Entrepreneurship Concepts

 Economic development emerges due to

o The launch of new source of procurement for raw materials or materials
o The introduction of a new production mechanism
o The introduction of a new quality of product, or a novel product
o The opening of new market
o The re-organization of a business.
 Entrepreneurs are:
o Action-oriented, initiative-taking individuals who take risks to achieve goals.
o Identify and pursue solutions among problems, possibilities among needs, and
opportunities among challenges.
o Someone who identifies and acts on an idea or problem that no one else has
identified or acted on → Different from small business owner.
 Entrepreneurs: Ability
o See and evaluate business opportunities.
o Gather the necessary resources to take advantage of them.
o Initiate appropriate action to ensure success.

 Opportunity: Definition
o A favorable juncture of circumstances with a good chance for success or progress.
 Entrepreneurs: Characteristics
o Entrepreneurs are vision-oriented people.
o Entrepreneurs have a high need for achievement.
o Entrepreneurs do not rely on fate or luck; however, they try to control their own
lives.
o Entrepreneurs take moderate risks, which is why they look for high earnings on
their investments.
 o Entrepreneurs can deal with several ambiguous situations in their ventures. They
face these ambiguous situations and circumstances regularly because they do
certain jobs and tasks which are entirely new by nature.
o Entrepreneurs have the tendency to be productive and efficient in each period.
However, at times, they might be seen as inflexible individuals in teamwork.
 Entrepreneurs: Types
o Achievement entrepreneur
o Salesperson entrepreneur
o Technology entrepreneur
o Manager
 Entrepreneurs: Overcoming challenges require
o Able to deal with a series of tough issues.
o Ability to create solutions and work to perfect them.
o Multi-tasking
o Resiliency
o Willingness to work hard and not expect easy solutions.
o Possess well-developed critical thinking skills.
o Able to learn and acquire the necessary skills for the tasks at hand.
 Entrepreneurs: Traits
o Risk takers
o Flexible
o Knowledgeable
o Independent
o Energetic
o Creative
o Dynamic leader
o Responsive to suggestions or criticisms
o Resourceful
o Initiators
o Persistent
 Entrepreneurship: Process
o Identify an opportunity.
o Producing the product or service
o Acquiring resources
o Marketing
o Designing and building company
o Responding to the environment
 Entrepreneurship: Opportunities
o Internet
o Emerging economies
o Cross-border engagements
o Market entry mechanism (strategic alliances, subsidiaries, joint ventures)
o Evolving trends
o Markets concerning social responsibility and ethics.
 Entrepreneurship: Avenues
o Balance between exports in potential market and the merchandising import
o Research to understand political aspects of global economy to understand barriers
to enter a market.
o Understand
 Development of domestic market
 How nation protect their industry using
 Tariffs
 Quotas
 Boycotts
 Non-tariff
 Monetary and market barriers
 Entrepreneurship: Challenges
 o Knowledge gap between the developed, emerging, frontier and underdeveloped
markets for conducting business.
o Difference in accounting systems in several countries
o Variable rates of return
o Non-convertibility of the currencies
o Communication gaps
o Language barriers
o Political unrest and legal concerns
o Cultural differences
o Discrepancies in the use of technology
o Complexity in the markets
o Supply chain concerns
o Lack of specific infrastructure in some countries or regions
o Financial markets and their volatility
 Entrepreneurship: Growth Factors
o “Pull” Influence
 Desire for independence
 Desire to exploit an opportunity:
 Turning a hobby or previous work experience into a business
 Financial Incentive(reason)
o “Push” Influence
 Redundancy
 Being without a job
 Unemployment
 Uncomfortable relation at work
 Entrepreneurship: Outcome
o Economic growth
o New industry formation
o Job creation
 Entrepreneurship: Success factors
o Founders are capable individuals.
o The entrepreneurial team
o Incremental growth of product or services
o Marketing and timing
 Entrepreneurship: Drawbacks
o Limited resource
o Lack of experience
o Disagreement between members
o Uncertainty of income
o Risk
 Entrepreneurship: Elements involved
o Risk
 Political risk
 Business risk
 Economic risk
 Property risk
  Personal risk
o Information
 Strengths and weakness of competitor
 Strategy of competitor
 Know threats and opportunity.
 Help design long term objectives and goal.
 Help to know market position locally and internationally.
 Source:
o Primary data
 Observation method
 Interview method
 Through questioner
 Warranty cards, consumer panels, etc.
o Secondary data
 Various publication of the central state and local government
 Various publications of foreign government or international bodies and
their subsidiary organization.
 Technical and trade journals
 Books, magazines, and newspapers
 Reports
 Public records and statistics, historical documents.
o Consideration of secondary data
 Reliability of data
 Suitability of data
 Adequacy(acceptability) of data
 Entrepreneurship: Vision
o What the entrepreneur wants the business to look like in the future—five or ten
years out.
 Entrepreneurship: Vision statement
o The picture you have for what the venture will become in the future: what it will
grow into
 Entrepreneurship: Mission statement
o Formal declaration about what the venture will do, what value it will provide to
the end customer, and how it will accomplish this action.
 Entrepreneurship: Value proposition
o A summary statement that conveys the benefits your product, service, or unique
business process/model provides to customers.
 Entrepreneurship: How to cultivate mindset
o Passion:
o Focus on your niche.
o Build a trusted and talented team.
o Embrace failure.
o Set small achievable goals.
 Goals
o SMART goals

 Specific
 Measurable
 Attainable
 Relevant
 Time-bound

Entrepreneurial Journey
 Entrepreneurial Process

1. Startup
2. Development
3. Resourcing
4. Market Entry
5. Growth
 6. Maturity
7. Exit
8. Rebirth
9. Harvest
 Entrepreneurial Opportunities and Option

o On the Job: Ventures created within the company.

o Family Obligations
o Purchase existing franchises.
o Web-based Venture
o Work for Hire
o Unemployment

 Finding your entrepreneurial path

o Through Self-Reflection
o Through Research and Experiments
o Through Soft Launch

 How to discover startup ideas?

o Spotting a problem
o Started asking questions.
o Find mentors.
o Develop a Problem-Solution perspective.
o Gain expertise in your areas of interest
o Observe social dialogue.
o Keep an eye on future trends.
o Detect inefficiencies.
o Skip the middlemen.
o Copy competition & improve.
o Let your passion lead you.

