Percentage, Money Management

By the end of the lesson, the students will be able to demonstrate knowledge of budget planning and banking. Students will have knowledge of words associated with banking and budgets including interest, percent, and budget Students will of a working knowledge of percentages and how to use this knowledge as it applies to banking, interests, loans and budgeting. Students will be able to develop a monthly budget given a particular income. Students will be able to calculate the interest on a purchase.Knowledge: The student can calculate total cost on an item given various tax rates. 2. Comprehension: Given two different costs on a particular item, with different tax rates, the student will be able to determine the best deal. 3. Application: The student will articulate the use of this knowledge in their daily life. 4. Analytical Thought: Students will begin to understand how this knowledge can assist them with problem solving regarding income and expenditures. 5. Synthetic Thought: Studen ts will be able to explain how to budget monthly to assure that all costs are covered.6. Evaluation: The students will understand the need to budget and shop around for financial security. Standards: Math – The student uses calculations for percentage correctly Material: 1. Calculator 2. Paper for the purpose of budget work Anticipatory Set: The teacher will ask the students about their knowledge of budgeting. They will discuss the importance of budgeting. Students will be asked to identify examples of when percentages can be useful into their everyday life. Input: 1. The teacher will allow for brief discussion on the examples calculated in class2. The teacher will allow time for discussion about other uses for percentages 3. The teacher will review the vocabulary related to the concepts 4. The teacher will allow class time to work additional problems related to percentages and money management. Modeling: 1. The teacher will construct examples for the students to complete in class. Prior to completing the problems, the teacher will review the vocabulary and the methodology for calculating percentages. The teacher will complete a problem related to the assignment. 2.When the students have completed the in class assignment, teacher will complete another larger and slightly more complex problem using the percentage concepts, perhaps related to credit use, as an example to looking forward to use of percentage. Check for Understanding The teacher will engage the class in discussion regarding money management and percentages to verify that students comprehend. 1. Memory: Can the student recall the meaning of the associated vocabulary words. 2. Translation: The students will be able to link the percentage concept to the real world3. Interpretation: Students can explain the use of percentage in different situations. 4. Extrapolation: Students will be able to come up with other uses for percentage calculations 5. Application: Students can complete assignments sh owing skills of methodology 6. Analysis: Students will be able to use percentage skill to make decisions on purchases. 7. Synthesis: Students can understand the use of percentages in their day to day life and understand values. 8. Evaluation: Students will complete assignments adequately.Checking through activities 1. The teacher will monitor the progress students make as they work through the problems. Teacher will answer questions and re explain concepts and methodology as needed. 2. Teacher will have a second opportunity to assess progress during discussion Guided Practice 1. Imagery of money management story regarding the purchase of a particular item in two different states at differing tax rates 2. Discussion for purpose of elaboration and comprehension 3. Vocabulary words related to money management and percentageIndependent Practice Students will be given home assignment to complete a more elaborate project related to money management Closure 1. Teacher will be able to demon strate through each activity, that students have a working knowledge and understanding of percentages. 2. The lesson will introduce the concept of money management and fiscal responsibly Adoptions for Learning Disabilities The teacher may choose to assign the classroom task as a group assignment to allow learning disabled students peer support.Students with perceptual disabilities can be given the task in a tangible puzzle assignment where percentages of the whole are experienced in a tangible way. For example Extensions for Gifted Students may choose to move ahead to more complex assignments involving credit card interest rates as appropriate Possible Connections to Other Subjects This lesson can be used in conjunction with any life skills class in which students are learning to plan for future financial responsibility. The vocabulary can be incorporated into 8th grade English vocabulary units.

Compulsory Voting

Compulsory Voting Compulsory voting would result in a decrease in the quality and accuracy of voting results and political leadership. Countries such as Australia do not take many factors into consideration when they require their citizens to vote in local, state, and national elections. Compulsory voting causes skewed results and stress for citizens who are not physically fit or mentally competent enough to vote accurately. Apathy and uneducated citizens can result in invalid voting results.If all people were forced to vote, uneducated citizens who are not familiar with the issues and concerns on the ballot might cast random, careless votes. Voters who are complacent about their country’s government would also create skewed results because they are not likely to research the topics they vote on. Secondly, each individual who is knowledgeable has a greater impact on the final results. These citizens who are informed, keep up with current events, and take the time to vote volun tarily because they recognize the importance of it should be rewarded.In many countries, citizens do not have an influence in government decisions. In parts of the world where citizens have the right to vote, the only method to create an accurate representation of the desires of citizens is to leave voting voluntary, not compulsory. Implementing a required voting system would be inconsiderate to many people and would cause many negative effects in society. It does not take into account citizens who are elderly, mentally or physically incompetent, or struggling financially. For elderly people, leaving the home in order to vote may enervate them.Many other groups of people might find it challenging to vote, such as those who can not afford gas or a car to drive the voting site. Some may not own a TV or a computer to research the candidates or issues they are supposed to vote for. With everyday stresses such as children, work, and finances, adding voting as a requirement for all would cause chaos. The government would have to grant exceptions to some citizens who are unable to vote, possibly causing disorder and lawsuits in the court system from people who believe they should be excused from voting.In every nation, residents should be given the choice to participate in influencing government affairs if they so choose. It would prevent inaccurate results by not forcing citizens who are unaware of the candidates or issues to vote, and would reward those who voluntarily take time out of their day to vote and research the issues. Discrimination against people who are unable to vote would also not occur. Voting should be encouraged by the government, but enforcing it would impinge on citizens and would be a disservice to society.

Response to "Is the American Dream Over" Essay

Response to "Is the American Dream Over" - Essay Example The primary question is â€Å"is the American Dream Over?† Whereas this question has been asked over and over by different scholars, there seems to lack a definite answer to this question. This is because different authors and scholars seem to have a different definition of the topic â€Å"The American Dream.† However, Cal goes on to explain define what American Dream is. He argues that American Dream simply means fulfilling one’s life objectives. However, he goes on to claim that the institutional frameworks of the American government have been so corrupted that it is impossible for the common American person to achieve the American Dream. The question â€Å"Is American Dream Over† is arguably a debatable question at issue. This is because the question brings about the room for debate on both sides of the issue. For example, in his work Cal actually points to the possibility of old and new definitions of American dream and then takes on the modern definition. He however goes on to explain why he believes that the American dream died long time ago because of the challenges facing the modern American citizen. This opens up room for debate because, a significant number of Americans are actually living a life of their dreams. Indeed, it can be debated that American dream has been achieved to some extent. However, the question at issue also overlaps as a controversial issue because it opens wide the room for criticizing the government for the failure of Americans to achieve the American dream The issue of American dream is a question at issue because it provides a good and fair basis in which both proponents and opponents can exchange intellectual fists. Indeed, the question of whether American dream is alive or dead has received equal measure of debate from both sides. In his side, Cal gives reason such as lack of â€Å"employment, overspending, overtaxing, and overregulating government† as some of the reasons why American

The Implications of the Great Recession of 2008 on U.S. Unionization Essay

The Implications of the Great Recession of 2008 on U.S. Unionization - Essay Example In other words, banks issued too much loans directed in real estate and as a consequence, prices were pushed up. In addition, Hetzel (2012) notes that debts grew faster than income and in the long run more people were unable to service their loans. This followed a financial crisis as the situation pushed banks to near bankruptcy and closure. One of the areas in the economy greatly affected by the recession of 2008 was employment sector. In light of the fact that a huge percentage of workers is presented by unions, this discussion elucidates the implications of the great recession of 2008 on U.S. unionization. To understand the implications of the 2008 great recession on U.S. unionization, it would be of significance to first describe unionization prior to the recession. According to the Bureau of Labor Statistics, the percentage of workers represented by unions was at the highest level in the 1950s at 35 percent of the entire workforce (Hetzel, 2010). In 1983, figures from the Bureau of Labor Statistics shows that 17.7 million workers were unionized (Hetzel, 2010). This figure represented 20.1 percent of the total workforce in the U.S. In 2009, Hetzel (2010) notes that the figure had dropped to 12.3 percent of the total workforce. Though the number of union members was reducing from the 1950s, the rate was stringent in 2009 and 2010 after the great recession of 2008. In 2010 for instance, approximately 612,000 union memberships were lost (Tilly, 2010). Before explicating the implications of the 2008 recession on U.S. unionization, it would also be important to demonstrate its impact on the rate of unemployment. Tilly (2010), in a documented material directed to the Global Labor University Conference in Berlin in 2010, asserted that the rate of unemployment peaked in the period following the great recession of 2008. In fact, Tilly (2010) notes that unemployment rate rose to

Forensic Pathology Research Paper Example | Topics and Well Written Essays - 2000 words

