What Is Self Employment - Financial Literacy - أول ثانوي

Link to digital lesson 1.3 What Is Self-Employment? www.lem.edu.sa Learning Objective Once you have completed this lesson, you should be able to: identify the advantages and disadvantages of self- employment ⚫ evaluate whether you have the qualities needed to be an entrepreneur. Key Terms Entrepreneur Profit Expenses Revenue Budget Insolvent Micro-, small-, or medium-sized enterprise (MSME) Productivity Gross domestic product (GDP) Business plan Entropy a person who sets up a business, taking on financial risks in the hope of profit Self-Employment Instead of joining the job market, many people dream of running their own business. Working for yourself is called self-employment. A person who takes the risks of being self-employed and owning a business is called an entrepreneur. وزارة التعليم 24 Financial Literacy Advantages of Self-Employment A major advantage of being the owner is that you get to make the deci- sions about how the business will be run. Major decisions include: ⚫ the choice of products and services that will be offered ⚫ the hours of operation ⚫ the types of customers the business will target ⚫ the prices it will charge.

Small business owners also keep all the profits of the business. Profit is the amount left after all expenses are deducted from the revenues. Among other things, expenses may include: ⚫ equipment - such as computers, photocopiers, or printers supplies - the basic materials used in the production of a product or delivery of a service. Disadvantages of Self-Employment If the business does not make a profit, or does not make enough profit, it may encounter difficulties. Factors that can affect profit include: ⚫ decreased revenue from a slow period in the economy ⚫ increase in competition leading to a loss in sales ⚫rising cost of business expenses. With most small businesses, especially during their first years, the own- ers must work long hours and perform many different tasks to keep the business running such as: ⚫ sales and marketing: to attract and grow customer numbers ⚫ stock ordering and management: to make sure the store only has enough products to sell that are demanded ⚫ managing finances and budgets: to make sure that each prod- uct is profitable and affordable ⚫ customer service: to create a good reputation to encourage customers to come back. Owners may not be able to hire others to do the work for them due to a lack of cashflow. This may be due to: ⚫ large spending on marketing to attract new customers ⚫ low customer numbers due to limited customer awareness. Most money invested in a small business comes from the owner and/ or the owner's family and friends. If a business fails, the money invested in the business is lost and the business owner can become insolvent if they cannot afford to pay back any money that they owe. Profit the difference between the income (amount camed) und expenditure (money spent) when operating a business Expunsas the cost of operating the business in order to make profit Revenu the uncome of a business. made from the sale of goods or services Budget a plan to show how much money will be earned and spent within a time period brtvent when someone has borrowed money from others and cannot pay it back وزارة التعليم 20123-1445 CHAPTER I Income 25

Micro small or medim sized enterans MSME] a company with fewer than 250 full-time employees and annual revenue below SAR 200 million Productivity the measure of how much is produred (output) for every unit of input (e.g. labor, Capital, or ravy materials) Gross domestic product tabel the total value of all the finished goods and services produced within a country's borders Business plan a document that describes the steps that will be taken to open and operate a business Getting Started in Business If you want to run your own business, you should spend time prepar- ing yourself before you start. Many business owners seek formal and/or informal education about how to run a business before they get started. Some entrepreneurs first work for other businesses to gain needed knowledge and experience. Becoming an entrepreneur and opening a business is becoming very popular in the Kingdom of Saudi Arabia. Between 2022 and 2023 there was an estimated 15% growth in micro-, small-, or medium-sized enterprise (MSME), which now make up 62% of all employment in the private sector. There are many services designed to help entrepreneurs and small businesses and there are many funding opportunities available. The Small and Medium Enterprises General Authority (Monsha'at) was cre- ated to regulate, support, develop, and sponsor the MSME sector. The main aims of Monsha'at are: ⚫ to increase the productivity of MSMEs ⚫ to increase the contribution of MSMEs to grow domestic prod- wet (GDP) from 20% to 35% by 2030 ⚫ to diversify (increase) the sources of funding available for MSMEs. Another good resource is KAUST MentorNet, which offers business men toring services from a wide array of backgrounds by matching entrepre- neurs with skilled mentors. They can give you advice on various issues, such as: how to structure the business: There are several different ways of structuring a business: as a sole proprietorship, as a partnership, or as a corporation (see Figure 1.3.1). You should choose the structure that is best for you and your business. ⚫ writing business plans: If you have a good business idea, you should put your idea into writing. A good plan should show that you are worthy of funding (loans) from government and private sources, such as banks and venture capitalists. حرارة التعليم 26 Financial Literacy

Do -Do Sole Proprietor ⚫ownership by one individual ⚫ the simplest form of business. FIGURE 1.3.1 Different Ways of Structuring a Business Partnership ⚫ ownership by two or more people ⚫ legal documentation is required. Corporation ⚫ ownership in the form of shares of stock ⚫ involves multiple owners who may sometimes have conflicting objectives ⚫ owners' liability for any losses is limited to the investment into the corporation. What different types of expenses might a business flave? T WREE A 4 3 a J L E + M J CAY WI x 1 4 CHIFTE Income 27

وزارة التعليم 28 Financial Literacy Is Entrepreneurship Right for You? How can you decide if being an entrepreneur is the right choice for you? Your answers to the following questions will give you a better idea of whether you should consider owning your own business: 1. Are you self-motivated? Business owners must do what needs to be done without being told or reminded. They enjoy mak- ing their own decisions. 2. Do you like people? Getting along with others, including employees and customers, is essential. 3. Are you a leader? Entrepreneurs are able to get others to follow their lead. 4. Do you take responsibility? Entrepreneurs take charge and follow through. 5. Are you organized? Business owners must have a good plan before they get started. 6. Do you work hard? Successful owners lead by example. They don't expect others to do what they themselves are unwilling to do. 7. Do you make decisions easily and quickly? Decisions some- times have to be made without complete information. 8. Are you trustworthy? Others must trust you in order to build long-term relationships that benefit the business. 9. Are you persistent? Business owners stick with it, even when a situation is difficult to deal with. They finish projects and forget about excuses. 10. Do you keep good records? Entrepreneurs must account for their expenses and revenues. They should be knowledgeable about profitability and cost analyses.

LOOKING AHEAD Could you be an entrepreneur? What business would you start when you leave education and/or gain some work experience? To prepare for this possible enterprise: 1. Reflect on the questions above. Do you think you have the skills and attributes needed to manage your own business? If you do not yet think you can answer all the questions positively, could you learn or improve these skills in time? 2 Identify a hobby or an interest that you could turn into a business opportunity. a Would you want to turn this into a job or a career? b. Would people be willing to pay for your product or service? Why? Are you motivated enough to work hard to succeed? 3. Once you have identified your chosen field, research an entre- preneur in Saudi Arabia with links to this field. How did they get started in the industry? How could you develop the Qualies needed to be an entrepreneur? وزارة التعليم 1127-1445 CHAPTER Income 29

وزارة التعليم 30 Financial Literacy Review Questions Choose the correct answer. 1. There are no disadvantages to being an entrepreneur. a. true b. false 2. Profil is the amount of expenses left after all revenues are deducted. a. true b. false 3. A business plan is useful when applying for business loans or investment. a. Live b. false 4. Which of the following is a reason why a new business owner might not be able to hire others to do the work at the beginning? a. they have high levels of cashflow b. profits are very high c. there are large numbers of customers d. cashflow is poor 5. Which of the following is a disadvantage of self employment? a. choosing target customers: b. choosing the hours of operation c. chance of insolvency d. choosing the prices charged 6. Which of the following is NOT a way of structuring a business? a. corporation b. sole proprietor c. micro business d. partnership