Creativity, Innovation and Entrepreneurship

 Ideas
o Connecting dots
o Creativity
o Day dreaming
o Envisioning
o Thinking
o Studying
o Extrapolating
o Tinkering
 o Inventing
 Innovation
o Product development
o Prototyping
o Value Creating
o Making
o Problem solving
o Designing
o Building
o Iterating
o Iterating
 Entrepreneurship
o Customer validation
o Business modelling
o Venture building
o Scalability
o Repeatability
o Discovering
o Experimenting
o Iterating
o Customer serving
 Creative Problem-solving methods
o Human-centric design thinking
 Accessing and expressing empathy
 Defining the problem
 Ideating solutions (brainstorming)
 Prototyping,
 Testing
o Six Thinking Hats method
 White Hat: Research
 Red Hat: Emotions
 Black Hat: Logic
 Yellow Hat: Encouragement
 Green Hat: Creativity
 Blue Hat: Enforcement
o Statement Starters method
 “How might we ________?”
 “What if we ________?”
 Ask a question to open up new possibilities?
 Innovation
o Output + Process of arriving at solution.
 Product innovation
o New, improved product
 Process Innovation
o Manufacturing processes are improved to make production cheaper.
 Service Innovation
 o New ways of delivering services are developed.
 Technology-push Innovation
o Advancement of technology is oriented primarily toward increased technical
performance.
 Market-pull Innovation
o Advancement of technology oriented primarily toward a specific market need.
 Open Innovation
o Searching for and finding solutions outside of the organizational structure.
 Innovation is more than problem solving.
o Innovators are analytical people but also can work with forms of problem creation
and problem imagination.

 Five key qualities of innovative product (DICEE)

o Deep
o Indulgent
o Complete
o Elegant
o Emotive
  Reasons why most startups fail.

Reason Description
Low sales Entrepreneurs may have overestimated sales, assuming they could take
sales away from established competitors.
Lack of experience Running a business is hard, and a new business can be especially
challenging, as it is difficult to prepare adequately for the unexpected.
Insufficient capital When calculating how much money you will need to start your new
business venture, be sure to account for the time it will take before your
business breaks even and be sure also to allow for some contingency
funds for when the unexpected happens.
Poor location For some types of businesses, location is critical. Of course, location
may be less important for a home-based business and not at all
important for an Internet business.
Poor inventory Too much inventory results in the business becoming cash-strapped and
management unable to buy advertising or other important goods and services.
Overinvestment in Especially when starting a business, it is usually less expensive to lease
fixed assets or purchase used equipment, thereby saving cash for meeting
operational expenses.
Poor credit Start your venture small and limit the amount of money you need to
arrangement borrow. Work with your banker from the beginning by sharing your
management business plan and vision for the business with the banker and, most
important, show that you are proactive in planning for when you will
need to borrow money.
Personal use of The owner should pay him/herself a minimal salary and not dip into
business funds business funds. If the business has done well, the owner will earn
additional funds at the end of the year.
Unexpected growth Surprisingly, some businesses fail because the business owner cannot
manage growth. Growing a new venture, especially if the growth is at a
higher rate than expected, can create surprising challenges. For example,
when creating a product, you need to consider the capacity of the factory
where you are producing the product. If you are at 100 percent capacity
and your orders increase, you will need to think about what actions can
support this increase in demand. If you cannot meet the demand, you
will have unhappy customers and negative publicity that will negatively
on your leadership and managerial skills. Your lack of planning for this
surge in sales may open opportunities for someone else to start a
competing business.
Competition Many small business owners underestimate their competition.
Remember, if there is money to be made, there will be competition!
Larger competitors can beat you every day of the week on price, so find
 another way to challenge competitors.

Entrepreneurial Opportunity
 Entrepreneurial opportunity is when 3 factors meet.
o Significant market demand
o Significant market structure and size
o Significant margins and resources to support the venture’s success.

 Competitive analysis
o To find information about the competitor
o Competitive analysis grid

o SWOT analysis
 Strength, Weaknesses, Opportunities, Threats
  Strengths and weaknesses are internal to entrepreneur.
 Threats and opportunities are external to entrepreneurs.
o Three circles
 Clarifying your vision, mission, and goals

To create a vision statement, consider:

o State how your organization would function in a dream scenario.

o Connect your organization’s dreams to broader hopes for progress.
o Define how you’re going to make the world a better place in the future through
your products and services.

To create a mission statement, consider:

o Who are we?

o What do we make or do?
o Why do we exist as an enterprise?
o Clarity is key.
o Answer the question with optimism.
 Sharing your entrepreneurial story
o Discuss your product and its problem-solution narrative, its value proposition, its
market niche, and the competition.
o Prepare to tell your entrepreneurial story by applying the most universal story
format: the fairy tale.
 Developing pitches for various audiences and goals
o A pitch as a formal but brief presentation
o Key audiences include potential investors, social connectors, potential partners,
key employee recruits, and the broader community, particularly if one needs to
request permits or regulatory concessions.

