Entrepreneurship Final Study Guide

What is an entrepreneurial leader?
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
What are the 5 key areas for assessing the feasibility of a new venture?
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
What are the strong attributes of a concept?
significant savings, solves serious problem, offers convenience, integrates well, clear market I.D., market barriers, large and growing market, big upside and low downside
When defining the concept, what are the questions to ask yourself in the conceptual model?
where is the value? to whom? for what? where? made by whom? marketed by whom? financed by whom?
What are the four pillars of a new venture?
1. large and growing market 2. strong team 3. excellent financial returns 4. competitive advantage (IP)
What are the strengths to look for when using the SWOT analysis?
core competencies, innovative capacity, management quality, proprietary technology, competitive protection, financial strength, effective strategies
What is another name for strengths in the SWOT analysis?
positive internal factors
What are the weaknesses to look for when using the SWOT analysis?
inadequate financial resources, inexperienced management, inadequate facilities, marketing/distribution problems, negative reputation, ineffective strategies
What are the opportunities to look for when using the SWOT analysis?
untapped market potential, new product or geographic market, significant potential market growth, emerging technologies, deregulation, global market opportunities, increasing market fragmentation
What are the threats to look for when using the SWOT analysis?
new strong competitors, increased demands from customers, substitute product demand, business cycle shifts, slow market growth, changing customer preferences, adverse demographic shifts
What is another name for weaknesses in the SWOT analysis?
negative internal factors
What is another name for opportunities in the SWOT analysis?
positive external factors
What is another name for threats in the SWOT analysis?
negative external factors
What are 4 questions that a business model should address?
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?
When designing your firm’s value solution, what 5 things should you consider and what should you ask yourself about these things?
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?
What are the 5 steps of the growth planning process?
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
What is marketing research?
the systematic and objective process of gathering, coding and analyzing data for aid on making marketing decisions
What questions should you answer when doing marketing research?
1. who is the customer? 2. who are the players? (competitors and potential competitors) 3. how can the customer be reached?
What is marketing segmentation?
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
What 3 things make up “the customer profile”?
1. demographics: age, gender, income
2, psychographics: innovative, risk-averse, etc.
3. user-term characteristics: heavy/passive users, level of usage
What are the 4 “Whos” of Marketing?
1. the user 2. the decision maker 3. the buyer 4. the influencer
What should you ask yourself when trying to know your competition?
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?
What are 4 promotional activities that a company should be doing?
1. advertising 2. personal selling: prospecting, communicating, servicing, information collection and allocating 3. publicity: public relations 4. sales promotion: promotional mix
What is the formula for profit?
profit= revenues-expenses
What is the formula for revenues?
revenues= price x quantity
What are the 4 product life-cycle stages?
1. introductory stage 2. growth stage 3. maturity stage 4. decline stage
What is the pricing strategy that should be used for a unique product in the introductory stage and what is it’s definition?
skimming: deliberately setting a high price to maximize short-term profits
What is the pricing strategy that should be used for a non-unique product in the introductory stage and what is it’s definition?
penetration: setting prices at such a low level that products are sold at a loss
What pricing strategy should be used for a product in the growth stage and what is it’s definition?
consumer pricing: combining penetration and competitive pricing to gain market share; depends on consumer’s perceived value of product
What pricing strategy should be used for a product in the maturity stage and what is it’s definition?
demand-oriented pricing: a flexible strategy that bases pricing decisions on the demand level for the product
What pricing strategy should be used for a product in the decline stage and what is it’s definition?
loss leader pricing: pricing the product below cost in an attempt to attract customers to other products
When matching strategy, solutions, and market drivers, what are the 5 market demands you should consider?
1. competitive price 2. high name recognition 3. superior customer service 4. performance of product 5. knowledge of staff and expertise
In the strategic planning approach, what are the steps of the analysis phase? (3)
1. environmental analysis 2. internal firm analysis 3. competencies and weaknesses
In the strategic planning approach, what are the steps of the action phase? (7)
1. mission statement 2. strategic posture 3. goal setting 4. unit strategies 5. writing the plan 6. implement 7. assess and revise
What are the 8 sections of the strategic business plan?
