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Becoming an entrepreneur requires various skills and talents. First you must
understand who you are and what you want by identifying your skills and
knowing your passions. A successful entrepreneur matches his or her skills and
passions with the right opportunity. However, it takes more than passion to be
successful; it also takes hard work and preparation. Analyzing the industry and
the feasibility of your idea is critical to success. This course gets you started.
As you proceed through this course, you will be asked to refer to
chapters within this course reader. The content of each chapter in this reader
reinforces and expands on the key ideas that are presented in the course. You
are introduced to the history and foundations of entrepreneurship and given
tools for success. Throughout the chapters, you are presented with two cases
studies that describe two companies, Zed WiFi and Acme Brewery. The case
studies are used to illustrate important concepts using “real-world” examples.
There are many steps along the path to creating a successful
entrepreneurship. Each chapter gives you the background and the basics you
need to understand the first steps to creating the idea. You must
Once you have completed these steps, you will be ready for
implementation and management! Good luck!
Published by
Laureate International Universities Publishing, Inc.
650 S. Exeter Street
Baltimore, MD 21202
www.laureate.net
Sources 45
Entrepreneurship has much to offer to anyone who has the passion and
drive to start a venture and follow it through. To be a successful
entrepreneur, you need to be aware of your own passions, motivations,
skills, and objectives, and you must know what areas you may need to
improve on or develop. Then, ideally, you will be able to align your skills
and desires with your venture.
History of entrepreneurship
Our definition and understanding of entrepreneurship has evolved over the
years, and it continues to evolve in terms of focus and scope. In the broadest terms, we
define entrepreneurship as the pursuit of an opportunity without regard to the resources
that the entrepreneur currently controls. An entrepreneur is therefore a person who
identifies an opportunity, then acquires the resources needed to pursue that opportunity
as a venture.
This is how we think about entrepreneurship today. However, the concept has
taken quite a journey from its roots over 500 years ago. The word entrepreneur comes
from the word enterprise, which has roots in the Latin language in the 15th century—
from the words entre, meaning “between,” and prehendere, meaning “to grasp or take
hold.” Then the word enterprise made its way into French and become entreprendre,
which means “to undertake.” From there, the word evolved and became entrepreneur.
In 1755, the French economist Richard Cantillon (in Essay on the Nature of Trade
in General) was one of the first individuals to define an entrepreneur in a business sense
as someone who uses business judgment to take on a difficult commercial enterprise.
Key to Cantillon’s definition were the ideas that this commercial enterprise had
uncertain outcomes and that the business person was motivated by personal gain. Both
of these features have carried down to our modern thinking about entrepreneurship.
Adam Smith, the Scottish philosopher and economist, added to Cantillon’s definition by
incorporating the idea that an entrepreneur is someone who accumulates capital and is
an agent of progress.
By the mid-19th century, the word entrepreneur was firmly part of the English
language of business. Around this time, the German mathematician Hans von Mangoldt
expanded the idea to include an element of risk; in his mind, risk was essential to the
concept. Then in the early 20th century, Joseph A. Schumpeter, an Austrian economist,
suggested that key elements of entrepreneurship are innovation, vision, and creativity.
Scholars and practitioners further refined the concept, and by the early 20th
century, an entrepreneur was someone who used business judgment in commercial
enterprises with uncertain outcomes, accumulated capital, took risks, and was
innovative and creative. Some people believe that to be truly entrepreneurial, a person
has to create something disruptive, such as a new product, industry, or market, or
identify and serve needs that are not currently being met.
Type of
entrepreneurship Goals
Commercial Business creation
Innovation
Wealth
Social Social mission
Social engagement
Intrapreneurship Innovation
Business creation within
existing organization
Profit
Hybrid Business creation
Social mission
Wealth
1. Identify an opportunity. Use creative techniques to come up with a new idea, seek
inspiration from existing sources to find an opportunity, or create one of your own
(see Chapter 2).
3. Develop the concept. Create a strategy and a business model, and write a venture
plan (see Chapter 7).
5. Acquire the resources. Engage in activities such as hiring employees, renting space,
buying materials, and acquiring supplies.
6. Implement and manage the venture. Run the venture, and adapt to changing
conditions as necessary.
7. Harvest/exit the venture. Close, sell, or transform the venture into something new.
Types of entrepreneurs
In addition to the types of ventures they seek to create (such as social or
commercial), entrepreneurs can be categorized by their different ideas for growth of the
venture.
Lifestyle. These entrepreneurs build a business in a way that is integrated into their
lifestyle. For some lifestyle entrepreneurs, profit (beyond what is needed to sustain
their lifestyle) is not the motive; they plan to keep the venture small. Other lifestyle
entrepreneurs may grow businesses with many employees and significant revenues.