 Key Elements of the pitch

 Pitch is presented through pitch deck.
 Pitch deck: Slides using PowerPoint.
 Entrepreneurial Marketing and Sales
 Steps in business
o Select the right product.
 The marketing aspects
 Technical aspects
 Financial aspects
o Detailed project report
 Detailed estimate of demand
 Technical specifications of the process
 Equipment required and their sources.
  Space.
 Total cost
 Means for financing.
 Economics of the entire scheme at projected operating level
o Implementation
 Deciding on form of ownership and registration
 Obtaining finance, Obtaining license
 Establishing necessary infrastructures
o Pre-commissioning requirement
 Ordering machinery from suppliers
 Obtaining utilities like power and water connections after construction of
shed, if necessary.
 Recruitment of staff,
 Arranging supplies of materials
 Arranging for distribution of the products
o Trial run + Commissioning of plant
 Trial run of machineries
 Promotional activity for the product
 Introduce the product to the market and obtain feedback.
o Ready for commercial production
 Traditional Marketing

Traditional Marketing Entrepreneurial Marketing

Greater number of resources
Management of an established brand, reminder
advertising
Financial and market share goals
Manage existing customers
Manage existing products, promotion, pricing,
placement, people, physical environment, and
process (the “7 Ps”)
Continue doing what works
Communication with customers standardized,
one-directional; more difficult to create one-
on-one relationships
Few to no resources; founder drives efforts
(sweat equity)
Must be ingenious, energetic, and persistent
to develop story and brand; leads to trust
Satisfaction and awareness goals
Capture first customers; develop a client
base and long-term relationships
Develop new products, price points,
channels (placement), communication,
process, training, and design
Trial and error; market pilots
Communication with customers is more fluid
and spontaneous; two-way relationships

 Marketing mix
o Product
o Pricing
o Promotion
o Place
o Physical
o Environment
o Process
 People
o
 Marketing mix: Promotion

| Promotion

Type Examples Advantages Disadvantages

Advertising • TV ads • Can reach a mass • Can be expensive
• Radio spots audience • Access can be limited
• Newspaper and • Great for creating brand • Some targeting is possible,
magazine spreads recognition but it is impossible to fully
• Internet ads • Increased sales control who sees the ad
• Billboards
Public • Sponsoring • Develops positive • Big events and public
Relations community events brand recognition relations campaigns can be
• Charitable and • Creates goodwill resource intensive
civic involvement toward company and • Not focused on generating
• Scholarships and brand within the sales
grants community
• Press conferences
Social • Social networking • Pervasive and • Many companies use social
Media sites such as inexpensive access to media, so it is hard to stand
Snapchat, Twitter, massive audiences out from the crowd
and Facebook • Target markets are • Can be time-consuming
• Blogs and vlogs highly customizable • Success requires dedicated
• Influencers based on available data • personnel with special
(industry experts Easy access to young expertise
who function as people • It is often difficult to track
advocates) • Can be used to create conversion (customers taking
goodwill and a loyal fan a desired action, such as a
base purchase) and sales numbers
• Requires the creation of
unique/engaging content
Direct Mail • Mailed letters, • Subscribers are already • Building an email list of
marketing flyers, interested in your interested customers can take
postcards, and product and thus more time
coupons likely to convert to • Direct mail campaigns can
• Email newsletters paying customers be expensive
• Keeps already • Results cannot be precisely
interested consumers up tracked
to date on product news, • Consumers often discard
sales, product releases physical and digital “junk
• Can target market mail” without looking at it
based on location,
average income, and
other census-derived
information
Sales • Sales • Incentivizes buying and • Reduces profits in exchange
Promotions • Limited time encourages consumers to for promotion
offers take action • The promise of future sales
• Coupons • Appeals to consumers’ and discounts can discourage
• Free samples desire to “get a deal” regular buying
• Rewards • A good way to attract
programs new and reluctant buyers
Personal • Sales meetings • Personalizes the • Can be resource intensive
Selling between a relationship between the • Requires salespeople who
salesperson and a business and the are well-trained and effective
potential customer customer • Consumers are turned off
• Effective salespeople by sales tactics they perceive
can convert reluctant as aggressive
parties into paying • Requires constant lead
customers generation
• Salespeople can
customize purchase
options for each buyer

 Marketing mix: Pricing

o Cost-led pricing: taking the cost of making the product and creating a profit
margin.
o Premium pricing
o Penetration pricing: Pricing below competitor
o Customer-led pricing: Ask what customer is willing to pay.
o Loss leader pricing: Use below standard price to attract business.
o Introductory offers: Lower initial price
o Skimming: Leverage newness of product to justify high price
o Bundling: Discount for a bundle of product
o Odd numbers strategy: Psychological effect, using $19.99 instead of $20.
o When pricing should be reviewed
 When adding a new product or service to your offerings
 When demand shifts (due to market, consumer, or other factors)
 When entering a new market
 When competitors are making changes
 When your costs are changing
 When adjusting products/services or strategies
 Marketing mix: Place
o Where customers can purchase your products
o Direct channels: Require no intermediaries to sell.
o Indirect channels: Require intermediaries to sell.
 Primary market research

1. Define research goal.

2. Choose research design.
3. Choose sample.
 4. Collect data.
5. Analyze data.
6. Results and next steps

 Primary market research: Choose research design.

o Qualitative research: uses open-ended techniques such as observation, focus
groups, and interviews.
 Ethnographic research: personal observations of the subject by being
immersed in the subject’s environment.
o Quantitative research: generation of numerical data that can be turned into usable
statistics.
 Causal research and test marketing: you present participants with a cause
and record the effect.
 Conjoint analysis: respondents must rank features or benefits.
 Secondary market research
o Uses existing data that has been collected by another entity.
 Target market
o Segmenting: separate the total population by similarity
o Targeting: select a target based on their ability and willingness to buy
o Positioning: a statement of how you want the customer to perceive your company,
good, or service
 Marketing techniques
 Entrepreneurial branding
o Customer-Focused Branding: The image a company conveys to its customers is
managed through what is called brand strategy, which can include advertising,
public relations, customer service, and sales promotions.
 Usage of tagline
o Defining and Developing a Brand: A brand should have a clear purpose derived
from the company’s mission.
o Promotion through Brand Advocacy: promoting your brand is to identify loyal
customers who are willing to share positive feedback about it.

