Entrepreneurship Final Study Guide – Flashcards
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an innovator who recognizes and seizes upon opportunities; develops and executes strategies to capitalize on marketable ideas; and creates employment and wealth for themselves and their communities
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What is an entrepreneurial leader?
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1. technical: feasibility analysis of product or service 2. market: determination of market opportunities and risks 3. financial: analysis of financial feasibility and resources 4. organizational: analysis of financial organizational and personnel requirements 5. competitive: analysis of the competition
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What are the 5 key areas for assessing the feasibility of a new venture?
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significant savings, solves serious problem, offers convenience, integrates well, clear market I.D., market barriers, large and growing market, big upside and low downside
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What are the strong attributes of a concept?
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where is the value? to whom? for what? where? made by whom? marketed by whom? financed by whom?
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When defining the concept, what are the questions to ask yourself in the conceptual model?
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1. large and growing market 2. strong team 3. excellent financial returns 4. competitive advantage (IP)
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What are the four pillars of a new venture?
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core competencies, innovative capacity, management quality, proprietary technology, competitive protection, financial strength, effective strategies
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What are the strengths to look for when using the SWOT analysis?
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positive internal factors
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What is another name for strengths in the SWOT analysis?
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inadequate financial resources, inexperienced management, inadequate facilities, marketing/distribution problems, negative reputation, ineffective strategies
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What are the weaknesses to look for when using the SWOT analysis?
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untapped market potential, new product or geographic market, significant potential market growth, emerging technologies, deregulation, global market opportunities, increasing market fragmentation
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What are the opportunities to look for when using the SWOT analysis?
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new strong competitors, increased demands from customers, substitute product demand, business cycle shifts, slow market growth, changing customer preferences, adverse demographic shifts
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What are the threats to look for when using the SWOT analysis?
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negative internal factors
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What is another name for weaknesses in the SWOT analysis?
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positive external factors
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What is another name for opportunities in the SWOT analysis?
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negative external factors
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What is another name for threats in the SWOT analysis?
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1. Who are the customers? 2. What do the customers value? 3. How does our business make money? 4. What is the underlying economic logic of the venture?
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What are 4 questions that a business model should address?
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1. CUSTOMER SERVICE: who in your firm is emphasizing customer service? how can your new venture offer customer convenience? 2. PRICE: how does your price compare to others? 3. PRODUCTIVITY: how does your product/service improve or enhance the productivity and efficiency of your market? 4. SIMPLICITY: how does your product/service "solve" some of the basic needs of customers? 5. IMAGE: how do potential or current customers perceive the benefits of your business?
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When designing your firm's value solution, what 5 things should you consider and what should you ask yourself about these things?
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1. define success measures 2. make time to plan 3. seek input from team and mentors 4. analyze your business (SWOT analysis, core competencies, organizational structure, market and competition) 5. set goals and measure performance
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What are the 5 steps of the growth planning process?
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the systematic and objective process of gathering, coding and analyzing data for aid on making marketing decisions
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What is marketing research?
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1. who is the customer? 2. who are the players? (competitors and potential competitors) 3. how can the customer be reached?
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What questions should you answer when doing marketing research?
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the identification of distinct heterogeneous buying groups, and the development and implementation of marketing strategy to fit each group segment according to: type of buyer, geography, demographics, time of use, benefits sought, buyer attitudes
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What is marketing segmentation?
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1. demographics: age, gender, income 2, psychographics: innovative, risk-averse, etc. 3. user-term characteristics: heavy/passive users, level of usage
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What 3 things make up "the customer profile"?
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1. the user 2. the decision maker 3. the buyer 4. the influencer
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What are the 4 "Whos" of Marketing?
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who are they? where are they? what are their strengths and weaknesses? who are their customers? how do they advertise and promote? what is the basis of competition?
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What should you ask yourself when trying to know your competition?
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1. advertising 2. personal selling: prospecting, communicating, servicing, information collection and allocating 3. publicity: public relations 4. sales promotion: promotional mix
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What are 4 promotional activities that a company should be doing?
