LESSON : ENTREPRENUERIAL MOTIVATION

The main objective of this lesson is to discuss the various factors that motivate/force people to venture

into entrepreneurship

Definition of motivation- It is the way in which desires and aspirations directs, control or explain the

behaviour of human beings

Nature of Motivation

The above definition reveals the following characteristics of motivation

i) Motivation is a personal and internal feeling i.e. it is a psychological situation that arises in

the mind of an individual when his needs and wants are satisfied.

- Motivation is related to need satisfaction because all conscious or motivated behaviour on

the part of human beings is directed towards the satisfaction of needs

ii) Motivation is a continuous process because human needs are unlimited, and a person always

feels a need

iii) A person cannot be partly motivated

iv) Motivation causes goal-oriented behaviour

Motivational Process

Motivation follows the following steps:

1. Awareness of needs- awareness of unsatisfied needs creates tension in the mind of a person. This

tension leads to goal-directed behaviour

2. Search for Action- In order to relieve his tension and to satisfy his needs, the individual looks

for suitable action. He develops certain goals and makes an attempt to achieve them.

3. Fulfilment of need- In case the attempt is successful, his need is satisfied and he feels motivated.

If the attempt is unsuccessful the need remains unsatisfied and the individual engages himself in

search for a new action

individual will set a new goal. This process continuous to work within an individual because

human needs are unlimited

A. Impetus/Drive to entrepreneurship

These are four (4) factors which propels entrepreneurs forward towards self-employment

These factors include:

(i) Negative displacement

(ii) Being between things

(iii) Positive push

(iv) Positive pull

i) Negative displacement

This is marginalization of individual or group of individuals from the core of the society. These

individuals or groups may be seen as not fitting to the main flow of social and economic life. Because

they are on the outer fringes of the economy and of society, they are sensitive to the allure of self-

employment, having no one to depend on, they depend on no one, Dollinger (1990).

The tendency of immigrants to become entrepreneur explains this phenomenon. Asians and Jewish

immigrants for example, have gone into business wherever they have settled. The Boda Boda individuals

in Kenya.

ii) Being between things

People who are between things are more likely to see entrepreneurial outlets than those who are in the

middle of things

The Shapero and Sokol model offers three examples:

 Between military and civilian life

 Between student life and career

 Between prison and freedom

Pull and push factors

personal desire, while push factors are motivators that, drawing on external factors unrelated to the

individuals' entrepreneurial characteristics, “force” these individuals to engage in entrepreneurship. Pull

entrepreneurs are often driven by the vision of a successful venture and the potential for personal and

professional growth. According to studies, pull entrepreneurs tend to be more successful than push

entrepreneurs.

iii) Positive pull

Individual interest of independence, achievement, recognition, personal development, and personal

wealth) have been identified that lead/pull an individual towards opportunity entrepreneurship

(Mkubukeli & Cronje, 2018).

Positive pull influences lead to decisions to investigate entrepreneurship.

iv) Positive push

Positive push factors are those situations that provide impetus and momentum for entrepreneurship. These

are individuals who are motivated by positive factors such as the attractiveness of a business idea, the

desire for self-realization, independence, or the opportunity to make a difference. These entrepreneurs

may seek to exploit an opportunity of a perceived market gap through specialist knowledge, product

development or they may hire the appropriate technology and skills.

Push factors may be a career path that offers entrepreneurial opportunities or an education that gives the

individual the appropriate knowledge and opportunity.

Two types of career paths can lead to entrepreneurship. These are: -

(a) Industry path

In the industrial pathway, a person prepares himself for job or career in a particular industry and

learnt everything. Since all industries display some sort of dynamic or change overtime,

entrepreneurial opportunities that exploit that change come and go. A person with a deep knowledge
 of the industry is in an excellent position t develop a business that fills a niche or gap created by the

industry change.

Specialized knowledge is a key resource in industry path. Such knowledge may be embodied in particular

people, a technology or a system or process.

(b)Sentry path

This approach emphasizes the money and the deal.

People with careers in sentry positions see many different opportunities in many different industries.

These people tend to be lawful accountants, consultants, bankers (especially business loan officers), and

brokers. They learn how to make deals and money. They have contacts that enable them to raise money

quickly when the right property comes along.

These often get into Service usinesses which present lower barriers to market entry.

B. Achievement motivation

According to McClelland theory, high need for achievement (N-ach is a personality trait common in all

entrepreneurs. People with high level of N-ach have a strong desire to solve problems by their own, enjoy

setting goals and achieving them through their own efforts and like receiving feedback on how they are

doing.

