Entrepreneurship:

supplier

(AKA vendor) a company that provides parts or services to another company

The four actions Framework (ERRC Grid)

** is used to reconstruct buyer value elements in crafting a new value curve or strategic profile.** +Eliminate: Which factors that the industry has long competed on should be eliminated ? +Reduce: Which factors should be reduced well below the industry's standard? +Raise:Which factors should be raised well above the industry's standard? +Create: Which factors should be created that the industry has never offered?

Investment model: Post Launch

**Post-launch: How much cash do you need to achieve break-even cash flow without raising additional investment? -What revenue and gross margin can you generate to contribute to your ongoing costs? -How lean an operating model can you run pre-breakeven? -Which key leaps of faith, if proven, will signal stepwise reductions in risk? How much cash will it take to reach each of them, and how much of your funding can be postponed until later?

Investment model:pre Launch

**Pre-launch: How much cash do you need to get into business? -What are the hard assets - facilities, equipment, and so on -(minus) you need prior to launch? What will they cost to buy, rent, or lease? -What are the development activities that must be completed before you can launch? What will they cost? -What are the leaps of faith you can test prior to launch? What will it cost to test them?

Industry boundary (broad)

*Advantages* -Brings substitutes directly into the assessment . . . reduces chance for subsequent surprises -Also make it easier to consider changes in your offering that might enhance its marketability *Disadvantage* -Can, if not careful, lead to lack of focus . . . and focus is essential in any cash-starved entrepreneurial venture

Industry boundary (Narrow)

*Advantages* -Can clarify focus as to who the principal competitors are . . . helpful toward assessing competitive rivalry -Can be helpful toward thinking about competitive differentiation *Disadvantages* -Can, if not careful, lead to overlooking of relevant substitutes, which, in some industries, are critically important e.g., Ball Corporation - glass and plastic packaging companies, beyond aluminum can manufacturing e.g., Southwest Airlines - other transportation modes such as rental cars, beyond direct airline competitors

Strategy Canvas

+Captures the current state of play in the known market space, which allows users to clearly see the factors that the industry competes on and where the competition currently invests +To propel users to action by reorienting their focus from competitors to alternatives and from customers to noncustomers of the industry

Uncontested Market Space: (The blue ocean strategy)

+Diagnosing existing market space +Action framework for building strategy that focuses on serving uncontested market space through 4 actions

How do you identify initial new venture ideas?

+Observation: Understand the underlying problem at the individual consumer level +Research: Understand the underlying problem at the macro consumption level +Creativity: Understand what you and your peers can reduce, eliminate, enhance, or create to influence the value proposition

Disadvantages of external growth strategies

- Incompatibility of top mgmt -Clash of corporate cultures -Operational problems -Business complexity increases -Loss of organizational flexibility -Antitrust implications

Advantages of internal growth strategies

- Incremental, even-paced growth -Provides maximum control -Preserves organizational culture - Encourages internal entrepreneurship Allows firms to promote from within-

disadvantages of internal growth strategies

- Slow form of growth - Need to develop new resources -Recouping from failed internal growth strategy investment can be difficult! - Adds to industry capacity

Why business models matter

-A good business model begins with insight into human motivations and ends in a rich stream of profits -patterns of business models are changing as technological diffusion and competition increases with the globalization of marketplaces -practical means for thinking about and communicating matters of venture design

Effectual Reasoning: Key Principles

-Affordable loss . . . versus expected return -Strategic partnerships . . . versus competitive analysis -Leveraging contingencies . . . versus exploitation of pre-existing knowledge and prediction

Equity funding sources

-Angel investors -Private placement -Venture Capitalists -IPO (Initial Public Offering)

Reasons for cash flow problems

-Capital projects fueling growth -Large expenditures up front for projects -Seasonality of sales -Unexpected variation in sales -Difficulty in collecting receivables -Ineffective inventory management -Policies on how payments to suppliers

Product development

-Companies decide to create new products that align with previous ones -Product line extension:

Business model sustainability: strategy

-Does the venture have a clear objective? . . . strategy for achieving the objective? -Is the venture compelling in terms of the value it creates? -Is there a sustainable competitive advantage?

5 Types of industries

-Emerging -Mature -Fragmented -Declining -Global

Key legal issues for new venture

-Founder's agreements -Choice of legal structure -Obtaining licenses and permits -Choosing legal counsel -Avoiding legal disputes

Geographic expansion

-Growth by simply expanding from their original location to additional geographic sites. *Most common in retail sites.