 Marketing strategy

 Sales strategy
 1. Prospecting
 Identify prospects.
 Determine which prospects are qualified and which are unlikely
consumers.
2. Making the Sales Call
 Learn prospect demographics.
 Set objectives for call (learning, next appointment, sale)
3. Presenting the Proposal
 Prepare talking points, visuals, and testimonials.
 Describe product/service, cost, and benefits.
4. Handling Objections
 Gain feedback
 Respond to concerns and objections by offering information and solutions.
5. Closing the Sale
 Ask trial close questions to test readiness.
 How is this so far?
 Can I answer anything else?
 Ask some additional questions.
 Can I place the order for you?
 Can we open a life insurance account for you?
 Can you come see the demonstration at our office?
 Can we meet next week for the financial terms?
6. Fulfilling Orders, Fostering Relationships, and Asking for Referrals
 Fulfill orders or commitments.
 Communicate regularly about satisfaction and needs.
 Ask for referrals.

 Customer service
 Operating manual for employees
 Training programs

Entrepreneurial Finance and Accounting

Entrepreneurial funding

 Financing
o The process of raising money for an intended purpose
 Accounting
o The system business owners use to summarize, manage, and communicate a
business’s financial operation and performance.
 Venture capitalist
o An individual or investment firm that specializes in funding early-stage
companies.
 Three stages of business
o Seed
 No revenue
  No saleable product
o Early
 Development of product/proof of concept
o Mature
Reached commercial viability.
Self-sufficient
 Entrepreneurial funding: Steps

1. Determine the basic requirements for starting the business:

1. What kinds of equipment will you need?
2. How much labor and what type of skills?
3. What facilities or locations would you require to make this business a reality?
2. How much do these items cost? If you do not possess enough money, how to raise more
funds?
3. Choose a funding strategy.

o Seed
 Personal saving
 Small investments from family and friends
 Angel investors
o Early
 Angel investors or funds
 Venture capitalists or private equity
o Mature
 Self-sustaining
 Private equity sale
 Initial public offering (IPO)

Types of Financing

 Types of financing
o Debt financing: Borrowing funds from another party.
 Ownership: Lender does not own stake in company
 Cash: Requires early and regular cash flow
 Sources: banks, credit cards, family, and friends
 Pro: Once paid back everything, leader own full company
 Cons: Small grace period
o Equity financing: Financing provided in exchange for part ownership in the
business.
 Ownership: Lender owns stake in company
 Cash: No immediate cash outflow
 Sources: friends and family, more sophisticated investor.
 Pro: No immediate cashflow requirement
 Con: investor entitled to a certain percentage of the profits for all future
years.
 Working capital
 o The funds a business has available for day-to-day operations.
 Fixed assets
o are major purchases - land, buildings, equipment, …
 Collateral
o Something of value that a business owner pledges to secure a loan, meaning that
the bank has something to take if the owner cannot repay the loan.

Special funding strategy

 Charitable organizations
o Founded for altruistic purposes.
o Can qualify for tax-exempt status.
 Charitable organization: Funding strategy
o Tax-exempt status
o Program service
o Donation
o Grant
o Crowdfunding
o Bartering
 Tax-exempt status
o If there is a profit from operations, it is not typically subject to taxes.
 Program service
o The basic offerings that a nonprofit organization provides result in revenue.
o Not typically enough to cover the overall cost of running the organization
o Closely resemble the customer interactions of a traditional business
o Provides a product or service in exchange for a customer’s money.
 Grant
o A financial gift given for a specific purpose by a government agency or a
charitable organization.
 Donation
o A financial gift with no expectation of repayment or receiving anything in return.
 Crowdfunding
o Collecting small sums of money from a large number of people
o Pro: business receives cash up front to launch
o Con: the reward requires a future payment to the backers
 Bartering
o A system of exchanging goods or services for other goods or services instead of
for money.

Accounting

 Accounting equation
o Assets = Liabilities + Equity
o Assets: items that a business owns and derives future use from (equipment…)
 o Liability: A debt that a company has incurred with another party, as when it
borrows money from a bank or purchases materials from other suppliers
o Equity: The owner’s claim on the assets of the business, that is, the difference
between what they own and what they owe

Financial statement

 Financial statement
o Output of an accounting system
 Financial statement: Types
o The balance sheets.
o The income statements.
o The statement of cash flows

The Balance Sheet

 The balance sheets.
o Summarizes the accounting equation and organizes the different individual
accounts into logical groupings.
 Account payable
o An account that covers many different vendors that the company buys from on
credit.
The income statements.

