Entrepreneurship notes PDF

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This is the content on the PowerPoint slides which is presented in an outline format so that you can take notes in class without having to write down everything on the screen. Feel free to download and add to as we discuss this in class. You are welcome to use your computer for this in class. As you prepare for class and the quizzes please add your notes from the hyperdocs to this outline. In watching videos or reading articles, chapters from the text prepare additional notes in a format that is effective for you. Welcome to Introduction to Entrepreneurship- Syllabus review SPARKS: Situation or Problem that makes you Aware of the Right Key to Start a venture.  1. Identify the Situation or Potential opportunity.  service based idea  innovation based idea (improve or create a new product)  2. Detail how you became Aware of it.  3. Identify the Key that solves the problem or creates a new situation. What is Entrepreneurship? To me: someone with a NEW idea wanting to LAUNCH their idea. Going into business for yourself. Social Entrepreneurship – utilizes business practices to create a business that serves the environment, society, or humanity. Entrepreneur – individual who organizes a business who assumes risk for potential profit someone who actually STARTS a venture Differs from gambling: entrepreneurship has a way of controlling odds (through good business plans, marketing, quality product, etc.) •

Entrepreneurs:  Start  Discover Opportunities  Solve Problems  Create Value  Innovate  Actively own  So what is an Intrapreneur?

What is the difference between a small business owner and an entrepreneur? Small business owner: franchising or preestablished idea/business - Can be an entrepreneur but does not have to be Intrapreneur: company within a company. Starts a division within a company. Why do you believe people would want to start their own business? - They want to work for themselves - They feel that there is a need for their idea - To make money - To make a difference - They have a passion for something - Dreams -> Actions - Create jobs ie make a difference

What are the rewards ? 10 Myths of Entrepreneurship • http://www.youtube.com/watch?v=G8gRkJ9cnzo - profit - recognition/notoriety - satisfaction (feelings of success)

What qualities do you find attractive that you would like to develop in this class?

What is the problem you want to solve in a venture?

Why Do People Become Entrepreneurs?

What is the difference between a Displaced and Self -Reliant Entrepreneur? Displaced - Someone who was laid off and doesn’t have a venture Self Reliant - Someone who is fed up with their current situation and leaves

What are some other reasons to leave a good paying job? 

Bad work environment

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Harmful to your health Family needs (ie location changes, lifestyle, etc)

Is Owning a Small Business a Good Fit for You? 1. Am I passionate about my product or service? 2. What is my tolerance for risk? 3. Am I effective in making decisions? 4. Am I willing to take on numerous responsibilities? 5. Will I be able to avoid burnout? “Reality Check” what are the pros and cons of starting your business? (ch 2-5) Pros Cons

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Pick a small business that you know has failed, why did it fail.

Ten Mistakes Made by Startup Entrepreneurs 1. Going it alone. 2. Asking too many people for advice. 3. Spending too much time on product development, not enough on sales. 4. Targeting too small a market. 5. Entering a market with no distribution partner. 6. Overpaying for customers. 7. Raising too little capital. 8. Raising too much capital. 9. Not having a business plan. 10. Overthinking your business plan. The Art of the Innovation VIDEO What did Guy Kawasaki have to say about making meaning? The Competitive Edge of Entrepreneurs  

Customer focused Quality o What is it?  Consistent delivery of a predetermined standard

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Special Niche o Differentiation Innovation & Globalization Integrity & Responsibility (business ethics)

Characteristics of a Successful Entrepreneur • 1 is an area of weakness 4 is an area that of Strength ENTREPRENEUR QUOTIENT: •

Know what the customer wants 3

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Ability to be creative 3

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Willing to take a risk 2

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Adaptable to change 4

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Self Reliant 4

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Ability to lead others 4

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Knowledge – satisfy the customer demand 2

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Your desire to succeed 4

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Your fear of failure 1

TOTAL : 27

Get with a partner a discuss the area you feel most comfortable in and the areas you need to work on. B (uilder) S (pecialist)

O (pportunist) I (nnovator)

