Chapter 2: The Entrepreneurial Process

Dedication

-Dedicated to business (sometimes with cost to relationships)

Distribute

-Distribute ownership of business with key employees who are critical to the success of the business

Decisiveness

-Don't procrastinate -Make decisions swiftly (key factor to success)

Doers

-Implement course of action ASAP

Triggering Event Examples

-Job dissatisfaction -Loss of job -Dissatisfaction with current level of income -Desire to be independent

Devotion

-Love what they do

Entrepreneurial frugality requires

-Low overhead -High productivity -Minimal ownership of capital assets

Dollars

-Money is a measure of success -Assumption: Rewarded if successful

Details

-On top of critical details

Entrepreneurial Process Factors

-Personal -Sociological -Organizational -Environmental

Determination

-Total commitment -Don't give up

Dream

-Vision of what the future could be like for business -Ability to implement dreams

Destiny

-Want to be in charge of their own destiny (rather than be dependent on employer)

10 D's (Characteristics of a successful entrepreneur)

1. Dream 2. Decisiveness 3. Doers 4. Determination 5. Dedication 6. Devotion 7. Details 8. Destiny 9. Dollars 10. Distribute

9F's (Ingredients for a successful new business)

1. Founders 2. Focused 3. Fast 4. Flexible 5. Forever innovating 6. Flat 7. Frugal 8. Friendly 9. Fun

3 factors for a successful new business (Roger Martin)

1. an unmet need 2. a 10X solution 3. the proper entrepreneur(s) Entrepreneurs are attracted to the suboptimal situation and want to provide a solution that is 10X better than what is currently available.

3 crucial components for a successful new business

1. the opportunity 2. the entrepreneur 3. the resources (needed to start/grow the company)

The crucial ingredients for entrepreneurial success are...

A superb entrepreneur with a first-rate management team and an excellent market opportunity.

Personal Attributes

Achievement Locus of control Ambiguity tolerance Risk taking Personal Values Education Experience Opportunity recognition

Frugal

By keeping overhead low and productivity high, entrepreneurial companies keep costs down

Customers provide proof of concept

Customer buy-in provides the most proof of concept for any startup

The Customer

Customers... 1. Are nondilutive 2. Are your market 3. Provide a positive feedback loop 4. Provide proof of concept

Types of startup capital (2)

Debt (paying interest) Equity (giving up some ownership)

Friendly

Entrepreneurial companies are friendly to their customers, suppliers and employers

Focused

Entrepreneurial companies focus on niche markets. They specialize

Flat

Entrepreneurial organizations have as few layers of management as possible

Founders

Every startup must have a first-class entrepreneur

In order to determine the amount of capital that a company needs to get started, an entrepreneur should....

First assess what resources are crucial for the company's success in the marketplace.

When determining how to allocate scarce resources, an entrepreneur should...

Focus on the company's key success factors

Customers provide a positive feedback loop

Having a positive feedback loop throughout the process allows startups to pivot or adjust throughout the development process, ensuring they are creating the best possible product or solution.

An unmet need

Identifying an unmet need in the marketplace means that there is an inefficient, unsatisfactory, or suboptimal problem within the industry

Entrepreneurial Process

Includes all the functions, activities and actions that are part of perceiving opportunities and creating organizations to pursue them 1. Innovation 2. Triggering event 3. Implementation 4. Growth

Fun

It's fun to be associated with an entrepreneurial company

Free Cash

More cash than needed to sustain operations and purchase assets to keep the company on its growth trajectory

Sociological Factors

Networks Teams Parents Family Role models Advisors

Environmental Factors

Opportunities Role models Creativity Economy Competition Resources Incubator Government policy Customers Suppliers Investors Bankers Lawyers

Sweat Equity

Ownership earned in lieu of wages

Operational Experience

Prior know-how about building and delivering the solution Ex. If a startup was producing apps for the iPhone, previous operational experience in mobile software would be desired

Pivoting

Refers to startups making the required course corrections during the development process to dramatically improve their odds for success.

Talent Triangle

Refers to the attributes of successful management teams. Includes 3 elements: -Business acumen -Operational experience -Domain knowledge

Business Acumen

Skills and expertise in the development of strategy and the execution of business planning

Entrepreneur

Someone who perceives an opportunity and creates an organization to pursue it

Organizational Factors

Team Strategy Structure Culture Products

Customers are nondilutive

The more customers a startup entrepreneur can speak to throughout the process, the more valuable information and feedback he or she will receive.

Forever innovating

They are tireless innovators

Flexible

They keep an open mind and respond to change

Fast

They make decisions quickly and implement them swiftly

Domain Knowledge

Understanding the customers and the industry within the business domain

Customers are your market

You can never ask enough questions or talk too much to customers throughout the development process

Debt

You don't have to give up any ownership of the business, but you do have to pay current interest and eventually repay the principal you borrow Bank will require you to put up some collateral (could be personal)

Equity

You have to give up some of the ownership of the business to get it, but you may never have to repay it or even pay dividend.

For entrepreneurs, happiness is...

a positive cash flow

The idea itself isn't important. What is important is...

developing the idea, implementing it, and building successful businesses.

You are not ready to start a business if you are not able to....

name a customer. They have found an idea but have not identified a market need.

In entrepreneurship, luck is where...

preparation and opportunity meet.