Eship Exam 2
Copyrights
(C) -Protects the form of the original works of authors, composers, screenwriters, and computer programmers -Does not protect the idea itself (protect written program for word processing software but not the concept of word processing itself) -Lasts for the life of the holder 70+ years
The mentor board
-The entrepreneur's personal board which serves as a sounding board, coach, advisor -A safe haven for the entrepreneur to air his or her fears, concerns, hopes, dreams -Should consist of mentors for both the entrepreneur's personal and professional life
Ethics
-The moral code by which we live and conduct business -Derives from the cultural, social, political, and ethnic norms with which we are raised as children Conflicts of Interest -When a person's private or personal interests clash with professional obligations
The Product Dvmt Cycle
-The proper opportunity recognition ->Have you identified a niche that has not been adequately served -Technical feasibility analysis -> Does the product/service currently exist? -> Does it have an application in the market? -> Can the product be produced? For how much? How long will it take? -Design and dvmt of a platform product -> Ideally, a platform product will provide for many derivative products and their corresponding revenue streams
Elevator Pitch
A brief statement of the business concept.
nonprofit corporation
A corporation established for charitable, public or religious purposes or for mutual benefit as recognized by federal and state laws.
Feasibility Analysis vs Business Plan
A feasibility analysis is primarily a test of a new concept's viability in the marketplace (will anybody buy it?). A business plan is more comprehensive and discusses the operational and financial aspects of a new business. A business plan focuses on execution of the concept and the building of a company.
Start the business Planning Process by First Developing a Compelling Pitch
Answers the following Q's -What need is being served? Pain in the market? -Can the founding team/product served that need? -What is the venture's competitive advantage -Can this venture make money? -Why is now the right time to launch this venture?
Outsourcing Product Dvmt
Areas suitable for outsourcing that require engineering analysis, design and expertise ->Processes for which you do not wish to (or are unable to) acquire the necessary assets/equipment ->Component design ->Materials specifications ->Packaging design ->Assembly drawings and specifications ->Operator's and owner's manuals
Partnership
Two or more people agree to share the assets, liabilities, and profits of a business (ideally via written partnership agreement)
Special Issues for High-Tech Teams
๏ Funding is through angel and venture capital. ๏ Founding team consists of scientists-engineers with little sales, mktg, or business management experience ๏ The venture requires professional management drawn from outside the founding team ๏ Bringing on professional mgmt at start-up ensures there will be no glitches when rapid growth begins and also leaves the founders the time they need to concentrate on the business' products/services
psychological pricing
to create a complex pricing structure by combining multiple products and services into one package (ex: buying a mobile phone, call service and data package)
Stakeholder Pressure
All stakeholders want what is owed them, when it is owed them
Major Components of a Business Plan
Components: -Executive Summary -Table of Contents -Business Concept -Founding/Mgnt Team -Industry/MKT Analysis -Product/Service Dvmt Plan -Operations Plan -Organization Plan -MKT Plan -Financial Plan -Financial Plan -Growth Plan -Contingency Plan and Harvest strategy -Timeline to Launch -Bibliography or Endnotes -Appendices (maps, forms, resumes, customer testimonials, technical drawings, contracts...)
geographical pricing
Different pricing used based on price tolerances in different geographic locations (example: the price of fast food in Ohio vs. Hilton Head vs. Hawaii).
