Intro to Entrepreneurship Exam #2

Guerilla Marketing

-A low budget approach to marketing that relies on ingenuity, cleverness & surprise rather than traditional techniques

Sources of Debt Financing

-Commercial banks -SBA Guaranteed loans

Dual-Use Document

-For most ventures, the business plan is a dual purpose document used both inside & outside the firm

Private Grants

-Limited # of grant programs available -Getting grants takes a little detective work -Granting agencies are low key, & must be sought out

Lead By Example

-The most important thing any entrepreneur, or team of them, can do to build a strong ethical culture in their org. is to lead by example

Why most new ventures need financing as funding?

1. Cash flow challenges 2. Capital investments 3. Lengthy product development

Initial Public Offering (IPO)

-A company's first sale of stock to public -Important milestone in firm

SBIR Program

-A competitive grant program that provides over $1 billion per year to small businesses in early stage and development projects -Each year, 11 federal departments and agencies are required by SBIR to reserve a portion of their R&D funds for awards to small businesses -Guidelines for how to apply for grants are provided on each agency's Web site -SBIR is a 3 phase program, meaning that firms that qualify have potential to receive more than one grant to fund a particular proposal -Historically, less than 15% of all Phase I proposals are funded. The payoff for successful proposals, however, is high -$ is essentially free. It's a grant, meaning that it doesn't have to be paid back and no equity in firm is at stake -Small business receiving grant also retains rights to any intellectual property generated as result of grant initiative

Sales Process

-A firm's sales process (or sales funnel) depicts steps it goes through to identify prospects and close sales

Patents

-A grant from federal government conferring the rights to exclude others from making, selling, or using an invention for term of patent -Doesn't give owner right to make, use, or sell an invention; rather, the right granted is only to exclude others from doing so

Venture Capital

-$ invested by venture capital firms -About 875 in US -Fund very few entrepreneurial firms in comparison to business angels

Intellectual Property Audit

-1st step a firm should take to protect its intellectual property is to complete an intellectual property audit -It's conducted to determine the intellectual property a firm owns

Importance of Keeping Good Records

-1st step toward financial management is keeping good records

Purpose of Elevator Speech

-A brief, carefully constructed statement that outlines the merits of a business opportunity -Most are about 60 seconds long

Establish a code of conduct

-A code of conduct (or a code of ethics) is a formal statement of an org.s values on certain ethical & social issues

Business Method Patent

-A patent that protects an invention that is or facilitates a method of doing business -Most notable business method patents that have been awarded= (Amazon.com's one click ordering system) (Priceline.com's "name-your-price" business model) (Netflix's method for allowing customers to set up a rental list of movies to be mailed to them)

Sales Forecasts

-A projection of a firm's sales for a specified period (such as a year) -1st forecast developed & basis for most other forecasts -Based on (for an existing firm)= 1. It's record of past sales 2. It's current production capactity & product demand 3. Any factors that will affect its future product capacity & product demand

Corporations

-A separate legal entity organized under authority of a state -Organized as either C Corp.'s or Subchapter S Corp.'s

Brand Management

-A way that some companies monitor the integrity of their brands

Leasing

-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 -Major advantage= enables a company to acquire the use of assets with very little or no down payment -Most leases involve a modest down payment and monthly payments during the duration of the lease -At end of an equipment lease, new venture typically has option to stop using equipment, purchase it for fair market value, or renew lease -Leasing is almost always more expensive than paying cash for an item, so most entrepreneurs think of leasing as an alternative to equity or debt financing

What is a business plan?

-A written narrative typically 25 to 35 pages long -Describes what a new business plans to accomplish

Sense of excitement

-Along w/ facts & figures, a business plan needs to project a sense of anticipation & excitement about the possibilities that surround a new venture

Strategic Partners

-Another source of capital for new ventures -many partnerships are formed to share costs of product/service development, to gain access to particular resources, as to facilitate speed to market -Older established firms benefit by partnering w/ young entrepreneurial firms by gaining access to the creative ideas & entrepreneurial spirit -Biotech firms often partner with large drug companies to conduct clinical trials and bring new products to market -Biotech firms benefit by obtaining funding from their partners, and partner benefit by having additional products to sell

Trademark

-Any word, name, symbol, or device used to identify source or origin of products/services and to distinguish those product/services from others -They also provide consumers with useful information -Example= (consumers know what to expect when they see a Macy's store; think how confusing it would be if any retail store could use the name Macy's)

Other professionals that make up team

-Attorneys, accountants & business consultants

Other Gov. Grants

-Be careful of grant related scams -List of grants on www.grants.gov

Establishing a Brand

-Brand= set of attributes (positive/negative) that people associate w/ a company (attributes can be positive, such as trustworthy, dependable, or easy to deal with) (attributes can be negative, such as cheap, unreliable, or difficult to deal with) -The customer loyalty a company creates through its brand is one of its most valuable assets

Founder or Founders

-Characteristics of them of a firm & their early decisions have a significant impact on the manner in which the new venture team takes shape

Skills Profile

-Chart that depicts most important skills needed & where skill gaps exist in a new firm