Forensic Pathology - Research Paper Example and 6 million child abuse allegations in the United States (â€Å"National Child Abuse,† n.d.) These data prove that children are the common victims of abuse and maltreatment, which also lead to their early death. Considering that child abuse is one of the most rampant crimes today, medical and legal practitioners try to find scientific and legal procedures to solve child abuse cases. Pediatric forensic pathology, as a medico-legal investigation procedure, proves sufficient enough to solve child death due to abuses. Accordingly, this paper aims to study the historical development of pediatric forensic pathology and analyze the significant events and people that contribute to its development. This paper will also discuss the theories and methods in pediatric forensic pathology; additionally, with case report evidences, this paper will show and analyze the successes and failures of the application of forensic pathology methods. Medico-legal investigation in America was patterned after England’s Coroner System, which empowers the coroner (equivalent to a sheriff) to perform judicial and ministerial authority over a corpse (Fisher, 1993, pp. 6-12). As an English colony, the American justice and medical system were patterned after the English system; thus, the American and English medical and justice systems are very much alike. During the years 1950 and onwards, American forensic pathology had undergone several changes and innovations; these innovations had contributed to the growth and advancement of forensic sciences in the United States (Rudin & Inman, 2002). Two of the most significant events in the history of forensic pathology in America are the establishments of the American Academy of Forensic Science (AAFS) in Chicago and the printing of the Journal of Forensic Science (JFS) in 1950. These were followed in 1966 by the discovery of the immunoelectrophoretic technique used to identify bloodstains; this technique was developed by Brian J. Culliford and Brian

Linguistic questions Essay Example | Topics and Well Written Essays - 750 words

Linguistic questions - Essay Example However, many researchers suggest that when the issue involves non-native speakers, the matter of teaching Standard English (British or American) becomes controversial. With non-native speakers, it is not good to confuse them with phrases like â€Å"Did you take† or â€Å"Have you taken†, so a mix of both standards is commonly used among them. This mix will be called the international English which will be spoken by the non-native speakers. This makes English not a foreign language but an international language where no standard is being followed when the aim of the student is to learn it for instrumental purpose and not to belong to a specific culture. Hence, although it is important to make the students familiar with Standard English because numerous research and publications are written using this dialect, however it is also important not to bound the non-native speakers to learn a specific standard so that they have an open learning horizon in front of them. According to Lenneberg’s Critical Period Hypothesis, an individual’s capability to learn a second language and gain the exact native accent diminishes after a certain age or time period (Moore, 1999). A child after birth and before entering into puberty has marked performance in learning the second language as compared to post-pubescent children or adults. However, the observations related to Genie’s linguistic development, it becomes quite evident that language acquisition can still occur after the critical period has passed. When Genie, the 13.5 year old adolescent who was kept within the confinement of a room until her discovery, was exposed and put under supervision of Susan Curtiss, linguistic development was observed in Genie which proved Lenneberg’s Critical Period Hypothesis as wrong. When for the first eleven months Genie did not respond to the researchers, they thought that she would never be able to learn language because

A Quantitative Critique for Predictors for NCLEX Success in Nursing Essay

A Quantitative Critique for Predictors for NCLEX Success in Nursing Students - Essay Example The purpose of the following study is to examine the correlation between the NCLEX success and scores of the NET and PreRN examination scores. NCLEX-RN is a national multiple choice exam overseen and administered by the National Council of State Boards of Nursing. It was first introduced in 1982 as a paper-and-pen two-day exam to a computer-adaptive test in 1994 which is also the present test form. TM was introduced in 1997 there are not many similar studies therefore. According to Rubino (1998) there exists a correlation between NCLEX success and NET scores. Among others, according to the Alexander and Brophy (1997) study the firmest predictors of NCLEX success were SAT verbal scores, nursing grade point average (GPA) and National League for Nursing (NLN) Comprehensive Achievement Test scores. Another study by Barkley, Rhodes and DuFur (1998) detect a bond between on standardized test scores and NCLEX, while Beeson and Kissling (2001), Briscoe and Anema (19999), Endres (1997), Swenty (1998), Wescott (1997) employed academic and non-academic variables for their stidoes: the Mosby Assess Test, NLN Achievement Tests, RN Entr ance Examination and ACT. These former content a high GPA is a predictor of success in nursing courses, and above the average scores on standardized tests were predictors of success on the NCLEX exam. Finally the study by Beeman and Waterhouse (2001) suggest that the results of NCLEX could be accurately via available student data. Study Framework, Research Objective and Study Design A drop in NCLEX-RN scores in 1997 led to exploration of failures rates and finding ways to overcome these. Defining predictors of NCLEX-RN such are the Nurse Entrance Test (NET) and Pre-RN exams of the Educational Resources, Inc. (ERI) and part of the Total Testing (TM) package. Total Testing is a monitoring technique held during the course of study and aims to increase NCLEX success evaluating student diverse performance under diverse conditions. The study at hand utilized for the purpose of the paper is a correlational comparative study utilizing the formerly mentioned NET and Pre-RN exams to answers the following questions: Is Pre-RN is the proper tool for NCLEX-RN success rate forecast Is NET is the proper tool for entrance to a nursing school program Are both Pre-RN and NET are predictors to successful performance on the NCLEX-RN exam Variables Analysis was performed using descriptive statistics with inferential statistics employing strength of relations between the measured variables, difference between groups' means, and confidence interval in a two-tailed test (Sayles, 2003). Demographic variables are used as independent along with average point and other marks, grade point average, ACT and additional test scores, taken courses and work experience. Sample, Population and Setting The studied sampled included the senior 83 students of an Associate in Nursing Degree Program (AND) and was held in 2001. (Sayles, 2003) with 78 students graduating and 68 of them taking the test for the first time. Data were obtained by university records and records form the nursing college and were divided in four categories of demographic data, applications to nursing courses, NET and Pre-RN data and the NCLEX results. The analysis and correlation

Reflecting on Food Systems Personal Statement Example | Topics and Well Written Essays - 2000 words

Reflecting on Food Systems - Personal Statement Example I still enjoy a Whopper and fries, but when I eat one now I am more keenly aware of the path that the burger has taken to get to my table, the lives that it has impacted, the social footprint it has made, and the alternatives I have when choosing the foods I eat. I have listened for years as the news has told about the health issues that surround the foods we eat. It seems like every week there is another new health scare that portrays the American diet as dangerous and unhealthy. Trans fat, bacon, mayonnaise, and cheese have all come under fire as health advocates have suggested the limiting or elimination of certain foods from our diet. At some point it becomes like the boy who cried wolf too often. I have to wonder what is the food of the week that has drawn the attention of dieticians and nutritionists. If I had taken it as serious as they portrayed it then my favorite double cheeseburger with a large fries would have been out and replaced by a bowl of greens and alfalfa sprouts. Still, I had only a few sources for my food and had no knowledge how different it all was. If I didn't get my food from Burger King, then what alternatives did I have I had never given much thought about how the food had arrived at my table, or how the process h ad taken its toll on the nutritional benefits of the food I was eating. Being told my food was unhealthy didn't ... I need facts and figures and they need to make a connection that I can understand. The learning that I have done in food systems has been instrumental in fundamentally changing the ways that I think about food, the decision I make regarding the foods I buy, and my future plans for creating an alternative means of acquiring it. Yet, this would not have been possible without being involved in this class, my exposure to the UCD student farm, and the education that I have gotten in regards to alternative means of food production. I am far more aware of the risks we take when deciding what foods to eat and the ways it impacts growers and farmers around the world. It wasn't that I didn't care about the health of the food I ate; it was that I simply was not aware of the myriad issues that surrounded the topic. One of the issues that I became more aware of was the use of chemicals that are required to feed the population of the world. I never stopped long enough to think that there are other species on the planet that are competing for the same food that the human race is. I didn't know how the smallest of insects could damage and kill a field of vegetables before they are even given an opportunity to grow. They can feed off the roots or the vines and bring death to the plant long before there are any signs of fruit. Killing the pests can be accomplished through the use of chemical pesticides, but they leave a residue that works its way into the plant. We then ingest the food and in doing so we consume some trace of the original pesticide. Weeds can overtake a field or garden plot as they also compete for space. Many weeds have evolved for the m illennia to endure the harsh outdoor conditions and are a

English literature on Educating Rita Essay Example | Topics and Well Written Essays - 1750 words

English literature on Educating Rita - Essay Example The system failed to tame me. However, it certainly turned me into a failed poet, a frustrated teacher and an unreliable husband, carrying on with life from one drink to the next. In that context, the entering of Rita in the scheme of things was like the gushing in of a waft of fresh air into a room that had been sealed and locked for centuries. Rita reminds me of something that had been since ages considered being patently British and which the current education system badly needs- ‘COMMONSENSE’! The system is still carrying on with the moth eaten and anachronistic canons and way of doing things set in concrete by the prophets of the yore. In Rita I found the flickering remnants of the essential British spirit of challenging the old norms, the raw courage of our hearty and robust, seafaring and blasphemous ancestors. Her referring to ‘assonance’ as â€Å"getting the rhyme wrong†, her irreverent aversion for Forster, her street smart solution to the s taging problems marring Ibsen’s Peer Gynt, her delight at connecting with the essentially universal appeal and humanness of Macbeth, her sense of stifling abhorrence for and a congenital allegiance to the British working class culture, her innocent fascination with Rubyfruit Jungle, her differences with Denny, her uninformed feminism, her inferiority infested sense of inability to fit in with my so called cultured guests and above all her deep ingrained belief in her ability to become something more and better than what she is†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.., raw, yes, common, yes, unrefined, yes, unsophisticated, yes, upstart, yes, but, certainly not devoid of ingenuity, gumption and hope. The system needs more Ritas. Second Dairy Entry Rita fascinates me†¦, or is it something else. My feelings towards Rita are getting confused, jumbled up and rather intense with each passing day. I dejectedly wait for her in my office, and the minute she enters the room, my heart starts beating with the intensity of a herd of buffalos thundering across some plane. Am I in love with her or is it just an attraction between the opposites? By Jove†¦, I am confused like some bleeding idiot! What do I want from her? What do I intend her to do? Why do I have a feeling of intense guilt, lurking behind my mind? When I first met Rita, she wanted to get cultured†¦, get cultured as the world understands culture. The bumbling idiot simply had no idea of her innate originality, appeal and charm. Then I decided to educate her so as to give her a voice, not to make her somebody, but to make her realize that she was already somebody. I wanted to teach her a way of expressing herself that the world could understand, a way of conveying ideas that could make people appreciate and understand her effortless humour and wit. I wanted her to be a woman in her own right. I wanted her to be able to make choices for herself. I think I have succeeded beyond my wildest expectations. Rita is now moving in the world with confidence and poise. She is meeting people and making friends. She has changed her job, though without telling me. She has moved into a flat with a flat mate. And, yes, I think boys find her attractive. They want to be with her. Why this makes me angry and drink profusely. Did I want her to make choices so as to eventually be her inevitable choice? IS IT SO? NO, NO, NO†¦

