business venture

Business Entrepreneurship - Discussion Questions

• Why and how do people become entrepreneurs?
• Why is entrepreneurship beneficial to an economy?
• How can governments encourage entrepreneurship, and, with it, economic growth?
• What social and economic factors have prompted the rise in small businesses?

Entrepreneurs

• Entrepreneurs are found in all industries and have different reasons for starting businesses.
• Entrepreneurs include small business owners.
• There is a difference between entrepreneurs and small business management.

Principles of Entrepreneurship

• Innovation is the key word for entrepreneurship.
• The concept of entrepreneurship was first established in the 1700s
• The entrepreneur is one who is willing to bear the risk of a new venture if there is a significant chance for profit
• Entrepreneurs are visionaries who pursue ideas of a new product/service
• Entrepreneurs identify opportunities and their capabilities to start new products or services
• Entrepreneurs can be small business owners, but not all business owners are entrepreneurs.

Entrepreneurs - Examples

• Small business owners have technical expertise and decide to stay small (e.g., a bookstore owner)
• Entrepreneurs can develop new markets or change existing ones (e.g., Jeff Bezos and Amazon.com which changed bookselling)
• Entrepreneurs often do not accept the status quo in contrast with small business owners.

Continued

• Economist Joseph Schumpeter (1883-1950) showed entrepreneurs' drive for innovation and improvement creates change and upheaval, also a force of “creative destruction” rendering industries obsolete.
• Entrepreneur Peter Drucker (1909-2005) described the entrepreneur as someone who looks for change, responds to it, and exploits it as an opportunity.
• Modern economists agree that entrepreneurship is essential to economic growth and job creation in all societies especially developing countries.
• Government support and incentives for entrepreneurs to take risks in new ventures are crucial, along with enforcing property rights and promoting a competitive market.

Continued

• Community culture can influence entrepreneurship.
• Cultural differences can make entrepreneurship more or less personally rewarding.
• A community that values professional expertise in organizations may discourage entrepreneurship.
• A high status given to "self-made" individuals is more likely to encourage entrepreneurship.
• People are attracted to entrepreneurship by the freedom of being their own boss, with autonomy to make decisions, have flexible hours, and have a higher chance of financial reward.
• Other motivations include disillusionment with job prospects, desire for accomplishment, or the belief that one can achieve more outside the structure of established businesses by being their own boss.

Why Become an Entrepreneur?

• Factors include being laid off multiple times, becoming frustrated with limited career prospects, being passed over for promotion, and having no other opportunities within an established business.
• Some people are repulsed by the existing corporate system and seek alternative ways of working that focus on accomplishment and fulfilling personal interests.

Advantages of Starting a Business

• Entrepreneurs are their own bosses, making decisions and setting schedules.
• Entrepreneurship offers more opportunities for significant financial rewards.
• Entrepreneurs have more prestige and control over their business.

Continued

• Entrepreneurship benefits the individual by allowing equity build-up, leading to inheritance options and the ability to financially contribute to the local economy.
• Entrepreneurs frequently contribute positively to society. The most successful entrepreneurs tend to demonstrate qualities like creativity, dedication, determination, flexibility, leadership, passion, self-confidence and "smarts."

What Makes Someone an Entrepreneur?

• There is no single profile of a successful entrepreneur since people come in varying ages, income levels, genders and races, with diverse education and experience.
• Research indicates that most successful entrepreneurs share similar personal qualities, which include creativity, dedication, determination, flexibility, leadership, passion, self-confidence, and "smarts."

Continued

• Creativity is the spark for new products, services, or ways of doing business.
• Dedication motivates hard work, even for long hours, during the beginning stages of an endeavor.
• Determination drives persistence in difficult times and encourages resilience.
• Flexibility is adapting to changing market conditions
• Leadership empowers creating rules, objectives and following through to ensure that standards are met.
• Passion energizes starting and sustaining entrepreneurial efforts.
• Self-confidence stems from planning well, gaining expertise, and actively listening.
• "Smarts" represents the combination of common sense, knowledge and experience in a relevant field.

Starting a new Business - Trends

• Trends in shaping entrepreneurship and small business ownership in the late 1990s.
• Starting a dot com in college seemed a quick route to riches.
• Many entrepreneurial opportunities emerge due to evolving demographic trends and technology.
• Businesses adapting to a fast-paced, technology-dominated environment are changing the face of entrepreneurship.

