Chapter 2: The Entrepreneurial Process
Dedication
-Dedicated to business (sometimes with cost to relationships)
Distribute
-Distribute ownership of business with key employees who are critical to the success of the business
Decisiveness
-Don't procrastinate -Make decisions swiftly (key factor to success)
Doers
-Implement course of action ASAP
Triggering Event Examples
-Job dissatisfaction -Loss of job -Dissatisfaction with current level of income -Desire to be independent
Devotion
-Love what they do
Entrepreneurial frugality requires
-Low overhead -High productivity -Minimal ownership of capital assets
Dollars
-Money is a measure of success -Assumption: Rewarded if successful
Details
-On top of critical details
Entrepreneurial Process Factors
-Personal -Sociological -Organizational -Environmental
Determination
-Total commitment -Don't give up
Dream
-Vision of what the future could be like for business -Ability to implement dreams
Destiny
-Want to be in charge of their own destiny (rather than be dependent on employer)
10 D's (Characteristics of a successful entrepreneur)
1. Dream 2. Decisiveness 3. Doers 4. Determination 5. Dedication 6. Devotion 7. Details 8. Destiny 9. Dollars 10. Distribute
9F's (Ingredients for a successful new business)
1. Founders 2. Focused 3. Fast 4. Flexible 5. Forever innovating 6. Flat 7. Frugal 8. Friendly 9. Fun
3 factors for a successful new business (Roger Martin)
1. an unmet need 2. a 10X solution 3. the proper entrepreneur(s) Entrepreneurs are attracted to the suboptimal situation and want to provide a solution that is 10X better than what is currently available.
3 crucial components for a successful new business
1. the opportunity 2. the entrepreneur 3. the resources (needed to start/grow the company)
The crucial ingredients for entrepreneurial success are...
A superb entrepreneur with a first-rate management team and an excellent market opportunity.
Personal Attributes
Achievement Locus of control Ambiguity tolerance Risk taking Personal Values Education Experience Opportunity recognition
Frugal
By keeping overhead low and productivity high, entrepreneurial companies keep costs down
Customers provide proof of concept
Customer buy-in provides the most proof of concept for any startup
The Customer
Customers... 1. Are nondilutive 2. Are your market 3. Provide a positive feedback loop 4. Provide proof of concept
Types of startup capital (2)
Debt (paying interest) Equity (giving up some ownership)
Friendly
Entrepreneurial companies are friendly to their customers, suppliers and employers
Focused
Entrepreneurial companies focus on niche markets. They specialize
Flat
Entrepreneurial organizations have as few layers of management as possible
Founders
Every startup must have a first-class entrepreneur
In order to determine the amount of capital that a company needs to get started, an entrepreneur should....
First assess what resources are crucial for the company's success in the marketplace.
When determining how to allocate scarce resources, an entrepreneur should...
Focus on the company's key success factors
Customers provide a positive feedback loop
Having a positive feedback loop throughout the process allows startups to pivot or adjust throughout the development process, ensuring they are creating the best possible product or solution.
An unmet need
Identifying an unmet need in the marketplace means that there is an inefficient, unsatisfactory, or suboptimal problem within the industry
Entrepreneurial Process
Includes all the functions, activities and actions that are part of perceiving opportunities and creating organizations to pursue them 1. Innovation 2. Triggering event 3. Implementation 4. Growth
Fun
It's fun to be associated with an entrepreneurial company
Free Cash
More cash than needed to sustain operations and purchase assets to keep the company on its growth trajectory
Sociological Factors
Networks Teams Parents Family Role models Advisors
Environmental Factors
Opportunities Role models Creativity Economy Competition Resources Incubator Government policy Customers Suppliers Investors Bankers Lawyers
Sweat Equity
Ownership earned in lieu of wages
Operational Experience
Prior know-how about building and delivering the solution Ex. If a startup was producing apps for the iPhone, previous operational experience in mobile software would be desired
Pivoting
Refers to startups making the required course corrections during the development process to dramatically improve their odds for success.
Talent Triangle
Refers to the attributes of successful management teams. Includes 3 elements: -Business acumen -Operational experience -Domain knowledge
Business Acumen
Skills and expertise in the development of strategy and the execution of business planning
Entrepreneur
Someone who perceives an opportunity and creates an organization to pursue it
Organizational Factors
Team Strategy Structure Culture Products
Customers are nondilutive
The more customers a startup entrepreneur can speak to throughout the process, the more valuable information and feedback he or she will receive.
Forever innovating
They are tireless innovators
Flexible
They keep an open mind and respond to change
Fast
They make decisions quickly and implement them swiftly
Domain Knowledge
Understanding the customers and the industry within the business domain
Customers are your market
You can never ask enough questions or talk too much to customers throughout the development process
Debt
You don't have to give up any ownership of the business, but you do have to pay current interest and eventually repay the principal you borrow Bank will require you to put up some collateral (could be personal)
Equity
You have to give up some of the ownership of the business to get it, but you may never have to repay it or even pay dividend.
For entrepreneurs, happiness is...
a positive cash flow
The idea itself isn't important. What is important is...
developing the idea, implementing it, and building successful businesses.
You are not ready to start a business if you are not able to....
name a customer. They have found an idea but have not identified a market need.
In entrepreneurship, luck is where...
preparation and opportunity meet.