How to select an attorney

-Contact local bar assoc. & ask for a list of attorneys who specialize in start ups in your area -Interview several attorneys -Select attorney who's familiar w/ start up process -Select attorney who can assist you in raising & for your new venture -Talk about fees -Make sure your attorney as a track record of completing his/her work on time -Select attorney that you think understands your business -Learn as much as possible about the process of starting a business

How to Obtain a Copyright

-Copyright law protects any work of authorship the moment it assumes a tangible form -Technically, it is not necessary to provide a copyright notice or register work with the U.S. Copyright Office -Steps can be taken, however, to enhance copyright protection 1. Copyright protection can be enhanced by attaching copyright notice, or "copyright bug" to something 2. Further protection can be obtained by registering work with U.S. Copyright Office

Issues to Consider in Choosing a Legal Form of Business Ownership

-Cost of setting up & painting the legal form -Tax considerations -The extent to which personal assets can be shielded from the liabilities of the business -The # & types of investors involved

Advantages of Sole Proprietorship

-Creating one is easy & inexpensive -Owner maintains complete control of the business & retins all of the profits -Business losses can be deducted against sole proprietor's other sources of income -The business is easy to dissolve -It's not subject to double daxation

Advantages of Partnership

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

Creative sources of financing & funding

-Crowdfunding -Leasing -SBIR & STTR Programs -Strategic partners -Other grant partners

Business Licenses & Permits

-Depending on nature of business, business may need local, state &/or federal licenses & permits to operate

Financial Ratios

-Depict relationships b/w items on a firm's financial statements -An analysis of its financial ratio's helps firm determine whether it's meeting financial objectives & how it stacks up against industry peers

Initial Ethical & Legal Issues Facing a New Firm

-Establishing a strong ethical culture -Choosing an attorney -Drafting a founder's agreement -Avoiding legal disputes -Obtaining business liceneses & permits -Choosing a form of business organization

Forecasts

-Estimate of firm's future income & expenses, based on past performance, current circumstances & it's future plans -New ventures typically base forecasts on an estimate of sales & then on industry averages or the experiences of similar start ups regarding cost of goods sold & other expenses

Implement an Ethics Training Program

-Ethics training programs teach business ethics to help employees deal w/ dethical dilemmas & imrpove their overall ethical conduct -An ethical dilemma is a situation that involves doing something that's beneficial to oneself or the org., but may be unethical

Equity Funding

-Exchanging partial ownership in a firm, usually in a form of a stock, for funding

Viral Marketing

-Facilitates and encourages people to pass along a marketing message about a particular product/service

Crowdfunding

-Finding a project or new venture by raising monetary contributions from a large # of people (the "crowd") typically via the internet

Bootstrapping

-Finding ways to avoid ned for external financing/funding through creativity, thriftiness, cost cutting or only means necessary -Many entrepreneurs bootstrap out of necessity -Examples= buy used equipment coordinate purchases w/ other businesses lease equipment instead of buying hire interns minimize personal expenses avoid unnecessary expenses obtain payments in advance from customers buy items cheapy but prudently via places like eBay share of file space or employees w/ other businesses

Oral presentation of business plan to investors

-First rule in making this is to follow directions. If you're told you have 15 minutes, don't talk more than alloted time -Presentation should be smooth & well rehearsed -Slides should be sharp & not cluttered

Limited Liability Company

-Form of business ownership that's rapidly gaining popularity in U.S. -Along w/ Subchapter S, it's a popular choice for start up firms -Limited liability company combines limited liability advantage of corp. w/ the tax advantages of a partnership -Doesn't pay taxes. Profits & losses are passed through to tax returns of the owners

Separate Elements of a New-Venture Team

-Founder or Founders of a new venture -Key employees -Board of directions -Board of advisors -Management team -Lenders & investors -Other professionals

Sources of Labor New Ventures Utilize

-Full or part-time employee -Intern -Freelancer (or contractor) -Virtual Assistant

Debt Financing

-Getting a loan

AdSense

-Google Program -Allows advertisers to buy ads that'll be shown on other Web sites instead of Google's home page -Google selects sites of interest to advertiser's customers -Advertisers are charged on a pay-per-click or a per-thousand impression basis -Advertisers benefit b/c content of ad is often relevant to Web site -Web site owners benefit by using the service to monetize their Web site

AdWords

-Google program -Allows advertisers to buy keywords on Google home page -Triggers text-based ads to the side of (and sometimes above) search results when keyword is used -Program includes local, national & international distribution -Advertisers pay a certain amount per click -Advertisers benefit b/c they're able to place their ads in front of people who are already searching for info about their product

New Venture Team

-Group of founders, key employees & advisors that move a new venture from an idea to a fully functioning firm -Team also involves more than paid employees (many firms have a board of directions, board of advisors, & professionals on whom they rely for direction & advice)

Ways Lenders & Investors add value to an Entrepreneurial Firm

-Help identiy & recruit key management personnel -Help venture fine tune its business model -Provide insight into the market that the new venture plans to enter -Serve as a sounding board for new ideas -Provides introductions to additional sources of capital -Serve on new ventures board of directors or board of advisors -Recruit customers -Help to arrange business partnerships -Provide a sense of stability & calm

Comparing a Firm's Financial Results to Industry Norms

-Helps determine how it stacks up against its competitors & if there are any financial "red flags" requiring attention

Key Elements of a Successful Founding Team

-Heterogenous rather than homogenous teams tend to be more effective

Financial Management deals w/ questions such as..

