Entrepreneurship

Lecture # 1,2,3:
Entrepreneur is a person who undertakes the risk of starting a new venture.
What is entrepreneurship?
The word “entrepreneur” drives from the French word “entre” meaning
between and “prendre” meaning to take, the word was originally used to
describe people who “take on the risk” between buyers & sellers ow who
undertakes a task suck as starting a new venture.
Academic definition:
It is the process by which individuals pursue opportunity without regard to
resources they currently control.
Venture capitalist:
It is the art of turning an idea into business.
 Entrepreneurs assemble and then integrate all the resources needed.
The money, the people, the business model, the strategy, needed to
transfer an invention or an idea into a visible venture.
Corporate Entrepreneurship
All firms fall along a conceptual continuum that ranges from highly
conservative to highly entrepreneurial.
The position of firm on this continuum is referred as its entrepreneurial-
intensity.
Entrepreneurial firms Conservative firms
 Proactive  Take more wait & see posture
 Innovative  Less innovative
 Risk taking  Risk adverse
 Why do people become entrepreneur?

1) Desire to be their own boss:

This doesn’t mean entrepreneurs are difficult to work with or that they have
trouble accepting the authority.
 Many entrepreneurs want to be their own because either they have had
a long-time ambition to own their firm,
 Because they have become frustrated working in traditional ways.

2) Pursue their own idea:

People have vision & tendency to see opportunities for new product and
services that are not offering by any company as of now & people want those
ideas to make it happen. Sometimes it happens that a person face problem in
everyday life that needs to be solved or fixed like it could be better.
3) Financial Rewards:
This is the secondary reason. People want to start their own firm to pursue
financial rewards. Earning profit & increasing the value of a company in the
market is a solid goal but money is rarely a primary motivation behind the
lunch of an entrepreneur firm that is why it is secondary to the first two
reasons.
Characteristics of a successful Entrepreneur
Passion for Business:
The number one characteristic shared by successful entrepreneur is “passion
for business”.
This passion typically stems from the entrepreneur’s belief that the business
will positively influence people’s lives.
 Do what you have passionate about. In the startup world if you are
bored. You might as well be dead. (Chris Sha, protechMy Photos)
 The key is to have passion & never give up. This is imperative because
it creates a drive to solve business problem.

Product & customer need:

An entrepreneur’s keen focus on products & customer typically stems from the
fact that most entrepreneurs are, at heart craftspeople.
 The computer is the most remarkable tool we are ever built, but the
most important thing is to get them in the hands as many people as
possible.
Tenacity Despite Failure:
Because entrepreneurs are typically trying something new, thei8r failure
rate is high. The limit test for entrepreneurs is their ability to preserve
through setbacks & failures.
Execution Intelligence:
The ability to fashion a solid business idea into a visible business is key
characteristics of successful entrepreneurs. It is the factor that determine
whether a startup is successful or fails. Execution means developing a
business model, putting together a new venture team, raising money,
establishing partnership, managing finances, leading and motivating
employees.
Common myths about entrepreneurs
Entrepreneurs are born not made:
 It is based on the mistaken belief that some people are genetically
predisposed to be entrepreneurs.
  The consensus of many studies is that no one is “born” to be an
entrepreneur, everyone has the ability to become / potential to
become one.
 Whether someone does or does not become an entrepreneur is a
function of environment, life experiences and personal choices.
Entrepreneurs are Gamblers:
 They are moderate risk takers.
 Their risk is calculated.
 They typically have jobs that are less structured & so they faced a
more uncertain set of possibilities than people in traditional jobs.
 Many entrepreneurs have strong need to achieve & set
challenging goals, a behavior that is often equated with risk
taking.

Entrepreneurs are motivated primarily by money:

 It is naïve to think that entrepreneurs don’t seek financial rewards
money is rarely a reason an entrepreneur started new firms.
 In fact, some entrepreneurs warn that pursuit of money can be
distracting.
Entrepreneurs should be young and energetic:
 Most active age of business ownership is “35 to 45” years old.
 It is important to be energetic, investors often cite the strength of the
entrepreneurs as their most important criteria in making decisions.
 what makes an entrepreneur strong in the eyes of an investors is
experience, maturity, reputation, track record of success.
Characteristics of Entrepreneurs
 achievement motivated
 creative
 visionary
  optimism
 assembler
 tolerate of ambiguity
 decisive
 energetic
 strong work ethic
 risk taker
 networker
 alert to opportunities
 persuasive
 promoter
 self-confident
 self-starter

Types of startup Firms

Salary substitute firms:
Firms that are basically provide their owner or owners similar level of income
to what they would be able to earn in a conventional job.
Lifestyle Firms:
Firms that provide their owner or owners the opportunity to pursue a
particular lifestyle & make a living at it.