Zero tolerance policies Essay Example | Topics and Well Written Essays - 1000 words

Zero tolerance policies - Essay Example Zero tolerance policies are not effective as they cause more harm than good to an institution and the student offender at hand. Despite the conflicting arguments on the zero tolerance policies, it has been widely used as a means of controlling school disruption and chaotic instances. Punishments given to all offences are severe disregard of the intensity of the incidents. The zero tolerance policies has its limitations in that it fails to address the underlying causes of the incidence therefore making it ineffective in countering crimes effectively. Recently, most schools in the America and Europe have embraced this policies which has led to most students being suspended or even expelled from their respective schools. A number of concerns and questions have aroused due to a research on this policies. Among the questions include, â€Å"Do zero tolerance policies in schools reduce incidents of bad behavior? and What are the societal consequences of suspension and expulsion of students who violate these policies? Juà ¡rez, pp. 415-416)†. Little evidence is available to credit school safety and improve b ehavior in students subjected to this policies. Research on the effectiveness of expulsions and suspensions as an educational intervention, and other ethical concerns has generated data that shows the negative effects of the zero tolerance policies. This data has led to a change in punishments adopted in different schools which matches the offences committed and preventive measures of bullying and improvement in class management. Research done on finding of alternative ways of punishment will help schools in developing more effective and intrusive methods of school discipline. In September 17, 1999, a fight broke between students of rival gangs in a football game at Decatur High School in Decatur. In October 1, 1999 the School Board expelled the seven students, all black from the school for two years. This move provoked reaction

Ancient Chinese Dynasties Essay Example for Free

Ancient Chinese Dynasties Essay There were many Chinese dynasties that rose and fell throughout China’s history. The history of China, in a way, is a history of battles and wars. These wars were so important that they changed the structure of Chinese culture both then and now. Three dynasties that rose and fell during ancient China were the Han, the Tang, and the Song. The rise and fall of these great dynasties form a link that runs through Chinese history. The Han period was one of the golden ages of Chinese civilization. The Han dynasty lasted from 206 B. C. to A. D. 220. It began when the prince of Han, Liu Bang, took the title Gao Zu and began to restore order and justice to his new empire. He lowered taxes and reduced the Qin emperor’s harsh Legalist policies. These policies created a strong basis for the Han dynasty. The most famous emperor, Wudi took China to a new level. During his reign from 141 BC to 87 BC, he strengthened both the government and economy. Economic expansion, strengthening the palace at the expense of the civil service, weakening the states hold on the peasantry and the rise of the rich and the gentry were all factors that led to the adoption of Confucian ideals. Han emperors made Confucianism the official belief system of the state. Under Wudi, China conquered many lands, expanding their power and influence. The Han Dynasty now controlled northern Vietnam and the Korean Peninsula. Wudi sent explorers toward Central Asia, eventually opening up the famous trade route known as the Silk Road. However, signs of decay began to appear throughout the dynasty which put an enormous burden on the economy. Weak emperors allowed canals and roads to fall into disrepair. Burdened by heavy taxes, and crushing debt, many peasants revolted. Thousands of rebellious peasants abandoned their villages and fled to the mountains. In AD 220 warlords overthrew the last Han emperor. After four hundred years of unity, China broke up into several kingdoms. The Han dynasty was over. After the Han dynasty collapsed, China remained divided for nearly four hundred years. It was not until the development of the Tang dynasty, in 618 that China was restored to its earlier glory. The tang was an imperial dynasty of China. Its territory was acquired through the military campaigns of its early rulers and was greater than that of the Han period. Tang rulers carried empire building to new depths. Chinese armies forced the neighboring lands of Vietnam, Tibet, and Korea to become tributary states. It is estimated that the population had grown by the 9th century to about eighty million people. The Tang Dynasty was largely a period of progress and stability. They rebuilt the bureaucracy and enlarged the civil service system to recruit talented officials trained in Confucian technology. Chinese culture flourished and further developed during the Tang era. It is considered the greatest age for Chinese poetry. Tang emperors began to lose territories in Central Asia to the Arabs. Corruption, high taxes, drought and famine all contributed to the downfall of the Tang Dynasty. In 1907, a rebel general over through the last Tang emperor, which brought the dynasty to an end. The Song Dynasty lasted for more than three hundred years. It began in 960, when a educated general reunited most of China. The Song controlled less territory than the Tang dynasty did. The dynasty was constantly threatened by invaders in the north. Despite military obstacles, the culture brought rise to a new religion. Education expanded the growth of literature and the arts. Foreign trade flourished and Chinese cities prospered as centers of trade. Positions in government were no longer held by aristocrats and were instead given to people with experience and degrees. This made the government stronger and formed new concepts. Chinese wealth and culture lead East Asia even when its militaries did not. Most problems in this dynasty were due to military power. A combination of corrupt officials and weak emperors contributed to its downfall. China has a long and mysterious history of almost five thousand years. China can trace her culture back to a blend of small original tribes which have expanded until they became the great country we have today. Each rise and fall of a dynasty created new leaders, new laws, new rules, and usually new expansion. Chinese history is that of alternating periods of political unity and disunity. The rise and fall of many dynasties created a rocky path in Chinas history.

Site Investigation And Preparation Construction Essay

Site Investigation And Preparation Construction Essay Select any industry that you know. Imagine how you prepare the site the stages you have to go through. Picture the document, the site investigation. Do you have any by-law? Follow your imagination and write a mini report. Sketch (include figure) an example of a bad site layout. Briefly explain why it is a bad lay out. Introduction Nowadays, population in Penang increasing rapidly but in Penang we are less free space for construction. Therefore, for reducing land space used, we are going to construct 20 storey building. We from NZL construction has to construct a huge apartment in residential area. This apartment consists of 20 floors which cover around 3300sq.ft in Penang. In order to start our construction, firstly we need to investigate and prepare the site (SI). The activities during preparing the site are earthwork, site clearing, fencing, dewatering, staking, and build temporary infrastructure for worker and build shortcut access for heavy vehicle. The construction is referring law of Penang. Objective of SI The SI needed to construct an construction that will lowering as much the inconvenient toward public and area during the project running. Besides, it s also need to make sure that the site is suitable for the construction. Site Investigation The geological and geotechnical parameters must suitable for the construction. There, we must extract the soil by using boring technique. This technique won t produce noisy that will disturb the residents. Moreover, the technique is more economical that will save our budget. After the test is conducted, we now know our geological suitable. Now, we can continue constructing the project. First of all, we must clear the site. Ex: cutting the existing tress that in site area and also demolishing old building. Next, excavating the surface for the formation level and slope stabilization The problem faces before and during construction The problem may occur before construction: 1. There are small rivers in the construction site. 2. Demolishing the old building bring unsatisfied among resident 3. Difficulty in transporting the materials to the construction site because near to the town and residential area The solution: 1. The river will cover up by the soil from cut and fill 2. Build suitable drainage system to void flood in the site and the residential area. 3. Give some pay back money for the residents for their loses in the old building 4. To avoid traffic jam, disturbing the resident and also for safety reason work carrying the equipment and materials such as tractor, timber and other is after peak that around 10 am to 3 pm Problem that may faces during the construction 1. Weather of the country is unpredictable. Its can be raining day without any sign. 2. The transportation of the raw materials is far away from the site cause the site is near to residential area. 3. Not enough space for keeping raw material small site area. 4. Safety for the resident. It s quite not safety when the heavy vehicle transporting the raw materials 5. The noisy sound from the construction site will disturb the residents condition 6. Flowing of heavy vehicle will damage the road. 7. The piling will affect the soil condition that may cause unstable condition for the foundation level The site layout Site layout is as references for a perfect construction. In must smartly plan to reduce careless as much as we can. It s also to avoid delay in construction. The site layout is as below: 1. Warning notice to warn public and workers at the construction. This is important to warn public people and also give awareness among the workers. 2. Briefing is needed for the workers 3. The site must secure from authorized people such as public workers. So, for more protection we need to fence around it. 4. The raw materials must be keeping systematically. If there not enough space, we need to rent it. 5. Electricity and watering is at the site. Producing this important thing must illegal and systematic to curb problem during construction that may delay project 6. Facilities for the workers must considerate. Must be fully constructed with electricity and water. 7. Consultant and contractor office must nearby the site Bad site layout Bad site layout may cause easier thing to be more difficult especially when it did not plan well. This is example of bad layout. Why we categorized it as bad layput: 1. Do not show road those heavy vehicles need to follow by. 2. No place to keep raw materials 3. No fencing around the construction site 4. Too simple plan layout. 5. No welfare for the workers such as toilets and canteen The site layout must be very clear including sketching road, and fence. Besides, site layout also must show the whole construction. The alternative road also must be suggested to avoid traffic problem and make the transportation raw materials become easier. Moreover, places for keeping the raw materials must be covered up by water proof to prevent it from damage internally and externally. Besides, all the welfare for workers needs to improve time by time to give comfortable and tidy place for them. This may give them spirit and courage them to work harder. This site is operated by Academic Computing, Centre for Information Communication Technology, Universiti Teknologi Malaysia Todays Hits : 45,796 Total Hits : 1,061,804

