BUS 401

Why is knowing the financial performance of similar business beneficial to start ups?

Financial Performance of Similar Businesses - second component of financial feasibility analysis is estimating a proposed start-up's potential financial performance by comparing it to similar, already established businesses. - approximate rather than exact numbers. - substantial archival data, which offers detailed financial reports on thousands of individual firms, is available online. - easiest data to obtain is on publicly traded firms through Hoovers or a similar source. - firms are typically too large, however, for meaningful comparisons to proposed new ventures. - challenge is to find the financial performance of small, more com- parable firms. - TheCompany provide data on the average sales and profitability for the firms in the industries they track. - ReferenceUSA provides revenue estimates for many private firms, but fewer libraries subscribe to its service. - expense side, a very useful website is BizStats.com, where an entrepreneur can type in the projected revenue of his or her firm, by industry classification (not all industries are covered), and receive a mock income statement in return that shows the average profitability and expense percentages of U.S. businesses in the same category. - IBISWorld also normally provides a chart of the average expenses (as a percentage of sales) for major items such as wages, rent, office and administrative expenses, and utilities for firms in the industries they follow. - BizMiner provides a printout of the average sales and profitability for firms in the industries it follows and provides more detail than similar reports. - If a start- up entrepreneur identifies a business that is similar to the one to be started, and the business isn't likely to be a direct competitor, it is perfectly acceptable to ask the owner or manager of the business to share sales and income data. - Even if the owner or manager is only willing to talk in general terms - Simple observation and legwork is a final way to obtain sales data for similar businesses. - basic way to do this is to frequent these stores and count the number of customers who come in and out of the stores during vari- ous times of the day

How do you determine the Overall Financial Attractiveness of the Proposed Venture?

Overall Financial Attractiveness of the Proposed Venture - evaluating the financial attrac- tiveness of a proposed venture. T - evaluations are based primarily on a new venture's projected sales and rate of return (or profitability), - projected return is a judgment call. - more precise estimation can be computed by preparing pro forma (or projected) finan- cial statements, including one- to three-year pro forma statements of cash flow, income statements, and balance sheets (along with accompanying financial ratios). - done at the business plan stage rather than the feasibility analysis stage of a new venture's development. - start-up's projected rate of return should be weighed against the following factors to assess whether the venture is financially feasible: - ■■The amount of capital invested - ■■The risks assumed in launching the business - ■■The existing alternatives for the money being invested - ■■The existing alternatives for the entrepreneur's time and efforts - some opportunities simply may not be worth it financially. - Steady and rapid growth in sales during the first five to seven years in a clearly defined mar- ket niche ■■ High percentage of recurring revenue—meaning that once a firm wins a client, the client will provide recurring sources of revenue - ■■ Ability to forecast income and expenses with a reasonable degree of certainty - ■■ Internally generated funds to finance and sustain growth - ■■ Availability of an exit opportunity (such as an acquisition or an initial public offering) for investors to convert equity into cash

Explain advertising as a revenue stream.

Revenue generated from advertising a particular product or service in a newspaper, magazine, website, or in some other manner.

What is a Razor and Blades Business Model?

This model involves the sales of dependent goods for different prices—one good (a razor) is sold at a discount, with the dependent good (blades) sold at a considerably higher margin. -Game Consoles and Games, Mobile Phones and Air Time, Printers and Ink Cartridges

What is creativity?

- Creativity is the process of generating a novel or useful idea. - Opportunity rec- ognition may be, at least in part, a creative process. - easy to see the creativity involved in forming many products, services, and businesses. - teams of entrepreneurs working within a company are sources of creativity for their firm.2

What are some other techniques to generating ideas?

- Firms use a variety of other techniques to generate ideas. - customer advisory boards that meet regularly to discuss needs, wants, and problems that may lead to new ideas. - Other companies conduct varying forms of anthropological research, such as day-in-the-life research.

What is a lifestyle firm?

- Lifestyle firms provide their owner or owners the opportunity to pursue a particular lifestyle and earn a living while doing so. - Lifestyle firms include personal trainers, golf and tennis pros, owners of bed & breakfasts, and tour guides. - not innovative, nor do they grow quickly. - promote a particular sport, hobby, or pastime and may employ only the owner or just a handful of people.

What cognitive factors may be a characteristics of entrepreneurs?

- Opportunity recognition may be an innate skill or a cognitive process. - entrepreneurial alertness, which is formally defined as the ability to notice things without engaging in deliberate search. - Most entrepreneurs see themselves in this light, believing they are more "alert" than others. - Alertness is largely a learned skill, and people who have more knowledge of an area tend to be more alert to opportunities in that area than others. - Some researchers conclude that alertness goes beyond noticing things and involves a more purposeful effort. - crucial difference between opportunity finders (i.e., entrepreneurs) and nonfinders is their relative assessments of the marketplace.2

What are Characteristics of Successful Entrepreneurs?

- Passion for the business - Product/customer focus - Tenacity despite failure - Execution intelligence

What is a product/market scope?

- Product/market scope is the fourth element of core strategy. A - product/market scope defines the products and markets on which it will concentrate. - Most firms start narrow and pursue adjacent prod- uct and market opportunities as the company grows and becomes financially secure. - new firms typically do not have the resources to produce multiple products and pursue multiple markets simultaneously. - a company should be very clear about its initial product/market scope and project 3-5 years into the future in terms of anticipated expansion.

What is a product/service feasibility analysis?

- Product/service feasibility analysis is an assessment of the overall appeal of the product or service being proposed. - many important things to consider when launching a new venture, nothing else matters if the product or service itself doesn't sell. - two components to product/ service feasibility analysis: product/service desirability and product/service demand. - Part 1: Product/Service Feasibility A. Product/service desirability B. Product/service demand - Part 2: Industry/Target Market Feasibility A. Industry attractiveness B. Target market attractiveness - Part 3: Organizational Feasibility A. Management prowess B. Resource sufficiency - Part 4: Financial Feasibility A. Total start-up cash needed B. Financial performance of similar businesses C. Overall financial attractiveness of the proposed venture - Overall Assessment

What are strong and weak tie relationships?

- Relationships with other people are called "ties. - Strong-tie relationships are characterized by frequent interaction, such as ties between coworkers, friends, and spouses. - Weak-tie relationships are characterized by infrequent interaction, such as ties between casual acquain- tances. - more likely that an entrepreneur will get a new business idea through a weak-tie than a strong-tie relationship, because strong-tie relationships —which typically form between like-minded individuals —tend to reinforce insights and ideas the individuals already have. - Weak-tie relationships, on the other hand, which form between casual acquain- tances, are not as apt to be between like-minded individuals, so one person may say something to another that sparks a completely new idea.

What are Entrepreneurial Firms' Impact on Society?

- Think of all the new products and services that make our lives easier, enhance our productivity at work, improve our health, and entertain us. - Dramatic impact - innovations do create moral and ethical issues with which societ- ies are forced to grapple.

Are start ups successful?

- United States, according to the Bureau of Labor Statistics, over half the businesses started are still in existence five years later.4 The number drops to just over a third after 10 years, but some of the businesses disappeared because they were successful and were sold or were acquired by another firm. - motivation must be coupled with a solid business idea, good financial management, and effective execution to maximize chances for success.

Why is the First Screen template useful?

- called First Screen because a feasibility analysis is an entrepreneur's (or a group of entrepreneurs') initial pass at deter- mining the feasibility of a business idea. - If a business idea cuts muster at this stage, the next step is to complete a business plan. - It maps the four areas of feasibility analysis - "Overall Potential," includes a section that allows for suggested revi- sions to a business idea to improve its potential or feasibility. - Business ideas at the feasibility analysis stage should always be seen as fluid and subject to change. - much more to be lost if a start-up gets halfway through writing a business plan and concludes that the business isn't feasible, or actually launches a business without having at least most of the kinks worked out. - best ideas are ones that emerge from analysis that is based on facts and good information, rather than speculation and guesses, - important to be completely candid when completing First Screen for your business idea. - no definitive way of discerning, after the worksheet is completed, if an idea is feasible. - meant to convey an overall impression or sense of the feasibility of a business idea.

