Entrepreneurship Exam 1
Does the product or service accomplish a task that has been problematic?
"Getting the job done" (Factor of Competitive Advantage)
The usual startup cost for microenterprise is approximately _______
$100
In fact, more than __________ of all U.S. firms have four or fewer employees, according to the U.S. Small Business Administration.
60 percent
Paid promotion through media outlets.
Advertising
Any item of value
Asset
Generated by outside circumstance
External opportunity
1. Calculating the unit of sale, 2. Determining the economics of one unit of sale, 3. Substituting someone else's labor, 4. Selling in volume, and 5. Creating jobs and operating at a profit.
Five breakthrough steps entrepreneurs can take to understand preliminary feasibility are:
_________ can be found within large organizations globally and are most successful when the organization supports their efforts and rewards entrepreneurial creativity and accepts failure as part of the process.
Intrapreneurs
How Do Entrepreneurs Create Business Ideas?
Listen, Observe, Analyze
Someone may become unemployed and be unable to find suitable work or their family may have health issues which preclude regular employment. This is an example of
Necessity-based entrepreneur
Enter entrepreneurship because circumstances make self-employment their best available option for income replacement
Necessity-based entrepreneurs
The difference between assets and liabilities
Net Worth
Free promotion
Publicity
The clear majority of businesses are:
Small businesses
WHICH segment of the market are you aiming to serve? As discussed in Chapter 2, this will be your target market. Defining your target market in a way that will help you identify qualified potential customers is critical to achieving success.
Target Market
Next, this analysis should describe your _________ segments
Target Market (opportunity analysis and research)
Debbi Fields, founder of Mrs. Fields Cookies, took resources; eggs, butter, flour, sugar, chocolate chips—and turned them into cookies. She added _________ to the resources she had.
Value
The reason customers select the products/services Examples: -Newness -Performance -"Getting the job done" -Design -Brand/status -Price -Cost reduction -Risk reduction -Accessibility -Convenience/usability
Value Proposition (VP)
Being able to __________ sell at a lower price because you have discovered a secret, less costly way to produce or deliver the product is a competitive advantage
permanently
As you consider an entrepreneurial path, consider these questions:
-Are you planning to be active in the business until retirement? At what age will you retire? Who will take over then? A family member? A new owner? -Do you plan to grow the business to a certain size or level of maturity and then sell it? If so, what is the target level? Are you looking at an initial public offering or a small private sale? Would you stay with the business after it was sold? -Would you want to stay active for a given number of years? Then what would you do?
The free-market system, which is also called capitalism, typifies the following attributes:
-Individuals and companies may compete for their own economic gains. -Private wealth and property ownership are permissible (allowed). -Free-market forces primarily determine prices.
Entrepreneurs have differing motivations for starting ventures. There are two main categories to differentiate between them according to motivation. What are they?
-Necessity-based entrepreneurs -Opportunity-based entrepreneurs
The two primary forms of franchising are:
-Product/trade name franchising -Business format franchising
1. Problems (your business can solve) 2. Changes (in laws, situations, or trends) 3. Inventions (of new products or services) 4. Competitive Advantage (in price, location, quality, reputation, reliability, speed, or other attributes of importance to customers) 5. Technological Advances (that entrepreneurs take from the laboratory to the marketplace)
5 Roots of Opportunity
The Association for Enterprise Opportunity (AEO) estimates that the more than 25.5 million microenterprises in the United States account for _________ of all businesses and _____________ of all private employment
91 percent of all businesses; 31 percent of all private employment
-The story of what the business is and hopes to become, -Costs projections and a marketing plan, -A description of how the business expects to be financed, and -An estimate of projected earnings.
A business plan should include:
1. The Offer 2. Target Market 3. Production and Delivery Capability
A solid business definition has three elements:
-In addition to the above, it is also necessary to -Understand the needs of your customers; -Have a sustainable competitive advantage or multiple, evolving advantages; and -Deliver a product or service that meets your customers' needs at the right price
According to Jeffry Timmons's New Venture Creation, a successful company needs to do one of the following:
-Sell to a market that is large and growing. -Sell to a market where the competition can make a profit. -Sell to a market where the competition is succeeding but is not so powerful as to make it impossible for a new entrepreneur to enter. -Sell a product or service that solves problems consumers may have with the competition. -Sell a product or service at a competitive price that will attract customers.
According to Jeffry Timmons's New Venture Creation, a successful company needs to do one of the following:
-Capital requirements -Cost advantages -Economies of scale -Access to distribution channels -Product differentiation -Government policy
According to Porter, sources of barriers to entry include
The purchase of a business can be a good way to jump-start entry into small business ownership.
