ENT 350

brainstorming

"session" is targeted to a specific topic about which a group of people are instructed to come up with ideas; number one rule of brainstorming is that no criticism is allowed; focuses on creativity rather than evaluation

concept test components

(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

What % of American adults is actively engaged in starting a business or is the owner/manager of a business that is less than three-and-a-half years old

1 out of every 8 (12.7%)

Opportunity Qualities

1) attractive, (2) durable, (3) timely, and (4) anchored in a product, service, or business that creates value for its buyer or end user.

Industry attractiveness characteristics:

1. Are young rather than old 2. Are early rather than late in their life cycle 3. Are fragmented rather than concentrated 4. Are growing rather than shrinking 5. Are selling products or services that customers "must have" rather than "want to have" 6. Are not crowded 7. Have high rather than low operating margins 8. Are not highly dependent on the historically low price of a key raw material, such as gasoline or flour to remain profitable

How to avoid legal disputes

1. Meet all contractual obligations. 2. Avoid undercapitalization 3. Get everything in writing. 4. Set standards.

Solving a Problem

1. Sometimes identifying opportunities simply involves noticing a problem and finding a way to solve it. 2. These problems can be pinpointed through observing trends, serendipity, chances, etc. 3. Some business ideas are clearly gleaned from the recognition of problems in emerging trends.

methods for finding product/service demand

1.) Talking Face-to-Face with Potential Customers 2.) Utilizing Online Tools 3.) Library, Internet, and Gumshoe Research

term of a design patent

14 years

term of a utility patent

20 years

Minority entrepreneurs

2007 (the most recent stats available), there were 5.8 million minority-owned firms. (1.9 million African American-owned firms, 1.5 million Asian American-owned firms, and 2.3 million Hispanic-owned firms)

Senior Entrepreneurs

2012, 20 percent of new businesses were started by people between 50 and 59 years old

Young entrepreneurs

4 in 10 kids in grades 5-12 say they plan to start their own businesses

Women entrepreneurs

8.6 million women-owned businesses in the United States in 2013

The Entrepreneurial Process

A. Decision to Become an Entrepreneur B. Developing Successful Business Ideas C. Moving from an Idea to an Entrepreneurial Firm D. Managing and Growing an Entrepreneurial Firm

Characteristics of Successful Entrepreneurs

A. Passion for the Business. B. Product/Customer Focus. C. Tenacity Despite Failure. D. Execution Intelligence

Salary-Substitute Firms

Are small firms that afford their owner or owners a similar level of income to what they would earn in a conventional job. EX-dry cleaners, convenience stores, restaurants, accounting firms, and hairstyling salons

Why Do People Become Entrepreneurs? (3 things)

Be their own boss Pursue Their Own Ideas. Realize Financial Goals.

Entrepreneurial Firms

Bring new products and services to market by creating and seizing opportunities. EX-Google, Facebook, and Zynga

Entrepreneurial Firms' Impact on Larger Firms

EX- they create products larger firms use; provide research development; create products to help them be more efficient or effective

Major Trend Categories

Economic Forces Social Forces Technological Advances Political Action and Regulatory Chances

"piercing the corporate veil"

If the owners of a corporation don't file their annual paperwork, neglect to pay their annual fees, or commit fraud, a court could ignore the fact that a corporation has been established, and the owners could be held personally liable for actions of the corporation.

Economic Impact of Entrepreneurial Firms.

Innovation & Job creation

Preparation (creative process)

Is the background, experience, and knowledge that an entrepreneur brings to the opportunity recognition process.

Creativity

Is the process of generating novel or useful ideas

incubation (creative process)

Is the stage during which a person considers an idea or thinks about a problem; it is the "mulling things over" phase

elaboration (creative process)

Is the stage during which the creative idea is put into a final form. The details are worked out, and the idea is transformed into something of value.

evaluation (creative process)

Is the stage of the creative process during which an idea is subjected to scrutiny and analyzed for its viability.

Choosing an Attorney for the New Firm

It is important for an entrepreneur to select an attorney as early as possible when developing a business venture

Creating gaps in the marketplace

Large retailers compete primarily on price by serving large groups of customers with similar needs. They do this by offering the most popular items targeted toward mainstream consumers

Common Myths About Entrepreneurs

Myth 1: Entrepreneurs Are Born, Not Made. Myth 2: Entrepreneurs Are Gamblers Myth 3: Entrepreneurs Are Motivated Primarily by Money. Myth 4: Entrepreneurs Should Be Young and Energetic.