What is a basis of differentiation?

- important that a business clearly articu- late the points that differentiate its product or service from competitors. - company's value proposition - A company's basis of differentiation is what causes consumers to pick one company's products over another's.1 - solves a problem or satisfies a customer need. - completing the basis for differentiation portion of the Barringer/ Ireland Business Model Template, it is best to limit the description to two to three points. - make sure that the value of the points is easy to see and understand. - Making certain that your points of differentiation refer to benefits rather than features is another important point to remember when determining a firm's basis of differentiation. P - Points of differentiation that focus on features, such as the technical merits of a product, are less compelling than those that focus on benefits, which is what a product can do. - features are nice, they typically don't entice someone to buy a product.

What is object recognition?

- opportunity recognition refers to the process of perceiving the possibility of a profitable new business or a new product or service. - an opportunity cannot be pursued until it's recog- nized.

What are the Types of Nonfinancial Resources That Are Critical to Many Start-Ups' Success?

Affordable office space ■■ Lab space, manufacturing space, or space to launch a service business ■■ Contract manufacturers or service providers ■■ Key management employees (now and in the future) ■■ Key support personnel (now and in the future) ■■ Key equipment needed to operate the business (computers, machinery, delivery vehicles) ■■ Ability to obtain intellectual property protection on key aspects of the business ■■ Support of local governments and state government if applicable for business launch ■■ Ability to form favorable business partnerships

What are Advertising Business Models?

Business model based on providing advertisers access to highly targeted customer niches. -Google, Facebook, Pinterest

What are Auction Business Models?

Currently synonymous with eBay, the auction business model has been around since 500 bc. The idea is to provide a platform for individuals and businesses to sell items in an auction format. -eBay, uBid.com

What are the 5 stages of the creativity process?

- 1) Preparation is the background, experience, and knowledge that an entrepreneur brings to the opportunity recognition process. - research suggest that as much as 50 to 90 percent of start-up ideas emerge from a person's prior work experience. - 2) Incubation is the stage during which a person considers an idea or thinks about a problem; it is the "mulling things over" phase. - Some- times incubation is a conscious activity, and sometimes it is unconscious and occurs while a person is engaged in another activity. - 3) Insight is the flash of recognition when the solution to a problem is seen or an idea is born. - "eureka" experience. - moment an entrepreneur recognizes an opportu- nity. - Sometimes this experience pushes the process forward, and sometimes it prompts an individual to return to the preparation stage. - 4) Evaluation is the stage of the creative process during which an idea is subjected to scrutiny and analyzed for its viability. - Many entrepreneurs mistakenly skip this step and try to implement an idea before they've made sure it is viable. - Evaluation is a particularly challenging stage of the creative process because it requires an entrepreneur to take a candid look at the viability of an idea. - 5) Elaboration is the stage during which the creative idea is put into a final form: The details are worked out and the idea is transformed into something of value, such as a new product, service, or business concept. - point at which a business plan is written.

What are the technological advances that help determine business ideas?

- Advances in technology frequently dovetail with economic and social changes to create opportunities. - Technological advances also provide opportunities to help people perform everyday tasks in better or more convenient ways. F - once a technology is cre- ated, products often emerge to advance it. - growing num- ber of start-ups working on smartphone apps - Smartphones, Wearable technology

What are the changes in women entrepreneurs?

- American Express OPEN, as of 2016, there were 11.3 million women-owned busi- nesses in the United States. - Between 2007 and 2016, the number of women-owned firms increased by 45 percent, compared to just a 9 percent increase among all businesses. - over the past nine years, the number of women-owned businesses has grown at a rate five times faster than the national average. - Women are now the majority owners of 38 percent of U.S businesses, - Of the 11.3 million women-owned firms, 44 percent are owned by minorities. T - 10 states home to the greatest number of women-owned businesses are California, Texas, Florida, New York, Georgia, Illinois, Michigan, Ohio, North Carolina, and Pennsylvania. - Other Services (such as hair and nail salons and pet care businesses), Health Care and Social Assistance (such as child day care and home health care services), Professional/scientific/ technical services (such as lawyers, accountants, and architects), and Adminis- trative Support and Waste Management Services (such as office administrative support and travel agencies).

What is Primary and Secondary research?

- Completing a feasibility analysis requires both primary and secondary research. - Primary research is research that is collected by the person or persons completing the analysis. o normally includes talking to pro- spective customers, getting feedback from industry experts, conducting focus groups, and administering surveys. - Secondary research probes data that is already collected. The data generally includes industry studies, Census Bureau data, analyst forecasts, and other pertinent information gleaned through library and Internet research. - should be emphasized that while a feasibility analysis tests the merits of a specific idea, it allows ample opportunity for the idea to be revised, altered, and changed as a result of the feedback that is obtained and the analysis that is conducted. - key objective behind feasibility analysis is to put an idea to the test—by eliciting feedback from potential customers, talking to industry experts, studying industry trends, thinking through the financials, and scrutinizing it in other ways. - types of activities not only help determine whether an idea is feasible but also help shape and mold the idea. - better to know early rather than later if an idea doesn't have sufficient merit to become a business.

What are The Positive Effects of Entrepreneurship and Entrepreneurial Firms? What is creative destruction?

- Creative destruction - entrepreneurs develop new products and technologies that over time make current products and technolo- gies obsolete. - new products and technologies are typically better than those they replace and the availability of improved products and technologies increases consumer demand, creative destruction stimulates economic activity. - new products and technologies may also increase the productivity of all elements of a society. - creative destruction process is initiated most effectively by start-up ven- tures that improve on what is currently available. - Small firms that practice this art are often called "innovators" or "agents of change." - process of creative destruction is not limited to new products and technologies; it can include new pricing strategies (e.g., Warby Parker in eyewear), new distribution channels (such as e-books for books), or new retail formats (such as IKEA in furniture and Whole Foods Market in groceries).

What are disruptive business models? What are the types?

- Disrup- tive business models, which are rare, are models that do not fit the profile of a standard business model, and are impactful enough that they disrupt or change the way business is conducted in an industry or an important niche within an industry. - three types of disruptive business models. - 1) new market disruption addresses a market that pre- viously wasn't served. - 2) low-end market disruption. This is a type of disruption is possible when the firms in an industry con- tinue to improve products or services to the point where they are actually better than a sizable portion of their clientele's needs or desires. - "perfor- mance oversupply" creates a vacuum that provides an opportunity for simple, typically low-cost business models to exist. - Low-end disruptive business models are also introduced to offer a simpler, cheaper, or more convenient way to perform an everyday task. - If a start-up goes this route, the advantages must be compelling and the company must strike a nerve for disruption to take place.

What are entrepreneurial firms? What is value?

- Entrepreneurial firms bring new products and services to market. - essence of entrepreneurship is creating value and then dissemi- nating that value to customers. - value refers to worth, importance, or utility. - Entrepreneurial firms bring new products and services to market by creating and then seizing opportunities. - Having recognized an opportunity, the entrepreneurs leading companies of this type create products and services that have worth, are important to their customers, and provide a measure of usefulness to their customers that they wouldn't have otherwise. - they partner with other firms and organizations, often to obtain the boost they need to realize their full potential.

What is a feasibility analysis?

- Feasibility analysis is the process of determining if a business idea is viable - If a business idea falls short on one or more of the four compo- nents of feasibility analysis, it should be dropped or rethought, - Many entrepreneurs make the mistake of identifying a business idea and then jumping directly to developing a business model (see Chapter 4) to describe and gain support for the idea. - mental transition must be made when completing a feasibility analysis from thinking of a business idea as just an idea to thinking of it as a busi- ness. - feasibility analysis is an assessment of a potential business rather than strictly a product or service idea. - Feasibility analysis is investigative in nature and is designed to critique the mer- its of a proposed business. - four key areas: product/service feasibility, industry/target market feasibility, organizational feasibility, and financial feasibility.

What is the economic impact of entrepreneurial firms? What is innovation?