Acquisition
Which are measurements of the key drivers of the start-up business that guide informed decisions and actions
Actionable metrics
A savvy entrepreneur learns from the mistakes of others and appreciates the wisdom and experience of trusted:
Advisors and Mentors
The appendices will provide you with an opportunity to strengthen your business plan with examples and details that are not critical for inclusion in the main portions. This is the place to add management resumes, sample promotional materials, and illustrations or diagrams of products and packaging In some cases, the detailed financial projections will appear in the appendices. Each appendix should be numbered and placed in the plan according to the order of reference in the text. The appendices should be listed in your table of contents.
Appendices
However, the operations of a small business ______________ as those of a large one.
Are not the same
The core principles involved in running a large company—like Microsoft—and a corner deli:
Are the same
-Write for your audience -Show that you have skin in the game -Be clear and concise -Use current data and reports for your industry -Choose a voice and stick with it -Use a consistent, easy-to-read format -Number and label -Present it professionally
As you put together your business plan, a number of guidelines and suggestions can help you get the most value for your time and effort
A method that analyzes the underlying value of a business's assets as a basis for negotiating a price The four most common standards are: -Book Value -Adjusted Book Value -Liquidation Value -Replacement Value
Asset Valuation
Types of professional advisors:
Attorneys and Accountants
Average Sale per Customer minus Average Cost of Sale per Customer equals:
Average Gross Profit per Customer
___________ show the business's assets (what you own), liabilities (what you owe), and net worth, or owner's equity. These statements provide insights into your financing strategy and overall business health.
Balance Sheet
Your three years of projected balance sheets will provide snapshots of your business at specific points in time, such as the last day of a month, quarter, or year.
Balance Sheet Projections (Financial Analysis and Projections)
A financial statement summarizing the assets, liabilities, and net worth of a business.
Balance Sheet def
In an industry, the threat of new entrants is largely defined by the strength of the barriers erected to prevent them
Barriers to Entry
The factors that contribute to the ease or difficulty of a new competitor joining an established market, and they cannot be so high that market entry and success are not possible.
Barriers to entry
The wealth you will accrue and the knowledge, skills, self-esteem, and experience you will gain.
Benefits
Bill Gates did not invent computer software, but he did recognize that people were frustrated and intimidated by it He created a user-friendly software applications that consumers wanted, and packaged them attractively with easy-to-read manuals
Bill Gates competitive advantage
Will customers associate your product with a quality brand or with luxury and status?
Brand/status (Factor of Competitive Advantage)
This calculation will determine your organization's breakeven point—that is, when the volume of sales exactly covers the fixed costs
Breakeven Analysis (Financial Analysis and Projections)
When the volume sales exactly cover fixed costs
Breakeven Point
Fixed Costs divided by Gross Profit per Unit
Breakeven Units
Most Americans earn money by working in __________. They are somehow engaged in the buying and selling of products or services to earn money.
Business
Offer Target Market Production Capability Problem solving
Business Definition Questions
A company's plan to generate revenue and make a profit from operations.
Business Model
Visual representation of the critical components, and creating it well will compel you to think through many facets of the business.
Business Model Canvas
A document that thoroughly explains a business idea and how it will be carried out
Business Plan
1. Cover Page 2. Table of Contents 3. Executive Summary 4. Mission, Vision, and Culture 5. Company Description 6. Opportunity Analysis and Research 7. Marketing Strategy and Plan 8. Management and Operations 9. Financial Analysis and Projections 10. Funding Request and Exit Strategy 11. Appendices
Business Plan Outline
-A written business plan is only one component of the business- planning process. -Business plan presentations may be formal or informal, and you may have anywhere from a few minutes to a couple of hours for the complete presentation and discussion. -Presentations to venture capitalists may be limited to as little as 5 to 20 minutes
Business Plan presentation
Includes the offer, target market, and product and delivery capability—answering the questions of who, what, and how
Business definition
The ___________ is intended to be created on a large scale, so that ideas and information can be posted on it to create a clear representation.
Business model canvas
It is more an execution document than an exploratory one
Business plan
This force is like that of suppliers, but on the demand side. The larger and more diverse the customer base, the less dependent competitors in an industry will be on particular customers.
Buyer Power
Cash or goods invested to generate income and wealth is called ___________; in a free-enterprise system, anyone who possesses or can raise the necessary capital may start a business.
Capital
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.
Capitalism
cash flow statement - Shows cash receipts less cash disbursements over a period
Cash Flow Projections (Financial Analysis and Projections)
A way of thinking based on cause and effect, with managers planning and creating steps toward a specific goal in a linear fashion
Casual Logic
How the company reaches and communicates with customer segments
Channel (CN)
A ____________ is a percentage of the value of a sale. If you decide to pay yourself a 10 percent ___________, and sell an item for $120, your commission on the sale would be $12.