-How are we doing? Are we making or losing $? -How much cash do we have on hand? -Do we have enough cash to meet our short term obligations? -How efficiently are we utilizing our assets? -How do our growth & net profits compare to those of our industry peers? -Where will the funds we need for capital improvements come from? -Overall, are we in good shape financially? -Are there ways we can partner w/ other firms to share risk & reduce the amount of cash we need?

Partnerships

-If 2 or more ppl start a business, they must organize as a partnership, corporation, or limited liability company -Organized as either general or limited liability partnerships 1. General Partnership -2 or more ppl pool their skills, abilities & resources to run a business -primary disadvantage is that all partners are liable for all partnerhsips debts & obligations 2. Limited Partnership -modified form of general partnership -major diff. b/w 2 is that this includes two classes of owners (general partners & limited partners) -general partners are liable for debts & obligations. Limited partners are only liable up to amount of their investment

The Roles of the Board of Directors

-If a new venture organizes as a corp., it's legally required to have a board of directors -it's a panel of individuals who are elected by a corp.'s shareholders to oversee management of firm -A board is typically made up of both inside & outside directors

Additional Requirements for Obtaining Business Licenses & Permits

-If you plan to use a fictitious name for business, in most cases you'll need to obtain a fictitous business name permit, aka DBA or "doing business as" -A fictitious name permit allows a business to operate under a fictitious name like Gold Coast SeaFood or Red Rock Bakery -All businesses, other than sale proprietorships that don't have employees, are required to obtain Federal Employee Identification Number, aka EIN -Easiest way to obtain an EIN is to go to www.irs.com & click on apply of EIN online

Recognizing the elements of the plan may change

-Important to recognize that the plan will usually change while written -New insights invariably emerge when an entrepreneur or a tem of entrepreneurs immerse themselves in writing the plan & start getting feedback from others

Important Q's that all start-ups must ask

-In order to succeed, a new firm must address this important issue= (who are our customers & how will we appeal to them?)

Business Angels

-Individuals who invest their personal capital directly in start ups -Difficult to find -Prototypical one is about 50 y/o, has high income & wealth, well educated, succeeded as entrepreneur, & is interested in start up process -# of them increased dramatically over past decade -Valuable b/c of their willingness to make relatively small investments -Generally b/w $10,000-500,000 in a single company -Looking for companies that have potential to grow b/w 30 & 40% per year

Market Segmentation

-Involves studying a firm's industry and determining different target markets in that industry -Markets can be segmented in # of different ways including: (product type; geography; demographic variables)

The strongest case for trade secret protection is information that is characterized by...

-Is not known outside the company -Is known only inside the company on a "need-to-know" basis -Is safeguarded by stringent efforts to keep the information confidential -Is valuable and provides company a competitive advantage -Was developed at great cost, time, and effort -Cannot be easily duplicated, reverse engineered, or discovered

Criteria for Determining what Intellectual Property to Legally Protect

1. Determine whether intellectual property in question is directly related to firm's competitive advantage 2. Decide whether intellectual property in question has value in marketplace

Intellectual Property

-It is any product of human intellect that is intangible but has value in the marketplace -Called "intellectual" property because it's the product of human imagination, creativity, and inventiveness

Content of the business plan

-It should give clear & concise info on al important aspects of the proposed venture -Must be long enough to procide sufficient info, yet short enough to maintain readers interest -For most plans, 25 to 35 pages is sufficient

Copyrights

-It's a form of intellectual property protection that grants to owner of a work of authorship the legal right to determine how work is used and to obtain economic benefits from the work -A work does not have to have artistic merit to be eligible for copyright protection -Things such as operating manuals and sales brochures are eligible for copyright protection

Trade Secrets

-It's any formula, pattern, physical device, idea, process, or other information that provides owner of information with a competitive advantage in marketplace -They include marketing plans, product formulas, financial forecasts, employee rosters, logs of sales calls, and similar types of proprietary information -Federal Economic Espionage Act, passed in 1996, criminalizes theft of trade secrets

Budgets

-Itemized forecasts of a company's income, expenses, & capital needs & are also an important tool for financial planning & control

Disadvantages of Partnership

-Liability on the part of each general partner is unlimited -Raising capital can be difficult -The liquidity of each partner investment is low -B/c decision making among partners is shared, disagreements can occur -Business relies on skills & abilities of partners. Owners can hire employees who have additional skills & abilities -Business ends w/ death or withdrawal unless otherwise stated in partnership agreement

Disadvantages of Sole Proprietorship

-Liability on the owner's part is unlimited -Raising capital can be difficult -Liquidity of owner's investment is low -Business relies on skills & abilities of a single owner to be successful. Of course, the owner can hire employees who have additional skills & abilities -The business ends at owner's death or loss of interest in the business

What is protected by a copyright?