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profit= revenues-expenses
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What is the formula for profit?
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revenues= price x quantity
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What is the formula for revenues?
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1. introductory stage 2. growth stage 3. maturity stage 4. decline stage
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What are the 4 product life-cycle stages?
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skimming: deliberately setting a high price to maximize short-term profits
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What is the pricing strategy that should be used for a unique product in the introductory stage and what is it's definition?
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penetration: setting prices at such a low level that products are sold at a loss
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What is the pricing strategy that should be used for a non-unique product in the introductory stage and what is it's definition?
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consumer pricing: combining penetration and competitive pricing to gain market share; depends on consumer's perceived value of product
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What pricing strategy should be used for a product in the growth stage and what is it's definition?
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demand-oriented pricing: a flexible strategy that bases pricing decisions on the demand level for the product
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What pricing strategy should be used for a product in the maturity stage and what is it's definition?
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loss leader pricing: pricing the product below cost in an attempt to attract customers to other products
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What pricing strategy should be used for a product in the decline stage and what is it's definition?
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1. competitive price 2. high name recognition 3. superior customer service 4. performance of product 5. knowledge of staff and expertise
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When matching strategy, solutions, and market drivers, what are the 5 market demands you should consider?
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1. environmental analysis 2. internal firm analysis 3. competencies and weaknesses
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In the strategic planning approach, what are the steps of the analysis phase? (3)
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1. mission statement 2. strategic posture 3. goal setting 4. unit strategies 5. writing the plan 6. implement 7. assess and revise
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In the strategic planning approach, what are the steps of the action phase? (7)
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1. title 2. table of contents 3. executive summary 4. product/service section 5. management section 6. marketing section 7. financial section 8. appendix
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What are the 8 sections of the strategic business plan?
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two to three pages in length, clear and concise description of the business, identify unique features and proprietary rights of the product/service, provide an overview of the market potential, demonstrate strong management team, communicate financial potential
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What should the executive summary in the strategic business plan be like?
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company description- business model, business opportunity, purpose and unique features of the product or service, current state of development, proprietary rights, any government approvals/status, any liabilities product/service may pose, means of production, warranties, service activities associated with the product or service
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What should the company and product/service description in a strategic business plan be like?
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team- key personnel and responsibilities, legal structure and agreements, board of directors/advisors, outside consultants, ENTREPRENEUR MUST DEMONSTRATE A STRONG TEAM CAPABLE OF SUCCESSFULLY LEADING THE VENTURE
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What should the management section in a strategic business plan be like?
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current market size/growth potential, competition analysis, customer profile, target markets, distribution channels, market penetration, pricing
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What should the marketing plan in a strategic business plan be like?
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start-up costs, income statement projections, cash flow projections, balance sheet projections, sources and uses of funds, break-even analysis
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What should the financial plan in a strategic business plan be like?
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1. operations section: location, facilites, etc. 2. critical risks: potential obstacles, risks, etc. 3. harvest section: plan for exiting the business
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What could be other possible sections of a strategic business plan and what would they consist of?
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technical specifications/diagrams, resumes of key team members, examples of marketing data, contracts or other legal documents, financial projections (statements)
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What should the appendix of a strategic business plan look like?
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1. stop selling and start sharing 2. differentiate or die 3. solve problems people will pay for 4. leverage the evangelists 5. be visible 6. create extraordinary experiences 7. put passion above all else
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What are the 7 concepts of the failures and foibles common to strategic planning and implementation?
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do: listen to what your prospects and customers say with their words and body language don't: pull out a brochure or sales sheet unless they ask for it
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In the failures and foibles common to strategic planning and implementation model, what are the do's and dont's of the concept, stop selling and start sharing?
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do: talk to real customers and ask them for a report card don't: chase last week's/quarter's/year's trend
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In the failures and foibles common to strategic planning and implementation model, what are the do's and dont's of the concept, differentiate or die?
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do: test, tweak, and try again don't: ask your friends or family and call it "research"
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In the failures and foibles common to strategic planning and implementation model, what are the do's and dont's of the concept, solve problems people will pay for?