Conditions for Entrepreneurs

• Entrepreneurial opportunities are influenced by environmental changes (political, regulatory, social, and demographic).
• Willingness and ability to act on opportunities differ between individuals.
• Risk-taking, the creation of value chains, and the utilization of opportunities like licensing are crucial.

Types of Entrepreneurs

• Classic Entrepreneurs: Risk-takers, innovative ideas, start and stay small (e.g., a bagel shop).
• Growth-Oriented Entrepreneurs: Wanting to grow the business into a major corporation (e.g., Jeff Bezos and Amazon.com).
• Multipreneurs: Start multiple companies (e.g., Elon Musk and Tesla).
• Intrapreneurs: Don't own companies, but are creative and take risks within large corporations, develop new products, and have authority to run a mini company.

Entry Strategies for New Ventures

• Determining the best product or service to offer involves several factors such as market potential, competitors, resources, and interests.
• Understanding why consumers would prefer your business rather than competitors is vital to success.
• Differentiation, specialization and innovation are essential strategies for success as low cost alone isn't a successful venture.

Intellectual Property

• Intellectual property is a valuable asset for entrepreneurs.
• It consists of legal property rights that give value to certain creations.
• Examples include new products, brand names, methods, processes, promotional schemes, and designs.
• Legal protection is essential to preserve a firm's ideas and creative efforts.

Protecting Intellectual Property

• Protecting intellectual property is a practical decision because not doing so could waste time, effort and money.
• Others can imitate ideas without incurring the same start-up costs.
• Laws are in place that give legal protections to creative ideas in order to encourage innovation and to give creators time to maximize their creative, and intellectual property investments.
• This protection is an asset that can be negotiated, sold, licensed or even given freely to others.

Main forms of Intellectual Property rights

• Patents give inventors the exclusive right to make, use, and sell an invention for a limited time. Once expired, the invention becomes part of the public domain.
• Copyrights protect original works like books, songs, and designs. They protect the expression but not the idea.
• Trade Secrets are confidential information unique to a business, such as formulas and business strategies. Protecting these secrets is often done through contracts, and non-disclosure agreements.
• Trademarks allow a business to set a symbol, word, or design which identifies the source of their goods.

Small Businesses

• Critical role in any economy.
• Account for a significant portion of economic output in US, employing around half of employees in the private sector.
• Businesses are often found in various sectors of the economy including, retail, services, construction, insurance, agriculture, and transport.

Strengths of Small Businesses

• Flexibility to innovate and create new products and services
• A small business entrepreneur can limit the advantages of larger businesses by careful planning.

Strengths of Large Businesses

• Access to funding and more comprehensive marketing and design.
• Economies of scale in high-volume manufacturing with lower costs.
• Credibility of a larger and well-known business name.

How Small Firms Can Compete

• Small firms can react rapidly to industry trends.
• Modifications to products, services and operating hours can be made quickly and effectively to meet customer needs.
• Customers can take an active role in product development.

Government Policies

• Policies to cultivate entrepreneurship and reduce poverty are crucial for economic growth and stability.
• Government backing and support can involve financial policies like tax incentives for small businesses in order to encourage entrepreneurial risk taking.

Tax Policy

• Taxes raise revenue for governments.
• Taxes on business activities have discouraging effects.
• Policymakers must balance tax collection with supporting entrepreneurship with methods like tax deductions for businesses, reducing tax rates and providing tax credits for investment.

Regulatory Policy

• A simplified and streamlined regulatory process for businesses benefits the establishment and increase of smaller businesses.
• Reducing the expenses related to compliance with regulations can be beneficial for developing businesses.
• One-stop centers can help entrepreneurs to gain access to assistance with regulatory issues and allow for online submission or storage of business requirements.

Access to Capital

• Starting a business requires considerable funds.
• Government programs and initiatives, like the Small Business Administration (SBA) in the US, help finance start-ups through loan guarantees.
• Lenders often lower requirements because the government backs the loans in case of default.
• Legal protections for property rights are essential for boosting investment, especially in small business.