-Literary works -Computer software -Pantomines & choreographic work -Musical compositions -Dramatic works -Pictoral, graphic & sculptural works

Importance of Financial Management

-Many experienced entrepreneurs stress importance of keeping on top of financial management of firm

The Nature of Funding & Financing Process

-Many people go about task of raising capital haphazardly b/c they lack experience in this area

Usefulness of Sales Process

-Mapping sales process in the manner shown provides a standard method for a firm's employees to use, and provides a starting point for careful analysis and continuous improvement -Often, when companies lose an important sale they'll find that an important step in sales process was missed or mishandled -Having a well thought-out sales process, along with appropriate follow-through, can dramatically improve a company's sales performance

Formal Responsibility of Board of Directions

-Meet 3 to 4 times a year -New ventures more likely to pay board members in company stock or ask them to serve on a voluntary basis than pay a cash hanovariun

Several Steps an Entrepreneur can take to avoid legal disputes

-Meet all contractual obligations -Avoid under capitalization -Get everything in writing -Set standards

Advantages of Limited Liability Company

-Members are liable for the debts & obligations of business only up to amount of their investment -# of shareholders is unlimited -B/c profits are taxed only at shareholder level, there is no double taxation

Avoiding Legal Disputes

-Most are the result of misunderstandings, sloppiness or a simple lack of knowledge of the law -Although it's tempting to try to show people you trust them by not insisting on written agreements, it's not a good practice -One of simplest ways to avoid misunderstandings & ultimately legal disputes is to get everything in writing

Federal Licenses & Permits

-Most businesses don't require one to operate, but some do -Examples of ones that require them to operate include businesses that sell/provide= (alcohol, tobacco, firearms, animal transport across state lines, commerical fisheries, radio & TV broadcasting)

Outline of a business plan

-Most don't include all elements in the simple plan -Each entrepreneur must decide which elements to include in his/her business plan

The 7(A) Loan Guarantee Program

-Most notable SBA program available to small businesses

Ratio Analysis

-Most practical way to interpret or make sense of a firm's financial statements is through ratio analysis

State Licenses & Permits

-Most states have 3 diff categories of licenses & permits that you may need to operate a business 1. Business Registration Requirements (some states require a new business to register w/ the states) 2. Sales Tax Permits (most states & communities require businesses that sell goods, & sometimes services, to collect sales tax & submit the tax to the proper state authorities 3. Professional & Occupational Licenses & Permits (in all states there are laws that require peope in certain professions to pass a state exam & maintain a professional license to conduct business) (examples of these are barbers, nurses, real estate agents)

Items to Include in Founders Agreement

-Nature of the prospective business -Identity & proposed titles of the founders -Buyback clause -Legal form of business ownership -Appointment of stock (or divison of ownership) -Consideration paid for stock or ownership share of each of the founders -Provisions for resolving disputes -Identification of any intellectual proprety signed over to the business -Description of how founders will be compensated & how the profits in businss will be divided

Liability of Newness

-New ventures have a high propensity to fail -High failure rate is due to liability of newness, which refers to the fact that new companies often falter b/c the people involved can't adjust fast enough to new roles & b/c firm lacks a track record of success -Assembling a talented & experienced management team is one path that firms can take to overcome these limitations

What qualifies for trade secret protection?

-Not all information qualifies for trade secret protection -In general, info that's know to public or that competitors can discover through legal means doesn't qualify for trade secret protection -Companies protect trade secrets through physical measures and written documents

Copyright Infringement

-Occurs when one work derives from another or is an exact copy or shows substantial similarity to original work -To prove infringement, a copyright owner is required to show that the alleged infringer had prior access to the copyrighted work and that the work is substantially similar to the owner's -Copyright infringement cost owners of copyrighted material an estimated $25 billion per year in the U.S. alone -example= illegal download of music

Subchapter S Corporations

-Often business startups -Combines advantages of a partnership & a corp. -Similar to partnership b/c income of business isn't subject to double taxation -Similar to corp. b/c owners aren't subject to personal liability for debts/behavior of business -Doesn't pay taxes. Profites & losses are passed through to tax returns of owner -Strict standards they must meet to quality for Subchapter S Corp

Forecast of Cost of Sales & Other Items

-Once firm completed sales forecast, it must do this -Most common way is to use the % of sales method & follow its procedures

Power of a strong brand

-Over 50% of consumers say that a known and trusted brand is a reason to buy a product -A brand allows a company to charge a price for its products or services that is consistent with its image -A successful brand can increase market value of company by 50% to 75%

Advantages of C Corporations

-Owners are liable only for debts & obligations of the corp up to amount of their investment -The mechanics of raising capital is easier -No restrictions exist on # of shareholders (differs from S) -Stock is liquid if traded on a major stock exchange -Ability to share stock w/ employees through stock options or other incentive plans can be a powerful form of employee motivation

Alternatives for raising $ for a new venture

-Personal funds -Equity capital -Debt financing -Creative sources

Potential Payoffs for Establishing a Strong Ethical Culture

-Potential avoidance of fines -Better access to capital -Improved brand reputation -Improved employee committment -Improved customer loyalty -Decreased vulnerability

PR Techniques

-Press Release -Traditional media coverage -Articles in industry press & periodicals -Social media coverage -Blogging -Monthly newsletter -Civic, social & community involvement

Pro Forma Financial Statements

-Projections for future periods based on forecasts & are typically completed for 2/3 years in the future -Strictly planning tools & aren't required by SEC

What Board of Directors can do to help a start-up get off to a good start?