The nine building blocks of a business model

-Key partners -Key activities -key resources -value proposition -target market segments -customer relationships -channels -revenue streams -cost structure

"Other" funding sources

-Leasing -Small Business Innovation Research Grants (SBIRs) -Strategic Partners

Debt funding sources

-Most common source: Banks -Most commonly overlooked sources: -SBA or other government backed lending programs -Credit cards (be careful!) -Peer-to-peer lending networks, e.g., Prosper.com, Kiva.org

Choice of legal structure

-Ownership -Set-up costs -Liability -Continuity of business -Transferability of interest -Management control -Profit distribution

Internal funding sources

-Personal cash -Other personal assets -Unsecured personal credit (e.g., credit cards) -Second mortgage on property -Pledging other assets (e.g., stocks, bonds) -Working a second job -Bootstrapping

Advantages of external growth strategies

-Reduces competition - Proprietary product access -Access to new products -Access to new markets -Access to technical expertise -Established brand name access -Economies of scale -Business risk diversification

Market penetration

-Seeks to increase the sales of a product or service through greater marketing efforts or through increased production capacity and efficiency Goal: raise sales revenue without making changes in the products or services.

Franchising

-Typically starts as internal growth strategy - i.e., singularly owned store. -At some point, success sparks desire to grow by offering franchise licenses externally to foster growth.

Types of Financial statement analysis

-Vertical Analysis -Horizontal Analysis

Creating & Implementing a Unique Marketing Strategy

-What makes us "different" and how do we create and manage our "brand"? -Difference = (4 Ps)

Business model sustainability: Operational

-What resources (physical, people, etc.) are needed to achieve its strategic objective? Does the venture have these? If not, can it acquire them?

Revenue model

-Who will buy? -What will they buy? -What pain are you resolving for your customers, or what delight are you offering? -How soon, how often, and how much or many will they buy? -At what price will they buy, and on what basis will they pay?

small tension points

-Work arounds: Quick and simple solutions that address only the obvious systems of a problem, not the actual problem itself. You eventually have to come up with another way around it. -Values: Tension is often present when a product, service, or experience is in conflict with the values people find desirable. -IF the values change.. Has that change revealed a gap between what consumers want and what's actually available? -Inertia: You can find opportunity in inertia when you see that costumers act out of habit. So when costumers are in an undesirable position, they will not seek change because of habit, thus, creating an opportunity -Should's Vs Wants: Theres tension between what people want in the moment and the should's, which are things people know are good for them in the long term. Trying to interrelate both creates opportunity.

extending time out of cash

-decrease burn by cutting cost -decrease time to break even by accelerating sales growth -if pricing is inelastic, price increase possible -raise more money

Entrepreneurial Finance

-involves useful ways of thinking about cash, risk, and value -teaches healthy sense of skepticism -Improves decision making

Working capital model

-the cash a company needs to have on hand in the short term to keep the business running - pay ee's, suppliers, etc. WC = Current assets - current liabilities

licensing

-the granting of permission by one company to another company to use a specific form of its intellectual property under clearly defined conditions -Technology -Merchandise -Characters Virtually any IP you own - patent, copyright, trademark - can be licensed

Porter's 5 forces model

-the profitability, expected and actual, of a venture is explained to a large extent by the surrounding industry structure includes... -Power of suppliers -Rivalry -Power of buyers -Threat of entry -Threat of substitutes

Needs for New Venture Financing

1) Investment needs Capital purchases Long product development cycle times in some cases 2) Operating cash flow "lags" Most businesses operate on accrual accounting basis

Obtaining licenses and permits

1) Licensure - Geography? -Special considerations . . . e.g., interstate distribution, haz mat 2) Permits e.g., - Health -Fire -Signage, etc.

Price

1) impacts availability of margin and hence "bottom line" or profitability 2) sends an important message to its target market . . . often either we are we "cheap" OR we "provide value worth paying for"

Four financial objectives for entrepreneurs

1) profitability: Venture's capacity to create and capture value 2)Liquidity: Venture's ability to meet short term obligations 3)Efficiency: How productively venture uses its resources 4)Stability: How risk relates to venture financial health over the long term . . . Managing risk effectively?

Long term debt

1)Beyond one year 2)Most often used to fund fixed asset purchases -Banks: term loans -Leasing companies -Real estate lenders

Short term debt

1)Expected to be paid within one year 2)Most often used to finance short-term expenditures such as inventory, supplies, payroll, etc. -Trade debt -Banks -Asset-based lenders -Factors

Two key analytical tools to identify industry structure

1)Five Forces Model of Competition 2)Competitive Grid

Weights

1)Forces thinking about customer experience...are some factors more important to customers than others? 2)Facilitates comparability of KSFs as foundational strategic factors 3)Facilitates comparability across competitors

Funding Source Types

1)Internal: 2)Debt 3)Equity 4)"Other"

Avoiding legal disputes

1)Misaligned expectations / misunderstandings 2)Sloppiness 3)Lack of legal knowledge

Ethical challenges

1)Should you play the game at all? 2)who owns the intellectual property? 3)who is really on the team? 4)Should we lie to -the investors/funders? -customers? -hit our numbers? 5)whom does the data belong to 6) What is our role in the community? 7)What's the end game? -Spend or save wealth?...give to kids?...social investment in community? 8)Poor actions by individual employees 9. Systems and structures Wells Fargo - sales incentives employee behavior

