ENTREPRENEURSHIP DEVELOPMENT

The word “entrepreneur” is derived from the French verb entreprendre. It means “to
undertake”.

Entrepreneurship is the ability and readiness to develop, organize and run a

business enterprise, along with any of its uncertainties in order to make a profit. The
most prominent example of entrepreneurship is the starting of new businesses.

Peter F. Drucker defines an entrepreneur as one who always searches for change,
responds to it and exploits it as an opportunity.

NATURE/ FEATURES/ CHARACTERSTICS OF ENTREPRENEURSHIP:

Creation Of Enterprise
Entrepreneurship is a process that refers to the creation and running of a new enterprise. It is an
activity under which a person called an entrepreneur starts a new venture using a new idea.

Economic Activity
Entrepreneurship is an economic activity as it involves creating and running a new business
through optimum utilization of all combined resources. It ensures that all scarce resources are
efficiently used for deriving better returns in the form of profit.

Innovation And Creativity

It is the process of discovering new ideas and concepts and implementing them in business
ventures. Entrepreneurship involves bringing innovation in the market by introducing new
products or process that delivers better service.
Risk Bearing
It is an activity which involves huge risk which every entrepreneur needs to undertake for
starting a venture. New ideas developed and implemented by the entrepreneur are uncertain
and may result in losses.

Profit
Profit earning is the sole objective of an entrepreneur for undertaking risk. Entrepreneurs start a
new venture with a view to earning profits.

Gap Filling
Entrepreneurship is a process of recognizing and filling the gap between customer needs and
available products or services. It focuses on removing the deficiencies from the currently
available products to fulfill the needs of customers.

Organizing Function
It is an organizing function that brings together different factors of production like land, labor,
and capital. Entrepreneurship is concerned with coordinating and managing all resources
engaged within the enterprise.
Importance of Entrepreneurship:
 Creation of Employment- Entrepreneurship generates employment. It
provides an entry-level job, required for gaining experience and training for
unskilled workers.
 Innovation- It is the hub of innovation that provides new product ventures,
market, technology and quality of goods, etc., and increase the standard of
living of people.
 Impact on Society and Community Development- A society becomes
greater if the employment base is large and diversified. It brings about
changes in society and promotes facilities like higher expenditure on
education, better sanitation, fewer slums, a higher level of homeownership.
Therefore, entrepreneurship assists the organisation towards a more stable
and high quality of community life.
 Increase Standard of Living- Entrepreneurship helps to improve the
standard of living of a person by increasing the income. The standard of living
means, increase in the consumption of various goods and services by a
household for a particular period.
 Supports research and development- New products and services need to
be researched and tested before launching in the market. Therefore, an
entrepreneur also dispenses finance for research and development with
research institutions and universities. This promotes research, general
construction, and development in the economy.

TYPES OF ENTREPRENEURS

Depending upon the level of willingness to create innovative ideas, there can be the following
types of entrepreneurs:

(i) Innovative Entrepreneurs – These entrepreneurs have the ability to think newer, better and
more economical ideas of business organisation and management. They are the business leaders
and contributors to the economic development of a country. Inventions like the introduction of a
small car ‘Nano’ by Ratan Tata, organised retailing by Kishore Biyani, making mobile phones
available to the common man by Anil Ambani are the works of innovative entrepreneurs.

(ii) Imitating Entrepreneurs – These entrepreneurs are people who follow the path shown by
innovative entrepreneurs. They imitate innovative entrepreneurs because the environment in
which they operate is such that it does not permit them to have creative and innovative ideas on
their own. In our country also, a large number of such entrepreneurs are found in every field of
business activity. Development of small shopping complexes is the work of imitating
entrepreneurs. All the small car manufacturers now are the imitating entrepreneurs.

(iii) Fabian Entrepreneurs – Fabian entrepreneurs are those individuals who do not show
initiative in visualising and implementing new ideas and innovations. On the contrary, they like
to wait for some development, which would motivate them to initiate unless there is an imminent
threat to their very existence.

(iv) Drone Entrepreneurs – Drone entrepreneurs are those individuals who are satisfied with
the existing mode and speed of business activity and show no inclination in gaining market
leadership. In other words, drone entrepreneurs are ‘die-hard conservatives’ and even ready to
suffer the loss of business.

(v) Social Entrepreneurs – Social entrepreneurs drive social innovation and transformation in
various fields including education, health, human rights, workers’ rights, environment and
enterprise development. Dr. Mohammed Yunus of Bangladesh who started Gramin Bank is a
case of social entrepreneur.

(vi) Agricultural Entrepreneur – The entrepreneurs who undertake agricultural pursuits are
called Agricultural Entrepreneurs. They cover a wide spectrum of agricultural activities like
cultivation, marketing of agricultural produce, irrigation, mechanization and technology.

(vii) Trading Entrepreneur – As the name itself suggests, the trading entrepreneur undertakes
the trading activities. He/she procures the finished products from the manufacturers and sells
these to the customers directly or through a retailer. These serve as the middlemen as
wholesalers, dealers, and retailers between the manufacturers and customers.

(viii) Manufacturing Entrepreneur – The manufacturing entrepreneurs manufacture products.

They identify the needs of the customers and, then, explore the resources and technology to be
used to manufacture the products to satisfy the customers’ needs.
(ix) Women Entrepreneurs – Women entrepreneurship is defined as the enterprises owned and
controlled by a woman/women having a minimum financial stake of 51 per cent of the capital
and giving at least 51 per cent of employment generated in the enterprises to women.

(x) Inventors & Challenger Entrepreneurs – Inventor entrepreneurs with their competence
and inventiveness invent new products. Their basic interest lies in research and innovative
activities & Challenger entrepreneurs plunge into industry because of the challenges it
presents. When one challenge seems to be met, they begin to look for new challenges.

(xi) Life-Timer Entrepreneurs – These entrepreneurs take business as an integral part to their
life. Usually, the family enterprise and businesses which mainly depend on exercise of personal
skill fall in this type/category of entrepreneurs.

Entrepreneur-------------------------Person

Entrepreneurship----------------------Process

Enterprise--------------------------------Outcome

DIFFERENCE BETWEEN ENTREPRENEUR AND ENTREPRENEURSHIP

S. No. Entrepreneur Entrepreneurship

1. He is the founder/initiator of a company Entrepreneurship is how an entrepreneur starts a

and has a vision for it. new firm under his direction and vision.

2. To help society, an entrepreneur can The entrepreneurship process can be used on a

create single or numerous enterprises. single project or a series of ventures and it can help
in creating jobs.

3. An entrepreneur is a person or a group The process of turning ideas into reality is known as
of people who tries to assist a social entrepreneurship. Entrepreneurship establishes a
cause by introducing products, services, path for people to follow to achieve a goal.
 and business scenarios relevant to the
cause.

4. Entrepreneurs are critical thinkers who Entrepreneurship allows innovators and critical
bring new ideas and inventive solutions thinkers to think outside the box to develop new
to make the world better. and creative solutions to social problems.

