Chapter 15. Entrepreneurship and Business Basics

Why entrepreneurship? Many vocational graduates become self-employed or start small businesses, such as workshops, repair services, salons, farms and contracting firms [24][25].

Business idea and plan. A business plan describes the product or service, target customers, competitors, marketing, operations, people, finances and risks. The Business Model Canvas summarizes the key parts on one page: customer segments, value proposition, channels, customer relationships, revenue streams, key resources, activities, partners and costs [24].

Costs and pricing

Fixed costs do not change with output (rent, insurance).

Variable costs change with output (materials, fuel).

Profit = revenue − total costs.

Break-even point (units) = fixed costs / (selling price per unit − variable cost per unit) [25].

Markup is profit as a percent of cost; margin is profit as a percent of selling price.

Record keeping. Record all income and expenses, keep receipts, separate business and personal money, track stock and prepare simple financial statements [25].

Marketing. Understand customer needs, build a reputation for quality and reliability, use word of mouth, signs, social media and referrals, and ask for reviews.

Legal and tax matters. Register the business if required, keep licences, insurance and tax records up to date and follow safety and employment laws in your country.

Customer relationships. Honest quotes, clear contracts and warranties build trust.

Review: A workshop has fixed costs of 6,000 per month. A product sells for 50 and costs 20 in materials. How many must it sell to break even? (Answer: 6,000 / (50 − 20) = 200 units.)