Understanding Entrepreneurs

What Is an Entrepreneur?

• An entrepreneur creates a new business amidst risk, aiming for profit and growth
• This involves identifying opportunities and gathering the necessary resources
• A standout trait among entrepreneurs is their diversity
• Anyone, regardless of background, can become an entrepreneur, even though not everyone is suited for it

Characteristics of Entrepreneurs

• Entrepreneurs commonly desire responsibility
• They often show a preference for moderate risks, acting as risk eliminators
• Entrepreneurs are typically self-reliant
• Entrepreneurs are confident in their ability to succeed
• Determination and a desire for immediate feedback drive entrepreneurs
• High energy levels is a key trait
• They demonstrate future orientation
• Some are opportunity entrepreneurs while others are necessity entrepreneurs
• Serial entrepreneurs have a track record of starting multiple businesses
• Entrepreneurs are usually skilled at organizing
• They generally value achievement more than money
• A strong commitment is a common entrepreneurial trait
• Tolerance for ambiguity is necessary
• Creativity and flexibility are also important
• Entrepreneurs are known for being resourceful
• They exhibit a willingness to work hard
• Tenacity helps them push through the obstacles of entrepreneurship

Benefits of Entrepreneurship

• Entrepreneurs have the opportunity to create one's own destiny
• Being an entrepreneur provides the chance to make a difference
• It allows one to reach their full potential
• Entrepreneurship can lead to impressive profits
• Contributing to society and gaining recognition is a possibility
• Entrepreneurs can do what they enjoy and have fun

Drawbacks of Entrepreneurship

• Income instability is a major drawback
• The risk of losing the entire investment exists
• Long working hours and hard work are necessary
• A lower quality of life may occur until the business is steady
• High levels of stress are often experienced
• Entrepreneurs must accept complete responsibility
• Discouragement may occur during tough times

Cultural Diversity of Entrepreneurship

• Young entrepreneurs are increasingly common
• Women entrepreneurs make significant strides
• Minority-owned enterprises are on the rise
• Immigrant entrepreneurs bring unique perspectives
• Part-time entrepreneurs balance business with other commitments
• Home-based businesses offer flexibility
• Family businesses pass down legacies
• Corporate castoffs start new ventures
• Corporate dropouts pursue entrepreneurial dreams
• Retiring baby boomers launch encore careers

Small Businesses by Industry

• Services account for 55.4%
• Construction accounts for 12.9%
• Retail accounts for 11.7%
• Finance, insurance, and real estate account for 9.0%
• Wholesale accounts for 5.4%
• Manufacturing accounts for 4.5%
• Other make up 1.0%

Putting Failure into Perspective

• Entrepreneurs are not paralyzed by the prospect of failure
• Failure is a natural part of the creative process
• Successful entrepreneurs learn to fail intelligently

Avoiding the Pitfalls of Small Business Failure

• Thorough knowledge of one's business is crucial
• The business model must be viable and tested
• A solid business plan is essential
• Understanding financial statements is necessary
• Sound management of financial resources is important
• Managing people effectively is vital for success
• It's important to set one's business apart from competitors
• Maintaining a positive attitude is key to overcoming challenges

Ethics and Social Responsibility

• Ethics is a philosophical study of right/wrong, duty, obligation, and virtue
• Social responsibility involves an organization's response to society's needs
• Business ethics are moral values forming the foundation for an organization's decisions

Establishing an Ethical Framework

• First, identify your personal moral/ethical principles shaping business decisions
• Second, recognize ethical dimensions involved in the dilemma
• Third, identify key stakeholders and how the decision will affect them
• Fourth, generate alternative choices and distinguish ethical/unethical responses
• Fifth, choose and implement the best ethical response

Social Responsibility

• Companies must exceed doing well' to living up to their social responsibility via doing good'
• Surveys show that 55% of small business mission statements include references to achieving social goals
• Surveys also show 90% of small business owners give to charity and 70% donate both money and time to local causes

