 Staff is significant asset not expense and to be treated
accordingly, and managed to attain goals
 How leadership, problem solving, motivation and others
influence the outcome
 How to build mutual trust and gain staff loyalty
18

Managerial Skills
Raising Money
Before approaching the enterprise financing, entrepreneur must accomplish the business plan
forecasting the cashflow and projecting the profits. Such plan should minimum contain the
needed new-venture/working capitals and when, financer, and money needed duration,
collateral/security and the entrepreneur’s monetary-participation. (Massingham, 2014)
Finance Source
Entrepreneur will seek a funding to cover the shortfall/financing-gap between his/her
available fund and the total needed fund. As per Pecking-Order Theory (Myers and Majluf,
1984), external finance is necessary when internal finance is insufficient and usually small
businesses prefer debt on equity as the debt is informationally less sensitive. (Stock and
Wilson, 2010)
Depending on the business type, location and other factors, the funding can be granted as
allowances, free-cash or low-cost loan from SMEs Fund, Government, Commerce Chamber
or others. Free financing is the best but stodgy and bureaucracy-dominated. Exploiting the
wrong fund could lead small businesses to catastrophe.
Banks can provide medium/long-term loans and overdraft facilities which need venture to
have cashflow. As entrepreneur is personally liable for overdraft, he/she should manage it
carefully and use it for day-to-day business, not for hard-borrowing. Overdraft should not be
used to buy new equipment to maximize production, as this shortfalls the finance needed for
expected working-capital. Enterprise can also obtain installment loans with sales/profit track-
record which are often used to cover working-capital.
Investors, lenders and angels are other funding sources. Usually investors fund the venture by
possessing equities and involve in the operations implicating the business nature.
Entrepreneur should consider choosing the investors with whom he/she has larger shares to
keep business under-control. Angels are wealthy-private investors provide financing for
potential-entrepreneurial enterprises under high-risk/high-reward basis. Entrepreneur should
reflect to these sources his/her commitment to the business and demonstrate the risk-taking to
win their financial and consultancy supports.
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Partners can be financing source. Entrepreneur should be careful of the partnership agreement
and know what drives partners to fund who may also target equity-stakes. Entrepreneur could
impose the principle of dividing revenues rather than dividing profits and each partner
handles his/her expenses. This makes partners more calculating and as a result decreases the
business overburdening. The best partnership is one partner, as troubles might increase with
more partners.
(Massingham, 2014; Hisrich et al. 2013; Stock & Wilson, 2010 and Coulter, 2003)
Controlling money
Break-Even
It is important for entrepreneurs to understand the Break-Even analysis that comprises sales-
revenues, fixed-costs and variable-costs, and unit-variable-costs (contribution-margin), as it
helps in determining how much units to be produced/sold to break-even where venture
revenues and total-costs are equal. Fixed-costs such as rental and salaries do not increase with
increasing production, while variable-costs do. The latter typically represents the costs of raw
materials, utility and part-time labor. Break-Even also assists in setting prices and defining
the targeted profit-margin. There will be a contribution to cover the fixed-costs when the
selling price per-unit is higher than the variable-costs. At Break-Even, the contribution covers
all fixed-costs. Therefore to attain profits, the contribution should be greater than the fixed-
costs. (Hisrich et al. 2013 and Stock & Wilson, 2010)
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Entrepreneur should insight into aforesaid parameters and change them as possible for higher
profit margins. Increasing contribution-margin decreases Break-Even, whilst lower margins
could lead to bankruptcy. Controlling/cutting costs, and increasing sales decrease Break-
Even. Enterprise could move from purely selling product into added-value services whereby
more revenues can be harvested such as aftersales-services and maintenance where great-deal
of profit margins is achievable. (Massingham, 2014)
Cash, Credit and Suppliers
Low sales, high costs, fail in collecting venture owned-money and not funding growth in
debtors are reasons of running-out-of-cash. Managing cash aims to retain liquidity.
Entrepreneur will make sure of having sustainable-positive cashflow (cash-inflow is more
than cash-outflow). Entrepreneur should strive to owe more cash from debtors than he/she
owes to creditors which needs augmenting the relationship with both. However, venture
should not exaggerate delaying supplier payment. Entrepreneur needs to know cash needed
and cash available in-hand; and should not use cash/credit for personal purposes. Cash
planning and tracking and cash inflow/outflow forecasting (cash-budget) are all necessary.
Entrepreneur should also monitor the credit and check the rate, and may give incentives for
early payments. Credit extend has risks of late/non-payment. Pricing-policy should allow for
capital-cost to avoid customer late-payment. (Massingham, 2014 and Coulter, 2003)
Entrepreneur should prevent accounting-fraud by separating the job duties. This prevents the
employee from using his/her authorized-power in manipulating accounting books/records.
(Johnson, 2014)
Financial Housekeeping
Complete-precise financial housekeeper is essential for any business-owners, investors and
employees. Entrepreneur without accurate financial-bookkeeping cannot know sales-volume
and how much cash collected/spent, when and where. Usually few small businesses recruit
full-time accountant, however, it is better for entrepreneurial-small-ventures to hire financial-
bookkeeper, as this is less expensive. Financial-housekeeper needs to be detailed-oriented,
watchful about keeping paperwork and backup information filing. Venture needs to have
efficient-computerised financial-housekeeping system with conventional double-entry
system. Entrepreneur can take the financial-bookkeeper as a close friend. (Massingham, 2014
and Epstein, 2006)
Page 3 of 6