5. Entrepreneurs are the people who come Entrepreneurship is a method for assisting
up with the idea for a new business and entrepreneurs in starting a new firm.
try to run it while considering the risk. Entrepreneurship also aids them in anticipating the
risks and possibilities that their businesses can face
in the future.

6. An entrepreneur is a leader who Entrepreneurship not only assists entrepreneurs in

stimulates employees and gives them coordinating their efforts and resources, but it also
guidance to put their efforts into assists them in managing their daily chores with
multiple aspects of the business. priority efficiently.

7. In a nutshell, an entrepreneur is the one In a nutshell, entrepreneurship lays out a path for
who starts anew business mostly for the entrepreneur to walk along and begin the
profit purposes but in some cases, it can process of launching their business idea.
be for the non-profit purpose also.

TYPES OF ENTREPRENEURSHIP

It is classified into the following types:

1. Small Business Entrepreneurship-

These businesses are a hairdresser, grocery store, travel agent, consultant, carpenter, plumber,
electrician, etc. These people run or own their own business and hire family members or local employee.
For them, the profit would be able to feed their family and not making 100 million business or taking
over an industry. They fund their business by taking small business loans or loans from friends and
family.

2. Scalable Startup Entrepreneurship-

This start-up entrepreneur starts a business knowing that their vision can change the world. They attract
investors who think and encourage people who think out of the box. The research focuses on a scalable
business and experimental models, so, they hire the best and the brightest employees. They require
more venture capital to fuel and back their project or business.

3. Large Company Entrepreneurship-

These huge companies have defined life-cycle. Most of these companies grow and sustain by offering
new and innovative products that revolve around their main products. The change in technology,
customer preferences, new competition, etc., build pressure for large companies to create an innovative
product and sell it to the new set of customers in the new market. To cope with the rapid technological
changes, the existing organisations either buy innovation enterprises or attempt to construct the
product internally.

4. Social Entrepreneurship-

This type of entrepreneurship focuses on producing product and services that resolve social needs and
problems. Their only motto and goal is to work for society and not make any profits.

JOHN KAO’S MODEL ON ENTREPRENEURSHIP:

John Kao thinks you need to play on the job. "When people use the word play in a
business context, it sounds kind of frivolous, but being playful is very much the
source of new ideas," says Kao, author of Innovation Nation and chairman of the
global Institute for Large Scale Innovation.
John Kao has developed a conceptual model of entrepreneurship in his article:
Entrepreneurship, creativity and organisation in 1989. This model has four main aspects:

1. Entrepreneurial Personality: The overall success of a new venture largely depends upon
the skill, qualities, traits and determination of the entrepreneur.
2. Entrepreneurial Task: It is a role played by entrepreneur in an enterprise. The major task
of the entrepreneur is to recognize and exploit opportunities.
3. Entrepreneurial Environment: It involves the availability of resources, infrastructure,
competitive pressures, social values, rules and regulations, stage of technology etc.

4. Organisational Context: It is the immediate setting in which creative and entrepreneurial

work takes place. It involves the structure, rules, policies, culture, human resource system,
communication system.

According to Kao, the most successful entrepreneur is one who adapts

himself to the changing needs of the environment and makes it hospitable for
the growth of his business enterprise. This ECO (Entrepreneurship, creativity
ad organization) analysis frame work developed and conceptualized by John
J. Kao contributes a great deal to the emergence as well as sustenance of
entrepreneurship and entrepreneurial talent in the prevailing business
environment.
IDEA GENERATION:
Idea generation is “the process of creating, developing, and communicating ideas which are
abstract, concrete or visual.” Idea generation simply focuses on identifying solutions for a
problem.

Ideas are the key to the innovation, without them there is not much to execute and because
execution is the key to learning new ideas and this is necessary for making any kind of
improvement..

Process of idea generation includes the following steps:

-Generate or collect ideas.

-Refine and Evaluation

-Validate & test

-Implement

IMPORTANCE OF IDEA GENERATION:

Idea generation is important because it helps people find new

solutions and approaches to solving a variety of problems. It can
help an individual come up with ideas that they otherwise might not
have. Idea generation can also be used to reflect on past ideas and
as a means to refine previous solutions to a problem. If a previously
devised solution does not help one achieve a certain goal, idea
generation can be used to refine the idea in ways that may be more
useful. Companies often use this approach as a way to determine
which solutions are effective at addressing specific problems or
tasks.

TECHNIQUES OF IDEA GENERATION:

1. Brainstorming

This technique is quantitative meaning that you come up with a large number of ideas. Here a
group comes up with a different probable solution to the problem.
For example, if you along with some of your colleagues are trying to come up with a tagline for
your product. And each one of you gives your ideas, then that is called brainstorming.

2. Mind Mapping

It is a technique of presenting information. Here we show the links between the different

elements or the pieces of information. The links or connection is usually shown with the help of

lines and arrows. It’s a visual way of presenting the information.

3. Reverse Thinking

As is very clear from the name itself this technique asks us to think oppositely. Instead of

working on the problem in front of us, we work on the exact opposite of it.

4. SCAMPER

The purpose of the SCAMPER is to make adjustments to some parts of the existing idea or
process to reach the best solution. It consists of seven actions that can be used to replace parts in
the process:

1. Substitute – Substitution technique refers to replacing a part of your product, concept or

process with another to achieve even better outcome.

2. Combine – The combine technique explores the possibility to combine two ideas into a single,
more effective solution.

3. Adapt – Adaptation analyses the possibilities to make the process more flexible and focuses on
other similar incremental improvements to the idea, process, or concept.
4. Modify – Modifying the idea looks at the problem or opportunity from a bigger perspective
and aims for improving the overall results, not just the idea.

5. Put to another use – This approach focuses on finding ways to use the idea or existing solution
for another purpose and analyses the possible benefits if applied to other parts of the business.

6. Eliminate – The elimination technique is quite straightforward: it examines the possible

outcomes if one or more parts of the concept were eliminated.

7. Reverse – This action focuses on reversing the order of interchangeable elements of an idea.

SIX SIMPLE STEPS TO IDENTIFY A BUSINESS OPPORTUNITY:

1. Find a problem in your community and provide a solution of it.

2. Find opportunity in your personal experience.
3. Look for ideas within existing business & present new solution to the existing problem.
4. Experience through philanthropic work & volunteering.
5. Keep up with current events & avail new opportunities.
6. Read & use Google to find out ways.

LEADERSHIP TEAM

LEADER:

A leader is someone who inspires passion & motivation in followers. A leader is someone with a
vision and the path to realizing it. A leader is someone who ensures their team has support and
tools to achieve their goals.

LEADERSHIP:

Leadership is the ability of an individual or a group of individuals to influence and guide

followers or other members of an organization.