1. title 2. table of contents 3. executive summary 4. product/service section 5. management section 6. marketing section 7. financial section 8. appendix
What should the executive summary in the strategic business plan be like?
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
What should the company and product/service description in a strategic business plan be like?
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
What should the management section in a strategic business plan be like?
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
What should the marketing plan in a strategic business plan be like?
current market size/growth potential, competition analysis, customer profile, target markets, distribution channels, market penetration, pricing
What should the financial plan in a strategic business plan be like?
start-up costs, income statement projections, cash flow projections, balance sheet projections, sources and uses of funds, break-even analysis
What could be other possible sections of a strategic business plan and what would they consist of?
1. operations section: location, facilites, etc.
2. critical risks: potential obstacles, risks, etc.
3. harvest section: plan for exiting the business
What should the appendix of a strategic business plan look like?
technical specifications/diagrams, resumes of key team members, examples of marketing data, contracts or other legal documents, financial projections (statements)
What are the 7 concepts of the failures and foibles common to strategic planning and implementation?
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
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?
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
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?
do: talk to real customers and ask them for a report card
don’t: chase last week’s/quarter’s/year’s trend
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?
do: test, tweak, and try again
don’t: ask your friends or family and call it “research”
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?
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
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?
do: put your mouth where your money is, too
don’t: hide in your office or behind your computer online
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?
do: consistently reinforce your key messages in everything you do
don’t: forget that every employee, partner, and affiliate is an ambassador, too
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?
do: work you love and believe is important
don’t: waste time, it’s your most precious commodity
What are the 6 parts of the elevator test?
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
What are the 6 openers for the 6 parts of the elevator test
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
What should you consider when preparing to present a plan? (presenting the plan model)
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
What are 5 things that entrepreneurial leaders should be doing?
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
What are the advantages of a start-up team? (6)
1. feedback 2. increased skill set 3. higher social level of support 4. moral support 5. capacity for innovation 6. extended network
How should someone build a powerful team?
create a staffing plan, hire people to fill positions from your personal network (friends, family), your advisors’ network, and your extended network (professors, alums)
What are 5 things to keep in mind when hiring team members and employees?
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
What are the principle for retaining loyal people and partners? (7)
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
What are some things to say if you are trying to create a collaborative team environment?
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…
What are the external team members that work alongside a virtual team?
outside investors, lawyers, accountants, board of advisors, board of directors, outside investors
What are the six tips for finding the best advisors for your business?
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
What are the 3 benefits of boards and describe them
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.
What should you consider when choosing board members?
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?
What 3 things should an entrepreneur be prepared to deal with?
1. family pressure 2. burn-out 3. interpersonal conflicts
What are some questions an entrepreneur needs to consider when beginning a business?
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?
What are the 2 parts of selecting the right capital source?
1. what is the financing need?
2. equity or debt financing?
When selecting the right capital source, and assessing the financial need, what types of things should you be looking at?
working capital, fixed assets, equipment, acquisitions
When selecting the right capital source, and assessing equity, what should you be looking at?
high potential returns: growth, niche market, good managment
When selecting the right capital source, and assessing debt, what should you be looking at?
low risk, good cash flow, low leverage, good management
If you have a start up or high growth company, what kind of capital source should you consider?
VC or Angel
If you have a rapid growth company, what kind of capital source should you consider?
investor group, VC, private placement, Angels
If you have an established company, what kind of capital source should you consider?
public offering, private placement
What are the 3 advantages of debt financing?
1. fastest decision- receive funds quickly
2. lower cost than equity financing
3. no loss (dilution) in ownership
What are the 3 disadvantages of debt financing?
1. personal guarantee
2. required scheduled repayment- principle and interest
3. increases leverage
What are the 6 advantages of equity financing?
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
What are the 5 disadvantages of equity financing?
1. dilutes ownership 2. more expensive than debt 3. cannot reverse the transaction 4. give up control/flexibility 5. difficult to find investors
What are the 4 personal sources of equity?
1. sweat equity 2. personal savings 3. home equity 4. friends and family
What is the personal source of equity, sweat equity?