Managing Risk
“Entrepreneurship, it is commonly believed, is enormously Risky.” (Drucker, 2007, p.25)
Ahwireng-Obeng and Mokgohlwa (2002, p.57) defined the Entrepreneurial Risk as “risks
associated with the success or failure of a business enterprise.” (Miles, 2011)
For entrepreneurial-businesses, a new entry is associated with sizeable risk that represents the
downside-loss’s probability and magnitude which may lead to failure. Entrepreneur
uncertainty over market-demand, high competition and developing technology are sources of
the downside-loss’s risk. (Hisrich et al. 2013)
Entrepreneur should know the best/worst scenarios and the upside/downside potential of
opportunity to define the in-between target scenario. Also to aware that the risk is
incremental and the reputational risk is the most damaging. It is hard to get the business
reputation back which could impose changing the brand. Entrepreneur should have the
managerial skills of understanding different types of risk (new, constant, contagious,
controlled and sudden risks) the ability of risk prediction and the mitigation.
Some people are risk-averse avoiding any uncertainty in dealing with stakeholders, whereas
other entrepreneurs are risk-takers who believe that reward is linked with risk-taking. As high
risk leads to high return, it can also cause high loss and the skill is to foresee the growth and
upside return linked to the risk to be taken. Since ‘estimating known-risk to potential-return’
is a business critical process, entrepreneur should realize the risk upside/downside
consequences. Entrepreneur must abandon the mindset of risk exclusion and instead build-up
a mindset of Risk-Acknowledgement which needs risk management skills whereby
stakeholders will realize that risk is well-handled, monitored, assessed, and controlled in all
business aspects of (finance, assets, operations and stakeholders) hence feeling tranquil that
the business is protected. This will minimize the probabilities of start-up failures.
Entrepreneur must carefully-manage strategic, financial and operational risks generated from
poor financial management, poor customer retaining, losing major suppliers, employees
swindle, money inflow misapply, and from unsustainable-competitiveness avoiding start-up
failure.
Page 4 of 6