Choosing legal counsel

1)Why have it? What exactly do you need? 2)How to select? One-Time Service or On-Going? Set-Up Comfortable Working Relationship Determine Costs Up-Front

Entrepreneurial Firm Types

1. Lifestyle business 2. Small/ salary substitute business 3. High growth business

4 Ps of marketing for new ventures

1. Product 2. Place 3. Price 4. Promotion

Elements of Operations

1. Product (or service) production 2. channels 3. key partners

4 Key Process Components of feasibility analysis

1. Product feasibility: -Is the product / service desirable? -Will there be demand for it? 2. Market/Industry feasibility: -Target market attractiveness? -Industry attractiveness? 3. Organizational feasibility: -determines whether a proposed business has; -sufficient management expertise -organizational competence -resources to successfully launch 4. Financial feasibility: -Total start-up cash needed? . . . Realistic? -Financial performance of comparable businesses? -Overall venture financial attractiveness?

Industry Characteristics

1. Size 2. Growth 3. Type 4. Profitability

Macroenvironmental Trends

1. Sociocultural 2. Technological 3. Economic 4. Political / Legal 5. Demographic 6. Global

Techniques for generating new ideas

1. brainstorming 2. focus groups 3. library and internet research

4 elements of a core strategy

1. business mission 2. basis of differentiation 3. target market 4. product/market scope

Types of pricing

1. cost based 2. value based

3 strategies in declining industry

1. leadership strategy: firms try to become dominant players in the industry 2.niche strategy: firms focus on a specific segment within the declining industry, that may grow by developing a new product or service. 3. cost reduction strategy: Firms try to achieve lower costs so they can sell the product for cheaper creating value for costumers.

Parts of the statement of cash flows

1. operating activities 2. investing activities 3. financing activities

The four characteristics shared by entrepreneurs

1. passion for their business 2. product/customer focus 3. tenacity despite failure 4. execution intelligence

Two common types of loans

1. single-purpose loan 2. line of credit

Political and Regulatory changes

2 forms: New laws and regulations -TN - Green Power Switch program Changes in political arena -EPA rule changes and enforcement with presidential changes

business plan

2 reasons for writing a business plan 1)Internal reasons: forces team to systematically thing through every aspect of the venture 2)External reasons: communicates the merits of a new venture to outsiders Pros: -screening tool -road map (a.k.a. blueprint) -communication tool...establishing stakeholder expectations Cons: -Irrelevant -Research-ability often inversely associated with financial attractiveness -Can lead to dysfunction

Economic trends

3 forms: State of the economy -Ex: Changing preferences for housing alternatives Level of disposable income Consumer spending patterns -Ex: "Want" versus "need" "Need" versus "need"

rivalry among existing firms

4 factors that determine the nature and intensity of the rivalry among existing firms in an industry. 1) balance of competitors 2)degree of difference between products 3)growth rate of an industry 4)level of fixed costs

Marketing strategy

A firms apporach for marketing its products and services

SBA guaranteed loan program

A loan program that is used by approximately 50% of the 9,000 banks in the USA

Idea

A thought, an impression or a notion

Technological advances

Advances in technology that create opportunities. 3 forms... +New technologies +Emerging technologies: +Innovation (new uses of old technologies)

Industry structure

Analyzed to determine... -Main sources of competitive pressure -Strength of these pressures -Our venturing options

Burn rate

Any period of time that your cash flow is negative 1)operating burn: If a business has this then focus on time to operating break-even 2)operational positive cash flow: If i business has this keep overhead and new fixed costs to a minimum until overall positive cash flow is achieved

Key competitor

Can be direct or indirect

Time Out of cash

Cash Available from Financing Sources Divided by Monthly Burn Rate **Gives time-based measure of cash remaining**

Effectual Reasoning: The Logic

Causal: To the extent that we can predict the future, we can control it. Effectual: To the extent that we can control the future, we need not predict it.

public corporations

Corporations listed on the New York Stock Exchange and the NASDAQ

Entrepreneurial financial management

Deals with 2 things: 1)Raising money 2)Managing finances to build venture and achieve high rate of return

Strategy

Deals with competition as critical dimension of venture performance . . . how you are going to do better by being different

target market selection

Decide which market(s) are "good" targets: - Is it attractive? . . . growing, favorable trends suggesting sustainability -Do you have (or can you build quickly and effectively) the capability to serve it? -how limited is the budget?

opportunity gap

Entrepreneur's role to recognize a gap and create a business or new form of enterprise to fill it

Unrelated stimulus

Finding different uses for something that is outside of what it typically does. EX: toy gun made into candy

External enablers

Gaps Trends

Product Attribute Map

Illustrates a Firm's Positioning Strategy Relative to Rivals

Self Assessment

Important because it... 1. Determining "fit" in decision-making 2 .Focuses resource building efforts 3. Early warning of personal dissonance

Pivot

Making a change in strategy, without a change in vision Costumer discovery ---> costumer validation--(pivot happens here and goes back to CD)-->costumer creation---> company building In the pivot you adapt your business model until you can prove it works in order to continue.

