Home » 4 Main Functions of an Entrepreneur (Explained With Examples)

4 Main Functions of an Entrepreneur (Explained With Examples)

Functions of an Entrepreneur

1. Entrepreneurial Functions

2. Managerial Functions

3. Promotional Functions

4. Commercial Functions

These are now discussed in seriatim:

1. Entrepreneurial Functions:

The major entrepreneurial functions include risk bearing, organizing, and innovation. Since these are already discussed under the heading 1.2 Evolution of the Concept of Entrepreneur, the same is, therefore, not discussed here again for the sake of repetition.

2. Managerial Functions:

In simple words, management is getting things working with and through others. Different experts have defined term management differently. According to Henri Fayol (1949) who is considered the father of ‘principles of management,’ “management is to forecast, to plan, to organize, to command, to co-ordinate, and to control.”

In the opinion of George Terry (1953), “management is a distinct process consisting of planning, organizing, actuating, and controlling performance to determine and accomplish the objectives by the use of people and resources.”

The significance of management function lies in the fact that enterprises with excellent facilities and quality resources have floundered and fizzled out due to either no management or poor management and enterprises with good management but with poor facilities and resources have flourished and performed exceedingly well. In small-scale enterprises, the entrepreneur who is the owner of the enterprise also has to perform the management functions as well.

The management functions performed by the entrepreneur are classified into the following five types:

1. Planning

2. Organizing

3. Staffing

4. Directing

5. Controlling

A brief description of each of these follows in seriatim:

1. Planning:

In common parlance, planning is the pre-determined course of action to accomplish the set objectives. In other words, planning is today’s projection for tomorrow’s activity. Planning pervades in all aspects of the business. An entrepreneur has to make decisions as to what is to be done, how it is to be done, when it is to be done, where it is to be done, by whom it is to be done and so on.

The importance of planning lies in the fact that it ensures the smooth and effective completion and running of a business enterprise. Absence of planning causes confusion which, in turn, affects the smooth performance of job whatsoever it may be.

How? The following anecdote beautifully demonstrates it:

This is a story about four people named Everybody, Somebody, Anybody and Nobody. There was an important job to be done. Everybody was sure that somebody would do it. Anybody could have done it, but nobody did it. Somebody got angry about that because it was Everybody’s job. Everybody thought anybody could do it, but nobody realized that everybody would not do it. It ended up that everybody blamed somebody when nobody did what anybody could have done.

2. Organising:

The organizing function of an entrepreneur refers to bringing together the men, material, machine, money, etc. to execute the plans. The entrepreneur assembles and organizes the above mentioned different organs of an enterprise in such a way that these combinedly start functioning as one, i.e., enterprise. Thus, organizing function of an entrepreneur ultimately provides a mechanism for purposive, integrated and co-operative action by many people in a joint and organized effort to implement a business plan.

3. Staffing:

Staffing involves human resource planning and human resource management. Thus, staffing function of an entrepreneur includes preparing an inventory of personnel available, the requirement of personnel, sources of manpower recruitment, their selection, remuneration, training and development and periodic appraisal of personnel working in the enterprise.

Business history is replete with evidence that it is basically the staff, i.e., personnel working in the organization that makes all the difference. While appreciating the role of personnel in the success of an organization, L. F. Urwick had remarked that “business houses are made or broken in the long-run not by markets or capital, patents or equipment, but by men.”

Andrew Carniege’s view that “Take my people and leave my factory, soon grass will grow on the floor. Take my factory and leave my people, soon we shall build a better factory” also underlines the significance of people or staffing in the making of an organization. However, staffing function is as crucial for the success of a business enterprise is equally complex as well.

4. Directing:

The functions like planning, organizing, and staffing are merely preparations for setting up a business enterprise. The directing function of entrepreneur actually starts the setting up of enterprise. Under the directing function, the entrepreneur guides, counsels, teaches, stimulates and activates his/ her employees to work efficiently to accomplish the set objectives.

Thus, directing function of entrepreneur concerns the total manner in which an entrepreneur influences the actions of his / her employees/ workers. It is the final action of an entrepreneur in making his / her employees actually act after all preparations have been completed.