After risk forecasted and measured, entrepreneur will decide the proper approach for
treatment; risk-avoidance, transferring the risk to third party (Insurance and Outsourcing),
and reducing the occurrence likelihood and its impact on business. Insurance and all other
legal issues shall be considered. Insurance is fundamental in covering most of the
unexpected-events.
(Massingham, 2014; Hisrich et al. 2013; Miles, 2011 and Scarborough & Zimmerer, 2000)
Managing Time
Time is the most valuable resource, and if its usage regularly analyzed, the utilization
approaches of most effective/efficient time can be realized. (Heller and Hindle, 1998)
Entrepreneur can ever exploit his/her time, and the more he/she does so the better for his/her
venture and personal life. Managing time is the individual’s productivity improvement
process via time-efficient-usage. Entrepreneur accordingly can increase productivity by
measuring time, organizing/allocating tasks, and setting priorities emphasizing the tasks
accomplishment efficiently within less-possible time. Entrepreneur needs to be aware of
utilized/wasted times, time control applying the principle of ‘Do-it-Now’, setting time
urgency/importance levels, and controlling time-imposition. (Massingham, 2014; Williams,
2014 and Hisrich et al. 2013)
Page 5 of 6

Managing Meetings
As meetings consume valuable time and money, it is necessary to hold meetings when
needed ensuring they are productive and abridged. (Heller & Hindle, 1998)
When necessary entrepreneur will plan for a meeting and set clear agenda, and specify time
and objectives. He/she should manage meeting that start/hold on-time and hold to time and
take minutes. (Massingham, 2014).
Managing Presentations
Effective presentation is crucial managerial skill and part of survival toolkit, as it is the
entrepreneur voice to staff, and expected by all business stakeholders. The more
effective/convening the presentation the more expected outcome. Entrepreneur needs to
prepare the presentation considering mainly the subject familiarity, planning and audience.
(Massingham, 2014 and Heller & Hindle, 1998)
Managing People
Managing people is the most challenging role and important, as it deals with employees; also
with customers, suppliers, banks and investors who are critical to venture success.
Entrepreneur should deal with people/staff as an asset not expense and treat them
accordingly. Entrepreneur backbone to manage people is to involve in planning, organizing,
directing, controlling, coordinating and assessing. He/she will consider that staff quality
reflects the organisation quality, and many start-up failures are a result of skills-lack. Also
how to make employees loyal to business, and what/how attractive workplace environment to
be offered. (Massingham, 2014; Williams, 2014 and Stokes and Wilson, 2010). Coulter
(2003) argued that entrepreneur needs to consider key HR issues for success: selective-
recruitment, training, decentralization and self-management teams, job-security, sharing
information, reduced-status discrimination, motivation, and rewards quadrate performance.
Managing Change
Managing business over the first two years to fulfill the break-even do not need change
and innovation. They consume time and money and require R&D, and usually applied after
a period of running business from which manager/entrepreneur find-out that change and/or
innovation are necessary to survive. However this skill is covered in Appendix-3.
Page 6 of 6

Entrepreneurship:
Establishing a new economic body centred on a unique
product or service that significantly differs from those
offered by competitors (Deakins and Freel, 2012)
“All too many small companies have foundered, or at best
floundered, because the lead person did not know his own
strengths and weaknesses and was not capable of selecting
and developing a complementary staff for this business.”
(Lowden, 1988, p.35).
19

Libyan Context
Libya with Oil&Gas resources, strategic location and high
percentage of young population, needs to move to a market-
based economy. Entrepreneurship and SMEs can play key
roles to rebuild and develop Libyan economy, and
changeover form hydrocarbon dependency to
diversification. (Alazet, 2013)
20

Local Context (of Libya)
The information is gathered from ( (Elmansori & Arthur, 2014; World Bank Group, 2012;
Eltaweel, 2011 and Porter & Yergin, 2006).
Libya stands universally at 171 out of 189 ranked economies having 180,000 registered
SMEs-enterprises, and many unofficial-enterprises run outside the formal-economy avert
taxation and fiscal regulations.
70% of SMEs report US$38,000/year sales, whereas 80% report net-profit of 10% and
employ maximum 5 workers. 46% of entrepreneurs prefer state-owned jobs who are either
supplementary or orphan entrepreneurs.
Figure below shows SMEs percentages in each sector indicating no business in the energy
sector.
Page 1 of 4