Serendipity

Making fortunate discovery by accident

value curve

Part of the blue ocean strategy, it is a tool for strategic managers to see visually how their strategy works in relation to close competitors.

Gross Margin Model

Revenue - Cost of goods sold (COGS) -expressed as % of revenue

Problems

Second approach to recognizing opportunities is by recognizing problems and solving them.

Product

Selling benefits is more important than features Benefits: -How buying the product will enhance a costumers life or business. Features: Sells a prospect an important feature but doesn't say why that's important.

Key characteristics of industry

Size - i.e., number of sellers, aggregate revenues Growth rate Profitability - increasing, decreasing, steady (more to follow with cov'g of Porter's 5 forces model) Type . . . slide below (also more with Porter's 5 forces)

Sociocultural trends

Social and cultural trends Like Gender views, Views toward sex, Cultural views on violence Ex: -Cardiovascular health -Gender -Dating- -Fitness / Weight Management

Venture lifecycle

Startup Rapid growth Maturity Decline Rebirth or death

Cash Flow Statement

Summarizes the changes in firms cash position for a specific period times and details why the changes occurred

3 types of business plans

Summary business plan: -works best for new ventures in early developing stages Full business plan: -works best for new ventures who are looking for funding or financing Operational business plan: -meant for internal audience -serves as a blueprint for new ventures operations and providing guidance to operational managers

Place

The first choice a firm has to make regarding distribution is whether to sell its products directly to consumers or through intermediaries (such as wholesalers and retailers). +Within most industries, both choices are available, so the decision typically depends on how a firm believes its target market wants to buy its product.

Demographic trends

The study of people +These Trends relate to people and how they are the driving force for the development of markets. The large and diverse demographics both offer opportunities but also challenges for businesses.

tension points

Things not big enough to be considered problems.

Finding gaps in the market place

Third source of business opportunities. Potentially workable business opportunities Ex: no guitars made for women

Causation

To the extent that we can predict the future, we can control it. -Market definition -segmentation (age, income) -Targeting -Positioning (through marketing strategies) **to reach the costumer**

Open resource Assembly: Opera Ideation

Traditional approaches to entrepreneurship assume the ideas are there to be 'discovered.' OPERA... -views ideas as 'assembled resources.' -releases the requirement for specific domain knowledge. -has 'emergent properties' and is designed to catalyze "Flow." -is a discontinuous nonlinear way to build a knowledge network.

creative destruction

When new products and technologies are developed that over time make current products and technologies obsolete

operational business plan

a business plan intended primarily for an internal audience and is a blueprint for a company's operations, commonly running between 40 and 100 pages n length

summary business plan

a business plan that is 10-15 pages in length and works best for companies very early in their development not prepared to write a full plan.

inventory

a company's merchandise, raw materials, and products waiting to be sold

Barriers to entry (6 sources)

a condition that creates a disincentive for a new firm to enter an industry -economies of scale -product differentiation: -capital requirements: need to invest large amounts of money -switching cost to buyers -access to distribution channels -government policies

private corporation

a corporation in which all the shares are held by a few shareholders

subchapter S corporation

a corporation that combines the advantages of a partnership and a C corporation, not subject to double taxation, owners can't be personally liable, however there are strict standards that a business must meet to qualify for S corp status

closely held corporation

a corporation where the voting stock is held by a small number of individuals and is very thinly or infrequently traded

competitor analysis

a detailed evaluation of a firm's competitors

inside director

a director who is also an officer of the firm

outside director

a director who is not employed by the firm

sources and uses of funds statement

a document that lays out specifically how much money a firm needs (if the intention of the business plan is to raise money)

Sarbanes-Oxley Act (2002)

a federal law that was passed in response to corporate accounting scandals involving prominent corporations that established a number of new or enhanced reporting standards for public corporations

peer-to-peer lending

a financial transaction that occurs directly between individuals

factoring

a financial transaction whereby a business sells its accounts receivable to a third party

profit margin

a firm's return on sales calculated by dividing net income by net sales

pro forma income statement

a forecast of a company's future income and expenses

sole proprietorship

a form of business organization involving one person. the person and the business are essentially the same most prevalent form of a business organization

limited liability company (LLC)

a form of business organization that is rapidly gaining popularity in the United States where all partners enjoy limited liability and are not subject to double taxation

general partnership

a form of business organization where two or more people pool their skills, abilities, and resources to run a business

copyright

a form of intellectual property protection that grants to the owner of a work of authorship the legal right to determine how the work is used and to obtain the economic benefits from the work

code of conduct

a formal statement of an organization's values on certain ethical and social issues

