Enterprise and the role of the entrepreneur

Why would a government lend money to people starting businesses, when most new businesses do not last five years? That is the real picture in the UK. Fewer than half of new businesses are still trading five years after they start. Yet the government runs a scheme called Start Up Loans. It lends people up to twenty-five thousand pounds each to get a business going. Plenty of those businesses will close, and still the lending carries on. What does the country get out of it? The answer starts with what a new business does for everyone else.

Business enterprise means spotting an opportunity, then taking the initiative and the risk to turn it into a business activity. An opportunity is a chance to meet a need that no business is meeting yet. Initiative means making the first move yourself, without waiting to be told. The risk is the money and time you could lose if the idea fails. That definition describes an activity, something people do. It does not name a person or a type of business. Being enterprising is that activity seen in someone's behaviour. An enterprising person shows initiative and tries new ideas. They will take a risk, and they seize an opportunity when they see one. A business that has traded for decades can be enterprising too. Take Marcus, who works in a food tent at a summer music festival. Every afternoon he sees hundreds of people queueing at one stall to charge their phones. The next summer, he hires three solar charging lockers, pays for a pitch at two festivals and charges five pounds a charge. Which part of his story shows Marcus using his initiative? A, noticing the queues. B, hiring the lockers and booking the pitches himself. C, charging five pounds. It is B. Initiative is making the move yourself, and Marcus hired the lockers and booked the pitches without anyone asking him to. Noticing the queues is the opportunity he spotted, and five pounds is his price, a separate decision. Put the parts together and you have described being enterprising. Marcus spotted an opportunity in those queues and used his initiative to hire the lockers. He took a risk too, because he pays for the lockers and the pitches whether or not a single phone gets charged. A question that asks what business enterprise is wants that activity. Answering with an entrepreneur, or a sole trader, names a person or a kind of business instead. One examiner's report says students' knowledge of what it means to be enterprising was excellent. Describe it through what the person did, the way Marcus was described, and you are on ground most students hold.

An entrepreneur is a person who starts and runs a business, and who takes the risk that it might fail. The entrepreneur's role is what that person does. They organise resources, they make business decisions and they take risks. Resources are what a business needs to make its product. Land is the place it works from. Labour is the people. Capital is the equipment and machinery. Now a quick one on those three words. A bakery's ovens: are they land, labour or capital? Capital. The ovens are equipment the bakery uses to make its bread, while the shop is its land and the bakers are its labour. Entrepreneurs also spot opportunities and use initiative and innovation. Innovation means bringing in a new idea, product or way of working. Think of someone throwing a party in a hired hall. They book the hall, buy the food, rope in helpers and pay the bill even if nobody turns up. That is the role, done for a business. Now a real case. Nia left her office job to start Cwtch Candles, making scented candles in a rented unit. She chose the scents and bought candle moulds. She bought wax and jars from suppliers and hired a part-time packer. And she put four thousand pounds of her own savings into the business. An exam question might ask you to outline the role Nia plays as an entrepreneur. Each part of the role needs a fact from her story. Start with organising resources. Nia rents the unit, which is her land. She buys the candle moulds, which are her capital. She hires the packer, who is her labour, and she buys in the wax and jars. She brings all of them together to make candles, and she decides which scents to sell. And she takes the risk. If Cwtch Candles fails, her four thousand pounds of savings are lost. Now a different question, built from two students' answers about Nia. Student A writes: Nia is creative and hard-working. Student B writes: Nia rents the unit, buys the moulds and hires the packer. Which one outlines her role, and why does the other miss? The answer is B. A role is what she does, and B points to three things Nia did with her resources. Creative and hard-working describe what Nia is like, which makes them characteristics. Characteristics answer a different question, and the video on entrepreneurs' characteristics, skills and motives covers them. One more wrong form is Nia starts a business, which only repeats the question. Two words get swapped here. An entrepreneur is a role, the person who starts a business and takes the risk, while a sole trader is a legal form, a business owned by one person. Nia could run Cwtch Candles as a sole trader. She could also go into partnership with a friend, or set up a company. In all three, she is still the entrepreneur. One examiner's report says a question on entrepreneurs was generally well answered by many students, but some did describe a sole trader instead of an entrepreneur. The habit that avoids it is to open with what the entrepreneur does: organises, decides and takes the risk. Save ownership for a question about ownership, which the next chapter covers. A quick one on that pair. True or false: every entrepreneur is a sole trader? False. Entrepreneur is the role, and a sole trader is only one legal form the business could take. Nia could just as well set up a company.

The government encourages enterprise because new businesses help the whole country, and each reason runs from the business to a benefit for everyone. Start with jobs. A new business that grows takes on staff, which means fewer people are unemployed. So the government pays out less in benefits and collects more income tax. The second reason is competition. New businesses compete with the ones already there, which means existing firms have to keep prices down and quality up. Consumers get better value and more choice. More reasons run the same way. New businesses bring new ideas and products. The economy grows as more is made and sold, and a few start-ups grow into large employers. Enterprise also meets needs that people and communities have. A new nursery, a village shop or a mobile repair service gives a place something it was missing. To get more of this, the government offers help such as loans, grants and advice. How those work belongs to the videos on finance. Now a question from the government's side. Asked why the government wants more start-ups, a student writes: so that the owner can make more money. Why does that answer miss what the question asked? Because it is a benefit to the entrepreneur. The government's reasons end in a benefit to the country, such as fewer people out of work or better value for shoppers.

Time to pull it together. Answer each of these in your head first.

What is business enterprise? Say it as an activity.

Spotting an opportunity, then taking the initiative and the risk to turn it into a business activity.

Now the person behind it. What are the three things an entrepreneur does in their role?

They organise resources, they make business decisions and they take risks.

Now a case you have not met. Dev turns an old ice-cream van into a crepe van.

He chooses a menu of hot crepes, hires a driver and borrows two thousand pounds to fit out the van. Which of those three is the risk, and why?

The borrowed two thousand pounds, because Dev must repay it even if nobody buys a crepe. The menu is a decision, and the driver is labour he organises.

Now one on ownership. Entrepreneur or sole trader: which one is a legal form?

The sole trader. Entrepreneur names the role, whatever legal form the business takes.

Now the government's side. What is one reason it encourages enterprise, ending on a benefit to the country?

For example, start-ups that grow hire people. Fewer are unemployed, so the government spends less on benefits and takes in more tax.

And that is why the government will lend to people starting businesses. Fewer than half of new businesses last five years, but the ones that do create jobs, pay tax and keep prices competitive. The government is betting that what they give back is worth more to the country than the cost of the ones that close.

If you could explain Nia's role to a friend now, give this a thumbs up, and this one's done. If not, leave it without one. The rest of the chapter keeps using these words, so they come back round.

Next in the chapter is Entrepreneurs: characteristics, skills and motives. Hopefully that's next in your feed, but if not, search for ScholaFly B U oh three, oh two.

Every other video is on scholafly.com too, easy to search by video code or by keyword. Whatever you're revising, go there and have a look, or, watch the next video.