- For two reasons, entrepreneurial behavior has a strong impact on an economy's strength and stability. - Innovation is the process of creating something new, which is central to the entrepreneurial process. - Job Creation. According to the SBA, small businesses create a substantial number of net new jobs in the United States. - key factor cited for the ability of small firms to create jobs is their skill when it comes to wisely and effectively deploying capital resources.5 - not the size of a business that matters as much as its age. C - Companies less than one year old have created an average of 1.5 million jobs per year over the past 30 years.

How can gaps in the marketplace be a source for business ideas?

- Gaps in the marketplace are the third source of business opportunities. - many examples of products that consumers need or want that aren't avail- able in a particular location or aren't available at all. - the reason that clothing boutiques, specialty shops, and e-commerce websites exist. These businesses are willing to carry merchandise that doesn't sell in large enough quantities for Walmart and Costco to carry - Product gaps in the marketplace represent potentially viable business oppor- tunities. - Gaps in the marketplace are commonly recognized when people become frustrated because they can't find a product or service they need and recog- nize that other people feel the same way. - Sometimes gaps in the marketplace are noticed via serendipity or chance, similar to the way that problems that need to be solved are spotted. A - One thing entrepreneurs must remain mindful of in pursuing business opportunities, regardless of whether the opportunity results from changing envi- ronmental trends, solving a problem, or finding gaps in the marketplace, is

What is the GEM?

- Global Entrepreneurship Monitor (GEM). GEM, which is a joint research effort among several international universities and the Interna- tional Council for Small Business, tracks entrepreneurship in 112 countries, including the United States. - interest to GEM is total early stage entrepreneurial activity (TEA), which consists of businesses that are just being started and businesses that have been in existence for less than three and a half years. - high- est rates of entrepreneurial start-up activities occur in low-income countries, - identifies whether its respondents are starting a new business to take advantage of an attractive opportunity or because of necessity to earn an income. - criticism of entrepreneurship, which is often repeated in the press, is that the majority of new businesses fail.

What is a industry/target market feasibility assessment? What are the 2 components?

- Industry/target market feasibility is an assessment of the overall appeal of the industry and the target market of the product or service being proposed. - distinct difference between a firm's industry and its target market; - An industry is a group of firms producing a similar product or service, such as computers, children's toys, airplanes, or social networks. - A firm's target market is the portion of the industry that it goes after or to which it wants to appeal. - Most firms, and cer- tainly entrepreneurial start-ups, typically do not try to service an entire indus- try. - Instead, they select or carve out a specific target market and try to service that group of customers particularly well. - two components to industry/target market feasibility analysis: industry attractiveness and target market attractiveness.

What are the different types of key assets?

- Key assets are the assets that a firm owns that enable its busi- ness model to work.2 - assets can be physical, financial, intellectual, or human. - Physical assets include physical space, equipment, vehicles, and distri- bution networks. - Intellectual assets include resources such as patents, trade- marks, copyrights, and trade secrets, along with a company's brand and its reputation. - Financial assets include cash, lines of credit, and commitments from investors. - Human assets include a company's founder or founders, its key employees, and its advisors. - Firms vary regarding the key assets they prioritize and accumulate. - All com- panies require financial assets to varying degrees. - different key resources are needed depending on the business model that a firm conceives. I - filling out the Barringer/Ireland Business Model Template, a firm should list the three to four key assets that it possesses that support its business model as a whole. - some cases, the ongoing suc- cess of a firm's business model hinges largely on a single key resource

How can library, internet, and gumshoe research help determine demand?

- Library, Internet, and Gumshoe Research. - Although talking to prospective customers is critical, col- lecting secondary data on an industry is also helpful. - need feedback from prospective customers and industry-related data - for your particular product or service you need archival as well as primary forms of research to assess likely demand. - university or college library is a good place to start, and the Internet is a mar- velous resource. - typing a query into the Google or Bing search bar s - Simple gumshoe research is also important for gaining a sense of the likely demand for a product or service idea. A - gumshoe is a detective or an investiga- tor that scrounges around for information or clues wherever they can be found. - Ask people what they think about your product or service idea. - Collect as much information as you can within reasonable time constraints. - building a prototype of the product and testing it with potential customers. - end goal is to build the version of your product that customers want rather than the version you set out to build and hope customers will buy.

What are the three approaches entrepreneurs use to identify an opportunity their new venture can choose to pursue?

- Observing trends, solving a problem, finding gaps in the marketplace

What is a salary-substitute firm?

- Salary-substitute firms are small firms that yield a level of income for their owner or owners that is similar to what they would earn when working for an employer. D - Dry cleaners, convenience stores, restaurants, accounting firms, retail stores, and hairstyling salons are examples - vast majority of small businesses - offer common, easily available and not particularly innovative products or services to customers.

What are common myths about entrepreneurs?

- Some misconceptions develop because of the media covering atypical entrepreneurs, - rarely state that these entrepreneurs are the exception rather than the norm and that their success is a result of carefully executing an appropriate plan to commercialize what inherently is a solid business idea. - Myth 1: Entrepreneurs are born, not made - mistaken belief that some people are genetically predisposed to be entrepreneurs. - no one is "born" to be an entrepreneur and that everyone has the potential to become one - Whether someone does or doesn't is a function of environment, life experiences, and personal choices. - traits are developed over time and evolve from an individual's social context. - people with self-employed parents are more likely to become entrepreneurs. - people who personally know an entrepreneur are more than twice as likely to be involved in starting a new firm as those with no entrepreneur acquaintances or role models. - direct observation of other entrepreneurs reduces the ambiguity and uncertainty associated with the entrepreneurial process. Myth 2: Entrepreneurs Are Gamblers - entrepreneurs are usually moderate risk takers, as are most people. - First, entrepreneurs typically have jobs that are less structured, and so they face a more uncertain set of possibilities than man- agers or rank-and-file employees. - Second, many entrepreneurs have a strong need to achieve and often set challenging goals, a behavior that is sometimes equated with risk taking. Myth 3: Entrepreneurs Are Motivated Primarily by Money - money is rarely the primary reason entrepreneurs start new firms and persevere. - Some entrepreneurs warn that the pursuit of money can be distracting. Myth 4: Entrepreneurs Should Be Young and Energetic - Entrepreneurial activity is fairly evenly spread out over age ranges. - majoity of business owners have work experience prior to launching a new venture. - investors often cite the strength of the entrepreneur (or team of entrepreneurs) as their most important criterion in the decision to fund new ventures - venture capitalists often express is that they would rather fund a strong entrepreneur with a mediocre business idea than fund a strong business idea and a mediocre entrepreneur. - What makes an entrepreneur "strong" in the eyes of an investor is experience in the area of the proposed business, skills and abilities that will help the business, a solid reputation, a track record of success, and passion about the business idea. Myth 5: Entrepreneurs Love the Spotlight - vast majority of them do not attract public attention. - many entrepreneurs, because they are working on proprietary products or services, avoid public notice - avoided attention or been passed over by the popular press.

Why do people want to pursue their own ideas?

- Some people are naturally alert, and when they recognize ideas for new prod- ucts or services, they have a desire to see those ideas realized. - Corporate entre- preneurs who innovate within the context of an existing firm typically have a mechanism for their ideas to become known. - Established firms, however, often resist innovation. W - Because of their passion and commitment, some employees choose to leave the firm employing them in order to start their own business as the means to develop their own ideas. - some people, through a hobby, leisure activity, or just everyday life, recog- nize the need for a product or service that is not available in the marketplace. - If the idea is viable enough to support a business, they commit tremendous time and energy to converting the idea into a part-time or full-time firm. - Many entrepreneurs experience tremendous satisfaction when their entre- preneurial idea catches on, and they see the positive results it creates.

What is the goal of a concept test?