Commission
-If the company is already established, is a franchise, or is the reincarnation of a previous business, there will be a history to share with the reader of the plan. -If this is a start-up venture, this section should describe briefly the background story of the company, explaining what you have done thus far and why you have done it. -The legal form of the business (sole proprietorship, corporation, LLC, partnership) should also be noted
Company Description section
For your business to be successful and to fulfill your mission and vision, you will need a strategy for beating the:
Competition
Society in general benefits because free enterprise encourages __________ between entrepreneurs.
Competition
The ________ must be sustainable to create long-term viability. Your competition is defined by your target market and can be direct (selling the same or similar products to the same market) or indirect (selling different products that compete for the same share of customer spending).
Competitive Advantage or Core Competency
research that compares an organization with several direct and indirect competitors by name in a manner that is meaningful to targeted customers.
Competitive Analysis (opportunity analysis and research)
Combines your business definition with your competitive advantage. A competitive advantage must be sustainable, meaning that you can keep it going.
Competitive strategy
Is it easy to use your product? Is your product accessible?
Convenience (Factor of Competitive Advantage)
The fundamental, ethical, and moral philosophy and beliefs that form the foundation of the organization and provide broad guidance for all decision making.
Core values
also called intrapreneurship, it 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
Corporate Entrepreneurship
All costs of operations
Cost Structure (C$)
The cost of producing a tangible item
Cost of Goods Sold
The cost of the direct labor used to produce the service plus the cost of the delivery of the service
Cost of Services Sold (COSS)
What is different about your business activities and the cost of doing business, compared to the competition? Overall, are you at a cost advantage or disadvantage?
Cost structure
A decision-making process in which the costs of taking an action are compared to the benefits
Cost/benefit analysis
Using a comparison of benefits and costs to make a decision is called a ____________. It is a helpful tool because people often evaluate pros and cons based on emotions, not intellect.
Cost/benefit analysis
The money, energy, and time you will have to invest, as well as the opportunities you will be giving up, to operate the business.
Costs
To turn an opportunity into a business, entrepreneurs invest both time and money. Before making this kind of investment, think carefully about:
Costs and Benefits
Entrepreneurs may have different reasons to start and continue their businesses, but they share the common focus of:
Creating Sustained Value
The ________ of an organization, whether intentionally or unintentionally created, is largely defined by its leadership.
Culture
The beliefs, values, and behavioral norms of an organization
Culture
Leaders of a company build a culture by making the beliefs, values, and behavioral norms explicit and intentional. Culture includes factors such as risk tolerance and innovation; orientation with respect to people, teams, and outcomes; attention to detail; and communications norms. Organizational culture is learned by members of the team in many ways, including through anecdotes, ceremonies and events, material symbols, and use of language
Culture is composed of the core values in action
A term for money when it is exchanged internationally
Currency
Types established through consumer segments reached Examples: -Personal assistance -Dedicated personal assistance -Self-service -Automated services -User communities -Co-creation
Customer Relationships (CR)
Where entrepreneurs are free to trade voluntarily to as large a market as possible, their ability to find customers to buy their goods or services increases, as well as their overall ability to meet _____________. Meanwhile, the Internet has made it much easier for businesses to sell to clients all over the world.
Customer needs
The customers for whom the company creates value
Customer segments (CS)
Can your product or service be tailored to the requirements of your customers?
Customization (Factor of Competitive Advantage)
Finding a committed business mentor with industry-specific knowledge and experience, broad general business experience, or both, is often __________, but can be a worthwhile endeavor.
Difficult
Employees that actively produce or deliver a product or service.
Direct Labor
Includes telemarketing, direct mail, in-person selling, and other personalized promotional efforts.
Direct Marketing
The public benefits from living in a free-enterprise system because it ___________ entrepreneurs who waste resources by driving them out of business. It ____________ entrepreneurs to use resources to satisfy consumer needs efficiently by rewarding them with profit and wealth.
Discourages; Encourages
Segments that aren't related and have very different needs
Diversified Market
Each stockholder's portion of the profit-per-share paid out by a corporation
Dividend
Take a share of the company's profit. As the owner, you can pay yourself a portion of the business's profits. In a corporation, this kind of payment is called a _________ and must be paid to all shareholders.
Dividend
If you are purchasing a company, you should perform ________, which is the process used to learn about its true financial condition (the current owners may have incentives to provide incomplete, misleading, or inaccurate information), its reputation, and its continuing viability
Due diligence
The exercise of reasonable care in the evaluation of a business opportunity.
Due diligence
a method that assesses the value of a business based on a stream of earning that is multiplied either by an agreed-upon factor (the capitalization factor) or by the price/earnings ratio (for a publicly traded company)
Earning Valuation
At first, an entrepreneur can be part of his own:
Economics of one unit
How much gross profit is being earned on each unit of the product or service that is sold
Economics of one unit of sale (EOU)
Who wrote in the preface of New Venture Creation: Entrepreneurship for the 21st Century, "A skillful entrepreneur can shape and create an opportunity where others see little or nothing—or see it too early or too late?