B corporation (benefit corporation)
-A benefit corporation is a type of for-profit corporate entity, legislated in 31 U.S states (not Ohio), that includes positive impact on society and the environment, in addition to profit, as its legally defined goals. -B corps differ from traditional American corporations in purpose, accountability, and transparency, but not taxation -A benefit corporation's directors and officers operate the business with the same authority as in a traditional corporation but are required to consider the impact of their decisions not only on shareholders but also on society and the environment -Benefit corporation laws address concerns held by entrepreneurs who wish to raise growth capital but fear losing control of the social or environmental mission of their business
Trademarks
-A symbol, logo, word, sound, color, design, or other device that is used to identify a business or a product in commerce -It has a longer life than a patent as you have exclusive right to it as long as you continue to use it - (R) Registered trademark -^TM Non-registered trademark
Trade Secrets
-A trade secret consists of: -> A formula, device, idea, process, pattern, or compilation of info that gives the owner a competitive advantage in the marketplace -> A novel idea that is not common knowledge and is kept in a confidential state -A trade secret is not protected by federal law, but protections for a trade secret can be created via contract -Sometimes owners/companies choose not to patent in order to keep a trade secret secret indefinitely
Not Trademarkable:
-Anything immoral or deceptive -Anything that uses official symbols of the U.S. or any state/municipality, such as a flag -Anything that uses a person's name or likeness without their permission -Anything that has become part of general language (example: the term "smart phone") -You don't necessarily need an attorney to trademark; but you'll probably need a good graphic artist
Nonprofit Corporation Advantages
-Attractive to corporate donors for business expense deductions -Can seek cash and in-kind contributions of equipment, supplies, personnel -Can apply for grants from government and private agencies -May qualify for tax-exempt status
S Corporation
-Combines the advantages of a partnership and a C Corporation -One creates an S corporation by first forming a C corporation and then "electing" S corporation status by filing a form with the IRS. No more than 100 members, Advantages: -Business losses can be passed through for taxation at entrepreneur's personal tax rate (S-Corp is taxed as a partnership) (Schedule k-1 included in the shareholder's annual Form 1040) -Avoids double taxation of C-Corporation -Not subject to personal liability for the behavior of the business
The Advisory Board
-Consists of a panel of experts interested in the new venture's success -Forces the entrepreneur to overcome "tunnel vision" -Payment for services is through honorarium ($250/$500/$1000 per meeting, but only after the venture has become profitable)
When forecasting the first year
-Don't forecast a straight line upward trajectory for sales or costs! -Consider seasonality. Almost every business has some variability in their revenue stream -Consider the lead times necessary to get your "product prepped for sale," to train new employees, to "install" your product, etc -Consider the effect of planned milestones of your business like moving into a larger facility or into a new geographic area, developing subsequent or add on products/accessories/services, etc
Effective ways to become socially responsible
-Donate products or services -Get other companies involved in being socially responsible -Offer the company's expertise free of charge -Contribute to the community, perhaps by supporting employees' volunteerism -Create a sustainable business!
Advantages of Sole Proprietorship
-Easy and inexpensive to create; simplest form -100% of ownership and profits stay with the owner -Complete decision making authority for the owner -Income is taxed only once (at the owners personal income tax rate) -No major tax or other reporting requirements exist (Form Schedule C is included in the sole proprietor's annual Form 1040) -Business losses can be deducted against the owner's personal tax return
Employees
-Employees are usually the single biggest expense of any business -Finding and hiring the best employees is time-consuming and challenging -> A business owner needs to understand the legal issues associated with hiring -> Must avoid even the appearance of discriminatory practices -> Certain question cannot legally be asked (ex: how old are you? What is your religion? Are you married?) -> Terminating and replacing employees is even more time-consumer and challenging than hiring them
The Patent process
-File a provisional patent (not required) -> Allows filer to use the term "patent pending" -> Doesn't have to include specific patent claims -File a (non-provisional; full) patent application -> Must file within 12 months of filing the provisional patent ->Note: You must file you non-provisional patent application within 12 months of the first sale of public disclosure (i.e., trade show use) of your product
