Entrepreneurship
This domain covers the mindset and basic tools for starting a retail venture: opportunity spotting, market research, value proposition, costs, funding and break-even. The exam tests practical business reasoning.
Core rules and concepts
- An entrepreneurial idea becomes an opportunity when there is demand, feasibility and a way to earn profit.
- Market research checks customers, competitors, location, suppliers and price expectations.
- A value proposition states why customers should buy from the venture.
- Costs include fixed costs, variable costs and working capital.
- Break-even quantity = fixed costs ÷ contribution per unit, where contribution = selling price - variable cost per unit.
Worked example
Fixed costs are Rs 30,000 per month; selling price is Rs 250 and variable cost is Rs 150 per unit. Contribution = Rs 100. Break-even = 30,000 ÷ 100 = 300 units per month. Reasoning: each sale contributes Rs 100 toward fixed costs; 300 sales cover them. Below 300, the venture makes a loss before tax and financing costs. The entrepreneur should check whether the market can absorb 300 units.
Traps that cost marks
- Calling revenue profit.
- Ignoring working capital for rent, wages and stock.
- Assuming passion proves demand.
- Forgetting variable costs in break-even.
Key points
- Opportunity needs demand, feasibility and profit potential.
- Research customers and competitors before launch.
- Contribution = price - variable cost per unit.
- Break-even = fixed costs ÷ contribution.
- Working capital is needed for day-to-day operations.