-Provide guidance -Lend legitimacy

Historical Financial Statements

-Reflect past performance & are usually prepared on a quarterly & annual basis -Publicly traded firms are required by SEC to prepare financial statemetns & make them available to public

Physical Measures for Protecting Trade Secrets

-Restricting access -Labeling documents -Password protecting confidential computer files -Maintaining logbooks for visitors -Maintaining logbooks for access to sensitive material -Maintaining adequate overall security measures

Process of Conducting an Intellectual Property Audit

1. Develop an inventory of a firm's existing intellectual property. Inventory should include firm's present registrations of patents, trademarks, and copyrights 2. Identify works in progress to ensure that they are being documented and protected in a systematic, orderly manner

Disadvantages of Limited Liability Company

-Setting up & maintaining one is more difficult & expensive -Tax accounting can be complicated -Some of the regulations governing LLC vary by state -B/c LLC's are relatively new type of business entity, there isn't as much legal precedent available for owners to anticipate how legal disputes might affect their business -Some states levy a franchise tax on LLC. (essentially a fee LLC pays state for benefit of limited liability)

Disadvantages of C Corporations

-Setting up & maintaining one is more difficult than for a sole proprietorship or a partnership -Business losses cannot be deducted against shareholders other sources of income -Income is subject ot double taxation (it's taxed at corporate & shareholder levels) (corp is taxed on its net income, & when some income is distributed to shareholders in forms of dividends, the income is taxed again on shareholders' personal tax returns) -Small shareholders typically have little voice in management of firm

Sole Proprietorship

-Simplest form of business entity -A form of business org. involving one person, & the person & business are essentially the same -Not a sepearte legal entity -The sole proprietor is responsible for all liabilites of the business, & this is a significant drawback

SBIR & STTR Programs

-Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs are 2 important sources of early stage funding for tech firms -Programs provide cash grants to entrepreneurs who are working on projects in specific areas -Main difference between the SBIR and the STTR programs is that STTR requires participation of researchers working at universities or other research institutions

Importance of Sales Process

-Some companies simply wing it when it comes to sales, which isn't recommended -It's much better to have a well thought out approach to prospecting customers and closing sales

Recruiting & Selecting Key Employees

-Start ups vary in terms of how quickly they need to add personnel -In some instances, founders will work along for a period of time. Others, employees are hired immediately. -Skills profile

Steps of the Business Plan

1. EXECUTIVE SUMMARY -a short overview of the entire business plan; shouldn't exceed two single spaced pages -provides a busy reader w/ everything that needs to be known about the new venture's distinctive nature -appears at beginning of business plan but should be written last -key insights (in many instances an investor will ask for a copy of a firms exec summary & will ask for a copy of entire plan only if summary is sufficiently convincing) (arguably the most important section of business plan) 2. INDUSTRY ANALYSIS -should begin by describing industry the business will enter in terms of size, growth rate & sales projections -items to include: (industry size, growth rate, sales projections; industry structure; nature of participants; key success factors; industry trends; long term prospects) -key insights (before business selects target market, it should have a good grasp of industry, including where its promision areas are & where its points of vulnerability are) (industry that a company participants in largerly defines the playing field that a firm will participate in) 3. COMPANY DESCRIPTION -this section begins w/ general description of company -items to include: (company description; company history; mission statement; products/services; current status; legal status & ownership; key partnership (if any) -key insights (while at first clange this section may seem less important than others, it's extremely important) (it demonstrates to your reader that you know how to translate an idea into a business) 4. MARKET ANALYSIS -breaks industry into segments & zeros in on the specific segment (or target market) to which firm will try to appeal -items to include: (marget segmentation & target market section; buyer behavior; competitor analysis) 5. THE ECONOMICS OF THE BUSINESS -addresses the basic logic of how profits are earned in the business & how many units of a business's profits must be sold for the business to "break even" & start earning a profit -items to include: (revenue drivers & profit margins; fixed & variable costs; operative leverage & its implications; start up closts; break even chart & calculations) -key insights (2 companies in same industry may make profits in diff ways. One may be high margin, low volume business. Important to check to make sure the approach you select is sound) (computing a breakeven analysis is extrememy useful exercise for any propoosed or existing business) 6. MARKETING PLAN -focuses on how the business will market & sell its procut/service -items to include: (overall marketing strategy; procut, price, promotio, distriution; sales process (or cycle); sales tactics 7. DESIGN & DEVELOPMENT PLAN -focuses on status of your development efforts -items to include: (development status & tasks; challenges & risks; projected development costs; proprietary issues- patents, trademarks, copyrights & licenses, brand names) 8. OPERATIONS PLAN -outlines how your business will be run & how product/service will be produced -useful way to illustrate how business will be run is to describe it in terms of "backstage (unseen to customer) & "front stage" (seen by customer) activities -itmes to include: (general approach to operations; business location; faciliites & equipment 9. MANAGEMENT TEAM & COMPANY STRUCTURE -management team of a new venture typically consists of founder(s) & handful of key managament personnel -items to include: (management team; board of directors; board of advisors; company structure) 10. OVERALL SCHEDULE -a schedule should be prepared that shows the major events required to run a business; format of milestones critical to business success -examples of milestones: (incorportation the venture; completion of prototypes; rental of facilities; obtaining critical financing; starting production; obtaining 1st sale) 11. FINANCIAL PROJECTIONS -final section presents a firms pro forma (or projection) finanical projections -items to include: (sources & user of funds statement; assumptions sheet; pro forma income statements; pro forma balance sheets; pro forma cash flow; ratio analysis)