Limited Liability Company Disadvantages
-Formation filing fee is required (like a corporation) -Consensus is difficult is there are many members -Sale of a member's ownership in the LLC can trigger a need to register with the SEC if not all members elect to be "active" managers of the LLC -May not have foreign ownership rights -May not be recognized abroad as a legal entity -May have foreign members -Unlike an S Corporation, which cannot have non-resident alien shareholders
Copyrights
-International protection -> Copyright laws are fairly consistent across countries -> The Berne convention gives protection for the life of the author 50+ years
Answering questions
-Investors like to ask questions they already know the answer to -Don't be afraid to not know the answer ->But assure them you'll find the answer and get back to them on it... and then do it!) -The founding team should join the CEO for questions
Plant Patent
-Issued for a new and distinct, invented or discovered asexually reproduced plant including cultivated sports, mutants, hybrids, and newly found seedlings, other than a tuber propagated plant or a plant found in an uncultivated state. (20 years) -Permits its owner to exclude others from making, using, or selling the plant for a period of up to 20 years from the date of patent application filing -Plant patents are not subject to the payment of maintenance fees
Design Patent
-Issued for a new, original, and ornamental design embodied in or applied to an article of manufacture -Permits its owner to exclude others for making, using, or selling the design for a period of 14 years from the date of patent grant -Design patents are not subject to the payment of maintenance fees -Note that the 14 year term of a design patent is subject to change in the near future
Utility Patent
-Issued for the invention of a new and useful process, machine, manufacture, or composition of matter, or a new and useful improvement thereof -Generally permits its owner to exclude others from making, using, or selling the invention for a period of up to 20 years from the date of patent application filing, subject to the payment of the maintenance fees -Approx. 90% of the patent documents issued by the USPTO in recent years have been utility patents, also referred to as "patents for invention"
Purpose of a business plan
-It serves as a reality check for the entrepreneur who will be forced to think about every aspect of operating the business -It is an operating guide for the business -It is a statement of intent for interested third parties
Successfully Presenting the Business Plan
-Keep the presentation to <30 mins -Tell your compelling story first -Do not use a podium to speak ->Limits movement and gestures and the use of visual aids -Move about without distracting the audience ->No pacing -Maintain eye contact with everyone -Make the visual aids simple -The CEO should do the presentation -Perform live demonstrations, if applicable -PRACTICE IN ADVANCE
C Corporation Advantages
-Limited liability for owners -Capital can be raised through the sale of stock -Ownership is easily transferable -Binding contracts do not need individual owner signatures -Enjoys status and deference in business circles -Employee access to retirement funds, defined-contribution, profit-sharing and stock option plans -The entrepreneur can hold personal assets which can be leased to the corporation for a fee -No restrictions on the number of shareholders
Bootstrapping
-Minimizing owned resources to keep overhead low -Beg, borrow, lease or barter for resources whenever possible -Many new ventures fail b/c of poor decisions about resource management -To succeed, entrepreneurs must create innovative combinations of resources to generate competitive advantage and wealth
C Corporation Disadvantages
-Most complex legal form to organize -Costs more to create -Subject to more governmental regulation -Stockholders do not receive personal benefit of business losses -After formation, ownership control passes to the Board of Directors -Shareholders elect the Board of Directors -Board of Directors elects the officers of the company -Double layer of income taxation -Corporation and dividend recipient (if applicable) each pay
Bootstrapping examples
-Negotiating longer payment terms with vendors before buying from them -Requiring deposits from customers before fulfilling their orders -Asking for temporary free rent or reduced rent -Utilizing incubator space and/or resources -Trading services (an entrepreneur creates marketing pieces for a fellow entrepreneur in exchange for that entrepreneur doing his business' tax return)
The resource Mix
-One of the secrets of constructing this resource mix is to maintain FLEXIBILITY by acquiring and owning only those resources that cannot be obtained by any other means. -Ownership of assets reduces flexibility and mobility, two critical needs of a start-up venture.