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do: make it easy for your evangelists to try your product or service don't: discount the negatives, there may be an important insight buried within
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In the failures and foibles common to strategic planning and implementation model, what are the do's and dont's of the concept, leverage the evangelists?
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do: put your mouth where your money is, too don't: hide in your office or behind your computer online
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In the failures and foibles common to strategic planning and implementation model, what are the do's and dont's of the concept, be visible?
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do: consistently reinforce your key messages in everything you do don't: forget that every employee, partner, and affiliate is an ambassador, too
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In the failures and foibles common to strategic planning and implementation model, what are the do's and dont's of the concept, create extraordinary experiences?
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do: work you love and believe is important don't: waste time, it's your most precious commodity
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In the failures and foibles common to strategic planning and implementation model, what are the do's and dont's of the concept, put passion above all else?
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1. target customers 2. the key need 3. name of your product/service 4. what do you in fact provide 5. competitive product and key benefit 6. competitive advantage
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What are the 6 parts of the elevator test?
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1. For... target customers 2. Who wants... the key need 3. The... name of your product/service 4. That... what do you in fact provide 5. Unlike...competitive product and key benefit 6. Our product...competitive advantage
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What are the 6 openers for the 6 parts of the elevator test
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opportunity description- setting the stage, illustrate how your product/service solves the customer's problem, details of the product/service, competitive overview, market entry and growth strategies, business/revenue model- how will you make money, team discussion, financials- how much you need, how you will use it, and how much could be made
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What should you consider when preparing to present a plan? (presenting the plan model)
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1. extract exceptional commitment an effort from organizational stakeholders 2. convince them that they can accomplish goals 3. articulate a compelling organizational vision 4. promise that their effort will lead to extraordinary outcomes 5. persevere in the face of environmental change
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What are 5 things that entrepreneurial leaders should be doing?
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1. feedback 2. increased skill set 3. higher social level of support 4. moral support 5. capacity for innovation 6. extended network
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What are the advantages of a start-up team? (6)
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create a staffing plan, hire people to fill positions from your personal network (friends, family), your advisors' network, and your extended network (professors, alums)
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How should someone build a powerful team?
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1. hire the person, not the position 2. avoid the killer of innovative thinking: the attitude that "I already know all there is to know about this company, because I (or we) started it." 3. hire people smarter than you 4. provide clear expectations to the management team and to employees 5. build the kind of company for which you would like to work
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What are 5 things to keep in mind when hiring team members and employees?
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1. preach what you practice, practice what you preach, communicate the vision, goals, and values of the organization 2. partners must win also, enable your vendors and partners to participate in win-win venture 3. be selective in hiring, select people with values consistent with the firm's, membership on the team is selective 4. use teams of talented people, use small teams for most tasks and give them the power to decide, provide simple rules for decision making so teams can act 5. provide solid compensation, benefits, and ownership 6. listen hard, talk straight, use honest two-way communication and build trust
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What are the principle for retaining loyal people and partners? (7)
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it is important to me that as a team we.... in difficult times, I value... I think it is important that we all agree to... one thing I am frustrated by about my team is... In team meetings, I think it is important that we...
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What are some things to say if you are trying to create a collaborative team environment?
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outside investors, lawyers, accountants, board of advisors, board of directors, outside investors
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What are the external team members that work alongside a virtual team?
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1. recruit advisors for short-term objectives 2. advisors can help establish credibility 3. look for advisors in unusual places 4. a free lunch is often a better motivator than equity 5. don't treat advisors like employees or suppliers 6. set term limits
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What are the six tips for finding the best advisors for your business?
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1. Access: Board members can supply networking and contacts to attract capital investment and to recruit employees and other members of the management team. 2. Credibility: Outsiders will assume that the new venture has experienced assistance and that it is worth considering. This will be helpful when trying to attract capital and management talent. 3. Mentoring: An effective Board provides the entrepreneur with mentoring and guidance through prosperous and difficult times. Ideally, the Board should always include at least one member whom the entrepreneur trusts and with whom he or she connects on a personal level.