Size of Founding Team

-Studies have shown that 50 to 70% of all new ventures are started by more than 1 individual -Experts disagree about whether new ventures started by a team have an advantage over those started by a sole entrepreneur

Patent Infringement

-Takes place when one party engages in unauthorized use of another party's patent -The tough part (particularly from a small entrepreneurial firm's point of view) is that patent infringement cases are costly to litigate -A typical patent infringement case costs each side at least $500,000 to litigate

Advantages of Starting a Venture as a Team

-Team brings more talent, resources & ideas to a new venture -Team brings a braoder & deepr network of social & professional contacts to a new business -The psychological support that the cofounders of a business can offer on anothe rcan be an important element of a new venture's success

Disadvantages of Starting a Venture as a Team

-Team members may not get along -If 2 or more people start a firm as "equals," conflicts can occur when firm needs to establish a formal structure & designate one person as CEO -If founders have similar areas of expertise, they may duplicate rather than compliment one another -Team members can easily diagree in terms of work havits, tolerances for risk, levels of passion for business, ideas on how business should be run & similar key issues

Strict standards they must meet to qualify for Subchapter S Corp

-The business cannot be subsidiary of another corporation -The shareholders must be U.S. Citizens. Partnerships and C Corp.'s may not own shares in Subchapter S Corp.'s. Certain types of trusts & estates are eligible to own shares in Subchapter S -It can only have one class of stock issued & outstanding (either preferred stock or common stock) -It can have more than 100 members. Husbands & wives count as one member, even if they own seperate shares of stock -All shareholders must agree to have the corp. formed as a Subchapter S Corp.

Process of selecting a target market & positioning strategy

1. Segmenting the market 2. Selecting a target market 3. Crafting a unique positioning strategy

Software Packages

-There are many available that employ an interactive, menu driven approach to assist in the writing of a business plan -Some are very helpful. However, entrepreneurs should avoid a boilerplate plan that looks as though it came from a "canned" source

Increasing Interest in Patents

-There's an increasing interest in patents -Since Patent #1 was granted in 1790, U.S. Patent & Trademark Office has granted over 6 million patents -Patent office is strained. It now takes an average of 29.1 months from the date of first filing to receive a U.S. patent

Importance of Financial Statements

-To asses whether its financial objectives are being met, firms rely heavily on analysis of financial statements -A written report that quantitatively describes a firm's financial health -The income statement, balance sheet, & statement of cash flow are the financial statements entrepreneurs use most commonly

Importance of Intellectual Property

-Traditionally, businesses have thought of their physical assets, such as land, buildings, and equipment as most important -Increasingly, however, a company's intellectual assets are most important

Sources of Equity Funding

-Venture capital -Business angels -Initial public offerings

C Corporations

-What most people think when they hear word "corporation" -Taxed as seperate legal entite -Seperate legal entity from owners -Formed by filing articles of incorporation -In most cases, it shields its owners, or shareholders, from personal liability for debts of corp. -Governed by a board of directions, which is elected by shareholders

A well managed start up approaches this query by following a 3 step process

1. Segmenting the market 2. Selecting a target market 3. Establishing a unique position

Choosing a Form of Business Ownership

-When business is launched, a form of legal entity must be chosen -Most common legal entities are: 1. Sole Propietorship 2. Partnership 3. Corporation 4. Limited Liability Company

2 Primary Audiences for a Firm's Business Plan

-Who reads the business plan & what are they looking for? 1. A firm's employee -looking for a clearly written business plan to help the employees of a firm operate in sync & move forward in a consistent & purposeful manner 2. Investor's & other external stakeholders -looking for a business plan that must make the case that the firm's a good use of an investors funds or the attention of others

Founders Agreement

-Written document (or shareholders' agreement) that deals w/ issues such as the relative split of the equity among founders of firm, how individual founders will be compensetaed for the cash or the "sweat equity" they put into the firm, & how long the founders will have to remain w/ firm for their shares to fully vest

Process for Obtaining a Trademark

1. Select an appropriate mark 2. Perform a trademark search 3. Create rights in the trademark

Steps to Preparing an Elevator Speech

1. Describe opportunity or problem that needs to be solved (20 seconds) 2. Describe how your product meets opportunity or solves the problem (20 seconds) 3. Describe your qualifications (10 seconds) 4. Describe your market (10 seconds)

Questions & feedback to expect from investors during presentation of business plan

-the smart entrepreneur has a good idea of the q's that will be asked & will be prepared for these queries

Reasons that motivate firms to go public

1. A way to raise equity capital to fund current & future operations 2. Raises a firm's public profile, making it easier to attract high-quality customers & business partners 3. Is a liquidity event that provides a means for a company's investors to recoup their investments 4. Creates a form of currency that can be used to grow company via acquisitions

Core Product vs. Actual Product

1. Core Product -the product itself, such as an antivirus software program 2. Actual Product -product plus all attributes that come with it such as quality, level, features, design, packaging & warranty

Cost-Based Pricing vs. Value-Based Pricing

1. Cost-Based Pricing -the list price is determined by adding a markup % to a product's cost 2. Value-Based Pricing -list price is determined by estimating what consumers are willing to pay for a product

