ENTR 238 Exam 1 Guide PDF

**The Revenue Model: An Entrepreneurship Framework** **1. Manufacturing (M)** - Take in raw materials and convert and/or add value. - Earn a margin by moving goods into the market through a distribution system (mostly owned by others, but not always). **2. Retail (R)** - Create an app...

**The Revenue Model: An Entrepreneurship Framework** **1. Manufacturing (M)** - Take in raw materials and convert and/or add value. - Earn a margin by moving goods into the market through a distribution system (mostly owned by others, but not always). **2. Retail (R)** - Create an appropriate space/environment. - Merchandise a collection of products (mostly made by others, but not always). - Earn a margin on items sold. **3. Dollars for Hours/Space/Access (DFH)** - Charge a fee per "unit." - Earn a margin on every "unit" sold. **4. Brokering (B)** - Earn a margin for making "connections" and/or facilitating transactions. - Usually (but not always) do not have to take title (ownership) or even possession of the items being bought and sold. **5. Leveraging Intellectual Property (LIP)** - Protect and sell/license your own intellectual property, OR - Acquire access to intellectual property owned by others to develop M/R/DFH/B. **6. Combination of Some or All of the Above** **Case Study Option 1:** Dollars for Hours\ **Case Study Option 2:** DFH + Brokering **Connecting Core Competencies, Competitive Advantages, and Meaningful Messaging** - **Core competencies**: Capabilities that make an organization valuable. - Must contribute to customer benefits across various markets and be hard to replicate. - Not product-specific. - **Competitive advantages**: Make offerings more attractive than competing options. - Tied to specific products or outputs. - **Compelling messaging**: Highlights competitive advantages derived from core competencies. **Flow of Value Creation:** Core Competencies → Competitive Advantages → Compelling Message **Lifestyle vs. Growth Businesses** **Lifestyle Businesses (Build to Keep)** - Small, family/partner-owned, slow growth. - No investor funding, long-term high income. - Examples: Retail, restaurants, lawyers, plumbers. - Owners control the business and can sell later. **Growth Companies (Build to Sell)** - Investor-funded, fast growth, high risk. - Aim to sell in 5-10 years for profit. - Examples: Software, medical devices, electronics. - Controlled by a Board of Directors. **Key Stats:** - 90% of startups are lifestyle businesses. - Less than 10% get angel/VC funding. - Some lifestyle businesses grow into large companies over time. **Top-Down vs. Bottom-Up Thinking** **Top-Down Approach (Big Market → Small Share)** - Starts with industry-wide data, then narrows down. - Example: *"If 1% of 45M laptop buyers buy our product, we sell 450K units."* - **Risk**: Overestimates demand without real customer validation. **Bottom-Up Approach (Small Base → Scales Up)** - Starts with real customer data and builds up. - Example: *"We identified 212 potential clients, 55 qualified, 3 already committed."* - More realistic, based on actual demand and early traction. **Three Types of Startup Markets (From *Four Steps to the Epiphany*)** 1. **Existing Markets (Better Product)** - Compete with known players. - Win by offering better performance or meeting unmet demand. 2. **New Markets (Innovative Product)** - No direct competitors; customers may not understand the product. - Enables something entirely new or drastically reduces costs. 3. **Re-segmented Markets (Refined Approach)** - **Low Cost:** "Good enough" at a lower price. - **Niche:** Premium solution for a specific audience. **Feasibility Influence Model** - Framework for feasibility studies. - Focuses on testing ideas within an entrepreneur's control. **Effective Messaging & Customer Development** **Common Top-Down Mistakes** - Generic slogans (*"Quality products, quality people!"*). - Focus on awareness instead of conversion. - Overloading with company name, features, and broad themes. **Key Messaging Principles** 1. **Structure Matters:** - **Headline** (Benefit-driven). - **Visual** (Eye-catching). - **Support Copy** (Call to action). - **Signature** (Logo). - **Contact Info** (Web, phone, location). 2. **Clarity & Presentation:** - Is the message meaningful? - Is it well-presented? **Improving with a Small Budget** - Use your own space first. - Partner with complementary businesses. - Leverage others' interests to expand reach. **Essential Questions** - **Who exactly is your customer?** (Not just broad demographics). - **How will you reach them?** (Beyond just \"social media\"). - **How will you measure success?** **How to Fail Productively?** - **Fail small, fast, and cheaply.** - Learn from failures **early on.** **Start Within Your Means** 1. **What you know** 2. **Who you know** 3. **Who you are** **Good Ideas Are Everywhere** - *Can we separate ideas into good and bad with enough research?* **FALSE** - Only **two types of ideas**: - **Tested ideas** - **Untested ideas** - No perfect "archetype" for entrepreneurs. **Fixed vs. Variable Costs in Early Ventures** - **Fixed Cost**: Incurred whether you sell or not. - **Variable Cost**: Only incurred when you sell something. **Effectual Entrepreneurship: Chapter Highlights** **Chapter 5 -- Plunge** - New businesses start by taking **action** (self-funding, selling to real customers). - *Delayed Life Plan* → "I'll start when I have time/money" → Often never happens! - **No perfect time to start** -- just begin with small steps. **Action Plan:** - Do one thing per week to move forward. - Consider max loss vs. minimum gain before taking the leap. **Opportunity Cost:** - Being a student = forgone income & time. - Starting a business = costs, but **not starting** means missing out on connections, experience, and learning. **Chapter 6 -- Entrepreneurs Are Not Predictors** - Entrepreneurs **shape** the future instead of predicting it. - **Uncertainty vs. Risk:** - **Risk** = Measurable. - **Uncertainty** = Unknown. - **Think risk first, then maximize potential returns.** - *The future belongs to those who create it, not those who try to predict it.* **Chapter 7 -- Where Ideas Come From** **1. Search & Select (Existing Need)** - A concept exists elsewhere but not here. - *Example:* Kids-only salon, bridal shop in Brookings. **2. Opportunity Making (Created Need)** - Entrepreneurs make opportunities through **curiosity and action.** - *Examples:* - *Kool Beans* -- Started roasting beans, built a coffee business. - *Blue Tide Car Wash, Cubby's Sports Bar* -- Used existing assets creatively. **3. Acting & Monetizing** - *Who will buy it? How will it make money?* - *Examples:* - *Daktronics* -- Wrestling scoreboard failed but led to new profitable products. - *Target* -- Invested in \"worst\" customers to turn them into loyal ones. **Chapter 8 -- Managing Uncertainty Through Control** - **What We Control:** Money, time, effort. - **What We Can't Control:** Economy, trends. - **Avoid Learned Helplessness** -- focus on what you can control. **Chapter 9 -- Leverage Contingencies & Partnerships** - **Turning Mistakes into Opportunities:** - *Jelly Belly → Belly Flops (misshapen jelly beans sold at a discount).* - **Partnerships Provide More Resources but...** - Don't over-rely on partners. - Maintain control & independence in decision-making.