Economist Jeffry A. Timmons
An ____________ is the wealth and resources of a country or region, including its financial structure.
Economy
Also known as entrepreneurial thinking and is defined as a way of thinking employed by entrepreneurs that includes decision-making principles applied in situations of uncertainty
Effectual Logic
This analysis of __________ versus __________ is important to understanding how successful entrepreneurs can create businesses from opportunities.
Effectual Logic; Casual Logic
a 30-second to 2-minute presentation that conveys in an engaging way what a business is proposing and why the listener should be interested
Elevator Pitch
Someone who earns a living by working directly for someone else's business is an ____________ of that business.
Employee
Successful entrepreneurs know it is important to begin with the _______________, so that they can have an idea of where they want the organization to be at their personal exit point, even before they make the first sale.
End in mind
Entrepreneurship is often called the _________________. It drives economic creativity, giving rise to wealth and jobs and improving the standard of living.
Engine of an economy
A person who recognizes an opportunity and organizes and manages a business, assuming the risk for the sake of potential return
Entrepreneur
People who have their own businesses work for themselves and are called business owners or:
Entrepreneurs
Manufacturing. One order (any quantity; e.g., 100 watches). Wholesale. A dozen of an item (e.g., 12 watches). Retail. One item (e.g., one watch). Service. One hour of service time (e.g., one hour of lawn-mowing service) or a standard block of time devoted to a task (e.g., one mowed lawn).
Entrepreneurs usually define their unit of sale according to the type of business. For example:
a review that addresses the roles of the community, region, nation, or the rest of the world, as they relate to a business.
Environmental Analysis (opportunity analysis and research)
For example, José has a construction business, and his neighbors hire him to renovate their kitchen. He wants to earn money and is willing to use his skills and time to do so. The neighbors are willing to give him money to get the renovation done. They each have something the other wants, so they are willing to trade. A satisfactory exchange only takes place when both parties believe they will benefit
Example of Voluntary Exchange
Example of trade-off: buying margarine instead of butter because its cheaper even though you know the cookies won't taste the same.
Example of trade-off
"At Superior Printing, we engage in business practices that affect the environment as little as possible." "At Sheila's Restaurant, we believe in supporting local organic farmers."
Examples of Core Values
General Motors—General Motors is leading the transportation revolution by delivering safer, better and more sustainable ways for people to get around. Driven by 177,000 talented employees across the globe, General Motors' vision is to help create a world with zero crashes, zero emissions and zero congestion. Google—To provide access to the world's information in one click. Kiva—We envision a world where all people—even in the most remote areas of the globe—hold the power to create opportunities for themselves and others.
Examples of Vision Statements
DuPont Company—DuPont puts science to work by creating sustainable solutions essential to a better, safer, healthier life for people everywhere. Google—To organize the world's information and make it universally accessible and useful. Kiva Microfunds—To connect people through lending to alleviate poverty.
Examples of mission statement
The executive summary must be compelling and comprehensive. It may be the only part that many people will read This section should be written last and limited to one or two pages. It should answer the who, what, when, why, and how questions for the business.
Executive Summary section
The degree of rivalry among existing competitors is generally the strongest force in an industry and is influenced by all the other forces
Existing Competitive Rivalry
The exit strategy is the way in which you and/or your investors expect to leave the company in a planned and orderly way. For investors, this might mean a buyout plan for their equity, or an initial public offering (IPO) when the company goes public—that is, puts itself on a stock exchange
Exit Strategy
Competitive advantage comes from one (or a combination) of several factors: 1. Quality 2. Price 3. Location 4. Selection 5. Service 6. Speed/turnaround 7. Convenience 8. "Getting the job done" 9. Brand/Status 10. Newness 11. Customization
Factors of Competitive Advantage
Among these mainstream firms are many ______________, which are companies owned and operated primarily by related family members
Family enterprise
a study to assist in making the go/no go decision based on a close examination of product/service, market, industry, and financial data in a sufficient degree of detail to ensure confidence in the results.
Feasibility Analysis
The financial section is the numeric representation of the business plan. It should demonstrate organizational viability in financial terms.
Financial Analysis and Projections
the relative value of one currency to another.
Foreign Exchange Rate (FX)
A ____________ is a legal and commercial relationship between the owner of a trademark, service mark, trade name, or advertising symbol and an individual or group seeking to use that identification in a business.
Franchise
A business that markets a product or service developed by a franchisor, typically in the manner specified by that franchisor.
Franchise
Economic system in which businesses are privately owned and operate relatively free of government interference.
Free-enterprise system
The economy of the United States is a ____________ because it is characterized by private (rather than governmental) ownership of capital assets and goods, and prices are determined by markets; anyone is free to start a business.
Free-enterprise system
Your business plan should explicitly state the funds you will need. Whether the need is $5,000 or $50 million, the logic must be clear and compelling
Funding Request
a company that achieves an annual growth rate of 20 percent or greater, typically measures by the increase of sales revenue.
