LESSON 2

SALIENT FEATURES OF ENTREPRENEURSHIP

NATURE AND CONCEPT

SALIENT- noticeable/important

 The salient features of entrepreneurship

 Provide better understanding of the whole concept.
 Act as the point of reference in determining whether a particular business endeavor is operating
within the realm of entrepreneurship.

5 SALIENT FEATURES OF ENTREPRENEURSHIP

1. ENTREPRENEURSHIP IS AN ART OF CORRECT PRACTICES

ENTREPRENEURSHIP
 Is an art
 It is not governed by fixed and absolute rules.
 There is constant change which denotes(indicat) movement and innovation.
 Is not static or stagnant.
 It continuously grows, develops, improves, and expands; the change does not stop.
 The development of entrepreneurship is a proof that it is an art that continuously evolves and responds to
the changing needs of the people.
 As an art, entrepreneurship is dynamic.
 The economic activity changes, the political, social and entrepreneurial activities will eventually change.
 As an art, entrepreneurship is closely related to creativity because there is a constant change or evolution
that contributes towards the enhancement of the enterprise.
Creative results in new ideas which are the backbone of entrepreneurship.
 Entrepreneurs keep on searching for something new and find ways to transform new ideas into
entrepreneurial opportunities. This aspect differentiates an entrepreneur from an ordinary small
businessperson.
 An entrepreneur transforms feasible new ideas into an entrepreneurial venture, while an ordinary small
businessperson only builds upon existing ideas to gain immediate earnings to her business.
 As a future entrepreneur, one should always remember that nothing is permanent in the field of
entrepreneurship.
 Entrepreneurship should be practiced not as a science but as an art.
 Creativity should always be applied to entrepreneurial undertakings by regularly evaluating the market
and the environment and responding to the changes in them.
 Art in entrepreneurship is also related to the correct practices or ways of carrying out entrepreneurial
activities.
 The owner of an ordinary small business has the freedom to manage and operate his/her business
according to what pleases him/her.
 The entrepreneur has to perform entrepreneurial activities correctly regardless of whether they are
undertaken easily or not.
 What is important in entrepreneurship is that the business activities are performed correctly.
2. ENTREPRENEURSHIP IS A WEALTH-CREATING VENTURE
 Ordinary small businesspeople equate wealth with the term profit.
 In the parlance of accounting, profit represents the excess income or revenue from the cost and expenses.
 The economist has a different perspective of wealth from that of an accountant.
EXAMPLE:

PRODUCT COST P60.00

REVENUE P80.00
MARK UP/ PROFIT : P20.00

However, the question is, “Is one enriched by twenty pesos? In case the sale is on account or on credit and
the customer does not pay, you lose P80.00 in the transaction.

 Entrepreneurship is operating with the concept of wealth creation rather than profit generation.
 The concept of profit is more applicable in the area of accounting as a way of measuring the operating
performance of a business.
 Wealth is defined as the abundance of money, property, or possession.
(RANDOM HOUSE WEBSTER’S DICTIONARY)
 As an entrepreneur, you should open your own business as a wealth-creating venture and not solely as an
income-generating venture.
 An entrepreneur looks at his/her own business as a wealth-creating venture, while an ordinary
businessperson regards his/her small business basically as a source of income.
 Wealth is create when the benefits derived by the owner in providing goods and services to the customers
are abundant enough to cover the costs incurred by the business and it provides personal benefits to the
owner, which in turn improve his/her life.
 The wealth created by the small business must improve the life of the owner and cascade (fall) to the
development of the local economy and eventually of the whole country.
 The creation of wealth must gradually accelerate and benefit both the owner and the community.
 The adoption of the wrong concept of wealth creation is the primary reason why most of the small
business ventures in the Philippines do not prosper.
 The owner takes the venture only as a means to support the basic needs of the whole family on a daily basis.

 Wealth creation is not merely (only) the selling of the products or services for a price.
 Selling products or services for a price does not necessarily mean creating wealth.
 Wealth is created when the value of the business has increased abundantly and the life of its owner has
improved considerably.

3. ENTRERPENEURSHIP PROVIDES VALUABLE GOODS AND SERVICES

 The mere act of selling goods or providing services does not make a person perform or act within the
concept of entrepreneurship because anybody can sell goods or services for a price.
 Entrepreneurship created economic wealth by providing goods and services to the consumers.
 Goods and services must have a value in order to create wealth.
 One essential principle in entrepreneurship then is, “not to sell waste to consumers but only valuable
goods and services”.
 Valuable goods and services highly satisfy the target buyers in terms quality and price.
 The entrepreneur defines value from the perspective of the buyers and not only from his/her own because
what is valuable to the entrepreneur may not be of any value to the consumers.
 Businesses that offer goods and services that are valuable from the buyer’s perspective are operating
within the concept of entrepreneurship and the business will definitely be a wealth-creating venture.

 Wealth is created when consumers are satisfied with the products and services offered by an entrepreneur
and tend to patronize the business and even endorse it to others.
  Wealth is lost when an entrepreneur sells the products and services which are not valuable to the
consumers, the latter may buy them the first time but may not patronize them for a second time and may
look for the same products and services from other sellers.
 As a future entrepreneur, it is a must to ascertain (discover) first whether or not the additional value that
will be placed on your product is valuable to the target consumers
 Adding another value to a product or service will surely increase the cost of the product or service.

