Entrepreneurial motives and characteristics — Edexcel A-Level Business
Test yourself on Entrepreneurial motives and characteristics with PEARSON EDEXCEL A-Level practice questions.
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Entrepreneurial motives and characteristics explained
Treat every trait as a skill that solves a problem the business in the case actually has, because a list of adjectives scores almost nothing.
Read the full explanation
Resilience keeps a founder trading through the negative cash flow of a first year; risk tolerance allows a launch before the market is proven; creativity produces the difference Porter would call differentiation; financial literacy is the ability to read a cash flow forecast and see the month the overdraft runs out; delegation matters only once staff exist. Greiner supplies the evaluation, since his first crisis is a crisis of leadership: the flair that launched the firm is not the management skill it needs at fifty employees, which is why founders often hand over to a professional chief executive, as Uber's did in 2017. Trait lists are blind to survivorship bias, describing only the founders who came through.
b) Reasons why people set up businesses: financial motives: profit maximisation and profit satisficing; non-financial motives: ethical stance, social entrepreneurship, independence and home working
Why someone started the business explains the objective they set, and that objective drives every later decision about price, growth and finance. Wanting the largest possible surplus pushes an owner towards higher prices, tight cost control and outside investment. Being content with enough surplus to fund a chosen way of life, which economists call satisficing, explains the family firm that turns down a franchise offer because expanding would cost the owner their weekends. The non-financial reasons are just as testable: a strong ethical position means accepting higher input costs for fairly traded cocoa, as Tony's Chocolonely does; a social entrepreneur reinvests surplus in the mission; wanting autonomy or working from the kitchen table quietly caps the size the firm will reach. The trade-off is that what makes an owner happy often makes the business unattractive to a bank.
Your focus
- a) Characteristics and skills required
- b) Reasons why people set up businesses: financial motives: profit maximisation and profit satisficing; non-financial motives: ethical stance, social entrepreneurship, independence and home working
Entrepreneurial motives and characteristics exam tips
Marking Points
- Name the skill and then say what it does for the business in the extract, for example that financial literacy lets the owner see which month needs an overdraft.
- Separate entrepreneurial characteristics such as risk tolerance and resilience from managerial skills such as delegation and cost control, then say which the firm needs at its current stage.
- Use Greiner to argue that the skill set required changes as the business grows, so a founder who was the asset at launch can become the constraint.
- Evaluate by noting that trait lists are drawn from founders who survived, so they describe success rather than predict it.
- Classify the motive as financial or non-financial and then say what it makes the owner do, such as turning down growth despite rising demand.
- Define profit maximisation as making the gap between total revenue and total costs as wide as possible, and satisficing as accepting a level of profit that is good enough once other goals are met.
- Apply a non-financial motive to a decision in the extract, for example an ethical sourcing policy raising unit costs or home working limiting capacity.
- Evaluate the conflict, since independence is usually paid for by refusing the equity finance that would fund faster growth.
Examiner Tips
- 💡This appears as a four or six mark explain item, or as the opening paragraph of a longer assessment of why one start-up succeeded where another failed.
- 💡Develop two or three traits fully instead of listing eight, because developed application outscores coverage every time.
- 💡Where the extract quotes the founder, use their own words as evidence of the trait and then judge whether it was decisive.
- 💡Motives are a favourite opening for assess items on whether a business will pursue growth, so write one chain from motive to objective to strategy.
- 💡Use the extract's evidence of the motive, such as the owner's quoted reason for starting, rather than asserting what they want.
- 💡In evaluation remember motives change, since an owner who satisficed for a decade may sell to a buyer interested only in profit.
Common Mistakes
- Listing adjectives such as hard working and passionate with no application, which earns knowledge marks only.
- Claiming characteristics guarantee success, when funding, timing and market conditions in the extract usually explain more than personality.
- Confusing a characteristic with a resource, since access to family capital is an advantage rather than a skill.
- Describing satisficing as laziness or failure, when it is a rational choice about the return an owner wants from their own time and capital.
- Treating a social enterprise as a charity, when it trades, earns revenue and can make a surplus that it reinvests in the mission.
- Stating the founder's motive and never reaching the consequence for the business, which is where the application and analysis marks sit.