Environmental Responsibility

• Socially responsible business owners the three Rs:
• Reduce energy and materials used by the company
• Reuse what you can
• Recycle materials you dispose of

Responsibility to Employees

• Recognize the value of employees
• Listen to/respect opinions
• Ask for input/involve them in the decision-making process,
• Provide regular feedback: positive/negative
• Always tell them the truth,
• Let them know exactly what's expected of them,
• Reward them for performing well,
• Trust them and create an environment of respect/teamwork

Responsibility to Customers

• Businesses should build long-term customer relationships
• Abide by the Consumer Bill of Rights such as:
• Right to safety,
• Right to know,
• Right to be heard,
• Right to education,
• Right to choice

Responsibility to Investors

• Businesses must provide investors with an attractive ROI
• Meet ethical/social goals
• Accurately and promptly report financial performance to investors

Responsibility to the Community

• Businesses provide jobs/create wealth
• This contributes to the community in many ways such as:
• Acting as volunteers for community groups
• Participating in projects to support the elderly/poor
• Adopting a highway to promote a clean community
• Volunteering in school programs

Creativity and Innovation

• Creativity is the ability to develop new ideas and to discover new ways of looking at problems and opportunities; "thinking new things."
• Innovation is the ability to apply creative solutions to problems or opportunities to enhance or to enrich people’s lives "doing new things."

Barriers to Creativity

• Searching for the one "right" answer
• Focusing on "being logical"
• Blindly following the rules
• Constantly being practical
• Viewing play as frivolous
• Becoming overly specialized
• Avoiding ambiguity
• Fearing looking foolish
• Fearing mistakes and failure
• Believing that "I'm not creative"

The Creative Process

• Preparation: becoming prepared to exert effort
• Investigation: examine all avenues of new information
• Transformation: view similarities and differences among the information collected
• Incubation: allow ideas to circulate in the mind
• Illumination: new idea is discovered
• Verification: idea is tested
• Implementation: idea is developed into a practical application

Improving the Creative Process

• Brainstorming to generate potential solutions
• Mind-mapping as a whole-brain approach
• Force-field analysis which examines factors that support and hinder a solution
• Theory of Inventive Problem Solving (TRIZ) systematically applies inventive templates
• Rapid prototyping developing working models in a short time

Idea Assessment

• Idea assessment involves examining a specific market need
• Idea assessment involves developing a solution for the need
• Idea assessment determines the entrepreneur's ability to turn the idea into a business
• The key issues to consider include customers, the offering, value proposition, core competencies, and people

Feasibility Analysis

• Feasibility studies determine whether any proposed buisness idea has real potential to become a viable company by asking whether the company should proceed with the business idea
• Elements of the Feasibility Analysis include;
  • Industry and Market Feasibility
  • Product or Service Feasibility
  • Financial Feasibility
  • Entrepreneur/Team Feasibility

Industry and Market Feasibility Analysis

• Assess industry attractiveness by using six macro forces:
  • Sociocultural, Technological, Demographic, Economic, Political and legal, Global
• Use Porter's Five Forces Model, which analyzes the competitive forces within the company's direct environment

Product or Service Feasibility Analysis

• Product or Service Feasibility Analysis determines the degree to which an idea appeals to potential clients
• This also determines what resources are needed to actually to get a concept into production
• Two questions to consider:
  • Are customers willing to purchase our product or service?
  • Can we provide the product or service to customers at a profit?
• Primary research: Collecting data firsthand and analyzing it
• Secondary research: Collect previously compiled data and analyzing them

Primary Research Techniques

• Customer surveys and questionnaires provide insight,
• Focus groups
• Prototypes and in-home trials
• 'Windshield" research and trade Associations/Buiness directories,

Secondary Research Techniques

• Industry databases
• Demographic data
• Forecasts and Articles
• Local data and Internet

Financial Feasibility Analysis

• Capital requirements: Estimate start-up capital needed
• Estimated earnings: forecasted income statements
• Time out of cash: cash needed to stay afloat until income occurs
• Return on investment: how much investors expect