5. Controlling:

Controlling is the last management function performed by the entrepreneur. In simple words, controlling means to see whether the activities have been performed in conformity with the plans or not. Thus, controlling is a comparison of actual performance with the target or standard performance and identification of variation between the two, if any, and taking corrective measures so that the target is accomplished.

3. Promotional Functions:

1. Identification and Selection of Business Idea:

Every intending entrepreneur wants to start the most profitable and rewarding project. The selection of the most suitable business project involves a process. The intending entrepreneur, based on his /her knowledge, experience, and information gathered from friends and relatives, generates some possible business ideas which can be examined and pursued as a business enterprise.

This process is also described as ‘opportunity scanning and identification’. Then, the generated ideas are analysed in terms of costs and benefits associated with them. Having made cost-benefit analysis of all the ideas, the most beneficial idea is finally selected to be pursued as business enterprise.

2. Preparation of Business Plan or Project Report:

The entrepreneur prepares a statement called ‘business plan’ or ‘project report’ of what he / she proposes to take up. In other words, a business plan is a well-evolved course of action devised by an entrepreneur to achieve the specified objectives within a specified period of time.

In this sense, business plan is just like an operating document. The preparation of business plan is not must, but it is very much useful for the entrepreneur to establish his / her enterprise in an effective and smooth manner. But, it is must for those entrepreneurs who intend to apply for financial assistance from the financial institutions and banks for their enterprises.

It contains information about the intending entrepreneur, location of enterprise, requirement for land and building, plant and machinery, raw material, utilities, transport and communication, manpower, the requirement for funds including working capital along with its sources of supply, break-even point and implementation schedule of the project.

3. The requirement for Finance:

The entrepreneur prepares requirement for funds with its detailed structure. The financial requirement is also classified into short-term and long-term separately. Then, the sources of supply to acquire the required fund are also mentioned. How much will be the share capital in terms of equity and preference shares and how much will be borrowed capital from different financial institutions and banks are clearly determined?

4. Commercial Functions:

1. Production / Manufacturing:

Once the enterprise is finally established, it starts producing goods or offering services, whichever be the case. Production function includes decisions relating to the selection of factory site, design and layout, types of products to be produced, research and development, and design of the product.

The ancillary activities include production planning and control, maintenance and repair, purchasing, store-keeping, and material handling. The effective performance of production function, to a large extent, depends on the proper production planning and control.

2. Marketing:

All production is basically meant for marketing. Marketing is the performance of those business activities that direct the flow of goods and services from producer to consumer or user. Thus, marketing essentially begins and ends with the customers. It is important to note that marketing is not just selling. In fact, marketing includes much more than selling. Selling is the last function in marketing activities.

The examples of marketing activities are market or consumer research, product planning and development, standardization, packaging, pricing, storage, promotional activities, distribution channel, etc. The success of marketing function is linked with an appropriate ‘marketing mix’. Traditionally, marketing mix referred to 4 Ps, namely, product, price, promotion, and physical distribution. Of late, 3 more Ps namely, packaging, people, and process are also added to ‘marketing mix’.

3. Accounting:

The main objective of any business enterprise is to earn profits and create wealth. Whether the business is fulfilling its objective or not is ascertained through accounting. What is an accounting? According to the American Institute of Certified Public Accountants, “Accounting is the art of recording, classifying and summarizing in a significant manner and, in terms of money, transactions and events which are, in part at least, of a financial character and interpreting the results thereof.”

Thus, accounting involves a process consisting of the following four stages:

1. Recording the Transactions

2. Classifying the Transactions

3. Summarising the Transactions

4. Preparing the Final Accounts

5. Analysing and Interpreting the Results.

The Profit & Loss Account is prepared for ascertaining whether the business earned a profit or incurred loss during a particular period of time also called ‘accounting year’. The Balance Sheet is prepared to know the financial position of business during the accounting period. Hence, the Balance Sheet is also called ‘Position Statement.’


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Salman Qureshi

Salman Qureshi is an Accountant by profession & he loves to write on Commerce & Management Sciences Subject to assist Students. Hope you guys will like his effort.