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What are the 3 benefits of boards and describe them
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Is a mentor and trusted confidant? Has built a management team? Has attracted equity investors and debt financing? Has created revenue and achieved positive cash flow?Has developed strategic partnerships? Is knowledgeable about your industry? Is experienced in the key operational challenges the venture will face in the next year or two? Has recent, successful experience in specific corporate functions and industries? Complements, rather than duplicates, the strengths of the current management?
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What should you consider when choosing board members?
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1. family pressure 2. burn-out 3. interpersonal conflicts
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What 3 things should an entrepreneur be prepared to deal with?
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1.What type of business are you in? 2.Where do you want to locate the business? 3.What, where, and how big is your market? 4.What round of financing are you seeking? 5.How much money do you need? 6.What do you need the money for? 7.How quickly do you need the money? 8.Are you looking for debt or equity capital?
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What are some questions an entrepreneur needs to consider when beginning a business?
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1. what is the financing need? 2. equity or debt financing?
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What are the 2 parts of selecting the right capital source?
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working capital, fixed assets, equipment, acquisitions
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When selecting the right capital source, and assessing the financial need, what types of things should you be looking at?
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high potential returns: growth, niche market, good managment
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When selecting the right capital source, and assessing equity, what should you be looking at?
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low risk, good cash flow, low leverage, good management
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When selecting the right capital source, and assessing debt, what should you be looking at?
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VC or Angel
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If you have a start up or high growth company, what kind of capital source should you consider?
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investor group, VC, private placement, Angels
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If you have a rapid growth company, what kind of capital source should you consider?
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public offering, private placement
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If you have an established company, what kind of capital source should you consider?
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1. fastest decision- receive funds quickly 2. lower cost than equity financing 3. no loss (dilution) in ownership
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What are the 3 advantages of debt financing?
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1. personal guarantee 2. required scheduled repayment- principle and interest 3. increases leverage
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What are the 3 disadvantages of debt financing?
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1. source of capital 2. increases company's net worth, borrowing capacity, and overall financial strength 3. enhance credibility 4. no scheduled repayment 5. no personal liability 6. additional help available
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What are the 6 advantages of equity financing?
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1. dilutes ownership 2. more expensive than debt 3. cannot reverse the transaction 4. give up control/flexibility 5. difficult to find investors
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What are the 5 disadvantages of equity financing?
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1. sweat equity 2. personal savings 3. home equity 4. friends and family
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What are the 4 personal sources of equity?
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"free" time you devote to your venture- ideas, commitment, energy and human capital devoted to the venture
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What is the personal source of equity, sweat equity?
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money saved through work or business investments
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What is the personal source of equity, personal savings?
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refinancing your home or seeking home equity loan
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What is the personal source of equity, home equity?
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1. loan: advantages may include no collateral, quick decision, and below market interest rate 2. gift: parents could provide you with 20,000 dollars per year and avoid gift tax 3. equity: benefits might include quick money and below market valuation
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What is are the 3 types of the personal equity, friends and family? explain them
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can be a quick and easy source of capital- but could also be problematic if the business fails
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What is the advantage and the disadvantage of getting personal capital from family or friends?
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1. receiving financing (factoring) 2. inventory financing 3. equipment financing 4. cash flow management
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What are the four parts of balancing sheet financing?
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1. character: your credit history and character 2. capacity: ability to repay loan (cash flow) 3. collateral: assets pledged to secure the loan 4. capital: amount you need and your net worth 5. contribution: your skin in the game
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What are the 5 C's of Credit and what are they?
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1. short term loans 2. lines of credit 3. intermediate loans 4. long-term loans
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What are the 4 types of commercial loans?
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short, immediate needs
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What are the commercial loans, short-term loans used for?
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seasonal financing
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What are the commercial loans, lines of credit used for?
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3-7 years for purchase of assets
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What are the commercial loans, intermediate loans used for?