LEADERSHIP TEAM:

A leadership team or executive team of senior manager working together to lead an

organization. A leadership team is responsible for an organisation’s high level goal.
They help to set and create strategy and vision.
 Stages of Team development:

 Forming: This is where team members first meet. It’s important for team leaders to facilitate the
introductions and highlight each person’s skills and background. Team members are also given
project details and the opportunity to organize their responsibilities.
 Storming: At this stage, team members openly share ideas and use this as an opportunity to
stand out and be accepted by their peers. Team leaders help teams in this stage by having a plan
in place to manage competition among team members, make communication easier, and make
sure projects stay on track.
 Norming: By now, teams have figured out how to work together. There’s no more internal
competition, and responsibilities and goals are clear. Each person works more efficiently because
he or she has learned how to share their ideas and listen to feedback while working toward a
common goal.
 Performing: There’s a high level of cohesion and trust between team members. Teams are
functioning at peak efficiency with less oversight from team leaders. Issues still come up, but at
this point, teams have strategies for resolving problems without compromising timelines and
progress.
 Adjourning: Teams complete their project and debrief on what went well and what could be
improved for future projects. Afterwards, team members move on to new projects. Now let’s
look at how to use this model to amplify the strengths within your remote marketing team so that
projects are successful and completed on time.

STRATEGIC PLANNING:

It is the art of creating specific business strategies, implementing them & evaluating the results
of executing the plan, in regard to a company overall long term goals or decision.

THREE KEY ELEMENTS OF STRATEGIC PLANNING ARE:

1. WHERE IS YOUR BUSINESS NOW?

2. WHERE DO YOU WANT TO TAKE IT?
3. WHAT DO YOU NEED TO DO TO GET THERE?

A strategic plan is a tool to define your organizational goals and what action you will take to
achieve them. Typically a strategic plan will include your company’s vision, mission statements,
your long term goals & an action plan of the steps you are going to take to move in the right
direction.

PROCESS OF STRATEGIC PLANNING:

1. Determine your strategic position

This preparation phase sets the foundation for all work going forward. You need to know where
you are to determine where you need to go and how you will get there.

Involve the right stakeholders from the start, considering both internal and external sources.
Identify key strategic issues by talking with executives at your company, pulling in customer
insights, and collecting industry and market data. This will give you a clear picture of your
position in the market and customer insight.

It can also be helpful to review—or create if you don’t have them already—your company’s
mission and vision statements to give yourself and your team a clear image of what success looks
like for your business. In addition, review your company’s core values to remind yourself about
how your company plans to achieve these objectives. Document your organization's internal
strengths and weaknesses, along with external opportunities (ways your organization can grow in
order to fill needs that the market does not currently fill) and threats (your competition). Also
conduct Political, Economic, Socio-cultural, and Technological analysis.

2. Prioritize your objectives

Once you have identified your current position in the market, it is time to determine objectives
that will help you achieve your goals. Your objectives should align with your company mission
and vision.

Prioritize your objectives by asking important questions such as:

 Which of these initiatives will have the greatest impact on achieving our company
mission/vision and improving our position in the market?
 What types of impact are most important (e.g. customer acquisition vs. revenue)?
 How will the competition react?
 Which initiatives are most urgent?
 What will we need to do to accomplish our goals?
 How will we measure our progress and determine whether we achieved our goals?

Objectives should be distinct and measurable to help you reach your long-term strategic goals
and initiatives outlined in step one. Potential objectives can be updating website content,
improving email open rates, and generating new leads in the pipeline.

3. Develop a plan

Now it's time to create a strategic plan to reach your goals successfully. This step requires
determining the tactics necessary to attain your objectives and designating a timeline and clearly
communicating responsibilities.
Strategy mapping is an effective tool to visualize your entire plan. Working from the top-down,
strategy maps make it simple to view business processes and identify gaps for improvement.

Truly strategic choices usually involve a trade-off in opportunity cost. For example, your
company may decide not to put as much funding behind customer support, so that it can put
more funding into creating an intuitive user experience.

Be prepared to use your values, mission statement, and established priorities to say “no” to
initiatives that won’t enhance your long-term strategic position.

4. Execute and manage the plan

Once you have the plan, you’re ready to implement it. First, communicate the plan to the
organization by sharing relevant documentation. Then, the actual work begins.

Turn your broader strategy into a concrete plan by mapping your processes. Use key
performance indicator (KPI) dashboards to communicate team responsibilities clearly. This
granular approach illustrates the completion process and ownership for each step of the way.

Set up regular reviews with individual contributors and their managers and determine check-in
points to ensure you’re on track.

5. Review and revise the plan

The final stage of the plan—to review and revise—gives you an opportunity to reevaluate your
priorities and course-correct based on past successes or failures.

On a quarterly basis, determine which KPIs your team has met and how you can continue to
meet them, adapting your plan as necessary. On an annual basis, it’s important to reevaluate your
priorities and strategic position to ensure that you stay on track for success in the long run.

Track your progress using balanced scorecards to comprehensively understand of your business's
performance and execute strategic goals.

Over time you may find that your mission and vision need to change — an annual evaluation is a
good time to consider those changes, prepare a new plan, and implement again.

FORMS OF OWNERSHIP:
What is Sole Proprietorship?

A Sole proprietorship is a business, owned, controlled and managed by a single individual.

A Sole Proprietor reaps the financial rewards and is responsible for all risks and liabilities while
conducting the business. It is suitable for individually managed occupations like salons or small
retail shops.

Advantages and disadvantages of Sole Proprietorship

There are several benefits as well as limitations of running a sole proprietorship. We will discuss
some of those points below:
Advantages –

 Swift decisions – A sole proprietor has complete responsibility in terms of making

business decisions. It results in faster decision-making for the business as there is no need
to consult multiple parties for every minor issue.
 Confidentiality – A sole proprietor can keep all business-related information to
themselves as the business’s only decision-maker. The law does not bind them to make
the accounts of a sole proprietorship public.
 Profit-sharing – A sole proprietor has complete ownership of profits arising from
business operations. They are not obligated to share profits with anyone else.
 Fulfilment – Since a sole proprietor is responsible for both risks and rewards of their
business, even a minor success can give a greater feeling of pride and satisfaction than
other business forms.
Disadvantages –

 Lack of Resources – It is challenging to raise vast amounts of capital in a sole

proprietorship compared to a partnership or company. This form of business runs mainly
on personal savings and borrowings made by its owner. Lack of adequate finances can
become an obstacle in growing the business.
 Dependence on owner – The owner and their business are a singular entity in a sole
proprietorship. While this has several advantages, the continuity of this form of business
depends solely on the owner’s well being. In case of death, insolvency, imprisonment,
etc., it can shut down if there is no successor or heir to continue the business.
 Unlimited Liability – If the proprietor cannot pay debts arising out of business from its
assets, his/her personal property is also at stake. This results in sole traders taking zero or
very minimal risks to ensure the survival of the business.
 Management – The proprietor has to perform most or all the activities related to the
business like purchase, client relationships, sales, marketing, accounting, etc. They may
employ others to help in business operations, but limited finances may prevent the owner
from getting full-time staff and give them attractive remuneration. As such, the proprietor
may have to carry out all activities without much assistance from others.
What is Partnership?

A partnership is a kind of business where a formal agreement between two or more people is
made who agree to be the co-owners, distribute responsibilities for running an organization and
share the income or losses that the business generates.
In India, all the aspects and functions of the partnership are administered under ‘The Indian
Partnership Act 1932’. This specific law explains that partnership is an association between two
or more individuals or parties who have accepted to share the profits generated from the business
under the supervision of all the members or behalf of other members.