Global trends

a general development or change in a situation that affects many countries of the world:

industry

a group of firms producing a similar product or service

guerilla marketing

a low budget approach to marketing that relies on ingenuity, cleverness, and surprise rather than traditional techniques used to create awareness of a firm and its products, often in unconventional and memorable ways

liquid market

a market where stock can be bought and sold fairly easily through an organized marketplace

entrepreneurial intensity

a measure of how entrepreneurial a firm tends to be

window of opportunity

a metaphor describing the time period in which a firm can realistically enter a new market

percent-of-sales method

a method for expressing each expense item as a percentage of sales

leadership strategy

a method in which a firm tries to become the dominant player in an industry

limited partnership

a modified form of a general partnership that includes two classes of owners: general partners and limited partners

niche market

a narrow group of customers with similar interests

emerging industry

a new industry in which standard operating procedure have yet to be developed

lifestyle firms

a non creative business that allows its owners to opportunity to pursue a particular lifestyle while still earning a living. Is profitable but doesn't want to grow.

concept test

a one page document that includes: 1. a description of the product or service 2. the intended target market 3. the benefits of the product or service 4. a description of how the product or service will be positioned relative to competitors 5. a brief description of the company's management team

board of advisors

a panel of experts asked by a firm's management to provide counsel and advice on an ongoing basis

board of directors

a panel of individuals elected by a corporation's shareholders to oversee the management of the firm

Strategic alliances

a partnership between two or more firms developed to achieve a specific goal

accredited investor

a person who is permitted to invest in higher-risk investments such as business start-ups.

tagline

a phrase that a business plans to use to reinforce its position in the marketplace help to integrate and reinforce promotional messages, brand awareness and management, when they are well done.

concept statement

a preliminary description of a product or service idea

mediation

a process in which an impartial third party helps those involved in a dispute reach an agreement.

sales forecast

a projection of a firm's sales for a specified period (such as a year)

price-to-earnings ratio (P/E ratio)

a ratio that measures the price of a company's stock against its earnings

corporation

a separate legal entity organized under the authority of a state

C corporation

a separate legal entity that, in the eyes of the law, is separate from its owners.

Value chain

a set of activities that an organization carries out to create value for its customers. *Look at chart*

brand

a set of attributes - positive or negative - that people associate with a company

Opportunity

a set of circumstances that creates a need for a new product, service, or business.

productive opportunity set

a set of opportunities the firm feels it's capable of pursuing

executive summary

a short overview of the entire business plan, arguably the most important part of it.

landing page

a single web page that typically provides direct sales copy

ethical dilemma

a situation that involves doing something that is beneficial to oneself or the organization, but may be unethical

Balance sheet

a snapshot of a companies -assets -liabilities -owners equity at a specific point in time

first mover advantage

a sometimes insurmountable advantage gained by the first company to establish a significant position in a new market

stock options

a special form of incentive compensation that provide employees the option or right to buy a certain number of shares of their company's stock at a stated price over a certain period of time.

regression analysis

a statistical method of projecting future sales that finds relationships between variables for the purpose of predicting future values

heterogeneous

a team is diverse in terms of their abilities and experiences

homogeneous

a team's areas of expertise are very similar to one another

competitive analysis grid

a tool for organizing the information a firm collects about its competition

full business plan

a type of business plan

low-end market disruption

a type of disruptive business model resulting when a company provides a simple product in an overly complex industry

lease

a written agreement in which the owner of a piece of property allows an individual or business to use the property for a specified period of time in exchange for payments

founders' agreement

a written document that deals with issues such as the relative split of the equity among the founders of the firm, how individual founders will be compensated for the cash or the "sweat equity" the put into the firm, and how long the founders will have to remain with the firm for their shares to fully vest

financial statement

a written report about a firms financial results, financial condition and cashflow

cost reduction strategy

accomplished through achieving lower costs than industry incumbents through process improvements

new market disruption

addresses a market that previously wasn't served

Operating leverage

all other day-to-day costs that must be incurred beyond COGS (cost of goods sold)

rewards-based crowdfunding

allows entrepreneurs to raise money in exchange for some type of amenity or reward

operating leverage

an analysis of a firm's fixed versus variable costs

Joint venture

an entity created when two or more firms pool a portion of their resources to create a separate, jointly owned organization

forecasts

an estimate of a firm's future income and expenses based on its past performance, current circumstances, and future plans.