- Statement can be used in an iterative manner to strengthen the product or service idea. - goal is to find a"product/ market fit" between the benefits your product or service offers and what your prospective customers need and require. - problem with not talking to potential customers prior to starting a busi- ness is that it's hard to know if a product is sufficiently desirable based simply on gut instinct or secondary research. - common reason new businesses fail is that there isn't a large enough market for the venture's product. - Rather than developing a formal concept statement, some entrepreneurs conduct their initial product/service feasibility analysis by simply talking through their ideas with prospective customers or conducting focus groups to solicit feedback. - ideal combination is to do both—distribute a concept state- ment to 25 or more people who can provide informed feedback and engage in verbal give-and-take with as many additional prospective customers and indus- try experts as possible. - online tools that help entrepreneurs quickly and inexpensively make contact with prospective customers and complete other steps in the feasibility analysis process. - tools range from services such as Growth Hackers, which is a forum suitable for getting feedback on business ideas and how to go about acquiring your first customers, to 3D printing services like Shapeways, which convert CAD drawings of product ideas into physical prototypes that you can show to potential cus- tomers.

What are the 4 steps of the entrepreneurial process?

- Step 1 Decision to become an entrepreneur o people become entrepreneurs to be their own bosses, to pursue their own ideas, and to pursue financial rewards. o triggering event prompts an individual to become an entrepreneur. - Step 2 Developing successful business ideas o Developing a successful business idea includes opportunity recognition, feasibility analysis, the develop- ment of an effective business model, industry analysis, and writing a business plan. o A firm's business model is its plan or recipe for how it creates, delivers, and captures value for its stake- holders. o Entrepreneurial firms need to have a crystal clear understanding of the issues concerned with creating, delivering, and capturing value if they are to be successful. I o business plan is a written document that describes all the aspects of a business venture in a concise manner. o usually necessary to have a written business plan to raise money and attract high-quality business partners. S o Writing a business plan forces an entrepreneur to think carefully through all the aspects of a business venture. o helps a new venture establish a set of milestones that can be used to guide the early phases of the business rollout. - Step 3 Moving from an idea to an entrepreneurial firm o first step in turning an idea into reality is to prepare a proper ethical and legal foundation for a firm, including selecting an appropriate form of business ownership. - Step 4 Managing and growing an entrepreneurial firm o Given today's competitive environment, all firms must be managed and grown properly to ensure their ongoing success.

What are key considerations when coming up with start-up cash?

- Total Start-Up Cash Needed - budget should be prepared that lists all the anticipated capital purchases and operating expenses needed to get the business up and running. - After determining a total figure, an explanation of where the money will come from should be provided. - Avoid cursory explanations such as "I plan to bring investors on board," or "I'll borrow the money." - thoughtful account is required of how you will provide for your initial cash needs. - If the money will come from friends and family or is to be raised through other means, such as credit cards or a home equity line of credit, a reasonable plan should be stipulated to repay the money. - Showing how a new venture's start-up costs will be covered and repaid is an important issue. - Many new ven- tures look promising as ongoing concerns but have no way of raising the money to get started or are never able to recover from the initial costs involved. - When projecting start-up expenses, it is better to overestimate rather than underesti- mate the costs involved. - rare start-up that doesn't experience some unexpected expenses during the start-up phase. - worksheets posted online that help entrepreneurs determine the start-up costs to launch their respective businesses.

How can online tools help assess demand?

- Utilizing Online Tools to Assess Demand. - online tools, such as administering surveys, utilizing Q&A sites, and conducting online marketing research. - Surveys are most effective in validating what you've learned from face-to- face interviews, rather than collecting initial data. - avoid confirmation bias, which is a tendency to search for information that vali- dates your preconceptions. - ask questions that allow for a wide range of responses. - better to not conduct a survey than to administer one in an uninformed and/or haphazard manner. - several Q&A sites that can be utilized to get feedback about product/service demand. - Quora is an excellent Q&A site. - Market research can also be completed online. - Google Trends, - combination of Google AdWords and landing pages. buy keywords on the Google search page. a link to an ad you have prepared will show up either at the top or to the right of the organic search results. - landing page is a single web page that typically provides direct sales copy, like "Click here to buy a Hawaiian vacation." - Google will provide you analytics regarding how many people click on the ad and how many follow through and provide their e-mail address. You can also capture the e-mail addresses that are provided. - eliciting responses from a self-selected group of potential buyers. - judgment call regarding how many clicks represent an encouraging response to your product idea - practical and often surpris- ingly affordable way to get another data point in regard to assessing demand for a new product or service idea.

Why is execution intelligence important for entrepreneurship?

- ability to fashion a solid idea into a viable business - execution intelligence is the factor that determines whether a start-up is successful or fails. - ability to effectively execute a business idea means developing a busi- ness model, putting together a new venture team, raising money, establishing partnerships, managing finances, leading and motivating employees, and so on. - also demands the ability to translate thought, creativity, and imagination into action and measurable results. - One way early-stage companies learn execution intelligence is by partici- pating in start-up incubator and accelerator programs.

What is brainstorming? What are the 4 rules?

- brainstorming is simply the process of generating several ideas about a specific topic. T - approaches range from a person sitting down with a yellow legal pad and jotting down interesting business ideas to formal "brainstorming sessions" led by moderators that involve a group of people - formal brainstorming session, the leader of the group asks the partici- pants to share their ideas. - One person shares an idea, another person reacts to it, another person reacts to the reaction, and so on. - session is not used for analysis or decision making—the ideas generated during a brainstorming session need to be filtered and analyzed, but this is done later. - number one rule for a brainstorming session is that no criticism is allowed, including chuckles, raised eyebrows, or facial expressions that express skepticism or doubt. - Freewheeling, which is the carefree expression of ideas free from rules or restraints, is encouraged; the more ideas, the better. Even crazy or outlandish ideas may lead to a good idea or a solution to a problem. - The session moves quickly, and nothing is permitted to slow down its pace. It is more important to capture the essence of an idea than to take the time to write it down neatly. - Leapfrogging is encouraged. This means using one idea as a means of jumping forward quickly to other ideas. - Criticism stymies creativity and inhibits the free flow of ideas. - Brainstorming sessions dedicated to generating new business ideas are often less formal.

What is a business model?

- business model is a firm's plan or recipe for how it creates, delivers, and 1 captures value for its stakeholders. - Business models are foundational to a firm's ability to succeed, both in the short and long term, especially when it is the first one to introduce a new product or service to customers. - proper time to determine a company's business model is following the initial validation of the business idea and prior to fleshing out the details of how the firm will operate to provide its product or service to customers. - firm's business model should not be completed in isolation. - founders of a firm should "get out of the building" and talk to potential customers as a firm's business model takes shape. - firm's business model represents the core aspects of its business. - also describes how the core aspects fit together and support one another. - three important elements of a firm's business model are its target mar- ket, its basis for differentiation, and its key assets. - Each element supports the others - Proper Time to Determine a Company's Business Model o Initial validation of the business idea -> preparation of the business model -> Fleshing out the operational details of the company - two general categories of business models: standard business models and disruptive business models

What is a concept test?

- concept test involves showing a preliminary description of a product or service idea, called a concept statement, to prospective customers and industry experts to solicit their feedback. - one-page document that normally includes the following: - description of the product or service. This section details the features of the product or service. - intended target market. This section lists the consumers or busi- nesses who are expected to buy the product or service. - benefits of the product or service. This section describes the benefits of the product or service and includes an account of how the product or service adds value and/or solves a problem. - description of how the product or service will be positioned relative to competitors. A company's position describes how its product or service is situated relative to its rivals. - brief description of the company's management team. - After the concept statement is developed, it should be shown to at least 25 people who are familiar with the industry that the firm plans to enter and who can provide informed feedback. - temptation to show it to family mem- bers and friends should be avoided because these people are predisposed to give positive feedback. - should be distributed to people who will provide candid and informed feedback and advice. - Prospective customers are the richest source of valuable feedback.

What are core competencies?

- core competency is a specific factor or capabil- ity that supports a firm's business model and sets it apart from its rivals. - core competency can take on various forms, such as technical know-how, an efficient process, a trusting relationship with customers, expertise in product design, and so forth. - may also include factors such as passion for a business idea and a high level of employee morale. - firm's core competencies largely determine what it can do. - key idea is that to be competitive a business must be particularly good at certain things, and those certain things must be supportive of all elements of its business model. - Most start-ups will list two to three core competencies on the business model template. - a core competency is compelling if it not only supports a firm's initiatives, but is also difficult for competitors to imitate and substitute. - Few start-ups have core competencies in more than two to three areas.