Advantages of Partnership:

 Easy Formation – An agreement can be made oral or printed as an agreement to enter as

a partner and establish a firm.
 Large Resources – Unlike sole proprietor where every contribution is made by one
person, in partnership, partners of the firm can contribute more capital and other
resources as required.
 Flexibility – The partners can initiate any changes if they think it is required to meet the
desired result or change circumstances.
 Sharing Risk – All loss incurred by the firm is equally distributed amongst each partner.
 Combination of different skills – The partnership firm has the advantage of knowledge,
skill, experience and talents of different partners.

Disadvantages of a partnership include that:

 the liability of the partners for the debts of the business is unlimited
 each partner is ‘jointly and severally’ liable for the partnership’s debts; that is, each
partner is liable for their share of the partnership debts as well as being liable for all the
debts
 there is a risk of disagreements and friction among partners and management
 each partner is an agent of the partnership and is liable for actions by other partners
 if partners join or leave, you will probably have to value all the partnership assets and this
can be costly.

What Is a Limited Liability Partnership?

A limited liability partnership (LLP) is a business structure that allows business owners to

protect their personal assets from lawsuits while still enjoying the protections of a corporate

entity. LLCs are popular among small businesses because they offer flexibility and convenience,

unlike other types of businesses.

Advantages of a Limited Liability Partnership
Limited Liability Partnerships offer many advantages over traditional corporations. They are
flexible and can be tailored to fit the needs of a particular business. Additionally, they are often
less expensive to operate than traditional corporations. Some of the advantages of limited
liability partnerships include:

 Flexibility: Unlike a corporation, which is typically set up as a single entity with strict rules
about how it can operate, a limited liability partnership can be made up of numerous separate
entities that can each have their own rules and procedures. This allows businesses to take on
different roles and functions, depending on the needs of the business at any given time.

 Cost Savings: Limited liability partnerships typically have much lower costs than traditional
corporations. This is because they do not have the same overhead costs that come with
having a central headquarters, for example. In addition, because there are no formal corporate
governance requirements, limited liability partnerships can be more agile and responsive to
changes in the market than traditional corporations.

 Flexible Resources: A business incorporated as a limited liability partnership can draw on

the resources of the entire partnership without fear of reprisal from individual partners.

 LLPs offer tax efficiency for shareholders: You can register the LLC as a sole
proprietorship, partnership, or corporation depending on your business needs and tax
situation. In most cases, LLCs are taxed as partnerships, which offers more advantageous tax
treatment than being taxed as a corporation.

 LLPs can provide flexibility in terms of governance and management: You can choose
to have a single managing member or a group of members who jointly manage the company.
This allows you to tailor the company’s operating structure to match your business needs
better.

 LLPs offer protection from lawsuits: Because LLCs are treated as separate legal entities,
they are not subject to personal liability protections that apply to individuals. If someone sues
an LLC, the entity will typically be held responsible instead. However, this limitation may
not be an issue if your LLC is only involved in passive activities such as owning assets or
conducting business transactions rather than actively participating in the company’s
operation.

The Disadvantages of a Limited Liability Partnership in India

 A limited liability partnership (LLP) is a type of hybrid entity in which the partners are not
personally liable for the company’s obligations. However, as with any business arrangement,
there are certain disadvantages to incorporating it as an LLP in India.

 The main disadvantage of incorporating as an LLP in India is that the barriers to entry are
high. This means that it will be difficult for new businesses to get started and compete with
those that are already established. In addition, establishing an LLP in India requires a lot of
paperwork and is likely to be more expensive than setting up a business as a sole
 proprietorship or a partnership without limited liability. Finally, because LLP partners are not
personally liable, they may find it difficult to attract investment or secure loans from banks or
other financial institutions.
What is a corporation?

A corporation is a business recognized by the state as a legal entity separate from its owners
(also known as shareholders). A corporation can be owned by individuals and/or other entities,
and ownership is easily transferable via the buying and selling of stock. Since a corporation is its
own legal entity, it can enter litigation on its own, protecting its owners from personal liability in
the event of legal action.

Adavantages:

 Limited liability. The shareholders of a corporation are only liable up to the amount of their
investments. The corporate entity shields them from any further liability, so their personal
assets are protected. This is a particular advantage when a business routinely takes on large
risks for which it could be held liable.

 Source of capital. A publicly-held corporation in particular can raise substantial amounts by

selling shares or issuing bonds. This is a particular advantage when its shares trade on a
stock exchange, where it is easier to buy and sell shares.

 Ownership transfers. It is not especially difficult for a shareholder to sell shares in a

corporation, though this is more difficult when the entity is privately-held.

 Perpetual life. There is no limit to the life of a corporation, since ownership of it can pass
through many generations of investors.

Disadvantages:

 Double taxation. Depending on the type of corporation, it may pay taxes on its income,
after which shareholders pay taxes on any dividends received, so income can be taxed twice.

 Excessive tax filings. Depending on the kind of corporation, the various types of income
and other taxes that must be paid can require a substantial amount of paperwork. The
exception to this scenario is the S corporation, as noted earlier.
 Independent management. If there are many investors having no clear majority interest, the
management team of a corporation can operate the business without any real oversight from
the owners.

FRANCHISING:
Franchising is an arrangement where franchisor (one party) grants or licenses some rights
and authorities to franchisee (another party). Franchising is a well-known marketing strategy for
business expansion.

A contractual agreement takes place between Franchisor and Franchisee. Franchisor authorizes
franchisee to sell their products, goods, services and give rights to use their trademark and brand
name. And these franchisee acts like a dealer.

In return, the franchisee pays a one-time fee or commission to franchisor and some share of
revenue. Some advantages to franchisees are they do not have to spend money on training
employees, they get to learn about business techniques.

Examples of Franchising in India

 McDonald’s

 Dominos

 KFC

 Pizza Hut

 Subway

 Dunkin’ Donuts

 Taco Bell

 Baskin Robbins

 Burger King

Advantages and Disadvantages of Franchising

Advantages to Franchisors

 Firstly, franchising is a great way to expand a business without incurring additional costs on
expansion. This is because all expenses of selling are borne by the franchise.

 This further also helps in building a brand name, increasing goodwill and reaching more
customers.

Advantages to Franchisees

 A franchise can use franchising to start a business on a pre-established brand name of the
franchisor. As a result, the franchise can predict his success and reduce risks of failure.

 Furthermore, the franchise also does not need to spend money on training and assistance
because the franchisor provides this.

 Another advantage is that sometimes a franchisee may get exclusive rights to sell the
franchisor’s products within an area.

 Franchisees will get to know business techniques and trade secrets of brands.
Disadvantages for Franchisors

 The most basic disadvantage is that the franchise does not possess direct control over the
sale of its products. As a result, its own goodwill can suffer if the franchisor does not
maintain quality standards.

 Furthermore, the franchisee may even leak the franchisor’s secrets to rivals. Franchising also
involves ongoing costs of providing maintenance, assistance, and training on the franchisor.
Disadvantages for Franchisees

 First of all, no franchise has complete control over his business. He always has to adhere to
policies and conditions of the franchisor.