How to Fail as an Entrepreneur 1. Overestimate what you can do. 2. Lack an understanding of the market. 3. Hire mediocre people. 4. Fail to be a team player. 5. Be a domineering manager. 6. Not share ownership in the business in an equitable way . Characteristics of a Successful Entrepreneur:   

Strong commitment to the business (tenacity) Strong internal locus of control (self-reliance) Moderate risk takers (financial, career, calculated risks)

What is the difference between an entrepreneur and a intrapreneur ? What does it mean to kill the cash cow? How does this affect the business’s culture? What did GK mean by collect and share? What Is Bootstrapping? How much debt do you have? If you have partners, what is their equity %? How much risk are you willing to take? Do your research Develop a $ strategy Do more with less Questions       

How much debt do you have? If you have partners what is their equity %? How much risk are you willing to take? Do Your Research Develop a $ strategy Do More with Less Control the resources .

The Importance of Mentors • Mentors  Accountability

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Knowledgeable Experiential guidance Teach you what they know Encourage you when it gets rough Warn you to potential threats Network to leverage resources

Creating a New Business from Scratch: o o o o

Make sure it’s about more than money Be adaptable and nimble Don’t be afraid to take the risk and be prepared to fail early Hire great people

Coming Up with Startup Ideas

Opportunity Recognition How have you recognized opportunities?

Entrepreneurial Alertness- SPARKS

Good Investment Qualities- more than money!

Types of Startup Ideas  New Customers- Taking an existing product or service, marketing it to new customers – LIDL, Existing Franchises, New Markets.  Innovations- A new product or service that has not been introduced before. Apple, Nanotech. Molecular Gastronomy.  Improvements – Fixing the problems with an existing product or service. Amazon, Uber, Redbox.

Market Innovation Chart • Burgers

Market (old UP)

Old Market Old Innovation

New Market New Innovation

Old Market New Innovation

New Market New Innovation

Innovation -> New

What are some ways to use Innovative Thinking to Generate Business Ideas? 1. Borrow 2. Combine 3. Begin with a problem in mind. 4. Recognize trends 5. Improve product /service 6. Streamline -customer’s friendly 7. Adapt - meet customer needs in different ways. 8. Expand market 9. Make it “green.” 10.Eye on new technologies . Trends in the General Environment o o o o o o

Political legal Technological Sociocultural Global Economic Demographic

The Competitive Environment Questions • Who is your competitor? • What unique resources do they control? • What are their strengths and weaknesses? • How will they respond to your idea? • How can you protect your venture? Idea Analyses • Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis •

What are others ways to analyze the opportunities?

Strategic Theory • What is Strategy? • What is an example of a Strategic Decision? • Describe a Sustainable Competitive Advantage . Selecting Strategies That Capture Opportunities

Focus Strategies • Focus Strategy Implementation • Restricting focus to a single subset of customers. • Emphasizing a single product or service. • Limiting the market to a single geographical region. • Concentrating on superiority of product or service . • Advantages • Niche market shields from direct competition. • Focus allows development of unique attributes. • Disadvantages • Focus markets can quickly erode if:  Competitors imitate the strategy.  Demand disappears.  Competitive advantage disappears.  Someone sub-segments the industry . Is Your Startup Idea Feasible? • Feasibility Analysis • A preliminary assessment of a business idea that gauges whether or not the venture envisioned is likely to succeed • Fatal Flaws • A circumstance or development that alone could render a new business unsuccessful  Market potential: acceptance, accessibility, growth, and size

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Power of competitors Strength of competitive advantage Startup costs Management capability.

An Overview of the Business Plan • The Purpose of a Business Plan • Identifies -who? when? where? • Presents- what? why? • Analyzes- how? • Guides . –if? • A business plan should illustrate a how the assumptions strategically match the vision.

Understanding the Business Model What does the term Business Model mean? • Reference Text- “An analysis of how a firm plans to create profits and cash flows given its revenue sources, its cost structures, and the required size of investment.” • Business Model Elements • The revenue model • The cost structures • The investment sought, the equity stakes. Two Main Types of Assumptions • Value Creation • What makes it unique, who will buy it? • Growth • How often, how easily will new customers adopt it?

Who Needs a Business Plan?