4. ENTREPRENEURSHIP ENTAILS OPENING AND MANAGING THE SELF-OWNED ENTERPRISE.

 The feature highlights two important elements:
1. The concept of opening a self-owned enterprise
2. The concept of managing it
 The entrepreneurs open his/her own business under the principle of entrepreneurship.

 It must be self-owned in order to qualify as entrepreneurial endeavour.

 A business is considered self-owned when the person managing its daily activities is also its owner.
 Businesses that are being managed by others for the benefit of the owners do not fall within the sphere of
entrepreneurship, these are operating under the concept of intrapreneurship.

Intrapreneurship
 May include the business practices of franchising and buyout
 Businesses falling under the concept of entrepreneurial endeavour may range from small bakery or
restaurant in the neighbourhood to a multimillion construction company operating throughout the
Philippines, provided that the business is managed by the owner himself/herself.
 Entrepreneurship is not about the size of the business but rather its sole ownership.
 Entrepreneurship incudes small, medium and multimillion businesses that are managed by their respective
owners.
 NGOs and even national government focus on small businesses in their entrepreneurial program because
the owners of small businesses lack the necessary knowledge, training, and budget for their
entrepreneurial activities.
 Big businesses operating under the concept of entrepreneurship have the much-needed financial
requirements to support their operation.
 Entrepreneurship includes all types of business operations, namely production, manufacturing,
merchandising and services.
 In entrepreneurship the owner of a business must also be the manager of the daily operations of the
entrepreneurial venture.
 A business whether big or small that is managed by a person other than its owner is now within the
concept of entrepreneurship, in this case the owner cannot be considered as an entrepreneur but as an
ordinary businessperson.
 The person handling the activities of the venture is not an entrepreneur but a manager.

MISCONCEPTIONS ABOUT ENTREPRENEURSHIP

1) Entrepreneurship has generally been equated with ordinary small business.
2) It has been a common knowledge that small businesses are managed by their owners.
3) The most programs of non-governmental organizations (NGOs) promoting entrepreneurship have been
directed toward and are participated in by ordinary small businesses.
4) The impression that entrepreneurship is purely about small businesses when in fact the concept of
entrepreneurship also covers big businesses whose owners and managers are one and the same person.
5) Relative to self-owned business, it is more inclined toward production or manufacturing and is not applicable
to buying and selling of goods or rendering of services.
 PLANNING
 Is an important principle in management.
 Refers to the process of setting the goals of the business.
 The entrepreneur, being the owner and manager, must clearly set the goals of his/her business.
 He/She should establish a clear direction of his/her entrepreneurial venture.
 He/She must have a definite answer to the question “Where will my entrepreneurial venture be in five or
ten years after?
 Without planning, the possibility of failure is great.
 An entrepreneur is similar to a farmer who labors long and hard in preparing the farm for planting.
 As a future entrepreneur, you have to constantly plan for the course of your entrepreneurial endeavour
 Planning does not cost anything but the benefit you will gain from exercising it can be rewarding.

5. ENTREPRENUERSHIP IS A RISK-TAKING VENTURE

 Risk is inherent in an entrepreneurial venture.
 Once an entrepreneurial venture is born because of new ideas or opportunities, risk comes simultaneously
within the venture.
 Risk cannot be detached from any entrepreneurial venture and the only way to remove it is to close the
venture.
 Closing the business is not the ultimate answer in handling its inherent risk.
 The risk in entrepreneurship is called a business risk.
 The approach in handling business risks differentiates an entrepreneur from an ordinary businessperson.
 Usually, a businessperson does not understand the nature of business risk which in one way or another
may lead to the failure of his/her business and shuns or avoids it which indicates that he/she only favors
operating under favourable condition.
 Wherever the business goes, there will always be business risks.
 An entrepreneur should face business risk intelligently.
 He/She must find ways to minimize the effects of the risk.

LESSON SUMMARY
1) Entrepreneurial concepts and principles are not fixed. They constantly change and are highly
influenced by the changes in the environment. The evolutionary processes happening in
entrepreneurship are mainly due to the creativity and innovation born or created from business
opportunities. As new ideas are created, new entrepreneurial ventures open.
2) A wealth-creating venture is an entrepreneurial undertaking wherein wealth is created. It is a
business endeavor where the resources of the enterprise have been utilized fully to maximize the
investment of the entrepreneur. The venture improves the life of the entrepreneur in terms of
economic, financial, social, moral, and psychological aspects.
3) Value is basically the opposite of waste. Products and services are considered valuable when they
provide additional benefits to the buyers and users. In entrepreneurship, value is always measured
from the perspective of the consumers. The goods and services become valuable when the
consumers get additional benefits from using the products or availing of the services.
4) All businesses, whether big or small, are operating within the concept of risk-taking because of
uncertainty. Nobody knows what will happen tomorrow. Business risks cannot be eliminated. They
are inherent in the venture. Entrepreneurs, however, face the business risks instead of avoiding
them. They find ways to minimize the effects of the business risks.