 Another disadvantage is that he always has to pay some royalty to the franchisor on a
routine basis. In some cases, he may even have to share his profits with the franchisor.

FRANCHISE AGREEMENT:

There are 4 basic types of franchise agreements: Single-unit, multi-unit, area

development and master franchising.

A single-unit franchise is the most common and is simply where a franchisor grants a
franchisee rights to open and operate one single franchise unit.
 A multi-unit franchise is where a franchisor grants a franchisee rights to open more than
one franchise unit.

An area development agreement allows a franchisee the rights to open multiple units
over an agreed amount of time within a specified geographic location and / or to own
rights to their specific territory and earn money on each franchise sold in their territory
through sharing of the franchise fee and ongoing royalties.

A master franchise agreement, also referred to as sub-franchising, gives a franchisee

the same rights as an area development agreement but also gives that franchisee rights to
sell franchises to other people within its territory. A master franchisee assumes many of
the tasks and obligations of the franchisor such as training and support and receives a
portion of the franchise fee and royalties. While technically there are significant
differences you will find that master franchising and area development are used
interchangeably.

TYPES OF FRANCHISE:

JOB FRANCHISE

Typically, this is a home-based or low investment franchise that is taken by a person who wants
to start and run a small franchised business alone. Franchisee usually has to purchase minimal
equipment, limited stock and sometimes a vehicle. A wide and diverse range of services fall into
this group, like travel agency, coffee van, domestic lawn care service, plumbing, drain cleaning,
commercial and domestic cleaning, cell phone accessories and repair, real estate service,
shipping service, pool mainatanance, corporate event planning, children’s services, etc.
PRODUCT (OR DISTRIBUTION) FRANCHISE

Product-driven franchises are based on suplier-dealer relationships, where franchisee distributes

the franchisor’s products. The franchisor licenses its trademark but usually does not provide
franchisees an entire system for running their business. Product franchises deal mainly with large
products, such as cars and car repair parts, vending machines, computers, bicycles, appliances,
etc. Product distribution franchising represents the highest percentage of total retail sales. Some
well-known product distribution franchises are Exxon,Texaco, GoodYear Tires, Ford, Chrysler,
John Deere and other automobile producers. Sometimes franchisor licenses not only distribution,
but also part of the manufacturing process, like in the cases of soft drink manufacturers Coca-
Cola and Pepsi.

BUSINESS FORMAT FRANCHISE

The business format franchisee also gets to use the franchisor’s trademark, but more importantly,
it gets the entire system to operate the business and market the product and/or service. The
franchisor offers a detailed plan and procedures on almost every aspect of the business, provides
initial and ongoing training and support. Business format franchising is the most popular type of
franchise system and the one generally referred to when talking franchising. Businesses from
more than 70 industries can be franchised, and the most popular are fast food, retail, restaurant,
business services, fitness and other.
INVESTMENT FRANCHISE

Typically, these are large scale projects which require a large capital investment, such as hotels
and the larger restaurants. The franchisees usually invest money and engage either their own
management team or franchisor to operate the business and produce a return on their investment
and capital gain on exit.

CONVERSION FRANCHISE

Conversion franchising is a modification of standard franchise relationships. Many franchise

systems grow by converting independent businesses in the same industry into franchise units.
The franchisees adopt trademarks, marketing and advertising programs, training system and
critical client service standards. They also usually increase procurement savings. The franchisor
in this model has a potential for very rapid growth in terms of units and royalty fee income.
Examples of industries that extensively use conversion franchising are real-estate brokers,
florists, professional services companies, home-services, like plumbing, electricians, air
conditioning, and so on.
FRANCHISE CONTRACTS AND FRANCHISE AGREEMENT

The franchise agreement is a legally binding contract. It sets out the rules of the franchising
relationship that both the franchisor and franchisee have agreed to. A franchise agreement is a
legal agreement that is binding on the franchisor and the franchisee. The contract details the
franchisor’s expectations from the franchisee, how the business must be operated, and so on. It is
an agreement where the franchisor (business) consents to grant the enterprise name or company
system to the franchisee (individual or entity).

What’s in a Franchise Contract?

Here are the main provisions covered in most franchise contracts. It’s important to know what to

expect before looking at contracts so that you can make an informed decision about whether to

accept a franchisor’s terms. Franchise contracts are legally binding, so be sure that you can abide

by the terms before signing.

1. Franchise Territory and Boundaries

Each franchise location covers a certain area, which is spelled out by the franchise contract.

Other franchisees cannot have their locations within a certain number of miles. This is done to

make sure there isn’t too much competition in the area, which can limit sales potential and the

success of the franchise location.

2. Training and Support Provided By the Franchisor

It is standard for franchisors to train new franchisees and to give them ongoing support. Franchises are
built around uniform business practices, and training will help new franchisees

understand what is expected of them and learn the practices that have given the franchise

company success. Ongoing support can take the form of continuing training, discounts on
equipment and supplies, and advertising subsidies.

3. Length of the Franchise Agreement

The typical duration of a franchise agreement is usually 10 or 20 years. This part of the contract

will also spell out the conditions under which the franchise can be sold to someone else, which

can be stringent to make sure that any future franchisee is qualified to be an owner. Sometimes

there will be a right of first refusal clause that allows the franchisor to buy back the franchise

rather than have it sold to someone else.

4. Franchise Costs and Fees

Besides the initial purchase fee, this part of the contract covers the costs involved in owning a

franchise, including monthly royalties, advertising buy-ins, and other costs. Many franchise

contracts also include stipulations on how much cash franchisees must have available before

purchasing the unit, so that franchisors know that their franchisees will be able to cover

everything from payroll to equipment repairs and upkeep of any property involved.

5. Trademarks, Patents and Signs

The franchisor owns the trademark, various patents and the signage associated with the

franchise. This part of the contract outlines the specific ways a franchisee is permitted to use

those entities, as well as the ways they are not permitted to use them.

6. Rules for Operating

Each franchise has specific rules for the way franchisees must run their units. These can include

hours of operation, specific items or services sold, and pay scale for employees, among many

other things. Managerial structure, software programs used, and the way a franchise location

must be laid out are other items that may fall under rules for operating.
7. Franchise Renewal Rights and Termination Policies

Specifics about how a franchise can be renewed and under what conditions it can be terminated

are included here. If a situation arises where the franchisor and franchisee are in conflict, there

may be an Arbitration clause that would prevent either side from going to court unless an

arbitrator reviews the case and makes a recommendation first.

TYPES OF FRANCHISE ARRANGEMENTS

Franchising provides excellent business opportunities for individuals, companies and investor
groups. The number of franchisors, variety of industries and different levels of
investments create business opportunities for the smallest single unit family businesses to the
large multi -million investment groups looking to diversify their portfolios. Franchising provides
excellent business opportunities for individuals, companies and investor groups. The number of
franchisors, variety of industries and different levels of investments create business opportunities
for the smallest single unit family businesses to the large multi -million investment groups
looking to diversify their portfolios.