Gazelle
Business activities that avoid harm to the environment or help to protect it in some way.
Green Entrepreneurship
According to the Corporation for Enterprise Development (CFED), ______________ can: -create jobs and offer entrepreneurship opportunities; -increase energy efficiency, thus conserving natural resources and saving money; -decrease harm to workers' health; -enable businesses to tap into new sources of local, state, and federal funding; -take advantage of consumer preference for environmentally friendly goods -preserve limited natural assets on which businesses and communities depend for business and quality of life.
Green entrepreneurship
Total sales revenue (price) minus cost of goods sold
Gross Profit
Develop a love for the business rather than being in love with the:
Idea of the business
a financial document that summarizes income and expense activity over a specified period and shows net profit or loss
Income Statement (profit and loss statement)
An income statement or profit and loss statement summarizes income and expense activity over a specified period, such as a month, quarter, or year, and shows net profit or net loss
Income Statement for 3 years (Financial Analysis and Projections)
a critical view of industry definition, industry size and growth (or decline), product and industry life cycle, and any current or anticipated legal or regulatory concerns.
Industry Analysis
The industry analysis will provide the broad context
Industry Analysis (opportunity analysis and research)
First offering of corporate stock to investors on the open (public) market.
Initial Public Offering (IPO) (Exit Strategy)
is one that comes from inside you—from a personal hobby, interest, or even a passion—or inside your organization
Internal opportunity
Opportunities fall into two categories:
Internal opportunity and External opportunity
Critical actions for success 1. Production 2. Problem-solving 3. Platform/network
Key Activities (KA)
The suppliers and partners needed in the network -Strategic alliances between noncompetitors -Cooperation (strategic alliances between competitors) -Joint ventures -Buyer-supplier relationships
Key Partners (KP)
That which is critical to making the model function 1. Physical 2. Financial 3. Intellectual 4. Human
Key Resources (KR)
A hypothesis-driven approach to business start-up using iterative development, introduced by Eric Ries in 2008
Lean Startup
The __________hypothesis-driven approach shortens product development cycles through experimentation, iterative product releases, and validated learning. It reduces waste and increases value.
Lean Startup
A business debt
Liability
One way to potentially shorten the product-development cycle and to access innovative technology is to identify and license that technology—that is, to enter into a contract to use it without purchasing the rights to own it.
Licensing Technology
__________________ are microenterprises that permit their owners to follow a desired pattern of living, such as supporting college costs or taking vacations.
Lifestyle businesses
Can you find a more convenient location for customers?
Location (Factor of Competitive Advantage)
Taking the ___________ also means considering your personal satisfaction and priorities, including conformance with individual values and ethics.
Long view
The people you hire and the processes you plan to implement will be an essential part of your business plan. This is where the rubber meets the road in the planning process The management team is often the deciding factor for a potential investor's decision to financially support a business The team must be composed of an effective balance of members with technical expertise (e.g., engineering, marketing, accounting, and operations), experience in the field, and life experience
Management and Operations
A group of people or organizations that may be interested in buying a given product or service, has the resources to purchase it, and is permitted by law and regulation to do so.
Market
The combination of the four factors: product, price, place, and promotion—that communicates a marketing vision. Also know as Core Competency
Marketing Mix (marketing strategy and plan)
a statement of the marketing goals and objectives for a business and the intended strategies and tactics to attain them.
Marketing Plan (marketing strategy and plan)
A large, broadly similar group of customers
Mass Market
A trusted advisor with whom a person forms a developmental partnership through which information, insight, skills, and knowledge are shared to promote personal and/or professional growth.
Mentor
Two of the best resources for getting and staying on track are:
Mentors and Business advisors.
a firm with five or fewer employees, initial capitalization requirements of under $35,000, and the regular operational involvement of the owner.
Microenterprise
Most businesses are founded as ___________, which are defined as businesses with five or fewer employees, initial capitalization requirements of less than $50,000, and the habitual operational involvement of the owner.
Microenterprises
Start-ups create __________, models or version of a new product that are designed to secure maximum customer feedback with minimal effort
Minimum Viable Products (MVP)
Expressed in a mission statement, is a concise communication of strategy, including your business definition and competitive advantage
Mission
A brief, written statement that informs customers and employees what an organization's goal is and describes the strategy and tactics to meet it.
Mission Statement
The presence of financial and operational goals and measures, as well as ____________, can feed a drive for success and motivate a team to excellence.
Mission and vision statements
Limited to 21 to 40 words to induce clarity in concept and expression
Mission statement should be:
Generally are composed of supplier and customer segments that are all served
Multi-sided Market
Is your product new and novel? Is it on the leading edge of technology?