 Income statement (Profit-and-loss statement)

o Describes how much money the company earned while operating the business and
what costs it incurred while generating those revenues.
 Profit margin
o The profit is divided into the total revenue, described as a percent.
 Net income
o Profit if there are funds left over.
 Direct cost (The cost of goods sold)
 o Costs that are specific to the product sold
 Gross profit
o The selling price of an item minus its direct costs

The statement of cashflow

 Statement of cashflow
o Showing activities that result in cash received or cash paid.
o The most important financial statement
o Bridge gap between income statement and the balance sheet
 Operating activities
o The day-to-day activities of the business
o Including purchasing supplies, paying rent, and receiving cash from customers
 Investing activities
o Include major purchases of equipment or facilities.
 Financing activities
o Tell readers where new infusions of cash come from
Projections

 Projection
o A forecast of the future operations of the business
o Related key concept: run rate, burn rate.
 Run rate.
o Help extrapolates into the future.
o Example
 For example, if the pizzeria is generating sales of £10,000 per month, that
translates into an annual run rate of £120,000 per year. Multiplying the
monthly amount by twelve tells us the annual amount; if we wanted
quarterly projections, we would multiply the monthly amount by three.
This is useful for explaining to investors what the company will look like
now that it has achieved traction in generating sales.
 Burn rate.
o The rate at which ash outflow exceeds cash inflow, or essentially how much
money the company is expending overall each month.
o Example
 if it takes six months to renovate the pizzeria and the monthly rent is
£2,000, then the burn rate is £2,000 per month and forecasts that the
business will need an additional £12,000 (£2,000 × six months) available
in financing on top of the cost of renovations. The location’s rent must be
paid, even if the pizzeria is not yet open for business.

Break-Even Analysis

 Breakeven point
o The level of operations that results in exactly enough revenue to cover costs.
o Yields neither profit nor loss.
 Variable costs
o Costs that fluctuate with the level of revenue
o Example
 $4 per pizza
 Total variable cost = $4 * Number of pizzas
 Fixed cost
o A set amount and do not change, regardless of the number of sales.
 o Insurance, wages, and office supplies are typically considered fixed costs.
o Example
 Contribution margin: $8 each
 Fixed cost → Rent: $2000 per month
 To find the number of pizzas each month, set rent as break-even point of
$2000.
 $2000/$8 = 250 (pizzas)
 The contribution margin.
o The gross profit from a single item sold.
o Selling price - Variable cost = Contribution margin
o Example
 The selling price of a pizza is £12. The variable cost is £4, which results in
a contribution margin of £8 per pizza. This £8 will go toward paying other
expenses; when those are covered, the remainder will be added to the
profit.

Launch for Growth to Success

Lean startup

 Build-measure-learn loop.
o a prototype is built → pitched to customers who provide feedback → makes the
changes to the prototype → starts all over again.
 Minimum Viable Product (MVP)
o The bare minimum is to help people understand what the product is about.
o Does not have to be built to be an MVP.
 Lean Startup
o Build →Measure → Learn → Build → …
 Build: build the MVP
 Measure: users’ reaction to test the product assumptions of the engineers
who created it.
 Learn: Assess the progress of the product in an objective manner
 Early adopters
o People who like to try new products as soon as they come out.

Business Failure

 Early failure can lead to success by providing lessons and experiences.

 Business failure
o The ending of a business due to the lack of goal attainment, which can mean low
levels of revenue and profits, or not meeting investors’ expectations.
o Result in the loss of assets—such as revenue, equipment, and capital
o Can cause trauma for the business owner.
 Business failure: common contributors
 o Marketing failure
 Lack of differentiation of product or services
 Missing the right customer
o Management failure
 Passion wanes or not the right business
 Fighting founders
o Financial failure
 Lack of cash
 Too much debt
 Lack of capital
o Innovation failure
 Lack of innovation or failing to change effectively.
 Fear of failure
o Influenced by people’s upbringing and cultural backgrounds.
o To cope
 Modify your business strategy by changing the target outcomes for your
business.
 If a goal is not met, do not consider it a total failure, and learn from it.
 Practice some sort of meditation or breathing exercise.

Business Ownership

 Business ownership: Pros

o Being autonomous, being your own boss, expanding ideas, enjoying creative
freedom
o Lifestyle, making your own schedule, flexibility.
o Satisfied with career.
o Serving customers and employees
o Profit
o Being known in the community
 Business ownership: Cons
o Being in charge, resolving issues, hiring/firing employees, and wearing many hats
o Dealing with stress, time constraints, and management
o Lack of focus, loss of passion
o Customer and employee complaints
o Money/cash flow problems
o Must deal with losses and financial risk.
The Lean plan

 Lean canvas

 Lean plan: How to develop?

1. Write a short and simple document.
2. Test your MVP through the build-measure-learn loop.
3. Review your results.
4. Revise your plan.
 Lean plan: Write a short and simple document.

o Basic strategies for product, price, place, promotion; add people, physical
environment, and process if it is a service.
o Basic strategies for target market and positioning
 o Day-to-day tactics, which include specific tasks or actions that will get an
objective done.
o A schedule with dates for acquiring needed licenses, launch date, and when to
review and revise the plan.
o A business model that details how you will make money.
o A basic forecast of sales, costs, profit, and break-even analysis

 Lean plan: Test your MVP through the Build-Measure-Learn Loop

o Build your MVP.

o Test your idea by sharing it with potential customers.
o Measure results by talking to customers and recording feedback.
o Ask questions such as: Are we building a product people want? What benefits do
we need to add? Is this our target market?
o Test different versions and cohorts of users.

 Lean plan: Review your result.

o Review customer feedback and go back to your plan to compare.

o Review target market, 7Ps of marketing, features, and benefits.
o Review numbers or outcomes, which may include sales, profit, customer signups,
and even customer reactions to advertisements and product attributes.

 Lean plan: Revise the plan.