Entrepreneurial Firms:
Firms that bring new products & services to the market by creating & seizing
opportunities regardless of the resources they currently control.
Changing Demographics of Entrepreneurs:
Women entrepreneurs:
According to study commissioned by AMERICAN EXPRESS OPEN there were 8.6
million women-owned business in the US 2013 generating over $1.3 trillion in
revenue & employing nearly 7.8 million people. In addition, between 1997
&2013the number of women-owned business increased at a rate of one and a
half times the national average.
  Musarrat Misbah, warda
Minority Entrepreneur:
 MBDA: minority Business Development Authority.
 2007: 5.8 million (36% of US population)
 2007: 1.9 million African-American
Senior Entrepreneur:
According to KAUFFORN Foundation & legal zoom study;
 2012, 20% of new business were started by people between 50 & 59 y/o,
12.5% older than 60 y/o.
Young Entrepreneurs:
 More energy levels.
 According to GALLOP study 7/10 high school students want to start their
own business.
 Girls 46%, Boys 40%
 Over 2000 two year and four-year colleges & universities offer
entrepreneurship courses.
Economic Impact
 Innovation:
 Creating something new.
 Small firms are twice as innovative
 Job creation
 Impact on society:
 Dramatic effect on society make our lives easier enhance productivity,
improve health.
 Impact on large firms.
Process:
1. Decide to become entrepreneur.
2. Developing successful idea
3. Moving from an idea to entrepreneurial firms
4. Managing & growing the entrepreneurial firms.
5. Exiting the venture
Lecture # 4,5,6
Chapter #2:
Recognizing the Opportunities & generating ideas
An opportunity is set if favorable circumstances that creates a need for a new
product, service or business.
Essential Qualities of opportunity:
 Attractive
 Timeliness
 Durable
 Anchored in product, service business that creates or adds value for
its buyer.
Something imagined or pictured in mind is called idea.
An idea may or may not meet the criteria of an opportunity. This is critical
point because many businesses fail not because the entrepreneurs that started
them didn’t work hard but because there was no real opportunity to begin
with.
 What needs are you fulfilling or what problems are you solving?
 Who are you selling to?
 How will you make money?
 Unique idea
 Competitors
 Worth, how much you invest?
 Cost to get started
 Investors
With this short checklist, you can already realize if your idea is really an
opportunity.
RAMP:
 R: return in terms of return on investment. You must be sure that your
idea can be profitable. How long this would take, how much money you
need.
  A: Advantage, you must see if you have competitors, if yes, what can you
do better. How to manage the intellectual property of your idea.
 M: market, target market, is there real need for your product or service.
 P: Potential, identify balance between risk & reward. You should also
asses whether the timing is right for your idea.