“free” time you devote to your venture- ideas, commitment, energy and human capital devoted to the venture
What is the personal source of equity, personal savings?
money saved through work or business investments
What is the personal source of equity, home equity?
refinancing your home or seeking home equity loan
What is are the 3 types of the personal equity, friends and family? explain them
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
What is the advantage and the disadvantage of getting personal capital from family or friends?
can be a quick and easy source of capital- but could also be problematic if the business fails
What are the four parts of balancing sheet financing?
1. receiving financing (factoring) 2. inventory financing 3. equipment financing 4. cash flow management
What are the 5 C’s of Credit and what are they?
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
What are the 4 types of commercial loans?
1. short term loans 2. lines of credit 3. intermediate loans 4. long-term loans
What are the commercial loans, short-term loans used for?
short, immediate needs
What are the commercial loans, lines of credit used for?
seasonal financing
What are the commercial loans, intermediate loans used for?
3-7 years for purchase of assets
What are the commercial loans, long-term loans used for?
real estate and buildings
What is the 7(a) Program?
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
What is the maximum loan amount in the 7(a) Program?
5 million max, guarantee is 3.75 million
What are the maturities for 1. working capital and 2. real estate and equipment in the 7(a) Program?
maturities of 10 years fir working capital and up to 25 years for real estate equiptment
What are the interest rates on loans in the 7(a) Program?
interest rates negotiated between the lender and the entrepreneur- subject to SBA maximums
How do guaruntees work in the 7(a) Program?
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
What is the small business innovation research program (SBIR)?
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
What are the 3 phases of the SBIR program?
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.
What is the small business technology transfer program (STTR)?
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.
What are the 3 phases of the small business technology transfer program (STTR)?
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.
What are the 6 key questions for angel investors?
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?
What is the criteria for angel investors?
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
What is the overview of venture capital?
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
what are the initial steps to build a business?
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
What are the 4 basics of intellectual property?
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.
What are some things to consider when it comes to licensing and technology transfer? (7)
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
What are the 5 legal forms of business?
1. sole proprietorship 2. partnership 3. corporation 4. limited partnership 5. limited liability partnership
Who has control in a sole proprietorship?
owner has complete control
What kind of liability does a sole proprietorship have?
unlimited personal liability
What kind of taxation does a sole proprietorship have?
not a separate taxable entity
What 3 types of businesses have additional administrative obligations?
coporation, limited partnership, limited liability company
what 2 types of businesses do not have additional administrative obligations and only have the obligations that are applicable to all businesses?
sole proprietorships and partnerships
What type of control is there in a partnership?
partners share control
What type of liability does a partnership have?
joint and several unlimited personal liability
What type of taxation does a partnership have?
not a separate taxable entity
What type of control is there in a corporation?
control is distributed among shareholders, directors, and officers
What type of liability does a corporation have?
limited personal liability
What type of taxation does a corporation have?
separate taxable entity unless subchapter S selection
What type of control does a limited partnership have?
general partners control, limited partners do not
What type of liability does a limited partnership have?
general partners: joint and several unlimited personal liability, limited partners: limited liability
What type of taxation does a limited partnership have?
not a separate entity unless affirmatively chosen
What type of control does a limited liability company have?
members share control or appoint managers
What type of liability does a limited liability company have?
limited personal liability
What type of taxation does a limited liability company have?
not a separate entity unless affirmatively chosen
When making stockholder and operating agreements, what kind of agreements will you have to make? (4)
1. negotiating employment terms 2. distribution of company profits 3. redemption provisions 4. disposition of equity interests
What are the 5 parts of the insurance pyramid? from the top
property, liability, key person life, business interruption, group life- disability and health insurance for employees
In the post-start up option model, what are the options for venture?
sell, maintain, grow
In the post-start up model, what are the options for the founder?
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
What are the components of a control system? (5)
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
What are some qualities of an entrepreneur?
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
What are some qualities of a manager?
maintains current operations, implements the business, resource driven, plans, organizes, staffs, controls, enhances efficiency of organization, supervises and monitors others, maintains consistency and predictability
What are some qualities of an entrepreneurial leader?
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