Cognitive Factors

Opportunity recognition may be an innate skill or a cognitive process; "six sense" called entrepreneurial alertness

Four Key Forms of Intellectual Property

Patents, trademarks, copyrights, and trade secrets

Personal Characteristics of the Entrepreneur

Prior Experience Cognitive Factors Social Networks Creativity

Lifestyle Firms

Provide their owner or owners the opportunity to pursue a particular lifestyle and earn a living while doing so EX-ski instructors, goal pros, and tour guides

3 types of start up firms

Salary-Substitute Firms Lifestyle Firms Entrepreneurial Firms

customer advisory boards

Some companies set up customer advisory boards that meet regularly to discuss needs, wants, and problems that may lead to new ideas.

library and internet research

The best approach to utilizing a library is to discuss your general area of interest with a reference librarian, who can point out useful resources; If you have a specific idea in mind, a useful technique is to set up a Google "e-mail alert" using keywords that pertain to your topic of interest

Social Networks

The extent and depth of an individual's social network affects opportunity recognition

Observing Trends

The first approach to identifying opportunities is to observe trends and study how they create opportunities for entrepreneurs to pursue

Entrepreneurial Firms' Impact on Society.

Think of all the new products and services that make our lives easier, enhance our productivity at work, improve our health, and entertain us.

Management Prowess

Two of the most important factors in this area are the passion that the sole entrepreneur or management team has for the business idea and the extent to which the management team or sole entrepreneur understands the markets in which the firm will compete

patent

a grant from the federal government conferring the rights to exclude others from making, selling, or using an invention for the term of the patent

Advantages of a General Partnership

a) Creating one is relatively easy and inexpensive compared to a corporation or limited liability company. b) The skills and abilities of more than one individual are available to the firm. c) Having more than one owner may make it easier to raise funds. d) Business losses can be deducted against the partners' other sources of income. e) It is not subject to double taxation

Disadvantages of a General Partnership

a) Liability on the part of each general partner is unlimited. b) The business relies on the skills and ability of a fixed number of partners. c) Raising capital can be difficult. d) Because decision making among the partners is shared, disagreements can occur. e) The business ends at the death or withdrawal of one partner unless otherwise stated in the partnership agreement. f) The liquidity of each partner's investment is low

s corp

a) The business cannot be a subsidiary of another corporation. b) The shareholders must be U.S. citizens. Partnerships and C corporations may not own share in a subchapter S corporation. Certain types of trusts and estates are eligible to own shares in a subchapter C corporation. c) It can have only one class of stock issued and outstanding (either preferred stock or common stock). d) It can have no more than 100 members. Husbands and wives count as one member, even if they own separate shares of stock. e) All shareholders must agree to have the corporation formed as a

ways for entrepreneurs to save on legal fees

a. Group together legal matters. b. Offer to assist the attorney. c. Ask your attorney to join your advisory board. d. Use nonlawyer professionals.

Product/Service Desirability

affirm that the proposed product or service is desirable and serves a need in the marketplace

intellectual property

any product of human intellect that is intangible but valued in the marketplace

Industry/target market feasibility

assessment of the overall appeal of the industry and the target market for the product or service being proposed.

Product/service feasibility analysis

assessment of the overall appeal of the product or service being proposed.

techniques for generating ideas

brainstorming focus group library and internet research customer advisory boards day-in-the-life research

Idea vs. opportunity

critical point because, as we noted in Chapter 1, many businesses fail not because the entrepreneurs that started them didn't work hard, but because there was no real opportunity to begin with

Entrepreneurship definition

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

Ethics training programs

designed to help employees resolve ethical dilemmas in an appropriate manner

Gumshoe research

detective or an investigator who scrounges around for information or clues wherever they can be found

Product/service demand

determine if there is demand for the product or service

Organizational feasibility analysis

determine whether a proposed venture has sufficient management expertise, organizational competence, and resources to successfully launch. There are two primary issues to consider in this area: management prowess and resource sufficiency

Resource Sufficiency

determine whether the potential new venture has sufficient resources to move forward in order to successfully develop a product or service

The Positive Effects of Entrepreneurship and Entrepreneurial Firms

economic impact, social impact, impact on larger firms

corporate entrepreneurship

established firms with an orientation toward acting entrepreneurially practice

Opportunity

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

financial feasibility analysis

final component of a comprehensive feasibility analysis. For feasibility analysis, a preliminary financial assessment is usually sufficient;most important issues to consider at this state are total start-up cash needed, financial performance of similar businesses, and the overall financial attractiveness of the proposed venture.

