Quiz 1: Entrepreneurship

Capitalism

Government involvement: none Ownership: private Profits: go to the owner Incentive: work for yourself, hard work is rewarded Pay: whatever you earn

Necessity entrepreneurs

start businesses because they cannot find work any other way

2 major types of economic systems

Capitalism and Socialism

Acquisition

a business purchase

Franchising

the system of operating a franchise governed by a legal agreement

Opportunity Cost

the value of what must be given up in order to obtain something else - Cost/benefit analysis is incomplete without considering opportunity cost

Mainstream Small Firms

these constitute the bulk of the small businesses in public perception, in the press, and in community visibility - Family enterprises

Costs

time with family, calm work environment, normal work hours, boredom of job

Service

intangible work that provides time, skills, or expertise

Franchisee

owner of a franchise unit or territory rights

Brainstorming

the process of generating several ideas about a specific topic

What is a small business?

- Less than 500 employees - Annual sales under $5 million - According to the SBA, small business size standards vary by industries described in the North American Industry Classification System

Advantages to the mindset

- Think outside the box - Embrace failure as part of the process to reach success - Create and capture value - Take calculated risks - Function well with uncertainty - Adapt to and predict change

Drawbacks of Entrepreneurship

- Uncertainty of income - Risk losing you entire investment - Long hours and hard work - Lower quality of life until the business gets established - High levels or stress - Discouragement

Most Important Qualities

- Vision - Work ethic - Resilience - Positivity - Passion

Benefits of Entrepreneurship

- Creating your own destiny - Making a difference - Reach your full potential - Reap impressive profits - Contribute to society and to be recognized for your efforts - Do what you enjoy and to have fun at it

Career Skills

- Critical thinking and problem solving - Written and oral communication - Teamwork and collaboration - Leadership - Creativity - Ethics and social responsibility

Characteristics of an entrepreneur

- Desire for responsibility - Preference for moderate levels of risk - Willingness to work hard - Self reliance - Confidence in their ability to succeed - Determination - Flexibility - Desire for immediate feedback - High level of energy - Competitive - High degree of commitment - Tenacity - Resourcefulness - Creativity - PASSION

Internal sources of opportunity

- Hobbies - Talents - Interests

How do they create business ideas?

1. Listen: entrepreneurs get ideas about improving a business or creating one by listening to others 2. Observe: entrepreneurs get ideas about how to help society by keeping their eyes and ears open 3. Analyze: they think about what product or service could solve it

Five roots of opportunity

1. Problems: your business can solve 2. Changes: in laws, situations, or trends 3. Inventions: of new products or services 4. Competitive advantages: of importance to customers 5. Technological advantages: that entrepreneurs take from the laboratory to the marketplace

What is franchising?

A system in which semi-independent business owners (franchisees) pay fees and royalties to a parent company (franchiser) in return for the right to become identified with its trademark, to sell its products or services, and often to use its business format and system

Socialism

Government involvement: total Ownership: public Profits: go to all Incentive: work for everyone and better society Pay: whatever you need

Main types of franchising

Product Distribution and Business Format

Types of Start-ups

Salary Substitute, Lifestyle, and Entrepreneurial

Entrepreneurial Mindset

Set of attitudes, skills, and behaviors that enable one to identify opportunities personally, academically and/or professionally, and take advantage of said opportunities regardless of any potential barriers - Skills: critical thinking, problem solving, resourcefulness - Attitudes: positive, curious, energetic - Behaviors: adaptable, creative, self-motivated

Buying a Business v Franchise

When buying an existing business model and products/services will complete flexibility to make changes since they were owned by you after the purchase

Franchise

a business that markets a product/service developed by a franchisor

Cost/benefit analysis

a decision-making process in which the costs of taking an action are compared to the benefits - Costs: money and time you must invest - Benefits: money, knowledge, and experience you will gain

Product Distrubtion

a franchisor licenses a franchisee to sell its products under the franchisor's brand name and trademark through a selective, limited distribution network ○ Beverage distributors: Pepsi, Bud light, & Coca Cola

Business Format

a franchisor sells a franchisee a complete business format and system ○ McDonalds, Chick Fil A, & KFC

Creative Thinking

a muscle that needs exercise - Challenge the usual - Think backwards - Be flexible - Judge later - Brainstorm in a group - Day dream - Pain points

Venture Philanthropy

a subset or segment of social entrepreneurship wherein financial and human capital is invested in not-for-profits by individuals and for-profit enterprises, with the intention of generating social rather than financial returns

Opportunity

an idea that is based on what consumers need to want and are willing to buy sufficiently often at a high enough price to sustain a business ○ Its attractive to customers because it creates or adds value for its customers ○ It will work in the business environment ○ It can be executed in a defined window of opportunity ○ It can be implemented with the right team to make it durable

Salary Startup

are small firms that afford their owner or owners a similar level of income to what they would earn in a conventional job ○ Examples are dry cleaners, convenience stores, restaurants

Entrepreneurial

bring new products and services to market by creating and seizing opportunities (could also be defined as disruptive in some cases). ○ Examples of entrepreneurial businesses are Dropbox, Facebook, and uber

Green Entreprenurship

business activities that avoid harm to the environment or help to protect it in some way

Microenterprises

businesses with five or fewer employees, initial capitalization requirements of less than $50,000, and the habitual operational involvement of the owner

Business

buying and selling products and services

Benefits

determine work schedule, sense of accomplishment, enjoyment of solving problems

Free-enterprise System

economic system in which businesses are privately owned and operate relatively free of government interference

Social Entrepreneurship

has multiple definitions and forms, but it is commonly thought of as a for-profit enterprise with the dual goals of achieving profitability and attaining beneficial returns for society - Example: Patagonia, mission to create and sustain social value, recognize and pursue new opportunities, engage in continuous innovation

The power of small businesses

key role in innovation- producing 16.5 times more patents per employees than large companies

What is intrapreneurship?

occurs when an individual or team within an existing corporation creates or identifies new opportunities for increased profits and/or improved competitive position, secures the necessary resources, and creates value through a new organization or innovation within the firm

Licensing Technology

one way to potentially shorten the product to development cycle and to access innovative technology is to identify and license that technology- that is, to enter into a contract use without purchasing the rights to own

What is an Entrepreneur?

one who creates a new business in the face of risk and uncertainty for the purpose of achieving profit and growth by identifying opportunities and assembling the necessary resources to capitalize on them.

Part-time Entrepreneurs

people may enter into the entrepreneurial experience on a part-time basis to ease into the experience without abandoning a paycheck to "test the waters"

Franchisor

person or company who develops/sells a franchise and specifies the terms and methods of the agreement

Lifestyle

provide their owner or owners the opportunity to pursue a particular lifestyle and earn a living while doing do ○ Examples are ski instructors, golf pros, and tour guides

Serial entrepreneurs

repeatedly start businesses and grow them to a sustainable size before striking out again

Product

something tangible that exists in nature or is made by people

Opportunity entrepreneurs

start businesses because they spot an opportunity in the marketplace (ring or amazon)

Unicorns

startup companies valued at over $1 billion

Due diligence

the exercise of reasonable care in valuation of business opportunity

Capitalism

the free-market system, characterized by individuals and companies competing for economic gains, ownership of private property and wealth, and price determination through free-market forces - Capital is the cash or goods invested to generate income and wealth

Drawbacks of Franchising

○ Constraints on creativity and freedom ○ Costs ○ Standards and termination

Advantages of Franchising

○ Start-up assistance ○ Instant recognition ○ Purchasing power ○ Advertising and promotional support ○ Operating guidelines ○ Record of success