Issues of SME Entrepreneurs and Investment Aspects

Issues of SME Entrepreneurs and Investment Aspects Introduction Start-Up Entrepreneurs who wish to transform their business dreams into reality will one way or another reach out for the external finance. Many new entrepreneurial start-up businesses do not obtain start-up financing (Gruber, 2004; Mason Harrison, 2004b). Private individual investors with a high net worth, known as business angels, represent the largest source of start-up financing for new entrepreneurial businesses (Aernoudt, 2005a). Establishment of new businesses is vital to the development and growth of the countrys economy (Reynolds et al., 2003). Since the first publication on a business angel was published by (Wetel, 1981), many authors have researched on the informal investment market and studied closely monitoring business angels characteristics, investment criteria and issues related to an investment. According to (Masons Harrison, 2000), it is cited that over the past generations many researches have been carried out in different countries and compared with each other. This dissertation will discuss about the mind of an investor and how they operate in terms of investing their financial assets in a start-up business they believe in succeeding. The main reason is to broaden our understanding of investment aspects of a business angel and how an entrepreneur should respond to it. To find out information sources on business start-ups, refer (Appendix 1). Problem Discussions Many business entrepreneurs do not have the luxury of initial capital thats needed to start-up a new business as it requires a vast amount of finance equity (Clarke, 2005; Sohl, 2006). How do entrepreneurs find the initial capital and which investor will trust the business ideas and fund the company? What is the difference between a good investment and a poor decision? What are the requirements of a business angel? These are the main issues SME business starters go through in the initial stages of a business (Wiltbank Boeker, 2007). The answers for all these issues vary depending on several criteria. For example, it could vary due to the type of the business the entrepreneur wish to start, the capacity of the risk involved, the return of investment period and especially the preference of the entrepreneur working alone or with the influence of the investor (Kaplan Schoar, 2005). The dissertation tries to reach active business angels view points on the issues of SME entrepreneurs and investment aspects. The researcher is confident that this thesis will benefit both the business angels and entrepreneurs. Introduction Of The Research Subjects According to a survey conducted by the (EIRO), the governments Bolton Committee in its 1971 report clarified that there is no single definition to explain Small to medium enterprises because of the wide diversity of businesses that operate in the United Kingdom. The report also explained that small to medium business varies according to the type of sector it operates. However section 249 of the Companies act of 1985 affirms that a small company will have to attribute at least two of the following characteristics; Turnover less than GBP 2.8 million Total balance sheet less than GBP 1.4 million Employees less than 50 And a medium sized entrepreneur should operate under the following regulations; Turnover less than GBP 11.2 million Total balance sheet less than GBP 5.6 million Employees less than 250 However in real practice, business functions that operate under small to medium terms, take on a range of working definitions depending on their business objectives (Leedy Ormfod, 2001). EIRO European Industrial Relations Observatory Formal And Informal Venture Capitalists Venture Capital is also known as risk investment (Langberg, 2004). Risk investment is invested as shares and the financier expects a superior â€Å"rate of return to recompense for the amount of risk invested (Kelly Hay, 2003). There are 2 main types of venture financing in the UK and they are; formal venture capitalists (large financial institutions) and informal venture capitalists (wealthy private investors commonly known as business angels). The UK Formal Venture capitalism began in the 18th century (Harding Bosma, 2007). During that time Entrepreneurs found affluent individuals to get support for their new businesses. This informal tradition of funding eventually formed a business trade by a number of venture capital firms created by many wealthy. Currently there are over 120 venture capital establishments in the UK, which fund billions of cash annually to the UK SME market (Frielinghaus et al., 2005). Informal venture capitalists are mainly recognized as Business Angels who are wealthy individuals with a high class reputation of managing well run businesses (Masson Harrison, 2004). As investors business angels bare a larger risk than venture capital firms as they have to be liable for the loss of the investment incase the business they invest lose out. On the other hand venture capital firms have many investors who can be hand in hand to one another in a bad situation (Masson Harrison, 2004). Business angels are more common in UK where they tend to invest more on SME businesses where banks and venture capital firms decide not to, which will be further discussed under evidence analysis (Madill et al., 2005). Business angels tend to be get more closer to the entrepreneur with a higher level of involvement in the firms operations, which shows that their choice of target firms are somewhat different than venture capital firms requirements and business angels investment decisions are made solely on the basis of the relationship between the entrepreneur and the investor (Masson Harrison, 2002). Although entrepreneurs could use formal informal investors at different stages in the business as shown in the (figure 1), it shows where business angels are needed where we will further discuss later on (Aernoudt, R., 1999). Figure 1: Financial sources and their involving stages Source: (VENTURE CAPITAL, 1999, VOL. 1, NO. 2, 187 – 195) Objectives Understand a business angel, an entrepreneur and their relationship in a SME start-up businesses in UK Identify detailed requirements of business angels when it comes to an investment Determine how different countries cultures undertake investments Literature Review This literature review is concerned about the academic groundwork of the research objectives which inquires about investment categories business angels tend to invest in a small to medium sized business sector. It also looks at how different authors have elucidated about the investment natures of different countries like New Zealand, Denmark, Sweden etc. In order to give a clear structure of this academic review, it will be categorized into subsections to converse different authors views about the research objectives. First the review will discuss about the academic Theories of investments. Then it looks at Business angels and entrepreneurs in the UK. Finally the review will investigate different countries nature of investments in their own markets. 2.1 Theories of Investment There are several investment theories defined and compared by many authors. This thesis mainly focuses on informal investors who wish to invest on SME start-up businesses. Although Stock market related investment theories are irrelevant for our objectives it will be impolite to ignore discussing all investment theories. Therefore lets investigate the theories and in the later chapters discuss the practical concepts (evidence) used currently by successful investors. Among the following theories, Efficient Market Theory will be related to investment in stock listed companies and â€Å"principal-agent, prisoners dilemma framework resource based theory† will be about business angels investing in SME businesses. 2.1.1 Efficient Market Theory (EMT) According to (Burton Malkiel, 1973), the stock values that show in the stock market almost define where the company is in its territory and how well it performs compared to its competitors. He suggests that stock prices may not always be accurate but it can be correct most of the time. On the other hand few business managers disagree, explaining that there companys values are priced unfairly and stock prices do not accurately replicate the performance of their companies (Burton Malkiel, 1973). The following discussion will communicate what efficient market theory is about and explore the arguments against it. According to (Michael Firth, 1975), it is stated that there were many academic researches carried out to monitor the share price behavior by investment advisory firms and investors to obtain profitable investment strategies. What is EMT or EMH? (Burton Malkiel, 1973) explained that Efficient Market Theory (EMT) is also known as Efficient Market Hypothesis (EMH) on a more technical term. This theory is a method of defining how stock values behave the way they do in terms of investment decisions. (Eugene Fama, 1965) later categorized EMH into three sub assumptions and they are as follows; 1. Weak form (EMH) This method assumes that current stock values replicate all past information about the specific company such as performance measurements, returns etc. By analyzing the stocks price chart, it can help the investors verify as to what the future holds for the companys stock values (Eugene Fama, 1965). 2. Semi strong (EMH) The assumption built on this method is that all the publicly available information and historical information replicates the values of a companys stock prices in the market. So the investors could gain more knowledge and confidence through a companys financial statements and recent developments. It will enable the investors to judge the company future performance (Eugene Fama, 1965). 3. Strong form (EMH) This method expressed that, other than publicly available information, the investors get an inside look into the company which largely reflects the stock value (Eugene Fama, 1965). Principal Agent Theory In general terms Principal Agent theory is defined as a business management framework to observe the behavior between employer contractor or employer employees (Spence and Zeckhauser, 1971; Ross, 1973). So here this theory can be applied to the business angel entrepreneur relationship and discuss its implication on the investment process (Jenson and Meckling, 1976; Harris and Raviv, 1978). In the corporate business, the principal (Business angel) usually appoints the agent (manager) or else make sure the entrepreneur works according to the principals ideas in the business (Jenson and Meckling, 1976). The principal usually make sure that the agents business intentions are as similar to him/her (www.financemind.com). In other words, the principal wishes to make sure that the business runs well and succeed the way he/she believes best (Eisenhardt, 1989). But on the other hand, over an informational advantage the agent could think otherwise for the business. This is where the problem of shared risks arises as (Eisenhardt, 1989) explains, where the Investor (principal) and the agent (manager) could end up having different opinions towards the business. The agency theory is widely used in venture capitalism (Bruton, Fried Hisrich, 2000a). Having conflicts due to differences in interests, it is essential to minimize these risks as (Bruton, Fried Hisrich, 2000b) agrees with Eisenhardt. To reduce these risks investors make sure that they actively monitor the companies they invest and build a better and close relationship with each other (Busenitz, Fiet Moesel, 2004). According to (Sweeting Wong, 1997), using a principal agent theory to evaluate a business angel investment is not highly recommended anymore. It is much better to have a mutually agreed relationship. The agency theory shows that money motivates both the principal and the agent (Busenitz, Fiet Moesel, 2004). But financial motivations or economic factors do not relate business angels relationship with the entrepreneur in this theory (Wijbenga et al., 2003). Prisoners Dilemma Framework (PDF) This is yet another theory that can be used in an investment study. In this framework there can be either a conflict or a development between the two parties involved (Cable Shane, 1997). In