target market challenge

find a market that's large enough to avoid attracting competitors at least until the entrepreneurial venture can get off to a successful start.

sole proprietorship

form of business organization involving one person, and the person and the business are essentially the same

general partnership

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

code of conduct

formal statement of an organization's values on certain ethical and social issues; provides specific guidance

entrepreneurial alertness

formally defined as the ability to notice things without engaging in deliberate search

focus groups

gathering of 5 to 10 people who are selected because of their relationship to the issue being discussed; strength of focus groups is that they help companies uncover what's on their customers' minds through the give-and-take nature of a group discussion; weakness is that is cannot be applied to large settings

industry

group of firms producing a similar product or service, such as airplanes, fitness drinks, or children's toys

Prior Experience

helps entrepreneurs recognize business opportunities; individual may spot a market niche that is underserved. It is also possible that while working in a particular area, an individual builds a network of social contacts in that industry that may provide insights that lead to opportunities.

Concept statment

i. A description of the product or service being offered ii. The intended target market iii. The benefits of the product or service iv. A description of how the product will be positioned relative to similar ones in the market v. A brief description of the company's management team

sole proprietorship advantages

i. Creating one is easy and inexpensive. ii. The owner maintains complete control of the business and retains all the profits. iii. Business losses can be deducted against the sole proprietor's other sources of income. iv. It is not subject to double taxation. v. The business is easy to dissolve

Disadvantages of a Sole Proprietorship

i. Liability on the owner's part is unlimited. ii. The business relies on the skills and abilities of a single owner to be successful. iii. Raising capital can be difficult. iv. The business ends at the owner's death or loss of interest in the business. v. The liquidity of the owner's investment is low.

LLC

i. all partners enjoy limited liability ii. The number of shareholders is unlimited. iii. An LLC can elect to be taxed as a sole proprietor, partnership, S corporation, or corporation—providing much flexibility. iv. Because profits are taxed only at the shareholder level, there is no double taxation

Finding a gap in the marketplace

identifying opportunities is to recognize a need that consumers have that is not being satisfied—by either large, established firms or entrepreneurial ventures

developing a successful business idea

includes opportunity recognition, feasibility analysis, developing an effective business model, industry and competitor analysis, and writing a business plan

Idea

is a thought, impression, or notion. It may or may not meet the criteria of an opportunity

buyback clause

legally obligates the departing founder to sell his or her interest in the firm to the remaining founders if they are interested

"window of opportunity"

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

limited partnership

modified form of a general partnership. The major difference between the two is that a limited partnership includes two classes of owners: general partners and limited partners

Utility patents

most common type of patent and cover what we generally think of as new inventions; "invents or discovers any new and useful improvement thereof."

Lead by example

most important thing that any entrepreneur, manager, or supervisor can do to build an ethical culture in their organization

patent protection

only form of intellectual property right expressly mentioned in the original articles of the U.S. Constitution

target market

place within a larger market segment that represents a narrow group of customers with similar needs

Creative Process (5 steps)

preparation incubation insight evaluation elaboration

Mediation

process in which an impartial third party (usually a professional mediator) helps those involved in a dispute reach an agreement

Innovation

process of creating something new, which is central to the entrepreneurial process; Small innovative firms are 16 times more productive than larger innovative firms

feasibility analysis

process of determining if a business idea is viable; used to determine if an idea is worth pursuing and to screen ideas before spending resources on them

two components to product/service feasibility analysis

product/service DESIRABILITY and product/service DEMAND.

moving from an Idea to an Entrepreneurial Firm

proper ethical and legal foundation, assessing a new venture's financial strength and viability, building new-venture team, and getting financing or funding

design patent

second most common type of patent and cover the invention of new, original, and ornamental designs for manufactured products.

corporation

separate legal entity organized under the authority of a state

Concept Test

showing a preliminary description of a product or service idea, called a concept statement, to industry experts and prospective customers to solicit their feedback

ethical dilemma

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

job creation

small businesses create a substantial number of net new jobs in the United States. Firms with 500 or fewer employees create 65 percent of new jobs on an annual basis.

First Screen

template entrepreneurial firms use to compete a feasibility analysis; initial pass at determining the feasibility of a business idea

insight (creative process)

the flash of recognition, when the solution to a problem is seen or an idea is born

managing and Growing an Entrepreneurial Firm

unique marketing issues, the importance of intellectual property, preparing for an evaluating the challenges of growth, strategies for growth, and franchising

founders' agreement (or shareholders' agreement)

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" they put into the firm, and how long the founders will have to remain with the firm for their shares to fully vest.