1. Adding a feature to the product
2. Adding new products
3. Changing promotional tactics
4. Communicating differently with customers and consultants

Growth
Lifecycle

 Lifecycle: Startup
o This stage centers around acquiring the first batch of customers.
 Lifecycles: Growth
o The growth stage is full of change when sales rise due to higher demand.
o Increases in sales, profits, additional market/product penetration, and an
expansion of professional staff.
o An increase in cash coming in and going out.
 Lifecycles: Maturity
o Grown to the point where revenues and profits level off
o Adequate staff and more management engaged in maintaining operations.
o Systems are well developed and working efficiently, with larger financials and
management.
 Lifecycles: Decline
o Sales wane due to change or business owners fail to keep their offerings relevant.
 Lifecycles: Rebirth or Death
o Death if the company does not evolve, or the business owner does not retain
passion, focus, or ability.

Pain of Growth

 Growing pain
o Figuring out how things work
o Managing healthy work/life balance
 Growth strategy: Product Improvement
o Enhancing a product.
 o Pro: Improving performance, quality, and cost of product; can also add to sales
and profits
o Con: Fails to deliver a benefit; can turn out to be a lost investment
 Growth strategy: New Product development
o Create new products to sell.
o Pro: Staying ahead of the competition, increasing sales/profit, going into new
markets
o Con: Create products no one wants, make costly mistakes
 Growth strategy: Market penetration
o Selling more to current customers by showcasing new uses for an existing product
o Pro: Increase sales by adding new benefits to existing products
o Con: Mispositioning the product, which will miss communicating to the right
market or by communicating benefits the target does not care for
 Growth strategy: new distribution channels
o Adding new distribution channels gives current customers more ways to purchase
the product.
o Pro: Reaching target market multiple times or reaching them at least once
o Con: More channels to keep track of and to manage
 Growth strategy: Product line extension
o A business can extend its product line to appeal to different customers with
different needs and budgets.
o Pro: Cater to different markets and different budgets; educate consumers to want
better, more expensive products
o Con: Fails to differentiate between products, cannibalization (decrease in sales
due to introduction of new product by same company)
 Growth strategy: Adding new markets.
o A company that was catering to only local customers might open a second
location in another town or region or provide products online to reach distant
clients in other cities, states, or countries.
o Pro: Expanding customer reach, adding to sales and profit
o Con: More customers to take care of, not engaging them correctly
 Growth strategy: Seek global markets.
o Entering global markets
o Pro: Serve global markets, reach more customers, increase sales and profits
o Con: Dealing with more customers, mistakes in many areas could happen
 Growth strategy: Integration of businesses
o Pro: Add new capabilities, synergy, take on more projects
o Con: Losing investment, losing project, not getting along well, breaking up
 Growth strategy: Licensing
o A contract in which one enterprise gives permission to another entity to
manufacture and sell its products for a royalty.
 Growth strategy: Franchising
o A form of licensing that allows the business (franchisor) to share its business
model to expand the business through various distributors (franchisees) for a fee.
 Growth strategy: Joint venture
 o The creation of a new business in which two different enterprises share the
expenses and profit to achieve certain goals of a project.
 Growth strategy: Mergers and Acquisition
o Two companies combine or one buys the majority stake of the other.
 Growth strategy: Strategic alliances
o Arrangements that two or more entities create to work on a project by sharing
some of their strengths and resources, but not actually creating a new entity like in
the case of a joint venture.

Business Model and Plan

 Business model
o The plan your business has for making money.
o An explanation of how you deliver value to your customers at an appropriate cost.
o Include
 Descriptions of the products
 Services you plan to sell.
 Target market
 Required expenses.
 Business model: Common models
o Direct
o Multisided
o Marketplace
 Business model: Direct
o Most common
o Involves users becoming customers.
 Business model: Multisided
o Users and customers are differentiated.
o Some services are provided to user for free.
o Those free services are paid for by different customer bases.
o Ex: Ad-based models
 Business model: Marketplace
o Complex variant of multisided models
o Divided into 2 customers segments: buyers, sellers.
o Ex: eBay, Airbnb
 Business model: Key to success
o Focusing on what customers want
o Must adapt to change.

Designing business model

 Canvas
o A display is used to map out and plan different components of the business.

 Canvas: Business model canvas

 o Key partners
o Key activities
o Key resources
o Value propositions
o Customer relationships
o Channels
o Customer segments
o Cost structure
o Revenue streams

 Business model: Value proposition

o A product that helps customers do a job they have been trying to do more
effectively, conveniently, and affordably.
o Result customers want + Specific period of time + Address objections = Initial
value proposition

 Canvas: Lean canvas vs Business model canvas

o Lean: for smaller businesses since its simpler
o Business model: for establishing businesses.

 Customer empathy map

 o Explore customer pains (fear, frustrations, anxieties) and gains (wants, needs,
hopes, and dreams)