Do all businesses need one?

What if the assumptions have been quantified? • Two Primary Functions

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Internal- Goals and Strategies External- Pitching to investors, bankers.

Types of Business Plans in our program • The Short Plan- ENTR 1001 • Discovery- Problem and Solution • Practice- Foreman Five • Final SVP- relate the data identified into an executive summary. • The Comprehensive Plan- ENTR 2030 Content of a Business Plan • The quantity of information is based upon • The opportunity- its scale • Critical resources • The entrepreneurial team • The financing structure • External factors • Which areas are you really concerned about to develop a short business plan? What is a Pro Forma? Identifies Records Communicates Information Relevant Reliable Comparable Help us make a better descision

The Content of our Business Plan Project • Executive Summary/Synopsis/Narrative • Answer the five questions  What is the product or service, is it unique?  Who is your customer?  How will the customer react?  How much money will it take?  Where will the money come from? • The Financial Projections- ulearn. Presenting Business Plan to Investors • Understanding the Investor’s Perspective • The Investor’s Short Attention Span

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Make it relevant to them- the ASK.

Small Business Leadership • What is Leadership? • RT- “Involves pointing the way: creating and communicating the entrepreneur’s vision of the firm.” • Varies in a business as it grows larger and more mature. • Leadership Qualities of Founders • A tolerance for uncertainty • A capacity for adaptation. What Makes an Effective Leader? One who • has intent focus on goals • motivates and builds loyalty and respect • influences decisions of employees- ethics • attracts qualified employees. Leadership Styles- Think of an example- type their name • Visionary - mobilize people toward a vision. • Coaching- develop people, establishing a relationship and trust. • Affiliative- create emotional bonds and harmony • Democratic-build consensus through participation. • Pacesetting- set high standards and expect excellence. • Commanding - demand immediate compliance.

Small Business Leadership • Leaders Shape the Culture of the Organization • Empowerment • Work teams • Working environment • Good Hiring • Measuring Performance • What else? Stages in Firm Growth and Management Sole Proprietor LLC Scalable Succession Managing Versus Doing

Servant Leadership – Kat Cole ’17 Managerial Responsibilities of Entrepreneurs - POLC

Planning Activities • What are the Benefits of Formal Planning? • Why do you need to set time aside for planning? • Should employees participate? Planning Activities: Types of Plans Long Term Short Term Budget Policies SOP Creating an Organizational Structure OBSERVATIONS

The Unplanned Structure • Structure evolves as the firm evolves. What is “Chain of Command”? What is “Span of Control”? Delegation of Authority • Benefits of Delegation-two perspectives.  For the manager.  For the employee. Iterative Process of Improvement Who is going to help me? Where is the money going to come from?

Crowd funding Craft fund

Discovery Process • Why is this business a good fit ? Motive • How much are you willing to invest? • How soon will you need to make money? 1 y? • Is this a good time for you? available? • What is your business characteristics? • Home, salon, mobile • Tolerance Levels- morning person who does not like.. • If is this something you could do for a while? • Are you a sales person, manager, recruiter ? • Franchise- can you follow a proven process?

What Is Integrity? • Make promises a priority and achieveable. • Write them down. • Make it important. • What are some promises that you have seen a lapse in as far as a venture? Kinds of Ethical Issues Think of Some Ethical Issues in Business Operations • Income and expense reporting (tax fraud) • “Truth in advertising”—persuasion and deception • Bribing customers and rigging bids • Direct selling—pyramid schemes, bait-and-switch selling • Effects of owners’ ethics on their employees • Accurately reporting financial information Ethical Decision-Making Process 1. Identify the problem. Lets think of a problem 2. Investigate the evidence. Take a moment an find out a fact. 3. Interpret all options. What are our options? 4. Intend to make best decision. What is your decision? 5. Implement the decision. 6. Inquire about the results of the decision. What is the Work of a Social Entrepreneur?