Corporation
-Supreme Court definition: "An artificial being, invisible, intangible, and existing only in contemplation of the law." -Powers include right to: -> Sued and be sued -> Acquire-sell real property -> Lend money -Owner's rights: -> Stockholders invest capital in exchange for shares in stock -> No personal liability for the corporation's debts -> Can only lose the money they invest
Disadvantages of Sole Proprietorship
-Owner has unlimited liability for all claims against the business ->Any and all debts or claims against the business must be paid from the owner's business or personal assets -Difficult for the owner to raise debt capital because the ownership cannot be shared -Survival of the business depends upon the survival of the owner Most sole proprietorships are salary-substitute or lifestyle firms - are typically a poor choice for aggressive entrepreneurship firms
Partnership Disadvantages
-Partners personally liable for all business debts and obligations -Individual partners can bind the partnership (and hence the other partners) contractually -Technical Partnership Dissolution results when a partner leaves or dies (unless otherwise stated in a written partnership agreement) -Partners can be sued individually for the full amount of partnership debt and obligations -Taxed on earnings whether distributed or not
Patent Infringement
-Patents give the holder right to enforce the patent -Defense costs in term of time and money often make it difficult for small business to enforce their patents
Start-up resources include:
-People (founding team, employees, advisers, independent contractors) -Physical Assets (equipment, inventory, office or plant space) -Financing (cash, equity, debt) At start up, the goal is to create a mix of resources that will enable the venture to start and operate until the revenues of the business produce a positive cash flow
5 impacts of Insufficient Resources
-Poor execution -Time to market increases -First to market opportunities are missed -Projects are made simpler -Team morale declines
Patents
-Primary means of protecting an original invention -Patent process: ->Designed by Thomas Jefferson in 1790 ->Designed to provide brief legal monopoly to give the inventor an opportunity to get the invention to market and recoup dvmt costs before competitors entered the market ->Designed to provide inventors with a financial incentive to invent
Pricing Strategies
-Product pricing is part of both the marketing strategy and the financial strategy. -Marketing strategy: How do you want to position your product/service in the market? -Financial Strategy: If the goal is maximize cash flow, raising prices and/or lowering direct costs may be the answer If the goal is to increase market share, prices may need to be lowered Customer goals also influence the entrepreneur's pricing strategies Are you targeting a price sensitive customer? Are you targeting a customer who has cash and needs their problem solved?
Nonprofit corporation disadvantages
-Profits can be distributed as dividends -Corporate money cannot be contributed to political campaigns or used for lobbying -Entrepreneur gives up proprietary interest in the corporation and whatever contributes to it -Upon dissolution, all assets must transfer to another tax-exempt nonprofit organization -
Common Mistakes in Developing a Business Plan
-Projecting rapid growth beyond the capabilities of the founding team -Developing a plan whose success is 100% reliant on the efforts of one entrepreneur ->Investors prefer teams to solo entrepreneurs and like to see multiple functional areas of expertise represented on the team -Projecting performance that exceeds industry averages w/out justifying such performance with a stated competitive advantage -Underestimating the venture's need for capital -Mistaking tactics for strategy -> Ex: Using price as a "marketing strategy" for a product/service -The entrepreneur not personally investing in the business
Projects are made simpler
-Projects are "dumbed down" or key features are deleted -Game-changing opportunities are bypassed in favor of cheaper opportunities involving only incremental innovation -As a result, competitive advantage may be reduced or lost entirely
The Product Dvmt Cycle
-Prototype building and field testing -> Almost every new product/service requires some type of prototype - which may resemble the finished product/service only in function (not appearance) -> Get qualified people (only) to help you develop your prototypes -Initial Market Tests (with your prototype) -> Use this as an opportunity yo get feedback (don't get angry or depressed) and modify/refine your product/service as needed -Market introduction and ramp up -> Take the time to consider how to replicate your product/service at the lowest possible cost
First to market opportunities are missed
-Research has shown that being 1st to market has long-term business benefits -A first to market opportunity may be squandered if, due to a lack of resources, it takes the entrepreneur too long to create his final product/service and, as a result, another entrepreneur beats her to market
Partnership Advantages
-Same advantages of sole proprietorships -Shared risk of doing business -Shared partner clout with multiple financial statements -Shared ideas, expertise, decision making -Partners receive pass-through earnings and losses taxed once at their personal tax rates (Schedule K-1 is included in each partner's annual Form1040)