triggering event

an event that prompts an individual to become an entrepreneur i.e. losing a job or receiving an inheritance

assumptions sheet

an explanation of the most critical assumptions on which the financial statements are based

declining industry

an industry or part of an industry that is experiencing a reduction in demand

fragmented industry

an industry that is characterized by a large number of firms of approximately equal size

global industry

an industry that is experiencing significant international sales

mature industry

an industry that is experiencing slow or no increase in demand, has numerous repeat (rather than new) customers, and has limited product innovation

investment bank

an institution that acts as an underwriter or agent for a firm issuing securities

industry/target market feasibility

analysis of the overall appeal of the industry and target market for the product being proposed

Product/service feasibility

analysis of the overall appeal of the product or service being proposed

Promotion

any activities the firm takes to communicate the merits of its product to its target market -Decide among many options . . . - PR - Advertising -Viral marketing and Guerilla marketing -Social media Key strategic issues: -Cost -Impact -Integration

secondary market offering

any later public issuance of shares after the IPO

strategic assets

are anything rare and valuable that a firm owns. They include plant and equipment, location, brands, patents, customer data, a highly qualified staff, and distinctive partnerships.

key assets

assets that a firm owns that enable its business model to work

fixed assets

assets used over a longer time frame, such as real estate, buildings, equipment, and furniture

What are the 4 key qualities of opportunity?

attractive durable Timely product creates value

nondisclosure agreement

binds an employee or another party (such as a supplier) to not disclose a company's trade secrets

market analysis

breaks the industry into segments and zeroes in on the specific segment (or target market) to which the firm will try to appeal

entrepreneurial firms

bring new products and services to market

founding team

brings more talent, resources, ideas, and professional contacts to a new venture than does a sole entrepreneur

High growth business

brings new products and services to the market, is built for fast and steady growth, and is funded by themselves and other investors.

industry analysis

business research that focuses on the potential of an industry

Small/Salary substitute business

business that offers common, easily available, and non-innovative products and services. provides income for owner similar to what they would earn being employed.

Direct competitors

businesses that offer products or services that are identical or very similar to those of the firm completing the analysis

debt-to-equity ratio

calculated by dividing its long term debt by its shareholders' equity

opportunity confidence

captures the many important ideas commonly discussed under the "opportunity" label. +Re-conceptualization makes important distinctions between... -actor and the entity acted upon; -external conditions and subjective perceptions; and the contents and the favorability of the entity acted upon.

current assets

cash plus items that are readily convertible to cash, such as accounts receivable, marketable securities, and inventories

strong-tie relationships

characterized by frequent interaction, such as ties between coworkers, friends, and spouses.

weak-tie relationships

characterized by infrequent interaction, like ties between casual acquaintances. It is more likely that an entrepreneur will get a business from a weak tie relationship, since the conversations are not between like minded individuals

Key success factors

competitive elements that most affect every strategic group member's ability to prosper in the marketplace

net sales

consists of total sales minus allowances for returned goods and discounts

sweat equity

contributions from founders in the form of personal funds, savings, and credit

fixed costs

costs that remain the same despite the volume of goods or services provided

variable costs

costs that vary proportionally with the volume of goods or services produced

product/market scope

defines the products and markets on which it will concentrate

financial ratios

depict relationships between items on a firm's financial statements

Standard business model

depicted by existing plans or recipes firms can use to determine how they will create, deliver, and capture value

channels

describe how it delivers its product or service to its customers Most of the time it is direct (storefront, online, etc.)

revenue streams

describe the ways in which it makes money Common revenue streams include advertising, commissions, licensing, etc.

Business model

describes how an organization creates, delivers, and captures value

core strategy

describes how the firm plans to compete relative to its competitors

cost structure

describes the most important costs incurred to support its business model

mission or mission statement

describes why a business exists and what its business model is supposed to accomplish

partnership agreement

details the responsibilities and the ownership shares of the partners involved with an organization

position

determines how the company or product/service is situated relative to its competitors

Corporate entrepreneurship

development of new ideas and opportunities in an already established firm to increase profitability, enhance competitive position, and coming up with new strategies.

Disruptive business model

disrupt or change the way business is conducted in an industry

Internal growth strategies

efforts taken within a firm itself -market penetration -geographic expansion - product development/ product strategies

current ratio

equals the firm's current assets divided by its current liabilities

Secondary research

examination of data that is already collected.

equity financing (or funding)

exchanging partial ownership of a firm, usually in the form of stock, in return for funding

articles of incorporation

filed with the secretary of state in the state of incorporation to form a corporation. includes... 1. corporation's name 2. purpose 3. authorized number of stock shares 4. classes of stock

bootstrapping

finding ways to avoid the need for external financing or funding through creativity, ingenuity, thriftiness, cost-cutting, or any means necessary

multidomestic strategy

firms that compete for market share on a country-by-country basis and vary their product or service offerings to meet the demands of the local market

niche strategy

focuses on a narrow segment of the industry that might be encouraged to grow through product or process innovation

debt financing

getting a loan

External growth strategies

growth strategies that rely on establishing relationships with third parties such as mergers, acquisitions, strategic alliances, joint ventures, licensing and franchising

equity-based crowdfunding

helps businesses raise money by tapping individuals who provide funding in exchange for equity in the business

financing activities

include cash raised during the period by borrowing money or selling stock and/or cash used during the period by paying dividends, buying back outstanding stock, or buying back outstanding bonds.