Only 5.5% of SMEs are governmental and 94.5% are private which have assets estimated in
US$ and made-up participation in percentage as per figure below.
92% of Entrepreneurial-SMEs have no governmental/banks financial support. 33% of which
are financed from personal savings, 30% form parents, 21% from partners and 8% form
loans.
The major entrepreneurial-ventures’ barriers are innovation deficient-funding, innovation-
culture absence in the educational-institutions, innovation-skills shortage, and bureaucracy.
60% of entrepreneurs are reluctant to bank loans, as Islam prohibits dealing with interests.
Page 2 of 4

As to figure below, entrepreneur to start business needs to take minimum 35 days, pursue 10
procedures which cost 19% of income/capita, and pay 31% of income/capita as capital.
Page 3 of 4

Conclusion
Starting-up a business is not just an idea, opportunity, business plan and capital, but beyond
of that. Now-a-days in a challenging market with rapid and constant changes where
sophisticated and experienced customers are prevailing, any entrepreneur should have the
mindset whereby he/she can keep pace with these challenges.
Entrepreneur has to have the business fundamentals and minimum level of knowledge of the
targeted industry and market, for instance, the reasons of business failures, understanding the
business model components, as this is the enterprise roadmap, and the business plan. He/she
needs to be armed with –at least- the essential skills to run a business and the knowhow of the
context where the targeted business will reside such as market size and competition, aimed
market-share, profitability, etcetera.
Moreover entrepreneur should realise that it is a complex chain and be aware of following the
entire process that composed by integrated components underestimating any one of them
leads the business to disruption or failure. For example, Identity, Resources, Customer,
Suppliers, and the Networking and Relationship with all stakeholders. Also considering risks,
readiness for unexpected events and achieving sustainable competitive-advantage are vital for
business sustainability. Last but not least, entrepreneurs need to know that entrepreneurship
and SMEs are not just kind of businesses producing, selling and harvesting profits, but
furthermore, they contribute to improve the economies and create society’s wealth.
Page 4 of 4

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I

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IV

Appendixes
Appendix-1
Several researchers and authors have debated the reasons behind the business failures. Here
are further contributions to this topic which have not been mentioned in part one.
Poor marketing
Entering and starting the business without rational marketing strategy and poor
product/service promotion and misreading the market all lead to failure. Market analysis,
planning and research and knowing the market potential size and competition extent, having
the right market information, understanding the market gaps and assuring the market
existence in such gaps, targeting the total customer experience, needs, wants and values are
all core for success. Market timing should be well-assessed where venture starts at the
right/real time; not too late and not far ahead (too early). Business should have irresistible
value proposition. Having no or bad relationships with the enterprise stakeholders such as
customer, supplier, shareholders and team results in failure. (Businesscasestudies.co.uk,
2014; Massingham, 2014; Skok, 2014; Zwilling, 2014; Deeb, 2013; EBIS, 2013; Schmmit,
2010 and Keough, 2008)
Effective marketing management and the marketing basic principles (analysis, planning,
control and implementation) are functions in realising the factors that influence the business
success and failure. Also segmentation is significant; who is the customer, where is located
and what does motive him to buy? (Lancaster and Massingham, 2011 and Massingham,
2014).
Poor Business Plan
It is usually said: “failing to plan is planning to fail” (Cassidy, 2002, p.29). (Lancaster and
Massingham, 2011, p.9) say: “For a business to be successful, consumers and their needs
must be placed at the very centre of business planning”.
As per Hisrich et al.,(2013), failure can also arise from: ignoring the business-plan update due
to market changes, arbitrary objectives, no commitment to/lack of targeted business
experience and ignorance of threats and weaknesses.
V