Benchmarks for an effective founding team
-Shared vision between the lead entrepreneur and the team -Shared passion leading to shared hard work -Industry experience relevant to the new venture -Solid industry contacts and contacts with capital -All functional areas of the business are represented -All team members have solid personal credit ratings -Team members have the time, money and physical stamina to endure the pressures and constraints associated with startups
The Nature of Product/Service Dvmt
-Sophisticated customers generally exist in fragmented markets -> Customers can differentiate products on a very subtle level ->They demand products that reflect their individual lifestyles and value systems ->A company must offer superior performance and value-based pricing to even begin to be competitive
When developing Pro Forma (Projected) Financials
-Start the process by writing down assumptions and knowledge (Do not attempt to leap right into generating numbers.) -Talk to customers, industry experts, suppliers and distributors in order to estimate new product/service demand -Add the entrepreneur's knowledge about the characteristics of the product/ service/ business/ industry to determine costs -Plan to go into limited production at first
How entrepreneurs develop products and services
-Strategies to consider to compete effectively in product dvmt: -> Design products right the first time -> Do what you can to shorten the time to market ->Outsource certain product development tasks
Outsourcing with Independent Contractors
-There are very strict rules defining employees vs. independent contractor relationships -If you treat someone as an IC and the IRS later defines them as your employee, your business is on the hook to pay both sides of any unremitted payroll tax, plus penalties and interest -It is always wise to verify that the IC has the appropriate/relevant licenses to practice.do business before hiring them -To reasonably ensure compliance with IRS regulations: ->Draw up a contract in which you indicate that you are paying (only) for a desired result that will be delivered at an agreed upon time in an agreed upon form and make no attempt to control when, where or how the IC completes the work ->Verify the IC has workers' compensation insurance -> Verify that you are no the IC's only client
Learning from Real-Life Dilemmas
-There is no better way to understand the role of ethics in any business than to encounter real-world dilemmas and determine how they might be resolved
Bankers'/Lenders Interests and Concerns
-They want to understand the company's margins and cash flow projections ->They want to see how and when cash will be generated so they can understand how and when they will be repaid -They want to know the specific amount of money needed -They want to understand the kind of positive impact the loan will have on the business ->They prefer to see the money used to grow a business, rather than to pay off old debts -They want to know the kinds of assets the business has to put up for collateral -They want to know how the bank will be projected if the business does not meet its projections ->What is the entrepreneur's Plan B? Plan C? -They want to know the entrepreneur's stake in the business ->They want to see that the entrepreneur has substantial "skin in the game"
The Impact of Technology
-Today the marginal cost of added tech is usually small, therefore, a growing business should not build its competitive advantage around technology alone -The entrepreneur needs to create differentiated products that meet specific customer needs in a way that is hard for the competition to replicate -Technology has significantly shortened the product life cycle of almost every product
Foreign Patents
-U.S. patent rights extend only to the borders of the United States. -Every country has different laws regarding intellectual property, although countries are working to develop an international patent system. -If attempting to obtain foreign patents, be sure to hire an intellectual-property attorney who is knowledgeable in that area.
Patents
-US Patent and Trademark Office (USPTO) criteria for patentability: ->The invention must be novel (at least some aspect of it must be new) ->The invention must not be non-obvious (ex: can't patent the process of how to hammer a nail) ->The invention must have utility (it must be useful) -> The invention must fit into one of the 5 classes established by Congress 1. Machine or something with moving parts circularly 2. Process or method for producing a useful and tangible result 3. Article of manufacture (ex: a hammer or shoes) (Articles of manufacture may have parts, but any interaction among the parts is usually static) 4. Composition of matter (ex: a new drug) 5. A new use or improvement of one of the above that does not infringe on the patents associated with them
start-up financials
-What are your start-up capital requirements? -What are your working capital requirements? -When will revenue first be generated? -How long will it take to achieve positive net income and positive cash flow once revenues are generated? -What is the break-even point for business?