Newness (Factor of Competitive Advantage)
A narrow, specialized, specific group of customers
Niche Market
WHAT will you sell to your customers? That is called your ______, and it includes the complete bundle of products and services you will be bringing to the marketplace.
Offer
An ____________ has a unique characteristic that distinguishes it from an ordinary idea
Opportunity
An idea that is based on what customers need or want and are willing to buy sufficiently often at a high enough price to sustain a business.
Opportunity
-Industry Analysis -Environmental Analysis -Proof of Market -Target Market
Opportunity Analysis and Research Components
Cost/benefit analysis is incomplete without considering ___________. This is the cost of your "next-best investment."
Opportunity cost
The value of what must be given up in order to obtain something else.
Opportunity costs
This person's motivation is not income replacement, but rather one of an envisioned future.
Opportunity-based entrepreneur
Start businesses to exploit a perceived opportunity or to pursue one that they created.
Opportunity-based entrepreneurs
But most employees have one thing in common—they do not __________ the business; they work for others who do
Own
the difference between assets and liabilities (Net Worth)
Owner's equity
Entrepreneurs are both __________ and ___________
Owners and employees
Americans do not have to get __________ from the government to go into business, although they are expected to obey laws and regulations and report their earnings.
Permission
This is the venue from which you will sell and distribute your product
Place (Marketing Mix)
Included in ___________ is your selection of a type of sales force (e.g., independent, company, single line, or multiline), any geographic definition of your market, and all channels of distribution.
Place marketing mix
The entrepreneur is working for the following potential rewards: 1. Control over Time 2. Fulfillment 3. Independence/ Autonomy (self-government) 4. Creation/Ownership 5. Financial reward/ Control over compensation 6. Control over working conditions 7. Self-esteem 8. Contribution to society
Potential Benefits of Entrepreneurship
While there are many potential benefits of entrepreneurship, entrepreneurs also face numerous possible costs: 1. Business failure 2. Obstacles 3. Loneliness/ Isolation 4. Financial Insecurity 5. Long hours/ hard work 6. Strain on personal relationships
Potential Costs of Entrepreneurship
Once you have chosen a business idea and determined your competitive advantage, you should make a _________ to determine whether the idea would be financially viable
Preliminary analysis
Can you offer a lower price on a sustained basis than your competition, or does your higher price reflect quality and/or uniqueness?
Price (Factor of Competitive Advantage)
The product or service has to be priced so that your target customers will buy it and the business will make a profit.
Pricing (Marketing Mix)
The free-enterprise system is also sometimes referred to as a _____________ because it is based on voluntary exchange
Private enterprise free-trade system
Is something that exists in nature or is made by human beings. It is TANGIBLE, meaning that it can be physically touched
Product
HOW will you provide your offer to your targeted customers? This includes how to perform the key activities required to produce the product or service, deliver it to your customers, and ensure they are satisfied.
Production and Delivery Capability
-Buying, developing, or manufacturing the product; -Identifying its potential qualified customers and selling the product to them; -Producing and delivering the product or service; and -Receiving payment.
Production and Delivery Capability includes primary activities of:
The product or service should meet or create a customer need
Products/Services (Marketing Mix)
Positive gain from operations after all expenses are subtracted
Profit
__________ is the sign that an entrepreneur has added value to the resources he or she is using.
Profit
The economics of one unit of sale is a method for seeing whether your business idea could be:
Profitable
Promotion consists of advertising, publicity, and other promotional methods, such as discount coupons or giveaways Examples: -Advertising -Public Relations -Publicity -Direct Marketing
Promotion (Marketing Mix)
An investigation that provides evidence of a market opportunity.
Proof of Market
In order to avoid such unwelcome surprises, you can create the production design for your product and create a working model, called a _____________, fabricated for testing by laboratories and prospective customers.
Prototype
Community activities that are designed to enhance an organization's image.
Public Relations
Can you provide higher quality than competing businesses?
Quality (Factor of Competitive Advantage)
Your business plan is the key to:
Raising Capital
A business plan should include standard ratios: gross profit, quick, current, debt, collection period, receivable turnover, inventory turnover, net profit on sales, net profit to assets, and net profit to equity
Ratio Analysis (Financial Analysis and Projections)
How funds are generated Examples: -Asset sales -Usage fee -Subscription fees -Lending/renting/leasing -Licensing -Brokerage fees -Advertising fees
Revenue Streams (R$)
All businesses take risks and make their projections based on assumptions: you need to state your financial assumptions and known risks explicitly.
Risks and Assumptions (Financial Analysis and Projections)
Strengths, Weaknesses, Opportunities, and Threats
SWOT Analysis
A fixed amount of money paid to an employee at regular intervals.
Salary
Entrepreneurs choose how and when they are paid. As owner of your company, when funds permit, you can decide to: Pay yourself a __________, a fixed payment made at regular intervals, such as every week or every month. Salaries are not applicable to sole proprietorships, where owners may take a "draw" on revenues, or partnerships, where they may "draw down" profits.