What are the statistics on Millenial Entrepreneurs?

- desire to pursue an entrepreneurial career is high among millennials. - Millennials overwhelmingly (78 percent) consider entrepreneurs success- ful and more than half have considered starting their own business. - biggest obstacles preventing them from acting on their entrepreneurial desires are lack of finances, lack of desire to start a business, fear of failure, and a lack of knowl- edge of the business start-up process. - Other factors may include the attrac- tiveness of corporate jobs, student debt, lack of savings, and risk aversion. - More than 2,300 colleges and universities in the United States offer at least one course in entrepreneurship at the under- graduate or graduate level. - activities offered by a number of organizations are encouraging college students to consider becom- ing entrepreneurs. - Small Business Development Centers (SBDCs) SBDC counselors provide encouragement and advice to people of all age ranges and offer a variety of free business consulting and training services.

Why is it important to have tenacity despite failure for an entrepreneur?

- developing a new business idea may require a certain degree of experimentation before success is attained. - Setbacks and failures inevitably occur during this process. - litmus test for entrepreneurs is their ability to persevere through setbacks and failures. - important that entrepreneurs have sufficient tenacity to overcome personal obstacles along with professional ones.

What are the statistics on Minority Entrepreneurs?

- eight million minority-owned firms in the United States—a 38 percent increase since 2007. - Healthcare and Social Assistance (13 percent), Administrative Sup- port and Waste Management and Redemption (12 percent), Professional/scien- tific/technical services (10 percent), Construction (9 percent), Retail (8 percent), Transportation and Retailing (7 percent), Real Estate and Leasing (5 percent), and Other (37 percent). - important factor facilitating the growth of minority entrepreneurs is the number of organizations that promote and provide assistance.

What Is Entrepreneurship and Why Is It Important?

- entrepreneur derives from the French words entre, meaning "between," and prendre, meaning "to take." - originally used to describe people who "take on the risk" between buyers and sellers or who "undertake" a task such as starting a new venture.5 - An inventor creates something new. An entrepreneur assembles and then integrates all the resources needed—the money, the people, the business model, the strategy, and the risk-bearing ability—to transform the invention into a viable business. - Entrepreneurship is defined as the process by which individuals pursue opportunities without regard to resources they currently control for the purpose of exploiting future goods and services. - art of turning an idea into a business. - tasks called for by this behavior can be accomplished by either an individual or a group and typically require creativity, drive, and a willingness to take risks. - established firms with an entre- preneurial emphasis are proactive, innovative, and risk-taking.

What is an opportunity? What are the 4 essential qualities?

- entrepreneurs recognize an opportunity and turn it into a success- ful business. - opportunity is a favorable set of circumstances that creates a need for a new product, service, or business - Some ventures are externally stimulated. - Some are internally stimulated. - an entrepreneur recognizes a problem or an opportunity gap and creates a business to address the problem or fill the identified gap. - A common mistake entrepreneurs make in the opportu- nity recognition process is picking a currently available product or service that they like or are passionate about and then trying to build a business around a slightly better version of it. - key to opportunity recognition is to identify a product or service that people need and are willing to buy, not one that an entrepreneur wants to make and sell. - an opportunity has four essential qualities: It is (1) attractive, (2) timely, (3) durable, and (4) anchored in a product, service, or business that creates or adds value for its buyer or end-user. - term window of opportunity is a metaphor describing the time period in which a firm can realistically enter a new market. o Once the market for a new product is established, its window of opportunity opens. As the market grows, firms enter and try to establish a profitable position. At some point, the market matures, and the window of opportunity closes.

What is corporate entrepreneurship? What is entrepreneurial intensity?

- established firms with an orientation toward acting entrepreneurially practice corporate entrepreneurship.1 - All firms fall along a conceptual continuum that ranges from highly conservative to highly entrepreneurial. - position of a firm on this continuum is referred to as its entrepreneurial intensity. - entrepreneurial firms are typically proactive innovators and are not averse to taking calculated risks. I - conservative firms take more of a "wait and see" posture, are less innovative, and are risk averse. - Firms with higher entrepreneurial intensity regularly look for ways to cut bureaucracy.

How are social networks a characteristic of entrepreneurs?

- extent and depth of an individual's social network affects opportunity recog- nition. - People who build a substantial network of social and professional con- tacts will be exposed to more opportunities and ideas than people with sparse networks. - exposure can lead to new business starts. - between 40 percent and 50 percent of those who start businesses got their ideas through social contacts. - solo entrepreneurs (those who identi- fied their business ideas on their own) - network entrepreneurs (those who identified their ideas through social contacts) - network entrepreneurs identified significantly more opportunities than solo entrepreneurs, but were less likely to describe themselves as being particularly alert or creative. - concept that sheds light on the importance of social networks to oppor- tunity recognition is the differential impact of strong-tie versus weak-tie rela- tionships.

What is a financial feasibility analysis?

- financial feasibility analysis is the final component of a comprehensive fea- sibility analysis. - For feasibility analysis, a preliminary financial assessment is usually sufficient; indeed, additional rigor at this point is typically not required because the specifics of the business will inevitably evolve, making it impractical to spend a lot of time early on preparing detailed financial forecasts. - most important issues to consider at this stage are total start-up cash needed, financial performance of similar businesses, and the overall financial attractiveness of the proposed venture. - If a proposed new venture moves beyond the feasibility analysis stage, com- plete pro forma (or projected) financial statements that demonstrate the firm's financial viability for the first one to three years of its existence must be com- pleted.

How can a business model be taking beyond its boundaries?

- firm's business model takes it beyond its own boundaries. - challenge associated with getting something like this to work is to provide suf- ficient incentive for partners to participate. (people contribution) o ex. IndieU's case, the students con- tribute because they are passionate about music, want to obtain work-related experience, and want to build their résumés. - Many companies feature the participation of others as an integral part of their business models. - Positive scenarios like this often allow businesses to not only strengthen but to expand their business models - Regardless of the business model a start-up is rolling out, one thing that new companies should guard themselves against is thinking that one particu- lar business model is a "homerun" regardless of circumstances. - strength of the opportunity must be assessed and the feasibility of the idea must be validated.

What is a business mission?

- first component of a business model is core strategy. - core strategy describes how the firm plans to compete relative to its competitors.1 - busi- ness mission, basis of differentiation, target market, and product/market scope are the primary elements of a core strategy. - business' mission or mission statement describes why it exists and what its business model is supposed to accomplish.1 - If care- fully written and used properly, a mission statement can articulate a busi- ness' overarching priorities and act as its financial and moral compass. - A firm's mission is the first box that should be completed in the business model template. - well-written mission statement is something that a business can continually reference as it makes important decisions in other elements of its business model. - mission statement indicates how a firm intends to create value for stakeholders. F - A business' mission statement should: o ■■Define its "reason for being" o ■■Describe what makes the company different o ■■Be risky and challenging but achievable o ■■Use a tone that represents the company's culture and values o ■■Convey passion and stick in the mind of the reader o ■■Be honest and not claim to be something that the company "isn't"

What is the first step in a product/service feasibility analysis?

- first component of product/service feasibility is to affirm that the proposed product or service is desirable and serves a need in the marketplace. Does it make sense? Is it reasonable? Is it something real customers will buy? Does it take advantage of an environmental trend, solve a problem, or fill a gap in the marketplace? Is this a good time to introduce the product or service to the market? Are there any fatal flaws in the product or service's basic design or concept? - best way to answer these questions is to "get out of the building" and talk— and, more importantly, listen to—potential customers. - A tool that is particularly useful in soliciting feedback and advice from prospective customers is to administer a concept test.

What is a focus group?