Effective Founding Teams
-Why do entrepreneurial TEAMS tend to lead to a better chance for new venture success? -> The team shares the intense effort required to start a new venture ->The loss of one member is less likely to result in start-up abandonment ->The team concept allows for expertise across the major business functional areas: marketing, finance, operations, etc -> A skilled team lends credibility to a start-up
Founding Team Quiz
1. What are your core values? 2. What is your short-term/ long-term goal for this business? 3. What do you see as your role in the business? Why? 4. What will you contribute 5. How should ownership be divided 6. How should decisions be made 7. How is your personal credit 8. What is your life-style goal 9. What are your work habits 10. What about you don't we know that we need to know to increase this business' chances for success?
Making a Decision About Legal Form
Ask the right Q's -Does the founding team have the necessary operational skills to handle the applicable legal requirements? -Do the founders have the required start up capital? -Are the founders willing/able to assume personal liability for claims against the business? -Do the founders wish to have complete control over operations? -Do the founders expect initial losses? -Do the founders expect to sell the business some day?
Reviewing Pro Forma Statements
Assessing financial risk -> Is the business financially feasible? -> Is there enough projected income to make the effort of starting this business worthwhile?
legal form of business
Choosing the right legal form of business depends upon: -Legal and tax ramifications -Liability issues -Operational control issues -Long-term intent regarding the business -Need to raise capital, now or the future
Pushing the Legal Limit
Entrepreneurs who regularly play too close to the edge of legality eventually get caught and the price is often their businesses and their reputations.
Professional Service Corporations
Ex: Firms formed by CPA's, doctors, architects, attorneys -Anyone who holds shared in the corporation must be licensed to provide the service it offers -Some states require this legal form -35% flat tax rate... but the tax is rarely paid -> Income is typically "bonus-ed out" -Benefit: Limited liability with regard to legal issues outside of the area of professional malpractice
demand-based pricing
Find out what customers are willing to pay at different demand levels and price accordingly (i.e., the price of gasoline)
Is it always necessary to prepare a business plan?
No- Many successful business have been started without a business plan Why bother? -Because it's good to know what's coming so you can plan and prepare for it
premium pricing
High price reflects a truly unique product/service and a significant competitive advantage.
Strategic Partners and Alliances
If they exist, significant strategic partnerships and alliances should be included in the Plan. -Examples: ->Licensing another firm to test, manufacture and/or assemble your product ->Supplying raw materials (or a component or product) to another venture in exchange for an equity interest in that venture ->Co-creating a needed part/component via joint venture -May be in the form of formal partnership agreements or informal agreements like purchase contracts
product bundle pricing
In a channel with many intermediaries, it is important to ensure that the final price to the consumer is tolerable, given all the mark-ups along the value chain (example: an internet, home phone and cable service bundle).
Team morale declines
Its stressful to feel you must "accomplish the impossible on the shoestring budget"
Trademarks-
Logos- Starbucks, McD, Windows Vista, Slogans- Wendy's -> "Where's the beef", American Express -> "Don't leave home without it"
limited Partnership
Partners are only liable up to the amount of their investment (usually formed to raise money)
Common Start-Up Pricing Strategies
Premium Pricing Price Skimming Demand-based Pricing Captive Product Pricing Psychological Pricing Product Bundle Pricing Geographical Pricing
Limited Liability Company
Privately-held companies which incorporate under strict guidelines Advantages: -Can elect to be taxed like an S-Corp (Not subject to double taxation) -Limited Liability -Centralized management - members can elect managers who may or may not be members -Free transferability of interests -No limits on numbers or status - members hold interest not shares -Owners can be managed and have limited liability (this is not a true partnership)
A Potential Investor's Interest and Concerns
Rate of growth Return on investment Degree of risk Degree of protection against risk -They look for market-driven, rather than product or technology-driven companies -They expect predictions to be based on solid, objective evidence and demonstrate a thorough knowledge of the market industry -They want to know when and how their investment will be repaid -They want to see that the entrepreneur understands the risks and challenges at hand and has a plan for mitigating those risks
S-Corporation Disadvantages
Retained earnings may not be available for expansion or diversification of the company as S-Corps tend to distribute all or most of their earnings to their owners -Taxed on earnings whether distributed or not -No deductions for many "employee-owner" fringe benefits -> Ex: health benefits provided to employee-owners -> Check with your CPA for annual changes
price skimming
Start with a high price. Drop price as competitors enter the market.
