Entrepreneurship

• Entrepreneurship: the result of a disciplined,

systematic process of applying creativity and
innovation to the needs and opportunities in the
marketplace.
• Entrepreneurs connect their creative ideas with the
purposeful action and structure of a business.

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 Characteristics of Entrepreneurs

• Desire for responsibility  High level of energy

• Preference for moderate  Future orientation
levels of risk: risk  Opportunity
eliminators entrepreneurs
• Self-reliance  Necessity
• Confidence in their entrepreneurs
ability to succeed  Serial entrepreneurs
• Determination  Skilled at organizing
 Value achievement over
• Desire for immediate money
feedback

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Characteristics of Entrepreneurs
• Entrepreneurs tend to exhibit:
• A high degree of commitment
• Tolerance for ambiguity
• Creativity
• Flexibility
• Resourcefulness
• A willingness to work hard
• Tenacity

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 Enhancing Organizational Creativity

(continued)
• Talk and interact with customers.
• Reward creativity.
• Model creative behavior.
• Monitor emerging trends and identify ways your
company can capitalize on them.
• Look for uses for your product or service in other
markets.
• Don’t forget about business model innovation.

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Enhancing Individual Creativity
• Allow yourself to be creative.
• Forget the “rules.”
• Give your mind fresh input every day.
• Take up a hobby.
• Travel and observe.
• Observe the products and services of other
companies, especially those in completely
different markets.

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Enhancing Individual Creativity
(continued)
• Recognize the creative power of mistakes.
• Notice what is missing.
• Look for ways to turn trash into treasure.
• Keep a journal handy to record your thoughts
and ideas.
• Listen to other people.
• Listen to customers.
• Get adequate sleep.
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Enhancing Individual Creativity
(continued)
• Watch a movie.
• Talk to a child.
• Do something ordinary in an unusual way.
• Keep a toy box in your office.
• Take note of your “pain” points.
• Do not throw away seemingly “bad” ideas.

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Enhancing Individual Creativity
(continued)
• Collaborate with others.
• Read books on stimulating creativity or take a
class on creativity.
• Doodle.
• Take some time off.
• Be persistent.

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 Executive Summary

• The executive summary is a written version of

“the elevator pitch”
• A good elevator pitch provides:
• Context
• Benefit
• Target customers
• Point of differentiation
• Clincher

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• Problem: What pressing and important problem are you solving or what
opportunity are you addressing?
• Solution: How are you solving this problem or tapping this opportunity?
• Business model: Who are your customers and how will you make money?
• Underlying magic: What makes your company special?
• Marketing and sales strategy: What is your go-to-market strategy?
• Competition: Whom do you compete with? What can you do that they
cannot? What can they do that you cannot?
• Projections: What are your financial projections for the next three to five
years? What are your key assumptions and metrics to achieve these
projections?
• Team: Who is on your team? Why are they special?
• Status and timeline: Where are you now? What are the major and
immediate milestones?
 Step 1: Develop a Vision and
Create a Mission Statement
• Vision: the result of an entrepreneur’s dream of
something that does not exist yet and the ability to
paint a compelling picture of that dream for
everyone to see.
• A clearly defined vision:
• Provides direction
• Determines decisions
• Inspires people
• Allows for perseverance in the face of adversity

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 Step 1: Develop a Vision and
Create a Mission Statement
(continued)

• Mission statement: addresses the question: “what

business are we in?”
• Clarifies “why we are here” and “where we are
going.”
• Serves as a “strategic compass.”
• Examples: Bongo World, Nisolo Shoes, Badger
Mining, Putney, Inc., Clymb

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 Elements of a Mission Statement

• Four key questions:

• What are we in business to accomplish?
• Who are we in to business to serve?
• How are we going to accomplish that purpose?
• What principles and beliefs form the foundation of the way
we do business?

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 (continued)
• Developing a business model helps the
entrepreneur better understand all that will be
required to launch and build a business.
• Once the entrepreneur completes the idea
assessment, feasibility study, and business model,
he or she is ready to develop the business plan.

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 Essential Functions
of a Business Plan

1. Guiding the company by charting its future

course and defining its strategy for following it.
2. Attracting lenders and investors who will
provide needed capital.

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 A Plan Must Pass Three Tests
1. The Reality Test: proving that:
• A market really does exist for your product or service.
• You can actually build or provide it for the cost estimates
in the plan.
2. The Competitive Test: evaluates:
• A company’s position relative to its competitors.
• Management’s ability to create a company that will gain
an edge over its rivals.
3. The Value Test: proving that:
• A venture offers investors or lenders an attractive rate of
return or a high probability of repayment.

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Environmental Forces
and New Ventures

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 Industry and Market Feasibility Analysis

• Assess industry attractiveness using six macro

forces:
1. Sociocultural
2. Technological
3. Demographic
4. Economic
5. Political and legal
6. Global

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 Porter’s Five Forces Model

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 Threat of Substitutes

• Substitute products or services can turn an

industry on its head.
• Industry is more attractive to new entrants when:
• Quality substitutes are not readily available
• Prices of substitute products are not significantly lower
than those of the industry’s products
• Buyers’ switching costs are high

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 Porter’s Three Strategies

Cost
Leadership

Strategy? Differentiation

Focus

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 Cost Leadership
(continued)

• Cost Leadership works well when:

• Buyers are sensitive to price changes.
• Competing firms sell the same commodity products.
• A company can benefit from economies of scale.
• Examples: Dollar General and Dollar Tree

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 Differentiation

• Goal: Build customer loyalty by positioning its goods or

services in a unique or different fashion.
• Be special at something customers value.

• Key: Build basis for differentiation on a distinctive

competence, something that the small company is
uniquely good at doing in comparison to its
competitors.
• Example: RentTheChicken.com

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 Focus

• Goal: Select one or more customer segments in a

market, identify customers’ special needs, wants,
or interests, and then target them with a product
or service designed specifically for them.
• Strategy builds on the differences among market
segments.
• Rather than try to serve the total market, the company
focuses on serving a niche (or several niches) within that
market.
• Example: I Do Now I Don’t

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 Corporations

• Corporation: a separate legal entity from its owners.

• Types of corporations:
• Publicly held: a corporation that has a large number of
shareholders and whose stock usually is traded on one
of the large stock exchanges.
• Closely held: a corporation in which shares are
controlled by a relatively small number of people, often
family members, relatives, or friends.

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 Avoiding Legal Tangles
• Identify the company as a corporation by using
“Inc.” or “Corporation” in the business name.
• File all reports and pay all necessary fees required
by the state in a timely manner.
• Hold annual meetings to elect officers and
directors.
• Keep minutes of every meeting (formal and
informal) of the officers and directors.

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 Avoiding Legal Tangles
(continued)

• Be sure that the corporation’s board makes all

major decisions.
• Make it clear that the business is a corporation
– officers should sign all documents in the
corporation’s name.
• Keep corporate assets and the personal assets
of the owners separate. This does not protect
owners from the law if they committed the
following:
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Piercing the corporate veil
• Uses corporate assets for personal reasons or commingles them with
his or her personal assets
• Fails to act in a responsible manner and creates an unwarranted level
of financial risk for the stockholders
• Makes financial misrepresentations, such as operating with more
than one set of books
• Takes actions in the name of the corporation that were not
authorized by the board of directors