Identify an Opportunity
Observing trends
The most important trends to follow are ECONOMIC, SOCIAL &
TECHNOLOGICAL trends.
A good entrepreneur keeps him proactive for opportunity. He innovates things
by seeing problem.
 Smart phones, sticky notes, food panda
Economic Trend:
Understanding economic trends help to determine areas that are ripe for new
businesses as well as areas to avoid. When the economy is strong, buying
power increases. Entrepreneur sees total disposable income of people after
paying taxes.
Social Trend:
The reason that a product or service exists has more to do with satisfying a
social need than the more transparent need the product fills.
 The proliferation of fast-food restaurants.
It isn’t primarily because of people’s love for fast-food but rather because
people are busy & often don’t have time to cook.
Technological Advances:
Advances in technology frequently dovetail with economic and social changes
to create opportunities.
Technological advances also provide opportunities to help people perform
everyday tasks in better or more convenient ways.
Political & regulatory Changes:
  Provide the basic business idea.
 It also endangers new business & product opportunities.
Solving a Problem:
Problems can be recognized by observing challenges & trends that people
encounter in their daily lives & through more simple means (intuition
serendipity and change).
Noticing a problem & finding a way to solve it.
Example: finding alternatives to fossil fuels, solar forms are launched to solve
it.
Finding gaps in the marketplace
It is often created when a product or service is needed by a specific group of
people but doesn’t represent a large enough market to be of interest to
mainstream retailers.
 Gourmet
Product gaps in the market place represent potentially viable business
opportunities.
 ALMAS specifically for men.
Personal Characteristics of entrepreneur
Prior experience:
 By working in an industry; as individual may spot a market niche that is
undeserved.
 An individual builds a network of social contacts who provide insight that
lead to recognizing new opportunities.
Cognitive factors:
Entrepreneurial alertness, which is defined as the ability to notice things
without engaging in deliberate search.
Social networks:
 Solo entrepreneur: who identified their ideas on their own.
 Network entrepreneur: who identify their ideas through social network.
People who build a substantial network of social & professional contacts will
be exposed to more opportunities & ideas than people with spare network.
Research results suggest that between 40% & 50% of people who start a
business got their idea via social contact.
 Tie: relationship with people
 Strong tie: frequent interaction (family, friends, co-workers), which
typically forms between like minded people- tend to reinforce insight
&ideas that people already have.
 Weak tie: infrequent interaction, forms between casual acquittances are
not as apt to be between like-minded people, so the person may say
something that sparks a completely new idea.
It is more likely that an entrepreneur will get the new business idea through
wea tie rather than strong tie relationship.
Creativity:
It is the process of generating a novel or useful idea.
 Preparation
 Incubation
 Insight
 Evaluation
 Elaboration
Techniques for Generating Ideas
Brainstorming:
It is a session typically involves a group of people & should be the targeted to a
specific topic.
Rules:
1. No criticism
2. Freewheeling is encouraged
3. The session should move quickly
4. Leap-frogging is encouraged
Focus group:
it is a gathering of five to ten people who have been selected based on their
common characteristics relative to the issue being discussed.
These groups are led by the trained moderator, who uses the internal
dynamics of the group environment to gain insight.
Library Research:
It is simply browsing through several issues of a trade journal or an industry
report on topic can spark new ideas.
 Bizminar, Proquest, IBIS World, Mintel.
Internet research:
 If you start from scratch type “new business ideas” or “hottest business
ideas.
 If you have specific topic setting up “google, yahoo, e-mail alerts”
 Targeted searches are also useful.
Customer Advisory board:
To discuss needs, wants & problems that may lead to new idea.
Day in-the-life research:
A type of anthropological research, where the employees of company spend a
day with the customer.
Establishing a focal point for ideas:
Establishing an idea bank or vault, which is physical or digital.
Encouraging creativity at Firm level:
Creativity is the raw material that goes into innovation.

Chapter #3:
Feasibility Analysis
• Feasibility analysis is the process of determining whether a business idea is viable.

• It is the preliminary evaluation of a business idea, conducted for the purpose of determining
whether the idea is worth pursueing.

When to conduct Feasible analysis:

Timing of Feasibility Analysis:

 The proper time to conduct a feasibility analysis is early in thinking through the prospects for
a new business.
  The thought is to screen ideas before a lot of resources are spent on them

Components of a Properly Conducted Feasibility Analysis:

 A properly conducted feasibility analysis includes four separate components, as discussed in

the following slides.