• Solve- Find practical solutions to social and environmental problems • Innovate- by finding a new product, service or new approach to a social problem • Create-Focus on creation of social value • Transform- Be a transformative force…. reforming or revolutionizing dysfunctional systems and industries. Social entrepreneurs operate in all sectors: education, environment, health, microfinance, human rights, enterprise development

When would you do this? How often? What if you made the wrong decision? • Michael Porter- Social Responsibility • Good processes = profit • Social Impact is creating a shared value  Addressing a social issue with a business model.  Capitalism at its finest  Social value + Economic Value  Levels of shared value – Meeting societal needs through products – Utilizing resources, suppliers, logistics and employees more productively – Improving the local business environment Change how business sees itself Change how others see business Social Entrepreneurship • Starting a venture that provides innovative solutions for social problems. • Toms Shoes• Kings Kitchen Presentation Tips

Practice Pitch -Research before Develop • 1. Find your customers • Demographic Data • Geographic Location • Wants and Needs • Hobbies and Activities • Market Size • 2. Identify the competition • Start the search engine.

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• Social Media – what are they saying • Trade Shows and Conference Network • Chat with their customers • Visit the competition • Research to Develop 3. Naming your Baby • Easy to remember • Avoid local names- think expansion • KISS • No strange spelling – Kwik Kofa’ • Think like a customer • Test it out • Integrity and Entrepreneurship

What Is Franchising? • Franchising  A marketing system involving a legal agreement, whereby the franchisee conducts business according to the terms specified by the franchisor. • Franchisor  Party in franchise contract that specifies methods to be followed and terms to be met by the other party. • Franchisee  An entrepreneur whose power is limited by a contractual agreement with a franchisor. The Pros and Cons for Franchisee • Advantages  Probability of success  Training Support  Financial assistance  Operating benefits • Limitations  Franchise costs  Restrictions on business operations  Lack of franchisor support- creates disputes- expectation

Evaluating Franchise Opportunities • Selecting a Franchise  Personal observation- make sure its right for you.  Would you visit the business  Advertisements- Entrepreneur Mag.

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Investigating the Potential Franchise  Information sources – Look at FDD

Pros and Cons of being a Franchisor • Pros  Reduction of capital requirements  Increase in management motivation  Speed of expansion  Cons  Reduction in control  Sharing of profits  Increase in operational support costs Buying an Existing Business? Finding a Business to Buy Determine your commitment. Establish what you can afford. Figure out what skills you have. Consider lifestyle impact. Pros and Cons of Buying an Existing Business • Pros  High chance of success  Less planning  Existing customers/ suppliers  Necessary equipment  Bargain price  Experienced employees  Existing business records • Cons  Existing problems  Poor quality of current employees  Poor business image  Modernization required  Purchase price based on inaccurate data  Poor business location. Examining the Financial Data

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Review financial statements and tax returns for the past five years. Recognize that financial data can be misleading.  Assets overvalued  Expenses overstated/understated  Income underreported  Unrecorded debts Adjust asset valuations to reflect the true state of the business (fair market value).

Valuing the Business • Asset-Based Valuation  Assets; not based upon going concern. • Market-Comparable Valuation  Good for proven business models- Franchise  Sale of last Pharmacy • Cash-Flow-based Valuation  When inventory can be controlled and COG is steady. Closing the Deal • Terms of Sale  Assets purchase or total entity  Indemnification clause  Payment in full or partial payments over time • Closing the sale  Third party assistance  Bill of sale - Attorney  Tax certifications - CPA  Payment-to-seller agreements and guarantees- Finance. Risk vs reward • Entrepreneur- independent operator has the highest of both • License is moderate • Selling the idea is lowest risk and can have a great reward if…..? Risk Vs Reward – Professor Foreman’s lesson Perfect Customer Monetizing the Idea- Ways to make money from a venture • Start a company, build a brand, plan for an exit.  Brand Equity- the difference between book value and market value of a company as it relates to a recognizable company symbol. • Sell the idea to someone else- patent or franchise. • License a product to a company

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Think of it like real estate – patent is a deed – license is a lease.

Licensing • Identify the licensee first- is it a good fit. • License is based upon a percent of sale. • Clause for renegotiation at some point. • Terms need to state a minimum production level • Pick one that is already in the business  Complimentary User  Private label brands  Companies that supply the users. The Econom...