3 steps in preparing to raise debt or equity financing

1. Determine precisely how much $ is needed 2. Determine type of financing/funding that is most appropriate 3. Develop a strategy for engaging in potential investors or bankers

Preferred Attributes of Sole Entrepreneurs & Members of a New-Venture Team

1. Higher Education -evidence suggests that important entrepreneurial skills are enhanced through higher education 2. Prior Entrepreneurial Experience -founders familiar w/ the entrepreneurial process are more likely to avoid costly mistakes than founders w/o similar experience 3. Relevant Industry Experience -founders w/ relevant industry experience are more likely to have: (better establish professional network; more applicable marketing & managemenet skills) 4. Broad Social & Professional Network -founders w/ this have potential access to additional know-how, capital & customer referrals

Steps involved in putting together an advertisement

1. Identity the purpose of the ad 2. Determine the target audience 3. Select a medium 4. Create the ad 5. Select a place & time for ad to appear 6. Fulfill expectations

Exclusions from Trademark Protection

1. Immoral or Scandalous Matter -profane words 2. Deceptive Matter -labeling oranges "Fresh Florida Oranges" that aren't grown in Florida 3. Descriptive Marks -phrases like "golf ball" and "fried chicken" are descriptive and can't be trademarked 4. Surnames -common surnames like "Anderson" or "Smith" can't be trademarked

2 Reasons for Conduction an Intellectual Property Audit

1. It's prudent for a company to periodically determine whether its intellectual property is being properly protected 2. It's important for a firm to remain prepared to justify its valuation in the event of a merger or acquisition

The Process of Obtaining a Patent

1. Make sure the invention is practical 2. Determine type of application to file 3. Hire a patent attorney 4. Conduct a patent search 5. File a patent application 6. Obtain decision from U.S. Patent & Trademark Office

Legal Agreements that Many Firms ask their Employees to Sign

1. Nondisclosure Agreement -binds an employee or other party (such as supplier) to not disclose a company's trade secrets 2. Noncompete Agreement -prevents an individaul from competing against a former employee for a specific period of time

Common Mistakes Firms Make in Regard to Protecting Their Intellectual Property

1. Not properly identifying all of their intellectual property 2. Not fully recognizing value of their intellectual property 3. Not legally protecting the intellectual property that needs protecting 4. Not using their intellectual property as part of their overall plan for success

4 Key Forms of Intellectual Property

1. Patents 2. Trademarks 3. Copyrights 4. Trade Secrets

Pluses & Minuses of Advertising

1. Pluses -raise customer awareness of a product -explain a product's comparative features and benefits -create associations between a product and a certain lifesty 2. Minuses -low credibility -possibility that a high% of people who see ad won't be interested -message clutter -relative costliness compared to other forms of promotion -intrusiveness

Process of Financial Management

1. Preparation of Historic Financial Statements -income statement; balance sheet; statement of cash flows 2. Preperation of Forecasts -income; expenses; capital expenditures 3. Preparation of Pro Forma Financial Statements -pro forma income statements; pro forma balance sheets; pro forma statement of cash flows 4. Ongoing Analysis of Financial Results -ratio analysis; measuring results vs. plans; measuring results vs. industry norms

4 P's of Marketing Mix

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

Types of Pro Forma Financial Statements

1. Pro Forma Income Statement -shows projected financial results of the operations of a firm over a specific period 2. Pro Forma Balance Sheet -shows a projected snapshot of a company's assests, liabilities & owner's equiety as a specific point in time 3. Pro Forma Statement of Cash Flows -shows projected flow of cash into & out of a company for a specific period

Financial Objectives of a Firm

1. Profitability -the ability to earn a profit -many start ups aren't profitable during first 1-3 years while they are training employees & building brand 2. Liquidity -a company's ability to meet short term financial obligations -even if firms profitable, it's a challenge to keep enough $ in bacnk to meet its routine obligations in a timely manner 3. Efficiency -how productively a firm utilizes its assets relative to its revenue & profts (ex= SW Airlines uses its very productively - turn around time is fastest in industry) 4. Stability -overall health of finaincial structure of firm, particularly as it relates to its debt to equity ratio -strength & vigor of firm's overall finacial posture (for a firm to be stable, it must not only earn a profit & remain liquid but also keep its debt in check)

Sales Process Steps

1. Prospect for (or gather) sales leads 2. Make the initial contact 3. Qualify the lead 4. Make the sales presentation 5. Meet objections & concerns 6. Close the sale 7. Follow up

Financial Management deals w/ 2 things

1. Raising $ 2. Managing a companys finances in a way that achieves the highest rate of return

2 Types of Crowdfunding Programs

1. Rewards-Based Crowdfunding -allows entrepreneurs to raise $ in exchange for some type of amenity or reward -most popular rewards based crowdfunding sites are Kickstarter, Indiegogo, & RocketHub 2. Equity-baesd Crowdfunding -helps raise $ by tapping individuals who provide funding in exchange for equity in business -the catalyst for the advent of equity based crowdfunding was the JOBS Act, which was passed in April 2012 -it appears that this will be confined to entrepreneurs raising $ from accredited investors -sites include FundersClub, Crowdfunder.com, & Circle Up

