Enterprise and entrepreneurs
Enterprise is the skill of spotting an opportunity, taking a risk and organising the other factors of production to start a business. An entrepreneur is the person who does this. Successful entrepreneurs are usually hard-working, willing to take calculated risks, good at making decisions and confident. Many businesses begin with a simple business plan that sets out the idea, the target market and how it will be financed.
Key idea
Entrepreneurs risk their own money and time in the hope of earning a profit and being their own boss.
Measuring the size of a business
There is no single perfect way to measure business size. Common methods include the number of employees, the value of output, the value of sales (turnover) and the capital employed. Each method has limits: a firm using lots of machinery may have few workers but high output, so one measure alone can be misleading.
Business growth
Firms may grow internally (organic growth) by selling more and opening new outlets, or externally by merging with or taking over another business. Owners want to grow to gain higher profits, a larger market share and economies of scale. However, some firms stay small because the owner wants control, the market is small, or personal service is valued. Rapid growth can also cause problems, such as harder communication, weaker control and the danger of expanding faster than the firm can afford.
Remember
- Enterprise = risk-taking and organising resources.
- Size measures: employees, output, sales, capital employed.
- Growth can be internal (organic) or external (merger/takeover).