preparing a business plan
Tasks to guide the preparation of the Plan (or the completion of any major project): -Identify what needs to be done -Identify who is responsible for what -Develop a timeline based on the tasks identified -Select a leader to: ->Review scheduled progress reports from the teams ->ensure everyone is working diligently to get the plan done ->hold the team to the timeline
Constructing a Business Process Map
The Q to answer: -Who does the work in this business? -Where do these people work? -What do they need to do the work? -What info is being generated? -Where does that info go? Must make lists of 1) the tasks that need completed and 2) the equipment/people/other resources needed to complete those tasks in order to develop financial projections
Preparing Pro Forma Statements
The basic Income Statement: Revenue - Cost of Goods = Gross Profit Gross Profit- Operating (& other) expenses= Net Income (Or profit) The simplified cash flow statement: Beginning cash+Expected cash receipts-Expected cash disbursements+/- Changes in balance sheet accounts / Ending cash
Intellectual property (IP) rights
The group of legal rights associated with patents, trademarks, copyrights, and trade secrets
Create a Strong Ethical Culture
The importance of developing a Code of Conduct: -When a Code of Conduct is written down, people in the organization tend to take it more seriously The entrepreneur must lead by example: -Communicate ethics as a priority -Set a good example of ethical conduct -Keep commitments -Provide information about what is going on (be transparent) -Support following (and follow!) the Code of Conduct
Survival Tactics
What an entrepreneur does today out of desperation will follow him for the rest of his business career
Preparing Pro Forma Statements
What statements does the entrepreneur really need to prepare? 1. A month by month schedule of the costs that will be incurred prior to revenue being generated 2. A beginner (pre-revenue) balance sheet 3. A month by month first year income statement 4. An end of the first year balance sheet 5. Annual income statements for years 2-5 of the business
Poor execution
When critical due diligence and market analysis are bypassed in favor of speed, execution typically suffers
captive product pricing
When the product/service has complements, charge a low price for the base product (i.e., printer) and a premium for consumables (i.e., ink cartridges).
Time to market increases
When there are not enough people to do the work - or the work needs to be re-done because unqualified people did it the 1st time - time to market increases
C Corporation
Where to incorporate: 1) In the state in which the business is locates 2) Alternatively, in states with more favorable tax laws -> Do your homework 3) Delaware - if seeking venture capital or intend to go public -> Cheaper to get the large amount of authorized shares needed -> Courts deemed most favorable to business
Starting a Business Before Doing the Business Plan
Why might it make sense to start a business after preparing a feasibility analysis but before preparing a business plan? -A desire to avoid losing a "first market" opportunity -A desire to first get "traction" with business in order to more easily obtain outside funding -A desire to get the business up and running and learn about an industry before writing a business plan (the more you know when you first write the plan, the less you have to change it later)
Questions to Assist With Ethical Decision-Making
Will the actions taken result in the "greatest good for all parties involved?" -Will the actions respect the rights of all parties? -Are the actions just? -Will anyone be hurt by the actions? -Would I be proud of my actions if they were announced in my local newspaper?
Social Responsibility
operating a business in a way that exceeds the ethical, legal, commercial and public expectations that society has of business
Outsourcing with Independent Contractors
๏ Independent contractors (ICs) own their own businesses and are hired by the entrepreneur to do a specific job. • Including: consultants, manufacturers, distributors, employee leasing firms, and professional advisers. • Hidden costs: ‣Searching and contracting ICs ‣Transferring activities to ICs ‣Managing IC (contract dvmt, confidentiality issues, etc) ‣Cost of getting IC "up to speed" with regard to the entrepreneur's business; the cost associated with eventually having to bring the activity "in-house"