- focus group is a gathering of 5 to 10 people who are selected because of their relationship to the issue being discussed. - Focus groups are used for a variety of purposes, including the generation of new business ideas. - Focus groups typically involve a group of people who are familiar with a topic, are brought together to respond to questions, and who are able to shed light on an issue through the give-and-take nature of a group discussion. F - usually work best as a follow-up to brainstorming, when the general idea for a business has been formulated but further refinement of the idea is needed. - conducted by trained moderators. - moderator's primary goals are to keep the group "focused" and to generate lively discussion. - effectiveness of a focus group session depends on the moderator's ability to ask questions and keep the discussion on track. - Napkin Labs helps companies funnel follow- ers from Facebook and other sites into more intimate structured online com- munities that are intended to serve as focus groups.

What are the economic forces that help determine business ideas?

- forces include topics such as whether consumer spending is rising or falling, whether housing starts are up or down, whether international trade is strong or weak, and whether interest rates are stable, falling, or increasing. - State of the economy, Level of disposable income, Consumer spending patterns - When personal income is rising, consumers have more money to spend and are willing to buy discretionary products and services that enhance their lives. - when personal income is falling, not only do people have less money to spend, they are less willing to spend it, opting instead to accumulate cash. - who has money to spend and what they spend it on. - understanding of economic trends also helps identify areas to avoid. - Rising personal incomes, Baby boomers entering retirement with disposable income

What is an idea?

- idea is a thought, an impression, or a notion. - idea may or may not meet the criteria of an opportunity. - critical point because many entrepreneurial ventures fail not because the entrepreneurs that launched them didn't work hard, but rather because there was no real opportu- nity to begin with. - Before getting excited about a business idea, it is crucial to understand if the idea fills a need and satisfies the criteria for an opportunity.

What is a target market?

- identification of the target market in which the firm will compete is extremely important. - target market is a segment within a larger market that represents a narrower group of cus- tomers with similar interests. - most start by identifying an emerging or underserved niche within a larger market. - firm's target market should be made explicit on the business model tem- plate. - target market can be based on any relevant variable, as long as it identifies for a firm the group of like-minded customers to whom it will try to appeal. - type of awareness of a firm's intended market, and the people who are the most likely to respond positively to a firm's product or service, is helpful in fleshing out all the elements of a firm's business model. F - It requires identifying and hiring people who have the ability to build anticipa- tion and can locate partners and suppliers that have exciting new products that appeal to all age groups. - requires a certain set of core competencies - target market a firm selects affects everything it does, from the key assets it acquires to the financing or funding it will need to the partnerships it forms.

Is there a perfect business model?

- important to understand that there is no perfect business model. - Each of the standard models has inherent strengths and weaknesses. - strength of the subscription business model is recurring revenue. - dis- advantage of the subscription business model is "churn." - Churn refers to the number of subscribers that a subscription-based business loses each month. - This is why companies that feature a subscription-based business model normally offer a high level of customer service. - want to retain as high a percentage of their subscrib- ers as they can to lower churn and avoid the expenses involved with replacing existing customers.

What is a bug report?

- individual's imagination is the only limiting factor to brainstorming. - Ask- ing students to complete a bug report is a popular technique that is used in classrooms to teach brainstorming. - To compile a bug report, students are instructed to list 50 to 75 conditions or "things" that "bug" them in their every- day lives. - Asking students to identify a number of conditions or things that bug them reduces the likelihood that they will specify only obvious things that bug them (e.g., campus parking, dorm food, and untidy roommates). - Students can also be encouraged to hold focus groups with friends to brainstorm conditions that can be included on their "bug" list.

Why do people want to be their own bosses?

- many entrepreneurs want to be their own boss because either they have had a long-time ambition to own their own firm or because they have become frustrated working in traditional jobs. - Some entrepreneurs transition from a traditional job to owning their own business more gradually, as shown by a decision to initially operate their firm on a part-time basis. - starting a business part time individuals can gain valuable experience, tuck away the money they earn, and find out if they really like the business before deciding to leave their job. - takes time to build a client list. - Some entrepreneurs will time their departure from their job with the point in time at which their client list is large enough and profitable enough to support a full-time business.

What is a mind map?

- mind map is a diagram used to visually organize information. - hierarchical and shows the relationships among pieces of the whole. - created around a single concept, which is placed at the center of the page. - From the center, branches are created, which reflect new and associated ideas that branch out from the central idea. - Each branch can then be built on to create sub branches with additional detail. - Each branch would have had sub-branches further defining the feature. - some of the features would be accepted and some would be discarded. - Additional branches may have referred to topics such as costs, marketing, manufacturing, etc.

Why do people pursue financial rewards?

- motivation, however, is typically secondary to the first two and often fails to live up to its hype. - average entrepreneur does not make more money than someone with a similar amount of responsibility in a traditional job. - financial lure of entre- preneurship is its upside potential. - Making a profit and increasing the value of a company is a solidifying goal that people can rally around. - money is rarely the primary motivation behind the launch of an entrepreneurial firm. - financial rewards associated with entrepreneurship can be bittersweet if they are accompanied by losing control of their firm. - thrill of building the business and of seeing the success o

What are the Political Action and Regulatory Changes that help determine business ideas?

- new laws often spur start-ups that are launched to take advantage of their specifications. - entire industries hinge on whether certain government regulations evolve in a manner that is favorable to the industry. - Ex. Drone technology - Political change also engenders new business and product opportunities. - Ex. global political instability and the threat of terrorism have resulted in many firms becoming more security-conscious. - companies need new products and services to protect their physical assets and intellectual property, as well as to protect their customers and employees. - Increased EPA and OSHA standards, Affordable Care Act

What are the ideas of observing trends?

- observe trends and study how they create opportunities for entrepreneurs to pursue. - most important trends to follow are economic trends, social trends, technological advances, and political action and regulatory changes. - important to remain aware of changes in these areas. - keen observation skills and a willingness to stay on top of changing environmental trends are key attributes of successful entrepreneurs: - important to distinguish between trends and fads. - New businesses typically do not have the resources to ramp up fast enough to take advantage of a fad. - discuss each trend individually, they are interconnected and should be considered simul- taneously when brainstorming new business ideas.

Why is talking to people important for determining demand of a product/service?

- only way to know if your product or service is what people want and need is by talking to them. - often doesn't happen. - idea is to gauge customer reaction to the general concept of what you want to sell. - Entrepreneurs are often surprised to find out that a product idea that they think solves a compelling problem gets a lukewarm recep- tion when they talk to actual customers. - pause and think carefully about who the potential customer is. - should also talk to as many of the relevant players in an industry as possible. - involves a complex list of people, but it is necessary to fully vet the initial fea- sibility of an idea and get comprehensive feedback. - Category of people to talk to - 1. Potential users of the service - 2. Family members of potential users of the service - 3. Physicians - 4. Nurses - 5. Health insurance companies - 6. Medicare and Medicaid personnel - 7. Pharmaceutical companies - 8. Owners/managers of assisted living facilities and nursing homes - 9. Hospital and physician office administrators - 10. Founders of other companies in the home health-care industry - contact trade associations and/or attend industry trade shows. - Attending trade shows in the industry in which you have an interest will place you in direct con- tact with numerous people who might be of assistance. - Online surveys are also useful to reach a large number of people quickly.

What is an organizational feasibility analysis?

- organizational feasibility analysis is conducted to determine whether a proposed business has sufficient management expertise, organizational compe- tence, and resources to successfully launch. - two primary issues to consider in this area: management prowess and resource sufficiency.

What are the statistics on Senior Entrepreneurs?

- percentage of individuals age 62 and older starting a business increased from 4.2 percent in 1988 to 5.4 percent in 2015. - SBA characterized the grown in senior entrepreneurs as healthy for the U.S. economy. - increase in senior entrepreneurs is attributed to a number of factors, including corporate downsizing, an increasing desire among older workers for more personal fulfillment in their lives, and growing worries among seniors that they need to earn additional income to pay for future health care services and other expenses. - Many people in the 60 and older age range have substantial business experience, financial resources that they can draw upon, and excel- lent vigor and health, which make them ideal candidates to start businesses in many industries. - steady increase in life expectancy

What are Entrepreneurial Firms' Impact on Larger Firms?