Table 3.1: check two things before starting business for checking the demand
desires of people.
 Primary research: that is collected by the person or persons completing
the analysis. It normally includes talking to proactive customers, getting
feedback from industry experts, conducting focus groups and
administering surveys.
 Secondary research: probes data that is already collected. The data
generally includes industry studies, census bureau data, analyst forecast
and other pertinent information gleaned through library and internet
research. (book)
Product / Service Feasibility analysis:
Product/service feasibility is an assessment of the overall appeal of the
product or service being proposed.
Benefits:
 Getting product right the first time.
  A segment of customers emerges because the firms or individuals that
participate in the feasibility analysis often become the firms first
customer.
 The firm avoids any defect in the product/ service design.
 Time and capital use more are used more efficiently.
 The entrepreneur collects information about the need from additional
product/services.
Product/Service Desirability
 The first component of product/service feasibility is to affirm that the
proposed product or service is desirable and serves a need in the
marketplace
 The proper mindset is to get a general sense of the answers to your
product desirability questions rather than try to reach final conclusions
 A concept statement should be developed.
 A concept statement is a one-page description of a business, that is
distributed to people who are asked to
 provide feedback on the potential of the business idea.
 The feedback will hopefully provide the entrepreneur
 A sense of the viability or the product or service idea.
 Suggestions for how the idea can be strengthened or “tweaked” before
proceeding further.
Concept Test:
• A concept test involves showing a preliminary description of a product or
service idea, called a concept statement, to industry experts and prospective
customers to solicit their feedback
• A concept statement is normally a one-page document which includes the
following:
(1) description of product or service,
(2) intended target market,
(3) benefits of product or service,
(4) description of how the product or service will be positioned relative to
competitors,
(5) description of how the product or service will be sold,
(6) a brief description of company’s management team.
• Concept statement should be shown to 5 to 10 people who are familiar with
the industry the firm hopes to enter,
• Attached to the concept statement should be a survey that asks participants
to,
(1) tell you three things they like about the product or service idea.
(2) provide you three suggestions for making it better (tell you whether they
think the product or service idea is feasible).
(3) share additional comments or suggestions.
Product/service Demand:
The second component of the product/service feasibility analysis is to
determine if there is demand for the product or service
There are two steps to assessing product/service demand.
 Step 1: Administer a Buying Intentions Survey
 Step 2: Conduct library, Internet, and Gumshoe research
Buying Intentions Survey
• A buying intentions survey gauges customer interest in a product or service
• The buying intentions survey consists of a concept statement with a short
survey attached
• The statement and survey should be distributed to 15 to 30 potential
customers
• The statement and survey typically feature a question that asks how likely
the subject would be to buy the product or service.
Library, Internet, and Gumshoe Research:
 The second way to assess the demand for a product or service is by
conducting library, Internet, and gumshoe research.
 Reference librarians can often point you towards resources to help you
investigate a business idea, such as industry specific trade journal and
industry reports.
  Internet searches can often yield important information about the
potentially viability of a product or service idea.
Gumshoe: A gumshoe is a detective or an investigator that scrounges around
for information or clues wherever they can be found.
• Be a gumshoe. Ask people what they think about your product or service
idea.
Industry/Target Market Feasibility Analysis:
 By focusing on a target market, a firm can usually avoid head-to-head
competition with industry leaders, instead of serving a specialized
market very well
 The challenge is to find a target market that’s large enough for the
proposed business, yet is small enough to avoid attracting larger
competitors
 Often, information from more than one industry and/or market must be
collected and synthesized to make an informed judgment, especially if
the firm is pioneering a unique area of the marketplace
 Is an assessment of the overall appeal of the industry and the target
market for the proposed business.
 An industry is a group of firms producing a similar product or service.
 A firm’s target market is the limited portion of the industry it plans to go
after.
Components of Industry/target market feasibility Analysis:
1. Industry Attractiveness
2. Target Market Attractiveness
Industry Attractiveness:
 Industries vary in terms of their overall attractiveness.
 In general, the most attractive industries have the characteristics
depicted on the next slide.
 the degree to which environmental and business trends are moving in
favour rather than against the industry.
 In general, the most attractive industries for start-ups are large and
growing, are young rather than old, are early rather than late in their life
cycle, and are fragmented rather than concentrated
  Some industries are characterized by such high barriers to entry, or the
presence of one or two dominant players, that potential entrants are
essentially shut out
 You should also note the degree to which environmental and business
trends are moving in favor of rather than against the industry

Characteristics of Attractive Industries:

 Are you rather than old?
 Are early rather than late in their life cycle
 Are fragmented rather than concentrated
 Are growing rather than shrinking
 Are selling products or services that customer must have rather than
want to have
 Are not crowded
 Have high rather than low operating margins
 Are not highly dependent on the historically low price of a key raw
material.
Target Market Attractiveness:
 The challenge in identifying an attractive target market is to find a
market that’s large enough for the proposed business but is yet small
enough to avoid attracting larger competitors.
 Assessing the attractiveness of a target market is tougher than an entire
industry. – Often, considerably ingenuity must be employed to finding
information to assess the attractiveness of a specific target market.
 By focusing on a target market, a firm can usually avoid head-to-head
competition with industry leaders, instead of serving a specialized
market very well
 The challenge is to find a target market that’s large enough for the
proposed business, yet is small enough to avoid attracting larger
competitors
 Often, information from more than one industry and/or market must be
collected and synthesized to make an informed judgment, especially if
the firm is pioneering a unique area of the marketplace
Market Timeliness
 Determine if the window of opportunity for the product or service is
open or closed
 Study the simple economics of the industry to determine whether the
timing is right for a new entrant
 Firms that fail to conduct a thorough industry and target market analysis
often find that the market is not large enough to maintain and grow the
business.
Organizational Feasibility Analysis
Organizational feasibility analysis determines whether a proposed business has
sufficient management expertise, organizational competence, and resources to
successfully launch its business.
 Purpose:
• Is conducted to determine whether a proposed business has sufficient
management expertise, organizational competence, and resources to
successfully launch a business.
• Focuses on non-financial resources.
1. Management Prowess:
 A firm should candidly evaluate the prowess, or ability, of its
management team to satisfy itself that management has the requisite
passion and expertise to launch the venture. Two of the most important
factors in this area are:
 The passion that the solo entrepreneur or the founding team has for the
business idea.
 The extent to which sole entrepreneur or the founding team
understands the markets in which the firm will participate.
 Individuals starting the firm should conduct honest and candid self-
assessments
 Two of the most important factors are passion for the business and
understanding of the markets in which the firm will compete
 Additional factors that define management prowess include prior
entrepreneurial experience, depth of professional and social networks,
degree of creativity, experience in cash flow management, and whether
the team has college degrees.
 2. Resource Sufficiency:
 This topic pertains to an assessment of whether an entrepreneur has
sufficient resources to launch the proposed venture.
 To test resource sufficiency, a firm should list the 6 to 12 most critical
nonfinancial resources that will be needed to move the business idea
forward successfully.
 If critical resources are not available in certain areas, it may be
impractical to proceed with the business idea.
 The focus in organizational analysis is on non-financial resources
because financial feasibility is considered separately
 Identify the 8 to 12 most important and potentially problematic non-
financial resources and assess whether they are available
 Examples of non-financial resources include office space, manufacturing
space, key management employees, key support personnel, and support
from state and local governments if applicable
 One easily overlooked resource sufficiency issue that should be
considered is proximity to similar firms, creating a cluster that can
increase productivity of the participating firms
Examples of nonfinancial resources that may be critical to the successful
launch of a new business:
• Availability of affordable office or lab space.
• Likelihood of local and state government support of the business.
• Quality of the labour pool available.
• Proximity to key suppliers and customers.
• Willingness of high-quality employees to join the firm.
• Likelihood of establishing favourable strategic partnerships.
• Proximity to similar firms for the purpose of sharing knowledge.
• Possibility of obtaining intellectual property protection in key areas.

Financial feasibility analysis:

  For feasibility analysis, a preliminary financial analysis, is
normally sufficient.
 The most important issues to consider at this stage are total
start-up cash needed, financial performance of similar
businesses, and overall financial attractiveness of the proposed
venture
 More complete financial projections will be included in the
business plan.
Purpose:
• Is the final component of a comprehensive feasibility analysis.
• A preliminary financial assessment is sufficient.
Components:
 Total Start-Up Cash Needed
 Financial Performance of Similar Businesses
 Overall Financial Attractiveness of the Proposed Venture
Total start-up cash needed:
 The first issue refers to the total cash needed to prepare the business to
make its first sale.
 An actual budget should be prepared that lists all the anticipated capital
purchases and operating expenses needed to generate the first $1 in
revenues.
 The point of this exercise is to determine if the proposed venture is
realistic given the total start-up cash needed.
 Try to determine total cash needed to prepare the business to make its
first sale
 A detailed explanation of where the money will come from should be
provided
 If money will come from friends, credit cards, or a home equity line of
credit, a reasonable plan should be stipulated to repay the money
 When projecting start-up expenses, it is better to overestimate rather
than underestimate the costs involved.
Financial performance of similar Business:
 Estimate the proposed start-up’s financial performance by comparing it
to similar, already established businesses.
There are several ways to doing this, all of which involve a little ethical
detective work.
• First, there are many reports available, some for free and some that require a
fee, offering detailed industry trend analysis and reports on thousands of
individual firms.
• Second, simple observational research may be needed. For example, the
owners of New Venture Fitness Drinks could estimate their sales by tracking
the number of people who patronize similar restaurants and estimating the
average amount each customer spends.
Overall Financial Attractiveness of the purposed venture:
 The extent to which a proposed business appears positive relative to
each factor is based on an estimate or forecast, not actual performance
 Important factors include the extent to which sales can be expected to
grow during the first few years of the venture, percentage of recurring
revenue to anticipate, the likelihood that internally generated funds will
be available within two years, and the availability of exit opportunities
for investors if applicable.
Table 3.6:
 Steady and rapid growth in sales during the first 5 to 7 years in a clearly defined market
niche.
 High percentage of recurring revenue, meaning that once a firm wins a client, the client will
provide recurring sources of revenue.
 Ability to forecast income and expenses with a reasonable degree of certainty.
 Internally generated funds to finance and sustain growth.
 Availability of an exit opportunity for investors to convert equity to cash.