Role, Benefits and Challenges of an Entrepreneur
Senior 2 · Entrepreneurship
Role, Benefits and Challenges of an Entrepreneur
Lesson 3 of 3
22 min
This case is written by Ganzaa. Nzeyimana opened a juice kiosk opposite a secondary school in Musanze. He borrowed money for a blender and a fridge, set a low price to attract students, and let teachers pay “at the end of the month”. Five months later he closed. The school holidays had emptied his street for weeks, two teachers never paid, and even in good weeks the money did not cover the rent. Every one of those problems is common and every one can be managed, if you see it coming.
The economist Frank Knight separated two ideas. Risk is a chance of loss that can be measured from experience, for example how often a fridge breaks down. Uncertainty is a situation where the chances cannot be measured at all, for example whether customers will like a completely new product. Entrepreneurs live with both, and they carry the loss personally when things go wrong.
| Challenge | What it looks like | A practical response |
|---|---|---|
| Shortage of capital | Banks ask for collateral (property pledged against a loan) that a young person does not have. | Save first; join a savings group (ikimina) or a SACCO; start small; pool money in a cooperative. |
| Irregular income and risk of loss | A good month is followed by a very bad one. | Keep a cash reserve; insure equipment; sell more than one product. |
| Competition | A second kiosk opens next door. | Better quality, faster service, a product the rival does not offer. |
| Lack of business skills | A skilled tailor assumes she can also manage money and staff. | Training, mentors, and keeping written records every day. |
| Poor pricing | Prices set so low that even full sales cannot cover costs. | Calculate costs and the break-even point before choosing a price. |
| Bad debts | Customers buy on credit and never pay. | Limit credit, record every debt, ask for payment by MoMo on the spot. |
| Seasonal demand and price swings | Tomato prices collapse at harvest; school holidays empty the street. | Store or process the product; plan for the quiet months. |
| Long hours and stress | Seven-day weeks with little family time. | Plan the week; train a trusted helper to share the work. |
| Rules, licences and taxes | Registration and tax forms seem complicated. | Ask the sector business adviser or the RRA; register early. |
| Theft and fraud | Fake MoMo payment messages, stock stolen. | Check every payment in the account itself; keep stock locked. |
Two kinds of cost matter. Fixed costs stay the same however much you sell (rent, electricity standing charge). Variable costs rise with every unit sold (fruit, sugar, cups). The contribution of each unit is its price minus its variable cost: the amount each sale adds towards paying the fixed costs.
Nzeyimana sold juice at 500 Frw a cup. Fruit, sugar and the cup cost 300 Frw. His fixed costs were 60,000 Frw a month.
His low price, chosen to attract customers, made success impossible before he sold a single cup. Poor pricing is one of the most common causes of small-business failure.
Tip
Exam technique. For every challenge, give a three-part answer: the challenge → why it happens → what the entrepreneur can do. “Shortage of capital, because banks require collateral, so the entrepreneur saves through a SACCO and starts small” is a complete answer. And remember break-even as fixed costs ÷ (price − variable cost).
Solution: Contribution = 200 − 120 = 80 Frw. Break-even = 24,000 ÷ 80 = 300 chapatis a month.
Solution: Contribution = 450 × 80 = 36,000 Frw. Profit = 36,000 − 24,000 = 12,000 Frw.
Solution: Any two of: save regularly and start small; join an ikimina or a SACCO and borrow as a member; form a cooperative so members pool savings; seek support from family.
Solution: An uncertainty: the product is new, so there is no past experience from which to measure the chance of rejection.
Summary
Sources and credits
The juice-kiosk case, the challenge table, the worked example and the practice items are written by Ganzaa.
This lesson adapts CC BY-SA material and is shared under CC BY-SA 4.0.