Salary
Economists consider ___________ all resources that are worth money, regardless of their relative availability
Scarce
-Using a new technology to produce a new product -Using an existing technology to produce a new product -Using an existing technology to produce an old product in a new way -Finding a new supply of resources (that might enable the entrepreneur to produce a product more economically) -Developing a new market for an existing product
Schumpeter's definition describes five basic ways that entrepreneurs find opportunities to create new businesses:
Groups with slightly different needs and problems
Segmented Market
Can you provide a wider range of choices than your competitors can?
Selection (Factor of Competitive Advantage)
Is labor or expertise exchanged for money. It is INTANGIBLE. It cannot be physically touched
Service
Can you provide better, more personalized customer service?
Service (Factor of Competitive Advantage)
1. Recognize an opportunity 2. Evaluate it with critical thinking 3. Build a team 4. Write 5. Gather resources 6. Decide ownership 7. Create Wealth
Seven rules for building a successful business
The French word entrepreneur began to take on its present-day meaning in the _____________. It was used to describe someone who undertook any project that entailed risk—military, legal, or political, as well as economic.
Seventeenth Century
Written and oral communications, critical thinking and problem solving, teamwork and collaboration, creativity, leadership, ethical behavior, and information technology
Skills that an engaged learner will recieve
A small business is defined by the U.S. Small Business Administration's Office of Advocacy as having fewer than 500 employees and selling less than $5 million worth of products or services annually
Small Business
__________ 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. Another view is that of taking an entrepreneurial perspective toward social problems.
Social Entrepreneurship
In addition to "social entrepreneurship," there is the more recent concept of the _____________, "a non-loss, non-dividend company designed to address a social objective within the highly regulated marketplace of today
Social business
a company created to achieve a social objective while generating a modest profit to expand its reach, improve the product or service, and subsidize the social mission.
Social business
____________ play the role of change agents in the social sector by: -adopting a mission to create and sustain social value (not just private value); -recognizing and relentlessly pursuing new opportunities to serve that mission; -engaging in a process of continuous innovation, adaptation, and learning; -acting boldly without being limited by resources currently in hand; and -exhibiting heightened accountability to the constituencies served and for the outcomes created.
Social entrepreneurs
It states where you expect to obtain your financial support and how you will use the funds
Sources and Uses of Capital (Financial Analysis and Projections)
Can you deliver your product/service more quickly than the competition?
Speed/turnaround (Factor of Competitive Advantage)
Apple cofounder Founder Steve Jobs
Stephen Wozniak
A plan for how an organization or individual intends to outdo competitors.
Strategy
Your strategy is the plan for outperforming the competition. Your tactics are the ways in which you will carry out your strategy
Strategy; Tactics
The less bargaining power and control the suppliers of raw materials, components, and labor have over competitors, the more attractive the industry.
Supplier Power
The specific ways in which a business carries out its strategy
Tactics
Groups defined by common factors such as demographics, psychographics, age, or geography that are of primary interest to a business.
Target Market
Starting a business is an opportunity, and like any opportunity, it should be evaluated by taking a careful look at all aspects of it. One thing is certain, though:
The desire to make money, alone, is not a good enough reason to start one's own business.
-product and/or service feasibility, -market and industry feasibility, and -financial feasibility.
The feasibility analysis essentially tests a business concept for viability in three areas:
1. existing competitive rivalry, 2. barriers to entry, 3. threat of substitutes, 4. supplier power, and 5. buyer power
The five industry forces identified by Michael Porter are essentially
Entrepreneurs must be able to tolerate more risk and uncertainty than is typical for people who work steady jobs at established employers. With higher risk, however, comes:
The potential for higher rewards.
-The entrepreneur looks for business opportunities through a process of identification and selection, beginning with self-developed (or group-developed) ideas. -The entrepreneur uses essentially the same process but starts with research on hot businesses, trends, or growth areas. -The entrepreneur has an idea for a product or service or has a problem to solve and searches for a market.
There are three primary routes in the deliberative search process to create and identify opportunities:
The level of threat posed by alternative products and services to industry customers matters. Some defining factors: -Convenience -Price competitiveness -Supply availability -Switching costs -Public policies
Threat of Substitutes
-It is 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.
Timmons's definition of a business opportunity includes these four characteristics:
-Competitive Offers -Unique Selling Proposition -Cost Structure
To determine whether you have a competitive advantage that will enable you to outperform your closest and strongest competitors, ask these questions:
-The cost of materials used to make the product (or deliver the service) and -The cost of labor directly used to make the product (or to deliver the service).
To get a closer look at one unit of sale, entrepreneurs analyze the cost of goods sold (COGS) of one unit. These are:
Who was the person that created an environmentally friendly company that would convert trash into fertilizer? There business was named TerraCycle Inc.