operating activities

include net income, depreciation, and changes in current assets and current liabilities other than cash and short-term debt

investing activities

include the purchase, sale, or investment in fixed assets, such as real estate, equipment, and buildings

business angels

individuals who invest their personal capital directly in start-ups invest between $10,000 to $500,000 in a single company and are looking for companies that have the potential to grow 30 to 40 percent per year before they are acquired or go public

limited partners

investors who invest in venture capital funds

core competency

is a resource or capability that serves as a source of a firm's competitive advantage. Examples include Sony's competence in miniaturization and Dell's competence in supply chain management.

Profit and Loss (P&L) Statement (income statement)

it records all the revenues and expenses for the given period and shows whether the firm is making profit or is experiencing loss.

budgets

itemized forecasts of a company's income, expenses, and capital needs

buyback clause

legally obligates departing founders to sell the remaining founders their interest in the firm if the remaining founders are interested

moral hazard

means that as a firm grows and adds personnel, the new hires typically do not have the same ownership incentives as the original founders, so the new hires may not be as motivated as the founders to put in long hours or may even try to avoid hard work.

adverse selection

means that as the number of employees a firm needs increases, it becomes increasingly difficult for it to find the right employees, place them in appropriate positions, and provide adequate supervision

customer advisory boards

meet regularly to discuss needs, wants, and problems that may lead to new ideas.

accounts receivable

money owed to a company by its customers

venture capital

money that is invested by venture capital firms in start-ups and small businesses with exceptional growth potential

intranet

network only accessible to employees of a firm

long-term liabilities

notes or loans that are repayable beyond one year, including liabilities associated with purchasing real estate, buildings, and equipment

current liabilities

obligations that are payable within a year, including accounts payable, accrued expenses, and the current portion of long-term debt

indirect competitors

offer close substitutes to the product the firm completing the analysis sells.

prior entrepreneurial experience

one of the most consistent predictors of future entrepreneurial performance

Effectuation

opportunities are merely "economic artifacts" To the extent that we can control the future, we need not predict it. -Definition of one or several possible markets -Adding segments/strategic partners -costumer definition -costumer identification **reach the costumer**

shareholders

owners of a corporation who are shielded from personal liability for the debts and obligations of the corporation.

Bargaining power of buyers

part of the 5 forces model where costumers put pressure on a businesses to get them to provide better products, service, and lower prices

basis of differentiation

points that differentiate its product or service from competitors. / what causes consumers to pick one company's products over another's

pro forma (or projected) financial statements

predictions of financial usage in a company's future. includes the pro forma income statement, balance sheet, and cash flow statement.

threat of new entrants

preventing other competitors from entering your industry by creating a barrier to entry

noncompete agreement

prevents an individual from competing against a former employer for a specific period of time

Threat of substitutes

products or services from other industries cant serve as substitutes for your product or service

pro forma balance sheet

provides a firm a sense of how its activities will affect its ability to meet its short-term liabilities and how its finances will evolve over time

due diligence process

refers to the process of investigating the merits of a potential venture and verifying the ket claims made in the business plan

value

refers to worth, importance, or utility

historical financial statements

reflect past performance of a company and are usually prepared on a quarterly and annual basis.

income statement

reflects the results of the operations of a firm over a specified period of time

Primary research

research collected by the person completing the analysis

day-in-the-life research

research to find out how a product functions in the daily life of the customer

Entrepreneurial Creativity

sense-making learning that yields contingent opportunities aspiring for marketplace utility.

limited partnership agreement

sets forth rights and duties of the general and limited partners along with the details of how the partnership will be managed and eventually dissolved

pro forma statement of cash flows

shows the projected flow of cash into and out of the company during a specified period.

corporate venture capital

similar to traditional venture capital except that the money comes from corporations that invest in start-ups related to their areas of interest provide an estimated 10.5% of the venture capital invested by all venture groups

salary-substitute firms

small firms that yield a level of income for their owner or owners that is similar to what they would earn when working for an employer

common stock

stock that is issued more broadly than preferred stock.