SINGLE UNIT FRANCHISE

Single Unit Franchise (or Direct Unit Franchise) is the most traditional and historically the most
common form of franchising. Franchisor grants to an entity (the franchisee) the right and
obligation to establish and operate one franchise. The franchisees have to invest their own capital
and apply their own management skills (generally hands-on).

MULTI UNIT FRANCHISE

Franchisor grants to an entity (the multi unit franchisee) the right and the obligation to establish
and operate more than one franchised unit. The multi unit franchisee agrees up front to open a
specific number of locations during a defined period of time. The multi unit franchisee must have
the financial and managerial capability to develop multiple units itself.

AREA DEVELOPMENT FRANCHISE

This type of franchising arrangement is similar to the multi unit franchise- the franchisor grants
to an entity (the area developer) the right and the obligation to establish and operate more than
one franchised unit. The area developer agrees up front to open a specific number of locations
during a defined period of time within a defined area.

MASTER FRANCHISE

Franchisor grants the right to an entity (the master franchisee) for a specific country, region or
continent, empowering the master franchisee to provide the full range of products and services of
the franchisor through sub-franchising, in just the same way that the franchisor runs its own
business. The master franchisee, in addition to having the right and obligation to open and
operate a number of locations in a designated area, also has the right (and sometimes- obligation)
to recruit other franchisees. In effect, the master franchisee becomes sort of a franchisor to those
franchisees that join the system through its master franchise.

FRANCHISE EVALUATION CHECKLIST

A document used by franchisors to evaluate the performance of their franchisees is the

franchise evaluation checklist. The Franchise Evaluation Checklist is for anyone looking to
launch a lucrative and knowledgeable franchising business.

THE NEW FRANCHISOR'S CHECKLIST FOR FRANCHISING A BUSINESS

The first introduction to franchising received by most business owners is when a customer walks into
their location, compliments the owner on the great business concept, and asks whether franchises are
available. The owner dashes around the internet, discovers that franchisees pay substantial initial fees
and continuing royalties, and imagines he or she has found a great new source of easy money. The
phone on my desk rings and a somewhat urgent meeting is arranged to explore what is involved in
franchising the business. New franchisor's checklist for franchising a business:

1. Reality check

It’s not easy money. It will be hard-earned money, and it will be generated in a business that is
entirely new and unfamiliar to the owner. Franchising has its own style, its own rules of the road,
and its own financial imperatives. The learning curve is not that steep—unless you’re in a hurry.
An experienced counselor (and the owner may decide to bring in a franchise business specialist
to help on this) will help consider whether the business is one that can and should be franchised.
Almost anything can be franchised, but only an examination of the market, the competition, and
the products and services of the business will tell you if it should be franchised.

2. Operations manual

The largest task on the checklist for the would-be franchisor is to create a comprehensive
operations manual that can be used to train and guide new franchisees. Think three-ring binder
with a couple hundred pages. Yes, it can be made available to your franchisees online (if
password protected). Yes, it can be prepared by an outside writer, but it probably shouldn’t be.
No, samples and forms are not available—this is a highly confidential document and franchisors
and franchisees don’t treat them casually—but yes, the tables of contents of most operations
manuals are publicly available; you’ll find one attached to just about every Franchise Disclosure
Document in the country.

3. Trademark

The company’s brand name needs to be registered with the U.S. Patent and Trademark Office. If
it hasn’t been done yet, now is the time to begin the process. The company will have no business
granting franchise rights to a trademark that has not been federally registered—state trademark
registrations won’t cut it. We can discuss why in our next meeting.

4. Corporate structure planning

For a variety of reasons, not the least of which is liability protection for other parts of the
business, it may make sense to create a separate legal entity to serve as the franchisor. This will
require a detailed review of the current structure, of course, and a discussion of a few key
ownership questions.

Yes, the franchisor entity can be a limited liability company or a corporation. In our planning on
this point we need to keep our eye on disclosure requirements imposed on some franchisor-
parent entities—we don’t want disclosure surprises down the road.

5. The bright lights of disclosure

Not all organizations are ready for the glare of public disclosure. The Franchise Disclosure
Document (FDD) will require that the franchisor itself, its directors, partners, and executive
managers reveal their criminal and civil litigation and bankruptcy histories, as well as a five-year
employment history for individuals.

FINANCING ENTREPRENEURIAL VENTURES

Entrepreneurial finance is defined as the process of acquiring capital and making financial
decisions for a new venture or startup. When starting a company, entrepreneurs dedicate a
majority of their time securing the funding to make their vision a reality. This involves
approaching investors and seeking loans that can allow them to launch operations and acquire
resources. Funding may be provided by friends, family, venture capitalists, angel investors,
banks and other sources. Entrepreneurs must be flexible, savvy and fast-moving in order to
acquire the financing needed to allow them to focus on scaling operations, hiring employees and
propelling their business forward. Entrepreneurs almost always require starting capital to move
their ideas forward to the point where they can start their ventures. Determining the amount of
money that is actually needed is tricky because that requirement can change as plans evolve.
Other challenges include actually securing the amount desired and getting it when it is needed. If
an entrepreneur is unable to secure the required amount or cannot get the funding when needed,
they must develop new plans. Once a venture begins to make cash sales or it starts to receive the
money earned through credit sales, it can use those resources to fund some of its activities. Until
then, it must get the money it needs through other sources.

Types of Financing for Start-up Businesses

1. Funding from Personal Savings

Funding from personal savings is the most common type of funding for small businesses. The two issues
with this type of funding are 1) how much personal savings you have and 2) how much personal savings are
you willing to risk. In many cases, entrepreneurs and business owners prefer OPM, or “other people’s
money.” The four funding sources below are all OPM sources.

2. Business Loans

Debt financing is a fancy way of saying “loan.” Banks offer funding that you must repay over time with
interest. This can come in the form of a personal loan, a traditional business loan, or different loans based
on the type of asset you need to purchase (e.g., for equipment, land, or vehicles). You must prove to the
lender that the likelihood of you paying back the bank loans is high, and meet any requirements they have.
Once again, you will have to pay the interest along with the principal.

3. Friends & Family

A big source of funding for entrepreneurs is friends and family. They can provide funding in the form of debt
(you must pay it back), and equity (they get shares in your company). Friends and family are a great source
of funding since they generally trust you and are easier to convince than strangers. However, there is the
risk of losing their money. And you must consider how your relationship with them might suffer if this
happens.

4. Angel Investors
Angel investors are generally wealthy individuals like friends and family members; you just don’t know them
(yet). At present, there are about 250,000 private angel investors in the United States that fund more than
30,000 small businesses each year. Most of these angel investors are not members of angel groups. Rather
they are business owners, executives, and/or other successful individuals that have the means and ability to
fund deals that are presented to them and that they find interesting. Networking is a great way to find an
angel investor for your business.

5. Venture Capital

Venture capital funding is a suitable option for businesses that are beyond the startup period, as well as
those who need a larger amount of venture capital for expansion and increasing market share. Venture
capitalists and VC firms are professional investors that are more involved with business management, and
they play a significant role in setting milestones, and targets and giving advice on how to ensure greater
success. Venture capitalists invest in new businesses and medium-sized businesses they believe are likely to
go public or be sold for massive future business profits.