C. Locus of control

According to the theory of lack of control there are two types of people:

External- these are people who believe that what happens to them is a result of fate, change, Luck or

forces beyond their control.

Internal -These are people who believe that for the most part the future is theirs to control through their

own efforts. Clearly people who undertake a new business must believe who undertake a will have

something to do with the business's future performance. The internals are therefore more entrepreneurial

that the externals.

D. Life path changes

formation of new enterprises due to life path changes. These factors include:

(i) Work environment

There are two work environments that which have been particularly good for spawning new enterprises.

These are:

 Research and development and marketing

While working in technology (Research and development) individual develop new products idea or

processes and often leave to form their own companies when those new ideas are not accepted by their

employees.

 Similarly individuals in marketing, have become familiar with the market and customers unfilled

wants and needs and they frequently leave to start their new enterprises to fill these needs, Hisrich

et al (2005)

(ii) Disruption

This is a negative force that makes entrepreneurs 'leave their present lifestyle to create something new.

Most new ventures are formed by people who have retired, relocated, fined or separated.

The decision to form a new enterprise is both desirable and possible, Hisrich et al (2005).

E. Self actualization

An entrepreneur is self-motivated while creating a new products or organization.

According to Maslow theory of the ladder of human needs. , e.g. According to Schumpeter referred to as

the “father of entrepreneurship” innovative entrepreneurs would get absorbed within larger innovative

businesses.

Motivating Factors

Several research studies have been conducted to identify the factors that inspire entrepreneurs.

- Some of these factors are as follows:

a) Educational background
 b) Occupational experience

c) Family background

d) Desire to branch out to manufacturing

e) Desire to work independently

f) Assistance from the government

g) Assistance from financial institutions

h) Availability of technology/raw materials

i) Other factors are demand of particular product, favourable business environment,

stable political situation

N/B The above factors were grouped into two categories- internal and external factors

1. Factors internal to the entrepreneur:

a) Strong desire to do something independently in life

b) Technical knowledge and manufacturing experience

c) Business experience in the same or related line

2. Factors external to the entrepreneur

a. Profit margin

b. Heavy demand

c. Encouragement from government and big business

d. Financial assistance from the government and other financial institutions

e. Machinery on hire purchase

 Another study on entrepreneurial motivation has classified the factors behind entrepreneurial

growth in three categories;

1) Entrepreneurial ambitions

a) To make money

b) To fulfil desire to self/wife/parents

c) To continue family business

e) To gain social prestige

f) Other ambitions- making of a decent living, desire to do something creative, provide

employment

2) Compelling reasons

a) Unemployment

b) Dissatisfaction with the job

c) Make use of funds made else where

d) Making use of technical/professional skills

e) Maintenance of large families

3) Facilitating factors

a) Previous association

b) Previous employment in the same or other line of activity

c) Success stories of other entrepreneurs

d) Property inherited

e) Advice or influence

 There are other factors that are classified as psychological in nature such as:

a) Need for achievement

b) Desire for taking personal responsibility

c) Keen interest in situations involving moderate risk

d) Anticipation of future possibilities

e) Organisation skills

f) Being energetic

ENTREPRENEURSHIP AND SELF-EMPLOYMENT

In the labor market there are self-employed, employee and unemployed individuals.
SELF-EMPLOYMENT

This is a situation where one creates his or her own business to employ him/herself and others. Self-

employment is the act of generating one's income directly from customers, clients or other organizations

as opposed to being an employee of a business (or person).

Self-employment involves lower business risks and less initial investment of capital. Most SE offer

services and products based on their skills.

FACTORS CONSIDERED IN SELF-EMPLOYMENT

1. PERSONAL FACTORS

(i) Self-Belief and Motivation: Self-employment requires confidence, motivation, and the ability to

take risks and make decisions independently.

(ii) Skills and Qualifications to run your business effectively. This includes business acumen,

financial management, and the specific skills required for your industry. Other skills may be

having the technical skills and knowledge you need for operating a business like graphic

designing, bookkeeping and marketing skills including “Soft” skills such as time management

and people skills.

(iii) Understanding your motivations for becoming self-employed can help sustain you in times of

struggle. Consider what your reasons are, and make note of them to remind yourself of why you

pursued self-employment.

(iv) Passion. You must like and be committed to what you’re doing, or you’re likely to give up when

you hit bumps in the road.