Intellectual Property

• Establishing intellectual property rights through patents, copyrights, and trademarks helps to encourage and support innovation.
• Laws that protect intellectual property avoid imitation and duplication by competitors and allow sufficient time for inventors to profit and recover development costs.

Business Culture

• Creating a supportive culture within a community by recognizing entrepreneurs and small business owners, promoting their achievements through award programs, can boost entrepreneurship.
• Governments can encourage a positive culture towards entrepreneurship by incentivising incubator business developments through funding, space and services, helping new business start-ups.

Marketing Is Selling

• All aspects of the transfer of goods from producer to customer are essential for running a profitable business, this includes advertising, storing, and selling.
• A company should undertake market research and analyse competitive products in order to fully understand how to sell effectively.
• Entrepreneurs should look through the methods of selling by competitors and include their successful selling approaches in their business plan.

Other Ways to Promote Business

• Utilize advertising techniques like newspaper, magazine, television, or radio ads, or print fliers to reach consumers.
• Consider being listed in directory services and on internet search platforms like in the United States with the Yellow Pages.
• Creating customer lists to send out mail or invitations can help.
• The head of a business should be the key salesperson, using excellent communication and sales skills.

Self-analysis of Entrepreneurship Readiness

• Entrepreneurship plays a critical role in having a thriving and healthy economy by improving general well-being.
• The most successful economies generally have high levels of quality and quantity of entrepreneurial activity.
• Expansive fiscal policies, increased consumption, and strong domestic and international investment are key to reducing high employment and poverty levels.

Business Trends in Shaping Entrepreneurship

• Changes in demographics and emerging technology create many opportunities for establishing new businesses.
• Individuals starting ventures in the late 1990’s in the technology sector often aimed for quick gains in the dot com bubble.

Different Parts of a Business Plan

• It is important to create a business plan for all businesses.
• The business plan should include elements like products and services, target market, competitive advantages, marketing strategy, and projections of financial aspects.

Elements of a Business Plan

• Business plans vary in length, but all of them have common elements.
• The plan generally includes an executive summary, a description of the business, detailed descriptions of products and services offered by the business, market analysis of competitors and customers, the company's competitive advantage outline, descriptions of its marketing strategy, financial projections, and selling of the management team.

Presentation of Business Plans

• Investors will likely prefer a concise and engaging presentation over one with excessive information
• A key selling point is that the presenter has in-depth knowledge of the business.
• A business plan's presentation should include an introduction about the company and its products, as well as detailed discussion about the size of the market, the customers, competitiveness, and growth projections, plus a demonstration of projected revenue and profitability, marketing strategies plus distribution and sales strategies.

Rehearsing Your Presentation

• Practising the presentation ensures a polished and professional presentation on the day.
• Be aware of time constraints and the need for time for questions.
• Outline the important points and include extra notes on the presentation slides.

Succeeding on Presentation Day

• Staying relaxed and calm is important to exude confidence.
• Practising presentation techniques like breathing exercises and visualization can help to reduce stress.
• Focus on your expertise and skills.

Market Research

• Conducting primary and secondary research on demand, market size, economic indicators, and the competition within the target market will be cost-effective.
• A comprehensive market analysis gives insight into trends affecting the industry to anticipate issues and provide a solid market analysis.

SWOT Analysis

• A SWOT analysis involves identifying internal (strengths and weaknesses) factors within a company and external (opportunities and threats) market factors.
• Internal factors can be improved.
• External factors cannot be controlled but can be assessed to guide company strategy.
• Identifying these factors and prioritizing them will be invaluable in planning a business strategy.

Advantages in Business

• Profitability: Generating revenue, generating income, financial security
• Flexibility: Work from home, work your own hours
• Independence: Being your own boss.
• Opportunity: Pursuing creative ideas
• Community Involvement: Helping local causes.
• Financial Success: Unlimited earning potential
• Excitement: Job challenges and flexibility
• Unique product or service: Be first to market.

Disadvantages in Business

• Financial Instability: In the first years, income levels may be inconsistent
• Stress: Lack of guaranteed income, added responsibility, and lack of direct support
• Tough Work Schedule: Long hours
• Risk: Potential for loss of capital and investment

Business Structure - Partnerships

• A thorough analysis of a partnership is required to evaluate advantages and disadvantages
• Benefits include access to varied expertise and knowledge and more cash resources. This can help company with more capital, to raise more funding, and help with more business opportunities. This can also reduce costs and eliminate downsides of business-related operational expenses.
• Issues include liability, loss of autonomy, disputes and emotional factors. Exiting a partnership may be difficult to manage as a partner may not want to sell the business.