Sources of Financing for Start-up Businesses

Companies always seek sources of funding to grow their business. Funding, also called financing,
represents an act of contributing resources to finance a program, project, or need. Funding can be
initiated for either short-term or long-term purposes. The different sources of funding include:

Retained earnings

Debt capital

Equity capital

1. Retained Earnings

Retained earnings are the amount of profit a company has left over after paying all its direct costs,
indirect costs, income taxes and its dividends to shareholders. This represents the portion of the
company's equity that can be used, for instance, to invest in new equipment, R&D, and marketing.
Businesses aim to maximize profits by selling a product or rendering a service for a price higher than
what it costs them to produce the goods. After generating profits, a company decides what to do with
the earned capital and how to allocate it efficiently. The retained earnings can be distributed to
shareholders as dividends, or the company can reduce the number of shares outstanding by initiating a
stock repurchase campaign. Alternatively, the company can invest the money into a new project, say,
building a new factory, or partnering with other companies to create a joint venture.

2. Debt Capital

Debt capital is the capital that a business raises by taking out a loan.

Companies obtain debt financing privately through bank loans. They can also source new funds by
issuing debt to the public. In debt financing, the issuer (borrower) issues debt securities, such as
corporate bonds or promissory notes. Debt issues also include debentures, leases, and mortgages.
Companies that initiate debt issues are borrowers because they exchange securities for cash needed to
perform certain activities. The drawback of borrowing money through debt is that borrowers need to
make interest payments, as well as principal repayments, on time. Failure to do so may lead the
borrower to default or bankruptcy.

3. Equity Capital

Equity or shares are a unit of ownership in a company, and equity capital is raised by issuing shares to
shareholders. It is also referred to as share capital. Shareholders are the owners of a business, and bring
in capital, take risks and directly or indirectly run the business.

Companies can raise funds from the public in exchange for a proportionate ownership stake in the
company in the form of shares issued to investors who become shareholders after purchasing the
shares. Alternatively, private equity financing can be an option, provided there are entities or individuals
in the company’s or directors’ network ready to invest in a project or wherever the money is needed for.

Managing growth of Venture

Business growth is a difficult task. Growth is crucial to the long-term survival of a business. It
helps to acquire assets, attract new talent and fund investments. It also drives business
performance and profit.

1. Set Growth Objectives

There are many ways to measure growth. Defining your goals will steer your efforts toward the types
that matter to you. Without clear objectives, you may grow in some areas, like your customer base,
without growing in those that actually matter to you. Also take into account what it will take to meet
your objectives. Consider the capital, workforce, and hours needed to get to where you want to go. In
your timelines, factor in the time required to hire, get a loan or otherwise create a foundation for
growth.

2. Stick to a Budget

Spending and saving are key parts to managing business growth. Spending promotes growth by
acquiring the supplies you need to develop and manufacture your product. Saving does not produce
immediate growth, but it helps you play the long game. Investing in new service lines, workspaces and
technologies can catapult you ahead of your competitors. This is all about balance. Your business needs
a budget to prioritize its spending while socking some away each month. Otherwise, you’ll be tempted
to overspend—which may produce short-term growth, but will ultimately make your organization more
fragile. Business debt should be a pivotal part of your budget as well. Most entrepreneurs cannot afford
to self-fund. Beware, though, that taking on too much debt can cause you to miss out on growth
opportunities and overpay on interest.

3. Concentrate Your Efforts

The reality is, you cannot focus on every area of your business at once. You may see needs
everywhere, but you won’t make a meaningful impact if you can’t prioritize your time.

Look back to your objectives. If revenue is how you’re measuring your growth, this might be the
quarter to optimize your sales team. If customer lifetime value is the metric that matters most to
you, your customer service team might need a little extra training.
4. Adapt Again and Again

With growth comes growing pains. Make sure not just you, but your employees, are ready to roll
with the punches. Growing client loads can stress out the account team. Retention initiatives can
cause you to keep unprofitable customers. Increased web traffic calls for more servers. Larger
order volumes may strain smaller suppliers. Infrastructure comes in many forms, all of which
can break. Listen to employees’ concerns before cracks in a process or system turn into a
catastrophe. Eagerly adopt new technologies that can lessen the burden on your team.

5. Take Care of Customers

Growth cannot occur without paying customers. No matter how many partnerships you forge or
products you build, you won’t get anywhere without a sizable customer base. Give your
customers your ear. Their insights can help you improve your product, root out customer service
issues, and even identify new customer demographics. And by implementing their feedback,
you’ll engender their loyalty. Every entrepreneur wants to see their company grow, but few have
the patience to grow well. In the business world, slow and steady often wins the race.

6. Hire the right team.

When you're growing quickly, it's important to hire the right people to help you scale. Look for
individuals who are not only skilled and knowledgeable, but also adaptable and able to work in a
fast-paced environment. The employees you hire are invariably the difference-makers that
influence the future success of your business. Regardless of products or service features and
benefits, without the right team, your growth will not be maximized. I believe that culture fit is
the most important aspect of hiring and retaining great employees, with skill set following
closely behind. Your team should reflect the ultimate vision of your company and represent the
values, beliefs, behaviors and experiences that make up your business’ work environment. Hiring
employees that don’t fit in with your current or desired work culture could lead to poor employee
work performance and decreased levels of job satisfaction.

7. Focus on your strengths.

As your business grows, you need to leverage areas of uniqueness and strength. It’s essential to
capitalize on whatever factors make you stand out from your competitors and identify and focus
on your target audience and their needs. Engage and entice your target audience with benefit-
oriented marketing content, special offers, informative events and services that highlight the
strengths of your business and connect the customer to your brand.

8. Delegate and empower your team.

As your startup grows, you will need to delegate more and more responsibility to your team.
Empower your team members to make decisions and take action, without needing to check with
you first.

9. Be flexible.
In a rapidly growing startup, things can change quickly and unexpectedly. Be flexible in your
approach and be prepared to pivot when necessary.

VALUATION OF A NEW COMPANY

What Is a Business Valuation?

A business valuation, also known as a company valuation, is the process of determining the economic
value of a business. During the valuation process, all areas of a business are analyzed to determine its
worth and the worth of its departments or units. A company valuation can be used to determine the fair
value of a business for a variety of reasons, including sale value, establishing partner ownership, and
taxation. Owners will often turn to professional business evaluators for an objective estimate of the value
of the business.

Why Would You Need a Business Valuation?

Due to the complexity of the business valuation process, these calculations are probably not something
you’ll be doing every day—so, when would you need a business valuation?

Overall, there are a handful of common reasons why business owners need to evaluate the worth of their
company:

 When looking to sell your business

 When looking to merge or acquire another company
  When looking for business financing or investors
 When establishing partner ownership percentages
 When adding shareholders
 For divorce proceedings
 For certain tax purposes

5 Common Business Valuation Methods

Below are five of the most common business valuation methods:

1. Asset Valuation

Your company’s assets include tangible and intangible items. Use the book or market value of those
assets to determine your business’s worth. Count all the cash, equipment, inventory, real estate, stocks,
options, patents, trademarks, and customer relationships as you calculate the asset valuation for your
business.