this theory, both parties can either go in their separate interests and gain a certain pay off or co-operate with each other and achieve a higher pay off (Bruton, Fried Hisrich, 2000). The prisoners dilemma framework promises better fitting for the business angels and the entrepreneurs because it does not presume a hierarchical relationship between the two parties (Bruton, Fried Hisrich, 2000; Cable Shane, 1997). Still the PDF theory only focuses on the investor – entrepreneur relationship and not any of the business angel investment activities or impacts. It concludes that the theory is not suitable enough to define a business angel entrepreneur relationship (Cable Shane, 1997). Resource Based Theory The resource based theory has many influences on the entrepreneurship. Business angels can contribute many resources other than cash it self. According to Freear, Sohl and Wetzet (2002), angel investors can contribute five types of resources to an entrepreneur: Human, physical, social, organizational financial. Human capital can be taken as angel investors contribution of business knowledge, skills and business experience to the firm (Erikson Nerdrum, 2001a). Social capital can be gained when business angels provide their business contacts (Angel networks). By this, the entrepreneur has the opportunity to meet other investors and extend the funding possibilities to the business. Physical resources can be machines or factories and organizational capital can be described as the influence and advice the investors can give for the business for an example making the business improve on its experience (Erikson Nerdrum, 2001b). Financial capital consists of the funding provided in the beginning of the start-up phase (Cassar, 2003). By far this presumed to be the best suited theory to define a relationship between a Business angel and an Entrepreneur where all aspects are covered (Rose, 2005). Summary Of Theories Looking back at the efficient market theory, Agency theory, Prisoners dilemma framework and Resource based theory; it seems to be that the â€Å"Resource based theory† is the most suitable theoretical framework for the Business angel investments. However the Resource based theory has to be amended with few assumptions: Human capital should be taken as the (knowledge, skills business experience) investors contribute with (Ardichvili et al. (2002). Although we discussed the above theories, many researchers have described and tried to apply other similar theories to the investor investee relationship [Example: Procedural Justice (Busenitz, Fiet Moesel, 2004), learning and knowledge-based view (De Clercq Sapienza, 2002), resource exchange theory (Gomez-Mejia, Balkin Welbourne, 1990)]. All the investment theories have a common characteristic that have only a few relevant investment features in them to the investor-investee concept. To make it applicable for the Business angels and entrepreneurs all these theories should have few amendments and adaptations (Sapienza, Manigart Vermeir, 1996). Small And Medium Enterprise (SME) William Kendall, the Chief Executive of Whole Earth Ltd stated, â€Å"SME business is a fantastic place to work. You have to think innovatively to be an entrepreneur. Its thrilling and its enjoyable.† According to (European Industrial Relations Observatory) there is no general definition for SME. But the (Governments Bolton Committee, 1971) cited that the characteristic of a SME firm is a self-sufficient business being owned by a single owner with a small market share. The report also stated that the size of the SME changes in different industries. Although it is hard to give one specific definition for SMEs, it can be measured and classified by numbers (employees revenue rates). The defining measurements are as follows: Definitions: (The Department for Business, Enterprise and Regulatory Reform – BERR, UK) has defined SME with 3 types of measurements and those are based on amount of employees: Micro firms: 0-9 employees; Small firms: 0-49 employees and Medium firms: 50-249. The (European Commission) changed the definition of the SME to increase the partnerships and innovations. The definition which took affect on 2005 is: â€Å" A Micro, Small and Medium-sized enterprise (SME) is made up of firms which employ less than 250 employees and have yearly revenue less than 50 million euro†. Importance Of SME In The Uk The country has raised the level of growth productivity in the last era reducing the competition gap between other countries like US, France Germany (BERR, 2008). Currently UK is reacting well to the global prospects and challenges. The growth of the SME market increases each year promising to boost the economy of the country. According to (European Business Angels Network (2007) Dissemination Report on the Potential for Business Angels Investment and Networks in Europe), the employment and annual revenue contribution of the SME industry as a whole is more than 50 percent of the total. The UK government provides necessary support for people to step up and start their innovative business to increase the competition level of the country (www.berr.gov.uk). The Entrepreneur Earlier it was discussed that previously recognized agency theories explains that the investor, ensuring a healthy relationship is highly regarded as a successful investment aspect in an investment (Kelly Hay, 2003). Therefore exploring more about what authors have studied about entrepreneurs and investors is vital. The difference between a formal venture capitalist and a business angel is that a venture capitalist invests looking at the company and its ability to perform (Schramm, 2004). On the other hand the business angel focuses mostly on the entrepreneur to make sure there can be a good business relationship (Mark and Robinson 2000, p138). The entrepreneur is the only key to get the funding needed for a start-up business. As an entrepreneur, it is vital to gain the investors trust and confidence in the business idea. According to (Osnabrugge Robinson 2000, p123), it is cited that during a business start-up there is a high percentage of entrepreneurs failing to make good management decisions in the initial stages. It is very sensible for an entrepreneur to seek a business angel as they pay special interest on the business they invest in with all their resources including non-financial contributions. It could help fill all the management weaknesses of an initial stage of the business and sav e huge amounts of consulting and managerial costs (Mason and Stark, 2004). Entrepreneur Evaluation (Osnabrugge Robinson, 2000) had explained that entrepreneurs should be aware that the investor not only pays attention on the business proposition but also the entrepreneur himself to ensure the safety, confidence, enthusiasm and the ability to depend on the entrepreneur. Trust is something investors work hard to find in an entrepreneur, because they invest large amounts of financial resources on a person they met in a short period of time (Osnabrugge Robinson 2000, p125). According to a study conducted by Stedler and Peters; entrepreneurs capability to convince the business angel to invest is very important and showed that 81% of business angels has expressed that a positive first impression established in the first meeting as important (Stedler and Peters, 2000). When it comes to angel investment decisions being made, business angels need to ensure that the entrepreneur should be a proficient manager (Gerald and Joel, 2000). Loyalty, leadership, reliability and personality are important characteristics that angel investors look into when they evaluate entrepreneurs. An entrepreneur should be able to have those qualities to gain an influence of the investor (Aernoudt 1999 Sappa 2006). The characteristics that separate a good ownership from a poor is, that if the entrepreneur is able to establish trust and leadership skills with confidence and make the employees follow him/her (Micah Baldwin 2007). Investors find it comforting to know that the entrepreneurs have invested partly on the business before seeking external investment. This gives the investor the idea that the entrepreneur has given all the effort in the involvement of the process and that the financial value of the business is appreciated (Osnabrugge Robinson 2000, p127). According to (Sappa 2006), business angels take lots of time and effort into finding out background information on the entrepreneur to ensure that the owner has the right expertise to manage the business he proposes. (Haines and Riding 1998) corroborates furthermore by adding that the entrepreneur sharing his/her previous business experiences and being much more practical about the business brings more information and confidence to the investor. Finally all the above characteristics that were discussed are very important for a new start-up entrepreneur to influence investments from professional business angels. Business Angels As we have gone through the theories of business angels it is important to know who business angels are in the minds of researchers. A business angel is a highly prosperous individual who can be a business person and willing to invest part of his/hers finance on a promising entrepreneur who has a potential to succeed (Isakssin 2000, Helle 2004). According to (Harrison Manson, 1999), there are three eras of business angel researches conducted in the investment business: First era of business angel research was conducted by United States of America in early 1980s. Authors like; (Landstrom, 1993) from Sweden and (Harrison Manson, 1992) from United Kingdom repeated the same work by giving out similar results. In this era it was solely concentrated on business angels thoughts, activities and characteristics (Freear, Sohl Wetzel, 2002). Second era enabled researchers to go deep into business angels by investigating their post investment involvements. Theory building up and applying for business angels began in this era. Although there were theories built for business angels, it wasnt developed enough to be completely suitable for the activities of angel investors (Connolly et al., 2006). Third era will be the era about the future researches of business angels. There were many faults in the previous researches done and they need to be taken in a new direction to make sure the researches investigated will produce good results (Arenius Minniti, 2005). This would finally make us understand the minds of business angels and match the Business angel – Entrepreneur relationship under changing economy, culture competition (Connolly, OGorman Bogue, 2006). By the help of (Harrison Mason) Swedish researchers like (Sorheim 2005) will enable to investigate on the changing environment of Business angels. This also mean that the theories being found in the previous eras could finally be developed enough to apply on the business angels current investment methods and get positive results (Gompers Lerner, 2007). Characteristics Of Business Angels Almost all the business angels who actively invest on new businesses have few common characteristics. They all have the main motive to increase the potential of their financial capital (Duxbary, Haines Riding 1996). But (Landstrom 1993, Osnabrugge and Robinson 2000) explained that all business angels should not be profiled in a similar way because cultures and person to person could make them different to each others ways in terms of making a personal investment decision. Although there could be many differences between business angels, (Osnabrugge and Robinson, 2000) also stated that there are general motives behind all business angels when it comes to a certain result they expect out of an investment. When Venture capitalists and business angels are taken together it is wide clear that Business angels are individuals who prefer to invest less financial capital than of the formal investors who invest large amounts. Business angels also prefer to invest their money mainly on initial stages of a business (Osnabrugge and Robinson 2000). When it comes to formal investors, they are selective in industries they invest on depending on a lot of information and research. But the Business angels invest on the entrepreneur regardless of what industry sector the business idea would succeed on. They do little research