Tom Szaky
The act of giving up one thing for another
Trade-off
A product and/or service with a particular environmental, social, or ethical purpose. Grameen Danone does this by providing food for the poor in Bangladesh.
Type I
In his book Creating a World without Poverty—Social Business and the Future of Capitalism, Mohammad Yunus defines two kinds of social business:
Type I Type II
Profit-oriented business with ownership consisting of underprivileged people who can benefit directly or indirectly.
Type II
-Own channel versus partners -Direct (sales force, web sales, own stores) versus indirect (partner stores, wholesalers)
Types of Channels
1. Deliver WOW through service 2. Embrace and drive change 3. Create fun and a little weirdness 4. Be adventurous, creative, and open-minded 5. Pursue growth and learning 6. Build open and honest relationships with communications 7. Build a positive team and family spirit 8. Do more with less 9. Be passionate and determined 10. Be humble
Types of Core Values from Zappos.com
Start-up company valued at $1 billion
Unicorn
Some firms are high growth and highly uncommon
Unicorns
the distinctive features and benefits that set you apart from your competition
Unique Selling Proposition (USP)
Is the basic unit of the product or service sold by the business
Unit of Sale
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 on their investments.
Venture Philanthropy
Will be broader and more comprehensive, painting the big picture of what you want your organization to become. It is built on the core values and belief system of the organization. It is typically shorter than the mission statement, with a loftier perspective.
Vision
The vision for your business is broader and more comprehensive than its mission, painting a picture of the overall view of what you want your organization to become in the future. It is built on the core values of the organization. It should energize your people, and they should embrace it with enthusiasm and passion.
Vision for Business
A market transaction between buyers and sellers who willingly agree to the trade.
Voluntary exchange
_______________ occurs when buyers and sellers willingly engage in a market transaction that benefits each party
Voluntary exchange
A fixed payment per hour for work performed. This is not a common choice, but it is available.
Wage
Find your competitive advantage by determining what consumer:
Want and Need
Entrepreneurs seek opportunities that they envision as generators of incremental income, or:
Wealth
If one unit of sale is profitable, the whole business may be. By contrast, if one unit of sale is not profitable, then no matter how many units you sell, the business:
Will never be successful
In addition, according to the late Jeffry Timmons, "An opportunity has the qualities of being ________________ in a product or service which creates or adds value for its buyer or end user."
attractive, durable, and timely, and is anchored
The organization's culture can be shaped according to the _____ and by the way employees, customers, and other stakeholders are treated—an example that is set by the founding entrepreneur (owner)
business environment
No serious professional investor will agree to meet unless you have put together a comprehensive, convincing:
business plan
Each organization has the opportunity to create a unique mission, vision, and culture that will be supported by its:
core values
As you work on plans for your enterprise, it is a good idea to work on an _________ that quickly conveys to the listener in an engaging way what you are proposing and why he or she should be interested.
elevator pitch
Conducting a product or service ___________ serves the dual purpose of determining whether realization of the product or delivery of the service is possible at a profit and whether customer demand will be sufficient.
feasibility analysis
A __________ presupposes the business's desirability and your interest in this segment of the industry.
feasibility study
Having completed the product or service feasibility analysis and conducted one for the market and industry, you can complete this process by assessing the ____________ of your business idea. This analysis does not need to be detailed. At this point, addressing capital requirements, revenues, costs, and earnings should suffice
financial viability
Remember, not every ____ is an opportunity
idea
The opportunity analysis and research section will provide the credible information to demonstrate the market viability of your proposed business before you launch It should be a clear description of why the business presents an excellent opportunity, based on sound research and logic, including hypothesis testing
opportunity analysis and research section
The description of the ___________ is similar to the discussion of place in the marketing mix but with the emphasis on logistics and workforce readiness.
physical location
An entrepreneur can better assess feasibility with a reasonable projection of revenues based on anticipated:
pricing and volume
Unlike an employee, an entrepreneur owns _________ that his or her business earns and may choose to reinvest profit in the business or take it as payment.
profits
The opportunity analysis should include a _________- investigation that will provide evidence of a market opportunity for your organization.
proof of market (opportunity analysis and research)
Opportunity is:
situational
A neighborhood restaurant, a mattress manufacturer, a technology research company, and a clothing boutique can all be examples of a ____________; even a leading local employer may be classified as "small" under this definition
small business
The amount of _________ required will be a function of the size and type of organization you are starting
start-up capital
Evaluating the ______________ and industry is essential to determining the viability of a business idea
targeted market
As you choose the elements of your marketing plan, always keep your ______ in mind
vision
It is important to perform a feasible study so that you don't:
waste valuable resources
In addition, by using the ________, you can save some time and money by presenting your business plan to several investors at a time, no matter where they are located. You can broadcast your presentation in real time over the web or send it electronically to interested parties.
web