Organizational feasibility

study conducted to find out whether a proposed business has enough management expertise, organizational competence and the resources to be successful

ethics training program

teaches business ethics to help employees deal with ethical dilemmas and improve their overall ethical conduct

execution intelligence

the ability to fashion a solid idea into a viable business

entrepreneurial alertness

the ability to notice things without engaging in deliberate search

liquidity

the ability to sell a business or other asset quickly at a price that is close to its market value

contribution margin

the amount per unit of sale that's left over and is available to "contribute" to covering the business's fixed costs and producing a profit

owners' equity

the equity invested in the business by its owners plus the accumulated earnings retained by the business after paying dividends

liability of newness

the fact that companies often falter because the people who start them aren't able to adjust quickly enough to their new roles and because the firm lacks a "track record" with outside buyers and suppliers

product prototype

the first physical manifestation of a new product, often in a crude or preliminary form

initial public offering (IPO)

the first sale of stock by a firm to the public

new venture team

the group of founders, key employees, and advisers that either manage or help manage a new business in its start-up years

competitive intelligence

the information that is gathered by a firm to learn about its competitors

resources

the inputs a firm uses to produce, sell, distribute, and service a product or service

Strategic entrepreneurs

the integration of entrepreneurial (i.e., opportunity-seeking actions) and strategic (i.e., advantage-seeking actions) perspectives to design and implement strategies that create wealth

merchandise and character licensing

the licensing of a recognized trademark or brand that the licensor typically controls through a registered trademark or copyright

target market

the limited portion of the industry that it goes after or to which it wants to appeal

costs of goods sold

the materials and direct labor needed to produce the revenue driver

churn

the number of subscribers that a subscription-based business loses each month

Acquisitions

the outright purchase of one firm by another firm into one

cost of sales

the part of an income statement that includes all the direct costs associated with producing or delivering a product or service, including the material costs and direct labor

carry

the percentage of the profits the venture capitalists get

break-even point

the point where total revenue received equals total costs associated with the output of the restaurant or the sale of the product

merger

the pooling of interests to combine two or more firms into one

bargaining power of suppliers

the pressure suppliers can put on competitors by raising prices, lowering quality, or making product less available.

entrepreneurship

the process by which individuals pursue opportunities without regard to resources they currently control for the purpose of exploiting future goods and services

Creativity

the process of coming up with a novel or useful idea in search of an opportunity

innovation

the process of creating something new

Feasibility analysis

the process of determining if a business idea is viable

market segmentation

the process of dividing the market into distinct segments

Vertical financial statement analysis

the process of looking vertically and comparing numbers of a financial statement to other similar companies

opportunity recognition

the process of perceiving the possibility of a profitable new business or a new product or service

Competitive grid

the purpose is to determine: -Strengths and weaknesses of the competitors within your market -Strategies that will provide you with a distinct advantage -Barriers that can be developed in order to prevent competition from entering your market -Any weaknesses that can be exploited within the product development cycle

brand equity

the set of assets and liabilities that are linked to a brand and enable it to raise a firm's valuation

stability

the strength and vigor of the firm's overall financial posture

solo entrepreneurs

those who identified their business ideas on their own

network entrepreneurs

those who identified their ideas through social contacts. research has found that network entrepreneurs identified significantly more opportunities than solo entrepreneurs, but were less likely to describe themselves as being particularly alert or creative.

preferred stock

typically issued to conservative investors who have preferential rights over common stockholders in regard to dividends and to the assets of the corporation in the event of liquidation.

ratio analysis

used to interpret or make sense of a firm's historical or pro forma financial statements. i.e. return on assets, return on sales

global strategy

using the same approach in all foreign markets

general partners

venture capitalists who manage the venture capital funds of a company

moderate risk takers

what entrepreneurs are, as opposed to gamblers and big risk takers.

line of credit

when a borrowing "cap" is established and borrowers can use the credit at their discretion

double taxation

when a corporation is taxed on its net income an, when the same income is distributed to shareholders in the form of dividends, is taxed again on shareholders' personal income tax returns.

piercing the corporate veil

when a court holds the owners of the corporation personally liable for actions of the corporation

single-purpose loan

when a specific amount of money is borrow that must be repaid in a fixed amount of time with interest

vendor credit

when a vendor extends credit to a business in order to allow the business to buy its product and/or services up front but defer payment until later

price-quality attribution

when customers naturally assume that the higher priced product is also the better quality product

constant ratio method of forecasting

when each expense item on a company's income statement will grow at the same rate as sales

economies of scale

when increasing productions lowers the average cost of each unit produced

geographic roll-up strategy

when one firm starts acquiring similar firms that are located in different geographic areas

economies of scope

when the advantage a firm accrues comes through the scope of a firm's operations rather than from its scale of production

cost-based pricing

when the list price is determined by adding a markup percentage to a product's cost

value based pricing

when the list price is determined by estimating what consumers are willing to pay for a product and then backing off a bit to provide a cushion

signaling

when well known and respected board members bring instant credibility toe a firm

attractive or ideal

when: -Rivalry is moderate -Entry barriers are high -Good substitutes do not exist -Suppliers and customers are in a weak bargaining position ...a competitive environment is....

unattractive

when: -Rivalry is strong -Entry barriers are low -Competition from substitutes is strong -Suppliers and buyers have considerable bargaining power ...a competitive environment is...

outsourcing

work that is done for a company by people other than the company's full time employees