on the industry but heavy research on the entrepreneur they expect to build a trust worthy relationship, because they depend on the entrepreneur mu ch more than the venture capitalists that only rely on the market and the performance of the company (Osnabrugge and Robinson 2000, p63). Furthermore a research conducted in the Norwegian angel market and studies conducted in the US have identified several angel categories. There could be cultural and economical differences among countries like (UK, Sweden Singapore) but angel investors do have likely investment standards in those countries (Landstrom 1993). (Freeny, Haines Riding 1998) explained that the markets which business angels are currently active are where they are wiling to invest more on. There could be many differences in Business angels personalities and points of views of the whole investment process. There are studies that showed the â€Å"most regular business angel†. It is stated that the age, where successful individuals decide to invest their money on a business is when they get to their 50s. This shows that it is almost a retirement phase from a business point of view. This can be confirmed by a research carried out in Germany where it stated that 95% of BAs were male individuals, 56% were directors or owners of their businesses and 17% were individuals who were in the director board on other organizations (Stedler Peters, 2003). Even (Osnabrugge and Robinson 2000, p156) supported Stedler and Peters by explaining that the individuals were in director posts and had good business experiences before they decide to move on into personal investments. Most business angels involve themselves heavily during the initial stages of start-up businesses. They wish to invest near to their homes to make sure of convenience. And Business angels are well educated, wealthy beyond a certain average and expect to have a good life with their feet up on a desk holding a glass of wine, which we all hope to achieve one fine day (Freeny, Haines Riding 1998). Although this thesis aims to look at the characteristics of UK business angels, it was clear by all previous studies that there are common statistics about their decisions and behaviors. This tells us that, UK angel investors too are not far from what was described before in the theories. Still it is important to point out few common characteristics of UK business angels; Common Characteristics Of UK Business Angels According to (Ardichvili et al., 2002), Business angels in the UK have been or still are active business owners. They invest in more similar markets to what they are operating in, which saves them a lot of time trying to understand the market and the operations. Like all business angels, UK investors are highly motivated by the return of their investments and the effort (non financial motives) they have put in to the start-up business. They do enjoy being a part of a new business hoping to succeed for the better part of the community and the country (Landstrom 1993). Furthermore UK business angels prefers and makes sure they invest on new businesses that they could visit regularly, which means they invest in promising firms which will locate geographically near to where they reside (Ardichvili et al., 2002). BAs would rather invest in firms within their residing area, than investing in a location where they find it hard to meet the entrepreneur even though it would double their investments (Harrison, Mason Robson, 2003). Most British angels prefer their entrepreneurs operate within 100 miles of their homes although investors who invested on technological businesses are willing to travel long distances (www.bbaa.org.uk). According to Mason, British angels mostly prefer to invest on small businesses during its initial stages where it is not too late to put in not just their finance sources but their advice and experience to get things on the right track. This, in a way gives them satisfaction of being a part of a promising business (Mason, 2002). After going through the common characteristics of British Angel Investors, it is quite clear that there isnt a major difference compared with the international countries like Sweden and Denmark which will be discussed later. We discussed about Business angels and it is vital to know the categories of their investments. Investment Aspects Of A Business Angel One of the objectives of this thesis is to find out how Business angels in UK and other similar countries decide to invest on a certain investment they find it promising. An investor looking for good reasons to decide on an investment is known as Investment Aspects or Investment Criteria (Landstrom, 1993). It is a way of evaluating the business and the entrepreneur to ensure the security and the profitability of the business proposal. According to the venture capitalism and angel investment comparison carried out by (Osnabrugge Robinson 2000), it revealed that although there were similarities among their attributes in their investment standards there were a certain amount of dissimilarities which makes business angels favorites for a new start up business. For an example, venture capitalists are prepared to invest almost in all stages of a business and therefore they look into all the past and probable financial records of the company. On the other hand the business angels much prefer to invest on a start-up phase of a new business where past financial experiences are not so important to them (Osnabrugge Robinson 2000). Most business angels give similar priorities to investment aspects, when it comes to making a decision. With much researches conducted over the past years (Osnabrugge Robinson 2000) has come up with a selected summary that illustrates the criteria of an investment. The following (Table 1) of twenty-five selective factors are prioritized by well known angel investors; Priority order Priority factors for an investment 1 passion of the industrialist 2 Dependability of the industrialist 3 Sales prospective of the product 4 proficiency of the industrialist 5 Entrepreneur(s) first impression 6 Development prospective of the market 7 Quality of the product 8 Benefits Issues of SME Entrepreneurs and Investment Aspects Issues of SME Entrepreneurs and Investment Aspects Introduction Start-Up Entrepreneurs who wish to transform their business dreams into reality will one way or another reach out for the external finance. Many new entrepreneurial start-up businesses do not obtain start-up financing (Gruber, 2004; Mason Harrison, 2004b). Private individual investors with a high net worth, known as business angels, represent the largest source of start-up financing for new entrepreneurial businesses (Aernoudt, 2005a). Establishment of new businesses is vital to the development and growth of the countrys economy (Reynolds et al., 2003). Since the first publication on a business angel was published by (Wetel, 1981), many authors have researched on the informal investment market and studied closely monitoring business angels characteristics, investment criteria and issues related to an investment. According to (Masons Harrison, 2000), it is cited that over the past generations many researches have been carried out in different countries and compared with each other. This dissertation will discuss about the mind of an investor and how they operate in terms of investing their financial assets in a start-up business they believe in succeeding. The main reason is to broaden our understanding of investment aspects of a business angel and how an entrepreneur should respond to it. To find out information sources on business start-ups, refer (Appendix 1). Problem Discussions Many business entrepreneurs do not have the luxury of initial capital thats needed to start-up a new business as it requires a vast amount of finance equity (Clarke, 2005; Sohl, 2006). How do entrepreneurs find the initial capital and which investor will trust the business ideas and fund the company? What is the difference between a good investment and a poor decision? What are the requirements of a business angel? These are the main issues SME business starters go through in the initial stages of a business (Wiltbank Boeker, 2007). The answers for all these issues vary depending on several criteria. For example, it could vary due to the type of the business the entrepreneur wish to start, the capacity of the risk involved, the return of investment period and especially the preference of the entrepreneur working alone or with the influence of the investor (Kaplan Schoar, 2005). The dissertation tries to reach active business angels view points on the issues of SME entrepreneurs and investment aspects. The researcher is confident that this thesis will benefit both the business angels and entrepreneurs. Introduction Of The Research Subjects According to a survey conducted by the (EIRO), the governments Bolton Committee in its 1971 report clarified that there is no single definition to explain Small to medium enterprises because of the wide diversity of businesses that operate in the United Kingdom. The report also explained that small to medium business varies according to the type of sector it operates. However section 249 of the Companies act of 1985 affirms that a small company will have to attribute at least two of the following characteristics; Turnover less than GBP 2.8 million Total balance sheet less than GBP 1.4 million Employees less than 50 And a medium sized entrepreneur should operate under the following regulations; Turnover less than GBP 11.2 million Total balance sheet less than GBP 5.6 million Employees less than 250 However in real practice, business functions that operate under small to medium terms, take on a range of working definitions depending on their business objectives (Leedy Ormfod, 2001). EIRO European Industrial Relations Observatory Formal And Informal Venture Capitalists Venture Capital is also known as risk investment (Langberg, 2004). Risk investment is invested as shares and the financier expects a superior â€Å"rate of return to recompense for the amount of risk invested (Kelly Hay, 2003). There are 2 main types of venture financing in the UK and they are; formal venture capitalists (large financial institutions) and informal venture capitalists (wealthy private investors commonly known as business angels). The UK Formal Venture capitalism began in the 18th century (Harding Bosma, 2007). During that time Entrepreneurs found affluent individuals to get support for their new businesses. This informal tradition of funding eventually formed a business trade by a number of venture capital firms created by many wealthy. Currently there are over 120 venture capital establishments in the UK, which fund billions of cash annually to the UK SME market (Frielinghaus et al., 2005). Informal venture capitalists are mainly recognized as Business Angels who are wealthy individuals with a high class reputation of managing well run businesses (Masson Harrison, 2004). As investors business angels bare a larger risk than venture capital firms as they have to be liable for the loss of the investment incase the business they invest lose out. On the other hand venture capital firms have many investors who can be hand in hand to one another in a bad situation (Masson Harrison, 2004). Business angels are more common in UK where they tend to invest more on SME businesses where banks and venture capital firms decide not to, which will be further discussed under evidence analysis (Madill et al., 2005). Business angels tend to be get more closer to the entrepreneur with a higher level of involvement in the firms operations, which shows that their choice of target firms are somewhat different than venture capital firms requirements and business angels investment decisions are made solely on the basis of the relationship between the entrepreneur and the investor (Masson Harrison, 2002). Although entrepreneurs could use formal informal investors at different stages in the business as shown in the (figure 1), it shows where business angels are needed where we will further discuss later on (Aernoudt, R., 1999). Figure 1: Financial sources and their involving stages Source: (VENTURE CAPITAL, 1999, VOL. 1, NO. 2, 187 – 195) Objectives Understand a business angel, an entrepreneur and their relationship in a SME start-up businesses in UK Identify detailed requirements of business angels when it comes to an investment Determine how different countries cultures undertake investments Literature Review This literature review is concerned about the academic groundwork of the research objectives which inquires about investment categories business angels tend to invest in a small to medium sized business sector. It also looks at how different authors have elucidated about the investment natures of different countries like New Zealand, Denmark, Sweden etc. In order to give a clear structure of this academic review, it will be categorized into subsections to converse different authors views about the research objectives. First the review will discuss about the academic Theories of investments. Then it looks at Business angels and entrepreneurs in the UK. Finally the review will investigate different countries nature of investments in their own markets. 