Entrepreneur Feasibility

• Analyze entrepreneur readiness (knowledge, experience, skills, etc.)
• Assess whether this will generate enough income

Business Modeling Process

• Businesses should engage in these phases: (1) Develop the Business Model Canvas (2) Test the Value Proposition with Customers (3) Test the Product with Prototype or Minimal Viable Product (4) Pivot Business Model Until Ready to Expand

Test the Value Proposition

• Ask Customer Do we really understand the customer problem and Can these customers spend money in our product

Business Prototyping

• Where Entrepreneurs test their business models on a small scale and Recognize that a business idea is a hypothesis that needs to be tested before taking it full scale

Pivots

• Making changes and adjustments to the business model depending on customer feedback
  • Product Pivot
  • Customer Pivot
  • Revenue Model Pivot

Business Plan Basics

• A business plan serves as a roadmap on various territory
• Essential functions of a Business Plan include
  • (1) Guiding the company by charting its future course and defining its strategy for following it
  • (2) Attracting lenders and investors who will provide needed capital
• Plans will need to pass three tests
  • (1) The Reality Test, if a market exist for your product
  • (2) The Competitive Test: company position in the competitive market
  • (3)The Value Test ensuring there is attractive rate of returns for lender and investors involved

Tips for a Good Business Plan

• Use an attractive cover
• Ensure there are no errors
• Make it visually appealing
• Make sure that it tells the truth
• Make it interesting and provide evidence that it will be profitable

The Pitch

• Key points for a good pitch include; the company its products, market problems it addresses, solutions to address these problems, Business Models and the company edge

Tips for Making the Pitch

• Demonstrate enthusiasm but avoid being overly emotional
• Practice your delivery
• Explain how your services benefit users, and provide supporting evidence
• Be upfront

###Key Elements of a Business Plan

• Title Page and TOC
• Executive Summary
• Mission and Vision Statement
• Description of Firm’s Product/Service
• Business and Industry Profile
• Competitor Analysis
• Marketing Strategy
• Mgt Resumes
• Plan of Operations
• Pro Forma
• Loan/Investment Proposal

Executive Summary

• Written elevator pitch provides:
• Context
• Benefit
• Target customers
• Point of differentiation
• Clincher ###Product /Service Description
• It is useful to describe the benefits customers will reap. In this context, feature’ refers to a descriptive fact about a product. While “benefit” is what customers stand to gain from that feature

Customer Analysis

• When doing a customer analysis, useful insights include?
• Who are the company’s key competitors?
• What are there strengths and weaknesses?
• What are their strategies?
• How successful are they?
• What's unique about our offerings?
• Can we develop a competitive edge through new strategies?

Marketing Strategy

Elements to show include, Customer interest, target market, prove need for product, document size and growth, and support growth facts

5 C's of Credit

• (1) Capital is important
• (2) Capacity to deliver
• (3) Collateral that will be needed
• (4) Character that will add worth to the company
• (5) Conditions

Types of Business Ownership

• Sole Proprietorship
• Partnership - General, LLP
• Corporation

Sole Proprietorships

• is a business that is owned by one person. It’s the most common as well as the easiest to form

Advantages and Disadvantages of Sole Proprietorships

Advantages

• Ease of start-up

Disadvantages

• Owner has unlimited liability.

Partnerships

• is a voluntary association of multiple persons with combined capital and expertise. Generally they are less common compared to Sole proprietorships

Types of Partners

• A general partner with shared control in everyday operations
• A limited partner with minimal control but also protection from liability

###Key Items in a Partnership Agreement

• Key items to formalize in a partnership include
• Who will make final decisions?

Hierarchy of Corporate Structure

• Typically shareholders have power over the hierarchy and can affect decisions and policy at the board level

Advantages and Disadvantages of Incorporating

Advantages

• Limited liability to only assets

Disadvantages

• Limited liability to only assets</