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real estate and buildings
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What are the commercial loans, long-term loans used for?
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The SBA's primary lending program, it is open to start-up and existing businesses, it is delivered through commercial lenders (not the gov), applicant businesses must operate for profit, be engaged in or propose to do business in the US, have reasonable owner equity to invest, and use alternative financial resources first including personal assets
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What is the 7(a) Program?
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5 million max, guarantee is 3.75 million
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What is the maximum loan amount in the 7(a) Program?
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maturities of 10 years fir working capital and up to 25 years for real estate equiptment
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What are the maturities for 1. working capital and 2. real estate and equipment in the 7(a) Program?
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interest rates negotiated between the lender and the entrepreneur- subject to SBA maximums
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What are the interest rates on loans in the 7(a) Program?
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agency may guarantee up to 85 percent of loans of 150,000 dollars or less, agency may guarantee up to 75 percent of loans above 150,000 dollars, loan guarantee fees range from 2 to 3.75 percent of guarantee amount
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How do guaruntees work in the 7(a) Program?
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SBIR is a highly competitive program that encourages small business to explore their technological potential and provides the incentive to profit from its commercialization. By including qualified small businesses in the nation's R&D arena, high-tech innovation is stimulated and the United States gains entrepreneurial spirit as it meets its specific research and development needs
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What is the small business innovation research program (SBIR)?
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1. Phase 1 is the startup phase. Awards of up to $150,000 for approximately 6 months support exploration of the technical merit or feasibility of an idea or technology. 2. Phase 2 awards of up to $1,000,000, for as many as 2 years, expand Phase I results. During this time, the R&D work is performed and the developer evaluates commercialization potential. Only Phase I award winners are considered for Phase 2. 3. Phase 3 is the period during which Phase 2 innovation moves from the laboratory into the marketplace. No SBIR funds support this phase. The small business must find funding in the private sector or other non-SBIR federal agency funding.
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What are the 3 phases of the SBIR program?
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STTR is an important small business program that expands funding opportunities in the federal innovation research and development arena. Central to the program is expansion of the public/private sector partnership to include the joint venture opportunities for small business and the nation's premier nonprofit research institutions. STTR's most important role is to foster the innovation necessary to meet the nation's scientific and technological challenges in the 21st century.
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What is the small business technology transfer program (STTR)?
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1. Phase 1 is the startup phase. Awards of up to $100,000 for approximately one year fund the exploration of the scientific, technical, and commercial feasibility of an idea or technology. 2. Phase 2 awards of up to $750,000, for as long as two years, expand Phase 1 results. During this period, the R&D work is performed and the developer begins to consider commercial potential. Only Phase 1 award winners are considered for Phase 2. 3. Phase 3 is the period during which Phase 2 innovation moves from the laboratory into the marketplace. No STTR funds support this phase. The small business must find funding in the private sector or other non-STTR federal agency funding.
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What are the 3 phases of the small business technology transfer program (STTR)?
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1. Does the investor have experience in this market? 2. What size of investment does the angel typically seek? 3. What is the angel's motivation to invest? 4. How long does the investor's due diligence process take? 5. Does the investor have a preferred deal structure? 6. Is the investor willing to co-invest with others?
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What are the 6 key questions for angel investors?
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exciting and fun, proprietary advantage/unique technology, cost advantage, understandable- not too complex, not an invention- plan for profit, strong management team, affordable investment, geographically close (driving rule), incremental investing opportunities, clear exit strategy
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What is the criteria for angel investors?
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finance new and rapidly growing technology-based companies; purchase equity securities; add value through serving on boards, contacts, and future fundraising; take higher risks and expect higher rewards; have a longer term orientation, 3 to 7 years
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What is the overview of venture capital?
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1. goals and objectives 2. INTELLECTUAL PROPERTY 3. name/registration 4. location 5. FORM OF OWNERSHIP 6. financing/banking options 7. INSURANCE 8. inventory 9. equipment 10. EMPLOYEES/TEAM 11. advertising
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what are the initial steps to build a business?