2.1 Theories of Investment There are several investment theories defined and compared by many authors. This thesis mainly focuses on informal investors who wish to invest on SME start-up businesses. Although Stock market related investment theories are irrelevant for our objectives it will be impolite to ignore discussing all investment theories. Therefore lets investigate the theories and in the later chapters discuss the practical concepts (evidence) used currently by successful investors. Among the following theories, Efficient Market Theory will be related to investment in stock listed companies and â€Å"principal-agent, prisoners dilemma framework resource based theory† will be about business angels investing in SME businesses. 2.1.1 Efficient Market Theory (EMT) According to (Burton Malkiel, 1973), the stock values that show in the stock market almost define where the company is in its territory and how well it performs compared to its competitors. He suggests that stock prices may not always be accurate but it can be correct most of the time. On the other hand few business managers disagree, explaining that there companys values are priced unfairly and stock prices do not accurately replicate the performance of their companies (Burton Malkiel, 1973). The following discussion will communicate what efficient market theory is about and explore the arguments against it. According to (Michael Firth, 1975), it is stated that there were many academic researches carried out to monitor the share price behavior by investment advisory firms and investors to obtain profitable investment strategies. What is EMT or EMH? (Burton Malkiel, 1973) explained that Efficient Market Theory (EMT) is also known as Efficient Market Hypothesis (EMH) on a more technical term. This theory is a method of defining how stock values behave the way they do in terms of investment decisions. (Eugene Fama, 1965) later categorized EMH into three sub assumptions and they are as follows; 1. Weak form (EMH) This method assumes that current stock values replicate all past information about the specific company such as performance measurements, returns etc. By analyzing the stocks price chart, it can help the investors verify as to what the future holds for the companys stock values (Eugene Fama, 1965). 2. Semi strong (EMH) The assumption built on this method is that all the publicly available information and historical information replicates the values of a companys stock prices in the market. So the investors could gain more knowledge and confidence through a companys financial statements and recent developments. It will enable the investors to judge the company future performance (Eugene Fama, 1965). 3. Strong form (EMH) This method expressed that, other than publicly available information, the investors get an inside look into the company which largely reflects the stock value (Eugene Fama, 1965). Principal Agent Theory In general terms Principal Agent theory is defined as a business management framework to observe the behavior between employer contractor or employer employees (Spence and Zeckhauser, 1971; Ross, 1973). So here this theory can be applied to the business angel entrepreneur relationship and discuss its implication on the investment process (Jenson and Meckling, 1976; Harris and Raviv, 1978). In the corporate business, the principal (Business angel) usually appoints the agent (manager) or else make sure the entrepreneur works according to the principals ideas in the business (Jenson and Meckling, 1976). The principal usually make sure that the agents business intentions are as similar to him/her (www.financemind.com). In other words, the principal wishes to make sure that the business runs well and succeed the way he/she believes best (Eisenhardt, 1989). But on the other hand, over an informational advantage the agent could think otherwise for the business. This is where the problem of shared risks arises as (Eisenhardt, 1989) explains, where the Investor (principal) and the agent (manager) could end up having different opinions towards the business. The agency theory is widely used in venture capitalism (Bruton, Fried Hisrich, 2000a). Having conflicts due to differences in interests, it is essential to minimize these risks as (Bruton, Fried Hisrich, 2000b) agrees with Eisenhardt. To reduce these risks investors make sure that they actively monitor the companies they invest and build a better and close relationship with each other (Busenitz, Fiet Moesel, 2004). According to (Sweeting Wong, 1997), using a principal agent theory to evaluate a business angel investment is not highly recommended anymore. It is much better to have a mutually agreed relationship. The agency theory shows that money motivates both the principal and the agent (Busenitz, Fiet Moesel, 2004). But financial motivations or economic factors do not relate business angels relationship with the entrepreneur in this theory (Wijbenga et al., 2003). Prisoners Dilemma Framework (PDF) This is yet another theory that can be used in an investment study. In this framework there can be either a conflict or a development between the two parties involved (Cable Shane, 1997). In this theory, both parties can either go in their separate interests and gain a certain pay off or co-operate with each other and achieve a higher pay off (Bruton, Fried Hisrich, 2000). The prisoners dilemma framework promises better fitting for the business angels and the entrepreneurs because it does not presume a hierarchical relationship between the two parties (Bruton, Fried Hisrich, 2000; Cable Shane, 1997). Still the PDF theory only focuses on the investor – entrepreneur relationship and not any of the business angel investment activities or impacts. It concludes that the theory is not suitable enough to define a business angel entrepreneur relationship (Cable Shane, 1997). Resource Based Theory The resource based theory has many influences on the entrepreneurship. Business angels can contribute many resources other than cash it self. According to Freear, Sohl and Wetzet (2002), angel investors can contribute five types of resources to an entrepreneur: Human, physical, social, organizational financial. Human capital can be taken as angel investors contribution of business knowledge, skills and business experience to the firm (Erikson Nerdrum, 2001a). Social capital can be gained when business angels provide their business contacts (Angel networks). By this, the entrepreneur has the opportunity to meet other investors and extend the funding possibilities to the business. Physical resources can be machines or factories and organizational capital can be described as the influence and advice the investors can give for the business for an example making the business improve on its experience (Erikson Nerdrum, 2001b). Financial capital consists of the funding provided in the beginning of the start-up phase (Cassar, 2003). By far this presumed to be the best suited theory to define a relationship between a Business angel and an Entrepreneur where all aspects are covered (Rose, 2005). Summary Of Theories Looking back at the efficient market theory, Agency theory, Prisoners dilemma framework and Resource based theory; it seems to be that the â€Å"Resource based theory† is the most suitable theoretical framework for the Business angel investments. However the Resource based theory has to be amended with few assumptions: Human capital should be taken as the (knowledge, skills business experience) investors contribute with (Ardichvili et al. (2002). Although we discussed the above theories, many researchers have described and tried to apply other similar theories to the investor investee relationship [Example: Procedural Justice (Busenitz, Fiet Moesel, 2004), learning and knowledge-based view (De Clercq Sapienza, 2002), resource exchange theory (Gomez-Mejia, Balkin Welbourne, 1990)]. All the investment theories have a common characteristic that have only a few relevant investment features in them to the investor-investee concept. To make it applicable for the Business angels and entrepreneurs all these theories should have few amendments and adaptations (Sapienza, Manigart Vermeir, 1996). Small And Medium Enterprise (SME) William Kendall, the Chief Executive of Whole Earth Ltd stated, â€Å"SME business is a fantastic place to work. You have to think innovatively to be an entrepreneur. Its thrilling and its enjoyable.† According to (European Industrial Relations Observatory) there is no general definition for SME. But the (Governments Bolton Committee, 1971) cited that the characteristic of a SME firm is a self-sufficient business being owned by a single owner with a small market share. The report also stated that the size of the SME changes in different industries. Although it is hard to give one specific definition for SMEs, it can be measured and classified by numbers (employees revenue rates). The defining measurements are as follows: Definitions: (The Department for Business, Enterprise and Regulatory Reform – BERR, UK) has defined SME with 3 types of measurements and those are based on amount of employees: Micro firms: 0-9 employees; Small firms: 0-49 employees and Medium firms: 50-249. The (European Commission) changed the definition of the SME to increase the partnerships and innovations. The definition which took affect on 2005 is: â€Å" A Micro, Small and Medium-sized enterprise (SME) is made up of firms which employ less than 250 employees and have yearly revenue less than 50 million euro†. Importance Of SME In The Uk The country has raised the level of growth productivity in the last era reducing the competition gap between other countries like US, France Germany (BERR, 2008). Currently UK is reacting well to the global prospects and challenges. The growth of the SME market increases each year promising to boost the economy of the country. According to (European Business Angels Network (2007) Dissemination Report on the Potential for Business Angels Investment and Networks in Europe), the employment and annual revenue contribution of the SME industry as a whole is more than 50 percent of the total. The UK government provides necessary support for people to step up and start their innovative business to increase the competition level of the country (www.berr.gov.uk). The Entrepreneur Earlier it was discussed that previously recognized agency theories explains that the investor, ensuring a healthy relationship is highly regarded as a successful investment aspect in an investment (Kelly Hay, 2003). Therefore exploring more about what authors have studied about entrepreneurs and investors is vital. The difference between a formal venture capitalist and a business angel is that a venture capitalist invests looking at the company and its ability to perform (Schramm, 2004). On the other hand the business angel focuses mostly on the entrepreneur to make sure there can be a good business relationship (Mark and Robinson 2000, p138). The entrepreneur is the only key to get the funding needed for a start-up business. As an entrepreneur, it is vital to gain the investors trust and confidence in the business idea. According to (Osnabrugge Robinson 2000, p123), it is cited that during a business start-up there is a high percentage of entrepreneurs failing to make good management decisions