Choosing an attorney for a firm

1. Select an attorney early -important to select one as early as possible when developing a business venture 2. Intellectual property -for issues dealing w/ this (patents, tradmearks, copyrights & trade secrets), it's essential to use an attorney who specializes in this field

Selling Direct vs. Selling Through an Intermediary

1. Selling Direct -producer directly to consumer 2. Selling Through an Intermediary -Other firms sell through intermediaries and pass off their products to wholesalers who place them in retail outlets to be sold -producer -> wholesaler distributors -> retailer -> consumer

Types of Business Plans

1. Summary Business Plan -10 to 15 pages -works best for new ventures in the early stages of development that want to "test the waters" to see if investors are interested in their idea 2. Full Business Plan -25 to 35 pages -Works best for new ventures who are at the point where they need funding, or financing -Serves as a "blueprint" for the company's operations 3. Operational Business Plan -40 to 100 pages -meant primarily for an internal audience -works best as a tool for creating a blueprint for a new venture's operations & providing guidance to operational managers

12 PPT slides to include in investor presentation

1. Title Slide 2. Problem 3. Solution 4. Opportunity & Target Market 5. Technology 6. Competition 7. Marketing & Sales 8. Management Team 9. Financial Projejctions 10. Current Status 11. Financing Sought 12. Summary

4 Types of Trademarks

1. Trademark -any word, name, symbol, or device used to identify and distinguish one company's goods from another -examples= Apple, GoPro -duration= renewable every 10 yrs, as long as the mark remains in use 2. Service Mark -similar to trademarks; used to identify services or intangible activities of a business, rather than a business's physical products -examples= Amazon.com, Dropbox -duration= renewable every 10 yrs, as long as the mark remains in use 3. Collective Mark -trademarks or service marks used by members of a cooperative, association, or other collective group -examples= Rotary International, International Franchise Association -duration= renewable every 10 yrs, as long as the mark remains in use 4. Certification Mark -marks, words, names, symbols, or devices used by a person other than owner to certify a particular quality about a good/service -examples= 100% Napa Valley, Underwriters Labratories -duration= renewable every 10 yrs, as long as the mark remains in use

3 Basic Requirements for Obtaining a Patent

1. Useful -it must have utility 2. Novel -it must be different from what has come before (i.e., not in the "prior art") 3. Not Obvious -it must not be obvious to a person of ordinary skill in the field

Types of Patents

1. Utility -new or useful process, machine, manufacturer, or composition of material or any new and useful improvement thereof -duration= 20 yrs from date of original application 2. Design -invention of new, original, and ornamental design for manufactured products -duration= 14 yrs from date of original application 3. Plant -any new varieties of plants that can be reproduced asexually -duration= 20 yrs from date of original application

Other sources of debt financing

1. Vendor credit -aka trade credit -when a vendor extends credit to business in order to allow business to buy its products &/or services up front but defer payment until later 2. Factoring -a financial transaction whereby a business sells its accounts receivable to 3rd party, called a factor, at a discount rate in exchange for cash 3. Merchant cash advance -lender provides a business lump sum of $ in exchange for a share of future sales that covers payment plus fees -these types of loans are arranged by online firms at an escalated interest rate 4. Peer-to-Peer Lending -financial transaction taht occurs directly b/w individuals or peers -faciliated by online firms such as Funding Circle, Lending Club, & Dealstruck

What's protected under trademark law?

1. Words -birchbox, Warby Parker, DripCatch 2. Numbers & Letters -3M, Boeing 787, AT&T 3. Designs & Logos -nike swoosh logo 4. Sounds -mgm's lion's roar 5. Fragrances -stationary treated w/ a special fragrance 6. Shapes -unique shape of Apple iPhone 7. Colors -Nexium (the "purple pill") 8. Trade Dress -layout & decor of a restaurant

Local Licenses & Permits

2 categories that may be needed 1. To operate a certain type of business (ex= childcare, barbershop/salon, automotive repair, hotels/motels) 2. Permits for engaging in certain types of activities (ex= building permit, health permit, signage permit)

Guidelines for Writing a Business Plan

Structure of the business plan -To make the best impression a business plan should follow a conventional structure, such as the outline for the business plan -Although some entrepreneurs want to demonstrate creativity, departing from the basic structure of thre conventional business plan is usually a mistake -Typically, investors are busy people & want a plan to where they can easily find critical info

Exclusions from Copyright Protection

The Idea-Expression Dichotomy -Main exclusion is that copyright laws cannot protect ideas -An entrepreneur may have the idea to open a soccer-themed restaurant. The idea itself is not eligible for copyright protection. However, if the entrepreneur writes down specifically what his or her soccer-themed restaurant will look like and how it will operate, that description is copyrightable -Legal principle describing this concept is called the idea-expression dichotomy -An idea is not copyrightable, but the specific expression of an idea is

SBA Guaranteed Loans

The SBA Guaranteed Loan Program -approx. 50% of 9,000 banks in U.S. participate -operates through private sector lendors who provide loans that are guaranteed by SBA -loans are for small businesses that aren't able to obtain credit elsewhere Size & types of loans -SBA can guarantee as much as 85% on loans up to $150,000 & 75% on loans over $150,000 -loan can be used for almost any legitimate business purpose -shouldn't be dismissed as a possible source of financing