Poor financial planning
Entrepreneur should secure enough money as a venture capital for setting up the project, and
as a working capital to keep it running. Although there is enough cash to start-up the
business, it can fail due to shortage in working capital. Entrepreneur needs to have enough
cash reserve at least for the first two years to cover his business and staying away from being
worried about it, as worrying is not good when interacting with customers who may not buy
in case of entrepreneur is angry and anxious (Massingham, 2014).
Lack of Experience and Risk-averse
Entrepreneur must possess the proper/appropriate experience and the awareness of the market
and product/service, and the ability of anticipating challenges. Venture manager should be
well-experienced having the right managerial and leadership skills and strategic thinking to
manage multi-skilled people and efficiently run the business. Poor management and team
lead to breakdown (EBIS. 2013; Willman, 2013 and Keough, 2008).
Not being Risk-taker, entrepreneur could fail in maintaining the business especially in
changing markets and highly-competitive marketplaces and where anticipating future is
necessary. No chance to success and no reward without taking risk (Massingham, 2014 and
Keough, 2008)
Poor Location
Entrepreneur needs to understand where targeted customer live/work, parking, accessibility
and traffic status and building conditions (EBIS, 2013). Optimal location matches between
minimum costs and customer visibility/accessibility (Businesscasestudies.co.uk, 2014).
Poor Credit Arrangements
Allowing long-time for customer to pay bills affects cash-flow. Entrepreneur to avoid late
fees needs to negotiate flexible terms and conditions form providers (EBIS, 2013).
Low Sales
Sales are the success ultimate measurement. Inferior product/service and overpricing,
misunderstanding market, misreading competition and retaining low-performance sales team
are catalysts for low sales thus lack of money for working capital and breakdown as a result
(EBIS, 2013).
VI

Appendix-2 Importance of Business Model
1. Sound Business-Model makes companies through one-comprehensive approach realise
the value-proposition, identify the target customer segments and customer effective
touch-points (distribution channels), what type of customer-relationships to
establish/maintain, what in-house and partners capabilities, how creating value, how
structuring costs and how flowing revenue streams.
2. Having such framework, also assists in constructing and handling the business reputation
among the present and future customers.
3. Companies without business-model can introduce as many new goods/services they like,
only causing customers confusion.
4. It is significant to realise the business-model takes the venture beyond its borders, as it is
the phase of how furnishing the company with the core-strategy, partnership-model,
customer-relation, key-resources and the way of creating value that reflects a sound
business-model.
5. This is very important stage, as it builds sold-ground for making firm decisions before
raising cash, recruiting people, joint-venturing or developing a marketing-plan.
6. It is a progression to feasibility analysis.
7. Emphasizes awareness on how all business components fit and work together.
8. Articulates the reasons of having participants-network those would work together to
make the idea of business viable.
9. Clarifies to all stakeholders the venture’s essence logic.
10. Business-model helps entrepreneurs recognize opportunities and challenges and define
actual growth expectations.
11. It is key factor drives venture start-up to success.
12. It is the start-point of allowing an organisation to maximise its earnings. The sooner
business-model materialised, the better.
13. The more viable business-model (along with good/service development) the bigger
chance of funding.
(Kaiser, 2014; MaRS, 2014; Buist, 2012 and Oosterhout, 2012)
VII

Appendix-3 Managing Change
Heller & Hindle (1998) claimed that the change is the most significant factor of successful
business management, and change ignorance is costly. Entrepreneur should step ahead of
competitors, set trends, and lead change to keep business survived/sustainable.
Entrepreneur should deal with the fact ‘change is always constant’ and realize that venture
needs to change to meet the internal dues forced by (implementing new strategy, adapting to
organizational-changes and improving performance), and external dues imposed by
(changing technology, economy/market trends and competition). Entrepreneur will make sure
the enterprise is efficiently/effectively running through the organizational progress of
decision-making, performance measure/evaluation, and catalyzing/making changes. He/she
must be aware of the significance of innovation/creativity management, customer-service, e-
business, and how to become high-class business (Coulter, 2003). Entrepreneur will
understand what drives/imposes change, and what provisions are to meet that change and
how, bearing-in-mind change is internally-resisted. He/she will consider both change
approached; perspective/proactive (pre-planned and controlled), and emergent/reactive
(unplanned and impulsive). (Massingham, 2014)
As Stokes and Wilson (2010) cited, Drucker (1986) insisted on developing the innovation
skills, and organizing systematically innovation and entrepreneurship as tasks in purposeful
manner. Entrepreneur should constantly seek innovation through inviting new ideas instead
of waiting for inspiration flash.
Appendix-4 Lecture Group Workshop: Business Plan (MEMI)
VIII