Business Structure - Private Company

• Advantages: Limited liability of owners which protects personal assets from company debts, more readily accessible funding options through investors, ability to maintain business operations even after shareholders have exited from business, and ability to utilize economies in trading for scale and discounts.
• Disadvantages: Funding may be less accessible compared to public companies, hindering business growth possibilities. Company shares are not accessible for sale to public.

Corporate Structure - Public Limited Company

• Advantages: Relatively easier access to finance from large amounts, ability to benefit from a variety of investors. Perpetual existence maintains operations even with changes in share ownership.
• Disadvantages: Company control is diluted by having multiple shareholders, which can be costly to manage. Administrative processes like AGM or distribution can have significant associated fees.
• Scrutiny from the public, and stringent listing requirements, may affect operations.

Franchising - Advantages

• Accelerated multi-unit expansion.
• Raising capital to start and grow a business.
• Providing the managerial talent to manage new locations.
• Taking advantage of economies of scale for purchasing.
• Generating new revenue streams.

Franchising - Disadvantages

• Requires significant costs to establish a franchise.
• Franchising involves strong regulations and legal compliance.
• Increased competition.
• Limited control of new location operations.
• Time investment to establish the system.

Buy-out overview

• Buy-outs involve acquiring control of a company either through full purchase or by getting hold of a controlling equity stake.
• Usually, a buyout includes the purchase of a target's outstanding debt (also called assumed debt by the purchaser).
• A buy-out is attractive to those parties aiming to improve the operations and/or financial performance of the purchased company under new ownership.
• It is likely to happen when one party sees a possibility of making a considerable return on investment.

Buy-outs - Management buyout (MBO)

• MBO involves the management team of the business acquiring all or part of a company from either the private owners or the parent company.
• The MBO is attractive to managers and leaders because they can expect greater potential rewards if they are the owners instead of employees.
• An MBO is often a preferred exit strategy for private owners who are looking for an exit point, such as retirement from ownership or sell-offs of different parts of the business that do not fit within the core operations.

Buy-outs - Leveraged Buyout (LBO)

• LBOs use huge loans to purchase companies since the assets act as collateral.
• This strategy allows access to large acquisitions without requiring the funding to be completely capitalized.

Advantages of Buy outs

• Reduced competition, which allows for increased profitability.
• Ability to avoid price wars with competitors
• Increased efficiency by doing away with product duplication which assists with profit and reduce operational costs.
• Ability to obtain better deals or prices when purchasing insurance, equipment, products, and all other associated business elements.
• Acquire new technology or products that can enhance the existing business.

Disadvantages of Buy outs

• Increased debt from loans used for financing of purchase
• Loss of key personnel who may leave the company in search of other challenges
• Integration issues that can affect efficiency and productivity for a prolonged period of time.

Business Plan overview

• A business plan is a strategic document used to outline a business's objectives and how to pursue its goals.
• They set a roadmap for the business from a marketing, financial, operational viewpoint.
• Plans are used for attracting investors and lenders or to help the business to set a clear vision in place.

Business Plan sections

• The plan includes elements like a brief executive summary, description of the business, detailed descriptions of products or services, market analysis, and projected financial data.
• A business plan must also include aspects that outline its competitive advantage, outlined marketing strategy, financial projections and the details of who will be in charge within the management of the company.

Other Business Structure Challenges

• Legal Compliance: Companies in any industry must comply with all legal standards regarding appropriate records and other documents that need to be maintained within the firm. This may vary by industry, location, and business entity type. Consulting with a qualified legal professional is generally recommended.
• Business Structure: It is essential to choose the right structure to operate a firm, from partnership to public limited company, to help ensure that the business thrives long-term. Some factors to consider include capital requirements, liability requirements, and the intended growth of the market.

Test your knowledge on entrepreneurial opportunities and SWOT analysis components. This quiz will help you understand the importance of strengths, weaknesses, opportunities, and threats in a business context. Explore critical concepts that shape successful entrepreneurial ventures.