- positively impact the effectiveness of larger firms. - original equipment manufacturers, producing parts that go into products that larger firms manufacture and sell. - many exciting new products, such as smartphones, digital cameras, and improved prescription drugs, are not solely the result of the efforts of larger companies with strong brand names, - produced with the cutting-edge component parts or research-and- development efforts provided by entrepreneurial firms. - many entrepreneurial firms have built their entire business models around producing products and services that increase the effi- ciency and/or effectiveness of larger firms. - Entrepreneurial firms are sometimes founded to respond to larger firms' needs.

How does personal experience contribute to entrepreneurship? Is it necessary?

- prior experience in an industry helps entrepreneurs recognize business opportunities. - experience is one of five criteria a start-up must satisfy if it is to succeed (a genuine need, adequate resources, buying customers, and a sound business model are the other four). - working in an industry is the most significant way to gain insights about a particular industry's char- acteristics. - Knowing the products, services, and problems in an industry not only helps you avoid the pitfalls of trial-and-error learning, but it also gives interested parties the confidence that you're the right person to build this business. Your experience and credibility are very important to potential team members, investors, customers, suppliers, and strategic partners. If you don't have the skills and experience to build your business, you'll be fighting an uphill battle. - working in an industry, an individual may spot a market niche that is underserved. - while working in a particular area, an individual builds a network of social contacts in that industry that may provide insights that lead to opportunities.1 - anecdotal evidence suggesting that people outside an industry can sometimes enter it with a new set of eyes, and as a result innovate in ways that people with prior experience might find difficult. - takeaway is that while prior industry experience may be preferable, it is not always necessary for start-up success. - in some cases it may actually work against an entrepreneur by fixing his or her mind on the "traditional" ways of doing things in an industry.

What is management prowess? What is a new venture team?

- proposed business should evaluate the prowess, or ability, of its initial man- agement team, whether it is a sole entrepreneur or a larger group. - requires the individuals starting the firm to be honest and candid in their self- assessments. - Two of the most important factors in this area are the passion the solo entrepreneur or the management team has for the business idea and the extent to which the management team or solo entrepreneur understands the markets in which the firm will participate. - Managers with extensive professional and social networks have an advantage in that they are able to reach out to colleagues and friends to help them plug experience or knowledge gaps. - a potential new venture should have an idea of the type of new-venture team that it can assemble. - new-venture team is the group of founders, key employees, and advisers that either manage or help manage a new business in its start-up years. - the founder or founders of a new venture have identified several individuals they believe will join the firm after it is launched and these individuals are highly capable, that knowledge lends credibility to the organizational feasibility of the potential venture. - same rationale applies for highly capable people a new venture believes would be willing to join its board of directors or board of advisers. - may benefit from finding one or more partners to help them launch their business. - good mentor will offer meaningful advice and help you work through challenges.

How can solving a problem lead to a business idea?

- second approach to identifying opportunities is to recognize problems and find ways to solve them. - Problems can be recognized by observing the challenges that people encounter in their daily lives and through more simple means, such as intuition, serendipity, or chance. - many problems that have yet to be solved. - Every problem is a brilliantly disguised opportunity. - Consistent with this observation, many companies have been started by people who have experienced a problem in their own lives, and then realized that the solu- tion to the problem represented a business opportunity. - Advances in technology often result in problems for people who can't use the technology in the way it is sold to the masses. F - For example, some older people find traditional cell phones hard to use: the buttons are small, the text is hard to read, and it's often difficult to hear someone on a cell phone in a noisy room. - Some business ideas are gleaned by recognizing problems that are asso- ciated with emerging trends. - On some occasions, individuals see problems that are rather obvious, but for some reason, no one has addressed them in a meaningful way. - Social ventures, a new type of entrepreneurial venture, are launched for the purpose of solving a range of social problems including poverty, hunger, and a lack of access to services such as water and electricity. - ventures can be for-profit firms or not-for-profit agencies.

Why is resource sufficiency important to an organizational feasibility analysis?

- second area of organizational feasibility analysis is to determine whether the proposed venture has or is capable of obtaining sufficient resources to move forward. - focus in organizational feasibility analysis is on nonfinancial resources - objective is to identify the most important nonfinancial resources and assess their availability. - If a firm launches in a community that does not have a labor pool that includes people with the skill sets the firm needs, a serious resource sufficiency problem exists. - Another key resource sufficiency issue is the ability to obtain intellectual property protection on key aspects of the business. - critical for companies that have invented a new product or are introducing a new business process that adds value to the way a prod- uct is manufactured or a service is delivered. - see if a patent has already been filed for its product or busi- ness process idea. - approach can give a start-up a quick assessment of whether someone has beaten them to the punch regarding a particular product or busi- ness process idea. - To test resource sufficiency, a firm should list the 6 to 12 most critical nonfinancial resources that it will need to move its business idea forward and determine if those resources are available.

What are resources?

- second component of a business model is resources. - Resources are the inputs a firm uses to produce, sell, distribute, and service a product or service.2 - basic level, a firm must have a sufficient amount of resources to enable its business model to work. - a firm may need a patent (a key asset) to protect its basis of differentiation. - business may need expertise in certain areas (core competencies) to understand the needs of its target mar- ket. - deeper level, a firm's most important resources, both tangible and intangible, must be both difficult to imitate and hard to find a substitute for in order for the company's business model to be competitive over the long term. - Resources are developed and accumulated over a period of time. - completing the Barringer/Ireland Business Model Template, the current resources a company possesses should be the resources that are noted, but aspirational resources should be kept in mind

What is the second component of a product/feasibility analysis?

- second component of product/service feasibility analysis is to determine if there is demand for the product or service - Three commonly utilized methods for doing this are (1) talking face-to-face with potential customers, (2) utilizing online tools, such as Google AdWords and landing pages, to assess demand, and (3) library, Internet, and gumshoe research.

What is the barringer business model?

- successful business model has a common set of attributes. - attributes are often laid out in a visual framework or template so it is easy to see the individual parts and their interrelationships. - The Business Model Canvas consists of nine basic parts that show the logic of how a firm intends to create, deliver, and capture value for its stakeholders. - Barringer/Ireland Business Model Template is slightly more compre- hensive than the Business Model Canvas in that it consists of 4 major categories and 12 individual parts. - 12 parts make up a firm's business model. - job of the entrepreneur, or team of entrepreneurs, is to configure their firm's business model in a manner that produces a viable and exciting business. - The Barringer/Ireland Business Model Template is a tool that allows an entrepre- neur to describe, project, revise, and pivot a business model until all 12 parts are decided upon. - 12 parts are spread out, which provides space for ideas to be recorded, scratched out, and recorded again as ideas morph and change.

How do you determine the attractiveness of a target market?

- target market is a segment within a larger market that represents a narrower group of customers with similar needs. - by focusing on a smaller target market, a firm can usually avoid head-to-head competition with industry leaders and can focus on serving a specialized market very well. I - not realistic, in most cases, for a start-up to introduce a totally original product idea into a completely new market. - Most successful start-ups either introduce a new product into an existing mar- ket or introduce a new market to an existing product - challenge in identifying an attractive target market is to find a market that is large enough for the proposed business but yet is small enough to avoid attracting larger competitors, at least until the entrepreneurial venture can get off to a successful start. - generally easy to find good information to assess the attractive- ness of an entire industry, discerning the attractiveness of a small target market within an industry is tougher, particularly if the start-up is pioneering the target market. - information from more than one industry and/or market must be collected and synthesized to make an informed judgment.

How can the library and internet searches help generate ideas?