in the initial stages. It is very sensible for an entrepreneur to seek a business angel as they pay special interest on the business they invest in with all their resources including non-financial contributions. It could help fill all the management weaknesses of an initial stage of the business and sav e huge amounts of consulting and managerial costs (Mason and Stark, 2004). Entrepreneur Evaluation (Osnabrugge Robinson, 2000) had explained that entrepreneurs should be aware that the investor not only pays attention on the business proposition but also the entrepreneur himself to ensure the safety, confidence, enthusiasm and the ability to depend on the entrepreneur. Trust is something investors work hard to find in an entrepreneur, because they invest large amounts of financial resources on a person they met in a short period of time (Osnabrugge Robinson 2000, p125). According to a study conducted by Stedler and Peters; entrepreneurs capability to convince the business angel to invest is very important and showed that 81% of business angels has expressed that a positive first impression established in the first meeting as important (Stedler and Peters, 2000). When it comes to angel investment decisions being made, business angels need to ensure that the entrepreneur should be a proficient manager (Gerald and Joel, 2000). Loyalty, leadership, reliability and personality are important characteristics that angel investors look into when they evaluate entrepreneurs. An entrepreneur should be able to have those qualities to gain an influence of the investor (Aernoudt 1999 Sappa 2006). The characteristics that separate a good ownership from a poor is, that if the entrepreneur is able to establish trust and leadership skills with confidence and make the employees follow him/her (Micah Baldwin 2007). Investors find it comforting to know that the entrepreneurs have invested partly on the business before seeking external investment. This gives the investor the idea that the entrepreneur has given all the effort in the involvement of the process and that the financial value of the business is appreciated (Osnabrugge Robinson 2000, p127). According to (Sappa 2006), business angels take lots of time and effort into finding out background information on the entrepreneur to ensure that the owner has the right expertise to manage the business he proposes. (Haines and Riding 1998) corroborates furthermore by adding that the entrepreneur sharing his/her previous business experiences and being much more practical about the business brings more information and confidence to the investor. Finally all the above characteristics that were discussed are very important for a new start-up entrepreneur to influence investments from professional business angels. Business Angels As we have gone through the theories of business angels it is important to know who business angels are in the minds of researchers. A business angel is a highly prosperous individual who can be a business person and willing to invest part of his/hers finance on a promising entrepreneur who has a potential to succeed (Isakssin 2000, Helle 2004). According to (Harrison Manson, 1999), there are three eras of business angel researches conducted in the investment business: First era of business angel research was conducted by United States of America in early 1980s. Authors like; (Landstrom, 1993) from Sweden and (Harrison Manson, 1992) from United Kingdom repeated the same work by giving out similar results. In this era it was solely concentrated on business angels thoughts, activities and characteristics (Freear, Sohl Wetzel, 2002). Second era enabled researchers to go deep into business angels by investigating their post investment involvements. Theory building up and applying for business angels began in this era. Although there were theories built for business angels, it wasnt developed enough to be completely suitable for the activities of angel investors (Connolly et al., 2006). Third era will be the era about the future researches of business angels. There were many faults in the previous researches done and they need to be taken in a new direction to make sure the researches investigated will produce good results (Arenius Minniti, 2005). This would finally make us understand the minds of business angels and match the Business angel – Entrepreneur relationship under changing economy, culture competition (Connolly, OGorman Bogue, 2006). By the help of (Harrison Mason) Swedish researchers like (Sorheim 2005) will enable to investigate on the changing environment of Business angels. This also mean that the theories being found in the previous eras could finally be developed enough to apply on the business angels current investment methods and get positive results (Gompers Lerner, 2007). Characteristics Of Business Angels Almost all the business angels who actively invest on new businesses have few common characteristics. They all have the main motive to increase the potential of their financial capital (Duxbary, Haines Riding 1996). But (Landstrom 1993, Osnabrugge and Robinson 2000) explained that all business angels should not be profiled in a similar way because cultures and person to person could make them different to each others ways in terms of making a personal investment decision. Although there could be many differences between business angels, (Osnabrugge and Robinson, 2000) also stated that there are general motives behind all business angels when it comes to a certain result they expect out of an investment. When Venture capitalists and business angels are taken together it is wide clear that Business angels are individuals who prefer to invest less financial capital than of the formal investors who invest large amounts. Business angels also prefer to invest their money mainly on initial stages of a business (Osnabrugge and Robinson 2000). When it comes to formal investors, they are selective in industries they invest on depending on a lot of information and research. But the Business angels invest on the entrepreneur regardless of what industry sector the business idea would succeed on. They do little research on the industry but heavy research on the entrepreneur they expect to build a trust worthy relationship, because they depend on the entrepreneur mu ch more than the venture capitalists that only rely on the market and the performance of the company (Osnabrugge and Robinson 2000, p63). Furthermore a research conducted in the Norwegian angel market and studies conducted in the US have identified several angel categories. There could be cultural and economical differences among countries like (UK, Sweden Singapore) but angel investors do have likely investment standards in those countries (Landstrom 1993). (Freeny, Haines Riding 1998) explained that the markets which business angels are currently active are where they are wiling to invest more on. There could be many differences in Business angels personalities and points of views of the whole investment process. There are studies that showed the â€Å"most regular business angel†. It is stated that the age, where successful individuals decide to invest their money on a business is when they get to their 50s. This shows that it is almost a retirement phase from a business point of view. This can be confirmed by a research carried out in Germany where it stated that 95% of BAs were male individuals, 56% were directors or owners of their businesses and 17% were individuals who were in the director board on other organizations (Stedler Peters, 2003). Even (Osnabrugge and Robinson 2000, p156) supported Stedler and Peters by explaining that the individuals were in director posts and had good business experiences before they decide to move on into personal investments. Most business angels involve themselves heavily during the initial stages of start-up businesses. They wish to invest near to their homes to make sure of convenience. And Business angels are well educated, wealthy beyond a certain average and expect to have a good life with their feet up on a desk holding a glass of wine, which we all hope to achieve one fine day (Freeny, Haines Riding 1998). Although this thesis aims to look at the characteristics of UK business angels, it was clear by all previous studies that there are common statistics about their decisions and behaviors. This tells us that, UK angel investors too are not far from what was described before in the theories. Still it is important to point out few common characteristics of UK business angels; Common Characteristics Of UK Business Angels According to (Ardichvili et al., 2002), Business angels in the UK have been or still are active business owners. They invest in more similar markets to what they are operating in, which saves them a lot of time trying to understand the market and the operations. Like all business angels, UK investors are highly motivated by the return of their investments and the effort (non financial motives) they have put in to the start-up business. They do enjoy being a part of a new business hoping to succeed for the better part of the community and the country (Landstrom 1993). Furthermore UK business angels prefers and makes sure they invest on new businesses that they could visit regularly, which means they invest in promising firms which will locate geographically near to where they reside (Ardichvili et al., 2002). BAs would rather invest in firms within their residing area, than investing in a location where they find it hard to meet the entrepreneur even though it would double their investments (Harrison, Mason Robson, 2003). Most British angels prefer their entrepreneurs operate within 100 miles of their homes although investors who invested on technological businesses are willing to travel long distances (www.bbaa.org.uk). According to Mason, British angels mostly prefer to invest on small businesses during its initial stages where it is not too late to put in not just their finance sources but their advice and experience to get things on the right track. This, in a way gives them satisfaction of being a part of a promising business (Mason, 2002). After going through the common characteristics of British Angel Investors, it is quite clear that there isnt a major difference compared with the international countries like Sweden and Denmark which will be discussed later. We discussed about Business angels and it is vital to know the categories of their investments. Investment Aspects Of A Business Angel One of the objectives of this thesis is to find out how Business angels in UK and other similar countries decide to invest on a certain investment they find it promising. An investor looking for good reasons to decide on an investment is known as Investment Aspects or Investment Criteria (Landstrom, 1993). It is a way of evaluating the business and the entrepreneur to ensure the security and the profitability of the business proposal. According to the venture capitalism and angel investment comparison carried out by (Osnabrugge Robinson 2000), it revealed that although there were similarities among their attributes in their investment standards there were a certain amount of dissimilarities which makes business angels favorites for a new start up business. For an example, venture capitalists are prepared to invest almost in all stages of a business and therefore they look into all the past and probable financial records of the company. On the other hand the business angels much prefer to invest on a start-up phase of a new business where past financial experiences are not so important to them (Osnabrugge Robinson 2000). Most business angels give similar priorities to investment aspects, when it comes to making a decision. With much researches conducted over the past years (Osnabrugge Robinson 2000) has come up with a selected summary that illustrates the criteria of an investment. The following (Table 1) of twenty-five selective factors are prioritized by well known angel investors; Priority order Priority factors for an investment 1 passion of the industrialist 2 Dependability of the industrialist 3 Sales prospective of the product 4 proficiency of the industrialist 5 Entrepreneur(s) first impression 6 Development prospective of the market 7 Quality of the product 8 Benefits