Producing a feasibility analysis

 Feasibility analysis
o Designed to assess whether your entrepreneurial endeavor is feasible.
o Help answer: “should we proceed with the proposed project idea?”
 A feasible business ventures.
o Generate adequate cash-inflow and profits.
o Withstand the risks it will encounter.
o Remain viable in the long-term and meet the goals of the founders.
 Feasibility analysis: Organizational
o Assess the prowess of management and sufficiency of resources to bring a
product or idea to market.
 Feasibility analysis: Financial
 o Seeks to project revenue and expenses.
o project a financial narrative
o Estimate project costs, valuations, and cash flow projections.
o Explanation of the underlying assumptions
o Should estimate the expected sales or revenue.
o Include
 A twelve-month profit and loss projection
 A three- or four-year profit-and-loss projection
 A cash-flow projection
 A projected balance sheets.
 A breakeven calculation
 Feasibility analysis: Market
o Define competitors.
o Quantify target customers and/or users.
o Can be done by analyzing the overall interest in the product or service within the
industry by its target market.
o Steps
 Define a market in terms of size, structure, growth prospects, trends, and
sales potential.
 → Total available market (TAM): number of potential users within your
business’s sphere of influence
 → Serviceable available market (SAM): the portion of that target market
that will be attracted to your business.
 etc.
 Business plan
o A formal document used for the long-range planning of a company’s operation.
o Include
 Background information
 Financial information
 Summary of the business
 Business plan: Standard: Sections
o Executive summary
o Business description
o Market strategies
o Marketing plan
o Competitive analysis
o Operations and Management Plan
o Financial Analysis
o Design and Development Plan
 Business plan: Brief vs Standard
o Brief: Focus on articulating a big-picture overview of business concept
o Standard: Executing the vision concept and a more detailed and structured
roadmap
 Business plan: Purpose
o A planning tool for your business to use and reach the desired goals over the
course of several years.
 o An investment tool that outlines financial projections
o A contingency plan by outlining “what-if.”
 Business plan: Executive summary
o Provide an overview of your business with key points and issues.
 Business plan: Executive summary: Sections
o The concept
o Market advantage
o Marketing
o Venture team
o Capital requirements.
 Business plan: Business description
o Describes the industry, your product, and the business and success factors.
o Provide a current outlook as well as future trends and developments.
o Overall strategic direction, your reasons for starting the business, a description of
your products and services, your business model, and your company’s value
proposition.
 Business plan: Industry Analysis and Market Strategies
o Define your market in terms of size, structure, growth prospects, trends, and sales
potential.
o Address market segmentation strategies by geography, customer attributes, or
product orientation
o Describe your positioning relative to your competitors.
 Business plan: Competitive analysis
o A statement of the business strategy as it relates to the competition.
o Identify major competitors, assess their market shares, market served, strategies
employed, expected response to entry.
o Conduct SWOT analysis (Strengths Weaknesses Opportunities Threats) and
competitive-strength grid or competitive matrix
 Business plan: Operations and Management Plan
o Outline how you will manage your company.
o Describe its organizational structure.
o Highlight:
 Backgrounds
 Experiences
 Qualifications
 Areas of expertise
 Roles of members of management team
 Business plan: Marketing plan
o Outline and describe an effective overall marketing strategy for your venture.
o Provide details.
 Pricing
 Promotion
 Advertising
 Distribution
 Media usage
 Public relations
 Digital presence
 Business plan: Financial plan
o Forecast revenue and expenses.
o Project a financial narrative
o Estimate project costs, valuations, and cash flow projections.
Business Structures, Legal, Risks
Business Structures

 Business structure: Create.

o Legal environment
o Tax environment
o Operational environment
 Business structure: How to choose.
o Have a clear understanding of business.
 Type
 Purpose
 Location
 Operation
 Most important initial decisions, from a legal perspective
o Choosing a business structure (or entity selection)
 Business structure: Options
o Corporations
o Partnerships
o Sole proprietorships
o Limited liability companies (LLCs)
o Limited liability partnerships (LLPs)
o Joint ventures (JVs)

Establishing a Business Purpose

 Business purpose
o The reason the entrepreneur forms the company and determines who benefits
from it.
 Business purpose: Questions to answers
o “Why am I going to a particular destination” → Purpose.
o “How will I get there?” → Mission
o “What will it be like when I arrive?” → Vision
o “Who will I see when I arrive?” → Impact
 Taxation
o Affected by the business structure.
 Determining business purpose
o Draft entrepreneur’s expectations
o Draft business’s operation
o Analyze cashflow.
o Analyze primary obligations.
 Consideration after determining business purpose.
o Determine if business is for-profit or not-for-profit.
o Determining state of incorporation
o Determine how the structure is.
 Bring new investors.
 Transfer profit out of business
  Support potential subsequent sale.
o Taxation

For-profit vs Not-for-profit business

 For-profit-business: Characteristic
o Profit distributes to owners.
o Entity structures
 Corporations
 LLCs
 Partnerships
 Sole proprietorships
o Taxes and filings
o Privately owned or publicly owned and traded.
o Publicly owned and traded sell stock or interest and must abide by special rules.
 Not-for-profit organization: Characteristic
o Dedicated to serving public interest.
o Follow regulations.
 Eligibility
 Lobbying
 Tax-deductible contribution
o Use revenue to achieve certain objectives.
o Ex: Schools, university, church
o Usually, tax-exempt
o Does not have owners but directors.

Corporations

 Corporation
o Owners are called shareholders.
o Operates as an entity that has some of the same rights as an individual (can sue or
be sued)
o Sell or issue stock to raise capital.
o Allow owners to shield themselves from personal liability → primary reason for
entrepreneur to incorporate.
 Corporation: Requirements
o Maintaining bylaws
o Annual shareholder and director meetings
o Keeping shareholder and director major decisions
o Ensure owners and directors sign documents in the name of the corporation.
o Maintain separate bank account from their owner.
 A share of stock = Equity: Transaction
o Can be bought and sold on the stock exchange.
 o A private sale is possible.
o This transaction conforms to certain rules.
 Corporation: Tripartite approach
o Shareholder → Board of directors
o Board of directors → Officers

 Public corporation
o Partially owned or sponsored by the government.
 Private corporation
o Does not allow members of the investing public to own stock.
o Some private group or friend/family can own stock.