2. ORGANIZATIONAL FACTORS

(i) Business Structure: You can choose between different business structures such as sole trader,

partnership, or limited company. Each structure has different legal and financial implications.
 (ii) Financial Planning: You need to manage your finances carefully, including setting aside money

for taxes, maintaining a reserve for unexpected expenses, and managing cash flow.

(iii) Legal and Compliance Requirements: Understanding and complying with legal requirements

such as health and safety regulations, employment law, and tax obligations is crucial.

3. ENVIRONMENTAL FACTORS

The prospective entrepreneur analyses the environmental factors, both External and Internal using the

PESTLE analysis tool. It studies the key external factors (Political, Economic climate, Sociological,

Technological, Legal and Environmental) that influence an organization and helps in strategic decision

making.

 Internal factors form the Workplace Environment which can be controlled by the entrepreneurship:

your health and safety; ensure that tasks are designed to match human strengths and limitations, corporate

culture, staffing, finance, current technology.

(iii) Social and Cultural Context: The social and cultural environment can influence your business

operations and customer interactions. Understanding local customs and values can be beneficial.

4. ADDITIONAL CONSIDERATIONS

(i) Health and Safety: Ensuring a safe working environment is crucial.

This includes ergonomic considerations to prevent injuries and maintain productivity.

(ii) Work-Life Balance: Self-employment can offer flexibility, but it also requires discipline to

manage time effectively and avoid burnout.

These factors collectively influence the success and sustainability of a self-employed venture.

ADVANTAGE OF SELF EMPLOYMENT

1. Personal Satisfaction – because you do what you are doing.

2. Independence – Freedom to control self and others using own knowledge and skills, making own

decisions.
 3. Profit – Enjoying all the proceeds of own labour is motivated and exciting

4. Job security – self-employment cannot be laid off. As long as the business exists, one is assured

of employment.

5. Status – self-employed persons receive attention and recognition in the society through customer

contact and public exposure, as a result, they enjoy status above other people.

DISADVANTAGES OF SELF EMPLOYMENT

1. Possible Loss of Invested Capital

If the business fails, the capital invested will be lost. Sometimes some entrepreneurs lose their lifetime

savings or borrowed loans which may take years to repay or lead to loss of family assets like land,

vehicles, computers etc.

2. Uncertain Or Low Income

Business is a risk- the income could at times be very low, uncertain or inadequate to meet the family or

personal needs. It could also vary from month to month.

3. Long Working Hours

Many self-employed people work for more hours than employed ones e.g. they wake up very early to start

working and close business late.

4. Routine Chores

Some business involves routine chores which can be boring after some time.

REASONS WHY PEOPLE START THEIR OWN BUSINESSES

1. Survival or lack of another alternative or job.

Majority of people start businesses for survival or to make a living because they have no other way of

earning their livelihood.

2. To supplement Income
There are many people who operate businesses to supplement their income from paid employment.

Mostly such entrepreneurs are in business part-time while they leave employees to work for them the

other times.

3. To become their own bosses

Those who prefer to be their own bosses, control their working schedules and work independently rarely

fit in paid employment and therefore start their own businesses.

4. Lack of job satisfaction

Some people lack job satisfaction may be because of routine or lack of challenge etc. end up starting their

businesses.

5. To use spare time productively

Many people who have a lot of free time from their paid employment prefer to use it productively in

business other than wasting it.

Assignment: Reasons why Self-Employed is Better Than Being an Employee

HOW TO BECOME SELF-EMPLOYED

Knowing how to become self-employed involves a similar process in most cases.

Step-by-step guide:

List your strengths and weaknesses

Knowing your strengths and weaknesses is important to avoid feeling overwhelmed when setting up your

business.

Outlining your strengths and weaknesses can help you decide what areas you need help with so you

can make your business a success.

2. Define what your business offers/products

This is an essential step and is one that is often overlooked. Many new business owners know the area of

business they want to work in. Yet, they haven't figured out what it is that they're offering and who

they're offering it to.

3. List what you require help with

4. Sign up with the Revenue Office

Once you've defined your business offer, it's time to sign on with the Revenue Office before you start

trading.

This is where you pay your taxes on your income and where you declare your annual return.

5. Decide on a business name

If you decide to use a business name, you register it with the Companies Registration Office. However,

many sole traders use their own names.

6. Pay taxes to Revenue

When you've registered as a sole trader, you pay your income tax under the self-assessment process. You

file your return every year. If you cannot meet this deadline, Revenue charge interest on late payments.

8. Grow your business and set income targets

Being your own boss means you can grow your business at your own pace, work with collaborators and

agencies; you can grow relationships and win new customers.

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