- third approach to generating new business ideas is to conduct library and Internet research. - natural tendency is to think that an idea should be chosen, and the process of researching the idea should then begin. - the best ideas emerge when the general notion of an idea is merged with extensive library and Internet research, which might provide insights into the best type of casual games to create. - Libraries are often an underutilized source of information for generating business ideas. - best approach to utilizing a library is to discuss your general area of interest with a reference librarian, who can point out useful resources, such as industry-specific magazines, trade journals, and industry reports. - Very powerful search engines and databases - starting from scratch, simply type "new business ideas" into Google or Bing. Taking this action will allow you to see links to newspaper and magazine articles about the "hottest" and "latest" new business ideas. - represent a starting point if you are trying to generate new busi- ness ideas from scratch. - useful technique is to set up a Google "e-mail alert" using keywords that pertain to your topic of interest. G - Google e-mail alerts are e-mail updates of the latest Google results including press releases, news articles, and blog posts based on your topic. - Another approach is to follow business leaders and experts in the industries you're interested in on Twitter. - Once an entrepreneur has an idea, the challenging process of converting the idea into a profitable business begins. T - obtaining a mentor is one way entrepreneurs can enhance the prob- ability of successfully using the entrepreneurial process.

What is the third component of a business model? What is a revenue stream?

- third component of a business model focuses on a firm's financials. - only section of a firm's business model that describes how it earns money— - Revenue streams, cost structure, and financing/funding are the primary aspects of the financials' component. - firm's revenue streams describe the ways in which it makes money. - Some businesses have a single revenue stream, while others have several. - nature of the way businesses make money also varies. S - Some businesses make money via one-time customer payments, while others receive recurring revenue by selling a subscription ser- vice. - Some businesses are very creative in the ways in which they make money. - many businesses have more than one revenue stream, primarily to leverage the value they are creating for their customers. - number and nature of a business's revenue streams has a direct impact on the other elements of its business model. A - All for-profit businesses need at least one revenue stream to fund their operations. - Whether additional revenue streams add or subtract value depends on the nature of the business and the other elements of its business model. - filling out the Barringer/Ireland Business Model Template, you should clearly identify your revenue streams.

Why Do People Become Entrepreneurs?

- three primary reasons that people become entrepreneurs and start their own firms are to be their own boss, pursue their own ideas, and pursue financial rewards.

What are the Types of Start-Up Firms?

- three types of start-up firms: salary-substitute firms, lifestyle firms, and entrepreneurial firms.

Why is product/customer focus crucial to entrepreneurship?

- two most important elements in any business—products and customers. - everything we build has to provide real value to both our users and customers. - best measure- ment of whether or not we are successful at delivering something valuable is if our customers, advertisers in our case, are willing to pay. - product/customer focus also involves the diligence to spot product opportunities and to see them through to completion.

What are standard business models?

- type of model is used commonly by existing firms as well as by those launching an entrepreneurial venture. - Standard business models depict existing plans or recipes firms can use to determine how they will create, deliver, and capture value for their stake- holders. - Most of the standard business models, with the exception of the freemium model, have been in place for some time. - many of the business models utilized by online firms were originally developed by offline firms, and simply transferred to the Internet. - Advertising Business Model, Auction Business Model, Bricks and Clicks Business Model, Franchise Business Model, Freemium Business Model, Low-Cost Business Model, Manufacturer/Retailer Business Model, Peer-to-Peer Business Model, Razor and Blades Business Model, Subscription Business Model, Traditional Retailer Business Model - common among successful start-ups, is adopt a standard business model and build upon it in one or more meaningful ways to produce a new way of creating value

What are the social forces that help determine business ideas?

- understanding of the impact of social forces on trends and how they affect new product, service, and business ideas is a fundamental piece of the opportunity recognition puzzle. - Often, the reason that a product or service exists has more to do with satisfying a social need than the more transparent need the product fills. - Changes in social trends alter how people and businesses behave and how they set their priorities. - ■■Aging of the population - ■■The increasing diversity of the population - ■■Millennials entering the workforce - ■■Growth in the use of mobile devices - ■■An increasing focus on health and wellness - ■■Emphasis on clean forms of energy, including wind, solar, biofuels, and others - ■■Continual migration of people from small towns and rural areas to cities ■■Desire for personalization (which creates a need for products and services - that people can tailor to their own tastes and needs) - proliferation of mobile devices is a social trend that's opening business opportunities for entrepreneurs across the globe. - entrepreneurs have launched businesses for the purpose of starting social networks that cater to specific niches. - Increased interest in different, tastier, and healthier food, Increased interest in fitness as the result of new medical information warning of the hazards of being overweight

What does it mean to have passion for the business?

- whether it is in the context of a new firm or an existing business. - passion for an idea that gets a business going and keeps it going when times are tough. - Making a difference in people's lives is the primary motivator behind many social enterprises, which are often started by people who set aside promising careers to pursue a social goal. - Passion is particularly important for both for-profit and not-for-profit entre- preneurial organizations because although rewarding, the process of starting a firm or building either a profit-making corporation or a social enterprise is demanding. - important to be enthusiastic about a business idea, but it is also important to understand its potential flaws and risks. - Reasons passion is important: o 1. The ability to learn and iterate o 2. A willingness to work hard for an extended period of time o 3. Ability to overcome setbacks and "no's" o 4. The ability to listen to feedback on the limitations of your organization and yourself o 5. Perseverance and persistence when the going gets tough - most effective business ideas take hold when their passion is consis- tent with their skills and is in an area that represents a legitimate business opportunity.

What are the changing demographics of entrepreneurs?

- women, minorities, and seniors own an increasingly larger number of them. - Although millennials (people 18-34 years old) express a high degree of inter- est in becoming entrepreneurs, a surprisingly low percentage of people in the millennial age range are choosing the entrepreneurial path.

What are characteristics of an attractive industry?

- ■ Are young rather than old - ■■ Are early rather than late in their life cycle - ■■ Are fragmented rather than concentrated - ■■ Are growing rather than shrinking - ■■ Are selling products or services that customers "must have" rather than "want to have" - ■■ Are not crowded - ■■ Have high rather than low operating margins - ■■ Are not highly dependent on the historically low price of a key raw material, like gasoline or flour, to remain profitable - want to pick an industry that is structurally attractive—meaning start-ups can enter the industry (in various target markets) and compete effectively. - Some industries are characterized by such high barri- ers to entry or the presence of one or two dominant players that potential new entrants are essentially shut out. - degree to which envi- ronmental and business trends are moving in favor of rather than against the industry are important for its long-term health and its capacity to spawn new target or niche markets. - should gain a sense of whether the industry you have chosen to enter is a good one or a poor one for start-ups. - Information that addresses each of these issues is available via industry reports published by IBISWorld, Mintel, BizMiner, and similar fee-based data- bases that are typically free if accessed through a university or large public library's website. - older industries that haven't seen much innovation represent opportunities for disruption.

What is a Traditional Retailer Business Model?

A business model calling for a firm to sell its products or services, made by others, directly to consumers at a markup from the original price. Can be sold online or offline. -Amazon, Whole Foods Markets, Zappos

What is a Bricks and Clicks Business Model?

A business model in which a company integrates both offline (bricks) and online (clicks) presences. -Apple, Barnes & Noble, J. Crew

What is a Freemium Business Model?

A business model in which a firm provides a basic version of its service for free, and makes money by selling a premium version of the service -Dropbox, Evernote, MailChimp

What is a Franchise Business Model?

A business model in which a firm that has a successful product or service (franchisor) licenses its trademark and method of doing business to other businesses (franchisees). -24 Hour Fitness, Panera Bread, iLoveKickboxing.com

What is a Manufacturer/Retailer Business Model?

A business model in which a manufacturer both produces and sells (online, offline, or both) a product. -Apple, Fitbit, Tesla Motors

What is a Subscription Business Model?

A business model in which the customer pays a monthly, quarterly, or yearly subscription fee to have access to a product or service. -Birchbox, Blue Apron, Netflix

What is a Peer-to-Peer Business Model?

A model in which a business acts as a matchmaker between individuals with a service to offer and others who want the service. -Airbnb, Uber, Task Rabbit

What are common traits and characteristics of entrepreneurs?

A moderate risk taker Persuasive Promoter Resource assembler/leverager Creative Self-starter Tenacious Tolerant of ambiguity Visionary Optimistic disposition A networker Achievement motivated Alert to opportunities Self-confident Decisive Energetic A strong work ethic Lengthy attention span

What is a Low-Cost Business Model?

A well-established business model that relies on driving down costs and making money by servicing a large number of customers. -Southwest Airlines, Warby Parker, Costco