2. Historical Earnings Valuation

A business’s gross income, ability to repay debt, and capitalization of cash flow or earnings determines its
current value. If your business struggles to bring in enough income to pay bills, its value drops.
Conversely, repaying debt quickly and maintaining a positive cash flow improves your business’s value.
Use all of these factors as you determine your business’s historical earnings valuation.

3. Relative Valuation

With the relative valuation method, you determine how much a similar business would bring if they were
sold. It compares the value of your business’s assets to the value of similar assets and gives you a
reasonable asking price.

4. Future Maintainable Earnings Valuation

The profitability of your business in the future determines its value today, and you can use the future
maintainable earnings valuation method for business valuation when profits are expected to remain stable.
To calculate your business’s future maintainable earnings valuation, evaluate its sales, expenses, profits,
and gross profits from the past three years. These figures help you predict the future and give your
business a value today.
5. Discount Cash Flow Valuation

If profits are not expected to remain stable in the future, use the discount cash flow valuation method. It
takes your business’s future net cash flows and discounts them to present day values. With those figures,
you know the discounted cash flow valuation of your business and how much money your business assets
are expected to make in the future.

Corporate Entrepreneurship or Intrapreneurship:

In simple language, corporate entrepreneurship is a procedure utilized for creating new business,
solutions or services inside a present company for giving values and creating new sort of revenues using
the thoughts and actions of an entrepreneurial. Corporate entrepreneurship means engaging employees
and giving them freedom and self-expression to immerse themselves in new opportunities. This boosts
their confidence, enhances their skill sets, and most importantly because employees feel valued and
motivated, increases their productivity.

It can motivate the entrepreneurs to take the necessary action and take the company to the required
goals. The main motive of this process is creating ideas with having disruptive nature instead of making
little bit changes. Additionally, it creates an environment where innovations are led by company
employees instead of being applied by management.

Corporate entrepreneurship, or intrapreneurship as it is often referred to, is the concept of supporting

employees to think and behave like entrepreneurs within the confines of an existing organisational
structure.

Aspects of Corporate Entrepreneurship

While there can be many aspects of corporate entrepreneurship that can vary significantly from
organization to organization, the four most significant ones that affect the level occurring are
indicated in the formula below:

L = I + O + C2

Where: L = Level of Corporate Entrepreneurship

I = Innovation

O = Ownership

C = Creativity

C = Change

https://unyscape.com/inspiring-examples-of-indian-intrapreneurship/

FEATURES OF CORPORATE ENTREPRENEURSHIP

1. Decentralisation: Companies that wish their employees to be entrepreneurial must have flat
management structures. Bouchard says “In order to foster an entrepreneurial environment
companies should be as flat as possible. If there are too many management levels and lines of
reporting decisions take too long to make. Slow decision making kills corporate
entrepreneurship.

2. Risk taking: Corporate entrepreneurs can only operate in a company that is open to a certain
level of risk taking. In order to promote this culture, companies should identify role models who
embody a spirit of entrepreneurial thinking and promote this as an ideal. “Managers should
discuss the successes and failures of role models to let employees know that taking risks in the
pursuit of entrepreneurial ideas is encouraged”.

3. Formal processes: Simple, formal processes to assess entrepreneurial projects must be in

place. If a project is given the go-ahead, it must then be supported. “Corporate entrepreneurs
need to be assessed as they develop their projects – and then supported with money, time and
company resources.”

4. Open communication: Companies should encourage and facilitate open communication

between employees and different business units, if corporate entrepreneurship is to thrive.
Gatherings and events that allow workers to talk and exchange ideas should be held regularly. “If
companies want employees to come up with good ideas, then frequent communication between
workers is critical. If workers don’t talk to each other, opportunities will be lost and
entrepreneurial activity will be stymied. There should be no silos in companies that want to
foster innovation.”

HARVESTING/ HARVEST STRATEGY:

A harvest strategy is a marketing and business strategy that involves a reduction or a

termination of investments in a product, product line, or line of business so that the
entities involved can reap—or, harvest—the maximum profits. A harvest strategy is
typically employed toward the end of a product's life cycle when it is determined that
further investment will no longer boost product revenue.
Why Companies use Harvesting Strategy
Businesses and companies use harvesting strategy for various reasons and they’re as follows;

Launching a business line or product at the cash cow stage, it’s the stage where the
promotion of your product is no longer useful. You could reallocate the same resources in the
other areas, where they could increase more revenue.

Developing a new product, when you’re working on the development of the new product, then
it requires a lot of resources and investment so that it would generate sales and profit.

Disconnecting the business line or the product, here the management decides to finish the
product line and marketing reinvestment is no longer an option.

The Product or Business Life Cycle

To fully comprehend the use and applicability of a harvest strategy, it is beneficial to understand
the business/product life cycle. There are four common stages that every business or product line
is expected to follow. They include the start-up or introduction stage, the growth stage, the
maturity stage, and the renewal or decline stage.

 The start-up stage is the very beginning of the cycle. The business model is still being
developed, and significant amounts of investment is needed to market the release of the
new product or business line. The start-up stage focuses on increasing customer
awareness and generating initial sales.
 The growth stage of a product or business line is the stage at which demand starts to
increase, thereby offsetting an increase in overall production and product access and
availability. At the growth stage, the existing consumer base begins to mature, while
traction for new customers continues to increase.
 The maturity stage of a business is the stage at which a business’ marketing and
production costs begin to decrease, and the business is generating its highest profits. At
the maturity stage, revenue is constant, and operations are efficient.
 The renewal or decline stage is the stage where a product or business line starts to lose
market share as a result of increased competition and/or stagnant revenues. It is also
known as the cash-cow stage of the business or product, where more investment is not
necessary, as further investments may not result in increased sales.
TYPES OF HARVESTING STRATEGY:

1. Selling Harvest Strategy:

Often referred to as the "exit strategy" is the selling of the firm or the product or service
line to another entity. The business owners may ask for a price, and perhaps parties
interested in the acquisition may offer a price.

2. Gradual Harvest Strategy:

This strategy involves getting rid of all the expenses and costs associated with the
product or service line. This is done to focus more on profitable and growth-oriented
product lines. The gradual harvest strategy involves the creation of profits or increasing
profits through heavy cutting on costs involved.

3. Buyout Strategy:
A buyout is a financial condition involving the acquisition of controlling interests in the
targeted company. This involves buying/acquiring more than 50% of the firm itself.
The buyout includes the following types

 Leveraged Buyout
 Management Buyout
 Management Buyin
 Institutional Buyout
 Leveraged Buildup

4. Mergers:
A merger is the coming of two different companies together to form a new company to
share a synergistic bond to expand its horizon of expertise.
The expansion of reach, market share, and acquisition of resources might be helpful in
future long-term growth. Most of the time, a merger is proven to be beneficial and
executed to enhance shareholders' value.
Business mergers are of different types. Some of them are conglomerate, congeneric,
and vertical.

What Is a Business Valuation?

A business valuation, also known as a company valuation, is the process of
determining the economic value of a business. During the valuation process, all areas
of a business are analyzed to determine its worth and the worth of its departments or
units.