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1. Investors are loath to put money into a venture that cannot establish a unique product niche. 2. Stockholders will challenge a corporation's investment of its resources in a program that can be easily copied once it is introduced to the market. 3. All the time, effort, and money people invest in perfecting a product, as well as advertising and promoting it, may be wasted if imitators can enter the market easily. 4. Moreover, the imitators can cut prices, because they have not incurred the startup expenses the company had to endure to bring the idea from conception to a mass-producible, reliable, and appealing product or service.
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What are the 4 basics of intellectual property?
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1. licensing vs. selling IP 2. defining the property being licensed 3. assigning value to a license 4. royalty rates 5. milestone payments 6. negotiating license agreements 7. sub-licensing
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What are some things to consider when it comes to licensing and technology transfer? (7)
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1. sole proprietorship 2. partnership 3. corporation 4. limited partnership 5. limited liability partnership
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What are the 5 legal forms of business?
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owner has complete control
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Who has control in a sole proprietorship?
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unlimited personal liability
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What kind of liability does a sole proprietorship have?
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not a separate taxable entity
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What kind of taxation does a sole proprietorship have?
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coporation, limited partnership, limited liability company
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What 3 types of businesses have additional administrative obligations?
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sole proprietorships and partnerships
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what 2 types of businesses do not have additional administrative obligations and only have the obligations that are applicable to all businesses?
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partners share control
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What type of control is there in a partnership?
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joint and several unlimited personal liability
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What type of liability does a partnership have?
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not a separate taxable entity
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What type of taxation does a partnership have?
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control is distributed among shareholders, directors, and officers
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What type of control is there in a corporation?
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limited personal liability
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What type of liability does a corporation have?
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separate taxable entity unless subchapter S selection
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What type of taxation does a corporation have?
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general partners control, limited partners do not
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What type of control does a limited partnership have?
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general partners: joint and several unlimited personal liability, limited partners: limited liability
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What type of liability does a limited partnership have?
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not a separate entity unless affirmatively chosen
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What type of taxation does a limited partnership have?
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members share control or appoint managers
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What type of control does a limited liability company have?
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limited personal liability
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What type of liability does a limited liability company have?
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not a separate entity unless affirmatively chosen
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What type of taxation does a limited liability company have?
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1. negotiating employment terms 2. distribution of company profits 3. redemption provisions 4. disposition of equity interests
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When making stockholder and operating agreements, what kind of agreements will you have to make? (4)
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property, liability, key person life, business interruption, group life- disability and health insurance for employees
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What are the 5 parts of the insurance pyramid? from the top
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sell, maintain, grow
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In the post-start up option model, what are the options for venture?
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stay with company, start another venture, seek other employment, become a manager, exit day-to-day management, BECOME AN ENTREPRENEURIAL LEADER, take alternate position in the firm, exit day-to-day management
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In the post-start up model, what are the options for the founder?
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1. accounts receivables and collections policies 2. an inventory management system 3. account payables policies 4. assessment of performance and expenditures 5. metrics to track trends in cash, receivables, inventory, payables, expenditures and performance
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What are the components of a control system? (5)
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locates new ideas, starts a business, opportunity driven, establishes and implements a vision, builds an organization around the opportunity, leads and inspires others, orchestrates change in the competitive environment
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What are some qualities of an entrepreneur?
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maintains current operations, implements the business, resource driven, plans, organizes, staffs, controls, enhances efficiency of organization, supervises and monitors others, maintains consistency and predictability
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What are some qualities of a manager?
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leverages core business while exploring new opportunities, starts businesses within an ongoing organization, capability and opportunity driven, leverages capabilities and builds new ones to expand opportunity domain, establishes a vision and empowers others to carry it out, maintains entrepreneurial ability as organization grows, ensures culture and structure, systems are conductive to entrepreneurship, removes barriers, develops and guides entrepreneurial individuals, bridges between individuals and groups with diverse expertise and orientation, orchestrates change in both the organizational and competitive environment
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What are some qualities of an entrepreneurial leader?