Partnerships and Joint Ventures

 Partnership
 o Formed by two or more partners.
o Each contributes capital, equipment, or skill.
o Share profit and loss
o Contract in its own name
o Take title to assets.
o Sue or be sued.
 Joint venture
o Temporary partnership
o Between two or more individuals or businesses
o Test drive relationship between entities
o Develop business ventures with less risk.
  General partnership (GPs)
o A written agreement is not required.
 Partnership: Partnership agreement
o Monetary investment of each partner
o Management duties
o Profit and loss
 Limited partnership (LPs)
o At least 1 general partner + 1 or more limited partners
o Limited partners’ liability: investment
o General partners’ liability: everything else
 Limited liability partnership (LLPs)
o Ex: Law firms, accounting firms
o Partners: Licensed professional
o Partners’ limited liability: financial obligation related to contract.
o Partners’ full liability: partner’s personal malpractice
 General partnership: Disadvantages
o In case of debt or accident, each partner can have unlimited liability.
 General partnership: Advantage
o Easy and inexpensive to form.

Limited Liability Companies

 Limited Liability Companies

o Hybrid of corporation and partnership
o Owners can be individuals or other business entities.
o Owners are called members.
 Member-managed Limited Liability Companies
o Owners often run the company themselves.
 Single-member Limited Liability Companies
o One owner
 Manager-managed Limited Liability Companies
o A professional manager manages daily operations.
 Limited Liability Companies: Advantage
o Protection of owners from personal liability
o Easier to form than corporation ← Fewer regulations.

Sole Proprietorships

 Sole proprietorships
o Work on their own, being both a business owner and an employee at the same
time.
o Personally liable for all the taxes and debt
o Easiest to start but no differentiation from an individual starting a business.
Risk Management

 Risk
o An uncertain event, good or bad
o Eliminate bad, make use of good.
o Identifying risk is part of developing a business.
o Being too pessimistic can stop an entrepreneur from taking risks.
 Property risks
o Involve tangible and highly visible assets.
o Many are insurable:
 Fire, Natural disasters, Burglary, Business swindles (or fraudulent
transactions) and Shoplifting.
 Personnel risks
o Occur through the actions of employees.
o Three types:
 Employee dishonesty
 Competition from former employees
 Loss of key executives
 Customer risks
o On-premises when
 Inadequate security causing assault, robbery.
o Product liability when
 A customer becomes ill or sustains physical or property damage from
using a product made or sold by a firm.
 Liability risks
o stems from contracts and torts, including taxation.
o A.K. An Operation risks, regulatory compliance risks, financial risks, and
strategic risks
 Factors that increase complexity of environments
o Inflation
o Growth of internal operation
o More complex technology
o Increasing government regulation
 Risk Management
o Systematic way to protect business against loss.
o Identification, measurement and treatment of liability, property, and personal pure
risks
o Science that deals with the techniques of forecasting future losses
 Enterprise risk management
o Risk identification
o Risk measurement
o Risk response development
o Risk response control
o Revaluating the decision
o Use tools to manage risk.
 Risk identification: Techniques
 o Brainstorming
o Event inventories and loss event data
o Interviews and self-assessment
o Facilitated workshops.
o SWOT analysis
o Risk questionnaires and risk surveys
o Scenario analysis
o Using technology
 Risk measurement
o Determination of the chance of an occurrence or relative frequency.
o Determination of the impact of losses upon financial affairs.
o The ability to predict the losses that will occur during the budget year.
 Risk response development
o Identifies and evaluates responses to risk.
o Evaluates options in relation to entity ‘s risk appetite, cost vs. benefit of potential
risk responses, and degree to which a response will reduce impact and/or
likelihood.
o Selects and executes response based on evaluation of the portfolio of risks and
responses.
 Risk response control
o Implementation follows all the planned methods for mitigating the effect of the
risks.
 Revaluating the decision
o The initial plan will not be perfect.
o Practice, experience, and actual loss will necessitate changes in the plan.
 Tools of Risk Management: Avoidance
o Refusing to assume an activity.
o Abandonment of previously assumed activities
 Tools of Risk Management: Retention/Acceptance
o Planned/conscious/ active risk retention.
 Recognition that the risk exists.
 Accept loss.
o Unplanned/Unconscious/ Passive Retention
 Does not recognize its existence.
 Does not know why loss happened.
 Tools of Risk Management: Loss Prevention and Reduction Measures
o Reduce the chance that risk occurs.
 Inspections
o Minimize the severity of the loss after occurrence.
 Fire extinguisher
 Tools of Risk Management: Separation /Diversification
o Separate the firm’s exposure to loss.
 Separate inventory between warehouse in case of fire.
 Tools of Risk Management: Transfer/Shifting
o Happens when a business cannot afford the loss, then look for a transfer
institution.
 Insurance
 Risk management matrix

Insurance

 Evaluating an insurance program

o Identifying insurable business risks
o Limiting coverage to major potential losses and
o Relating premium costs to probability of loss
 Insurance: Requirements
o Must be a sufficiently large number of homogenous exposure units to make the
losses reasonably predictable.
o Must be definite and measurable.
o Must be fortuitous or accidental.
o Must not be catastrophic.
o Must be large loss.
o Reasonable cost of transfer
 Insurance: Benefits
o Protection
o Diffusion of risks
o Credit standing
o Continuity and certainty of business
o Better utilization of the capital of the firms

Information Technology/Cybersecurity for Small Businesses

 Cybersecurity: Steps
1. Protect against viruses, spyware, and other malicious code.
2. Secure your networks.
3. Establish security practices and policies to protect sensitive information.
4. Educate employees about cyber threats and hold them accountable.
5. Require employees to use strong passwords and change them often Employ best
practices on payment cards.
6. Make backup copies of important business data and information.
7. Control physical access to computers and network components
8. Create a mobile device action plan.
9. Protect all pages on your public-facing websites and apps, not just the checkout
and sign-up pages.