Entrepreneurship Fundamentals

Definition of Entrepreneurship

• Entrepreneurship is defined as the process of creating or seizing an opportunity and pursuing it regardless of resources controlled.
• Entrepreneurship is also defined as the science of converting processed ideas into a remarkable business venture.
• Entrepreneurship is the capacity for innovation investment, and expansion into new markets and techniques.

Definition of Entrepreneur

• An entrepreneur is someone who starts and manages a business.

Underlying Principles for Business Success

• Entrepreneurs have a vision, manage effectively, take risks and opportunities, and make informed decisions
• Having a vision provides a sense of purpose and direction for the business.
• Effective management refers to achieving business goals and objectives with the help of employees and the proper utilization of organizational resources.
• Entrepreneurs are accountable for the success or failure of their businesses.
• Entrepreneurs need to apply informed decision-making, which involves logic and collecting information, when facing a significant risk or consequence.

Core Competencies

• Core competencies refer to an entrepreneur's traits or personal attributes.

EMPRETEC Program of the United Nations

• EMPRETEC is the Spanish acronym for Emprendedores (entrepreneurs) and tecnologia (technology).
• The program was first introduced in Argentina in 1988 and has been implemented in 36 countries.

10 Personal Entrepreneurial Competencies

• Opportunity-seeking and initiative
• Persistence
• Fulfilling of commitments
• Demand for quality and efficiency
• Taking Calculated Risks
• Goal-setting
• Information-seeking
• Systematic planning and monitoring
• Persuasion and networking
• Teamwork and leadership

Description of the Business

• Products and/or services
• Size of the business
• Mission statement and core values
• Location of the business and its major physical assets
• Background of the business owners/entrepreneurs

Production Plan

• Manufacturing process
• Physical plant
• Machinery and equipment
• Suppliers of raw materials
• Future capital equipment needs

Operation Plan

• A description of the company’s operations (manufacturing, service, retail or online business).
• Flow of orders for goods and services.
• Detailed information about the processes of a retail business.
• Details of the design and function of an online business website.

Marketing Plan

• Pricing
• Distribution
• Promotion
• Sales forecasts

Organizational Plan

• Documentation of the venture’s form of ownership
• Organizational chart
• Skills and abilities
• Roles and responsibilities

Financial Plan

• Assumptions
• Pro forma balance sheet
• Pro forma income statement
• Cash flow projections
• Sources and uses of funds
• Breakeven analysis

Assessment of Risk

• Potential risks - internal or external
• Strategies for preventing or minimizing risk
• Response to risk, should it occur

Timetable/Milestones

• When major activities will happen and when milestones will be reached.

Trends, Risks, and Disadvantages

• Losing stable income
• Lack of family support
• Long hours
• No health benefits
• All expenses are the entrepreneur's responsibility
• The entrepreneur does not get paid if they do not work
• High start-up costs

Disadvantages

• No regular salary
• Work schedule
• Administration

Reasons for Failure

• High debt ratio
• High levels of mismanagement
• Unexpected staff resignation
• Inadequate inventory
• Selling products below cost
• Dwindling working capital, consistent negative cash flow, and the inability to secure operational capital
• Declining profit
• Loss of market share

Trends

• Internet Businesses
• Service Businesses
• Home-Based Businesses
• Socially Responsible Nonprofit Businesses
• Focus on Technology
• Outsourcing
• Strategic Alliances
• Corporate Ventures
• Convenience Products/services

The Entrepreneurial Mindset

Theory of Economic Development

• Two types of entrepreneurs: Mega Entrepreneur and Micro Entrepreneur

Mega Entrepreneur

• Individuals who have generated substantial value and profits from innovations in a very short period of time
• Willing to absorb huge risks using enormous amounts of capital in their business
• Lead to rapid economic progress
• Add a huge amount of value to the economy
• Attract a number of competitors and imitators
• Are crucial in rapid economic prosperity.

Micro Entrepreneur

• Individuals who initiate business enterprise, but the value-added and profits they make are limited
• Value-added and profits are limited
• Their contributions are minimal
• Attract few competitors and imitators
• They are short on funds and have inadequate skills
• They cannot undertake huge capital, sophisticated technology, or extensive risks
• Engage in micro and small businesses as an alternative to formal employment.

Entrepreneurial Process

• A system entrepreneurs follow to achieve their goals.
• Uses the group discussion method to elicit ideas from the usual brainstorming
• After identifying all the problems and issues with the product or service, the participants are tasked to give alternative solutions to the problems

Free Association Method

• A method used in psychology to elicit unconscious thoughts of individuals by expressing their thoughts associated with words and ideas.

Checklist Method

• A creative way of obtaining business ideas from target participants by listing all the possibilities that ideas can be connected to, reprocessed and associated with

Generating Business Ideas Through Trends in the Business Environment

• Methodologies that focused on the Business Environment
• Porter’s Five Forces of Competition
• SWOT Analysis
• Environmental Scanning

Based on Trends in the Business Environment, Ideas Can Be Gathered From:

• Bargaining powers of competitors and suppliers
• Major shift in government involvement in business
• Sociodemographic changes and technological developments

Bargaining Power of its Competitors and Suppliers

• Lower the selling price
• Product differentiation

Factors that Influence Creativity

• Problem-Solving Factors
• Motivational Factors
• Situational Factors
• Organizational Factors

Creative Problem Solving

• A procedure of answering a problem with mechanism and technique incorporating creativity

• Divergent thinkers think of all possible ways to reach a solution.

• Convergent thinkers think for a final solution.

Osborn-Parnes Model

• A technique for creative problem-solving that involves six stages:
  • Fact Finding
  • Problem Finding
  • Idea Finding
  • Solution Finding
  • Acceptance Finding
  • Implementation Finding

Appendices

• Market research data
• Detailed financial projections
• Opportunity Assessment Plan
• Curriculum vitae of the management team
• Price lists from suppliers
• Profile of competitors
• Sample Licenses (Mayor’s permit, BIR, Health permit etc.)

Why Do Some Business Plans Fail?

• The document is sloppy and looks unprofessional.
• The executive summary is not coherent and is too long
• Unclear on why people would want to buy the product or service
• The sales and financial projections are unreasonably optimistic
• Inadequate description of the qualifications and experience of the management team
• Inadequate assessment of the potential threats to the business

How to Present a Business Plan

• Tell a compelling story.
• Exhibit confidence and professionalism.
• Cover the basics.
• Adopt a cooperative attitude when answering questions.

Recognizing, Assessing and Exploiting Opportunities

• Opportunity (according to Cambridge Dictionary): a situation or occasion that makes it possible to do something that you want to do.
• Opportunity (from a business perspective): an exploitable set of circumstances with uncertain outcome requiring a commitment of resources and involving exposure to risk.

Stages of Opportunity Recognition

• Precondition (Preparatory Stage)
• Conception (Gestation Stage)
• Visioning (Hunch; Logic of Connections)
• Assessment (Evaluation of Ideas)
• Realization (Production of Prototype)

Factors in Opportunity Recognition

• Market awareness: refers to personal exposure to the market and its components including customers and suppliers. Tools used are market analysis and environmental scanning.
• Entrepreneurial readiness: refers to a variety of features of an individual to start a business venture; types of resources, financial, physical and human resources; ability of the individual to take risks and manage uncertainties once the enterprise is operational.
• Connections (networks): families and friends as well as business associates can bring about opportunities that an individual can pursue.

Explore the essential definitions and principles of entrepreneurship and what it means to be an entrepreneur. This quiz covers the necessary traits, management skills, and vision required for business success. Test your knowledge on entrepreneurship concepts and principles.