MEMI
MEMI brings a new concept for delivering
Educational Excellence
Because
Children are our Future
© MEMI 22/02/2014 Because Children are Our Future
M E M I
By:
Abeer Ashraff
Ateeq Delrose
Yousef

Our Primary Objectives
To Deliver:
• Education to children aged 2 to 11 years old
• Off peak to off peak care to our children
• Door to door transportation for our children
• The opportunity to speak up to 2 languages in addition to the
language spoken at home
• To offer a number of ‘free’ places to selected children
• Education for the parents, grandparents and carers of our
children
• The opportunity for the generations to interact in education
and to learn from each other
Because Children are Our Future
M E M I

Our Secondary Objectives
To deliver substantial economic benefit to our
community by:
• Providing much needed day care facilities for periods that
support our working parents’ schedules
• Allowing parents to enter or re-enter the job market with the
peace of mind of affordable high quality childcare
• Providing employment
• Creating a legacy for future generations
M E M I

Gap in Market and Market Gap
• Identify market gap
• Location
• Face book / Tw
M E M I

Priority Customers
• Parents
• Grandparents
• Carers
4/2/2014 Because Children are Our Future
M E M I

Channels
Marketing:
• Website
• Leaflets
• Brochures
• Local paper
• Local radio
• Fayres
• Local authority directories
• On line directories
M E M I

Risks
• A change of policy leading to market rent being charged
M E M I

Competition
• All other childcare providers will be our competitors
• We have established that the areas where we are able to
differentiate ourselves :
• The off peak to off peak service
• The door to door transportation
• Bespoke menu selection
• Support in education for parents as well as children
• The value that intergenerational interaction will bring
M E M I

Competitive Strategy
• We aim to market directly to multicultural communities,
focusing on the differences from our competitors.
• We DO aim to compete on; quality, variety within the
provision such as the teaching of 10 different languages and
our innovative approach
• We WILL promote the recognised and respected Montessori
brand for which we will have a license
• We WILL promote the extra curricular activities available
during breakfast and after school sessions
M E M I

Critical Success Factor/s
• Lack of Marketing
• Low up take of places
M E M I

Our Value Chain Based
Resources
Customer
Key
relationship
Marketing Products Staff
Parents
Carers
Grandparents
Overseas -visitors
Local
Authorities
Parents
Community
leaders
Website
Networking
Word of mouth
Child /Adult
Education
Multilingual
languages
Teachers ,drivers,
cleaner, admin
team,
M E M I

COSTS
We have calculated that the cost of delivering
this quality service will be
£329,000 per year
We are in a fortunate position of not having to pay a market rent
on our accommodation.
M E M I

Costs Continued
The breakdown of our costs are:
M E M I

Prices
We have ascertained that in order to break even we will need to
have a total of 33 full time child places filled each week, with
the average child place charged at £195.00per week.
• Customers will be asked to pay a month in advance and pay a
terms deposit. The deposit will be returned at the end of the
leaving notice period
• A full terms notice must be given for those leaving
M E M I

Division of places
Weekly Income
M E M I

Profitability
Our initial calculations indicate that we will have profit of:
• £6,873 each week
• £357,960 per year (£178,698 for the 6 months)
• 108.80% pre tax
• Additional revenue will be derived from uniform sales,
literature and extra, extra curricular activities that can be
accessed at weekends by our primary customers and the
general public.
M E M I

Our Cash Flow
M E M I

Evaluation
Based on what we have calculated we can now look again at:
• Prices we will charge
• Can we offer free or subsidized places
• Can we increase staff wages
M E M I

MBA assignment about Management Skills & Entrepreneurship

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