Adaptability
Creativity
Drive to achieve
Initiative
Leadership skills
Motivation
Perseverance
Tolerance of ambiguity
Tolerance of risk
Vision
One thing that most successful entrepreneurs have is either a mentor or a strong
network of friends, colleagues, and supporters. Although in some cases an entrepreneur
may work alone, for the most part starting a venture requires teamwork and the input
and advice of several individuals. Entrepreneurs who work with a mentor can tap into
the expert guidance of someone in the same industry or someone who has experience
with entrepreneurship or general business. A broad network of colleagues and friends
CASE STUDY
Self-assessment
Creating an entrepreneurial venture from the ground up is an arduous process.
An individual who is interested in doing so needs to understand himself or herself to
know whether this type of lifestyle is suitable.
As you consider starting a new venture, it is helpful to understand your strengths
and weaknesses, what you are able to contribute to the venture, and in what areas you
will need to partner with someone to be successful. Because of the nature of
entrepreneurship and how it differs from being an employee at a company, it is also
very helpful to understand your feelings about and capacity for hard work, how you deal
with insecurities and adversity, and your capacity for working toward a goal.
As you think about your skills and attributes, it is also important to understand
your life goals—personal, professional, and financial. Where does a venture fit into those
Entrepreneurial
Am I willing and able to work without pay for some amount of time?
Personal
Am I creative?
Name Technique
Asking who, what, This is the process of coming up with as many ways to
why, when, where, think about a problem as you can. This technique is
and how helpful to open up your mind to think about a problem
from for many different angles.
New opportunities
Where do entrepreneurs find ideas for new opportunities? In addition to using
creative problem-solving techniques for inspiration, there are many other ways to find
ideas for new business ventures. While inspiration can come from anywhere, there are
several key sources that are useful for generating ideas and sparking innovation.
Demography. Use statistical data about the population (such as gender, age, race,
employment status) to learn about various segments of the population and become
aware of changing demographic shifts. If there is growth in a certain area of the
population, this may spark ideas for products or services aimed at that demographic
group. For example, a growing population of elderly people may present
opportunities for new healthcare services and leisure activities.
Technology. Keep up to date with technology in your field and related fields,
equipment, techniques, current trends, and projections for future trends. For
example, new equipment and technology might offer opportunities for ventures that
process raw materials in more cost-efficient and environmentally safe ways.
Laws and regulations. Study existing and proposed laws and regulations to
understand how changes may affect the manufacture or sale of a product or service.
For example, a regulatory change may mean that you can start a venture importing
several types of cheese that were previously illegal to bring into the country and
selling them to restaurants and grocery chains.
Hobbies. Determine whether something that you do for fun has a broader
application. For example, if you enjoy helping others learn how to read, that may
present an opportunity to create a nonprofit venture that works with teachers to
provide remedial reading help for adults in your community.
CASE STUDY
CASE STUDY
Intellectual property
The term intellectual property refers to creations of the mind such as inventions;
artistic and literary works; and symbols, names, images, and brands used in the world of
commerce. Often referred to as IP, these are the nonphysical assets of a company. There
are four types of intellectual property: patents, trademarks, copyrights, and trade
secrets.
Trade secrets are various pieces of confidential information that may provide a
competitive advantage. Trade secrets may include formulas, ideas, processes, or
other information that is unique to a venture. In contrast to other types of
intellectual property, there are no laws that protect trade secrets. The only way to
protect them is to keep them confidential by limiting access and using contracts and
confidentiality agreements with the people who require access to the secrets.
For any venture, especially new ones, protecting intellectual property is critical.
Patents, trademarks, copyrights, and trade secrets are unique elements that enable
organizations to stand apart from their competitors. Governments offer intellectual
property protections specifically to provide businesses with exclusive rights to their own
assets in order to maintain a competitive advantage. Intellectual property rights are
complex and vary around the world. Some countries have treaties with each other to
make conducting business across borders easier.
The most important step you can take to protect your venture’s intellectual and
creative assets is to work with a professional intellectual property attorney. Failure to
protect intellectual property can result in significant losses for the venture. For example,
unless you trademark your logo, others might copy it or use something similar, causing
confusion in the minds of consumers, a loss of market share, and reduced profitability.
Not only is it important to protect your own intellectual property, it is also
important to respect others’ intellectual property. A key part of planning a new venture
includes researching existing intellectual property. First, this helps you to determine
whether someone has already patented your idea or trademarked a similar name or logo
so that you can make sure you do not violate the rights of another entity. Second, it
helps to paint a picture of the market, your competition, and whether any similar
products or services exist.
CASE STUDY
Advantages Disadvantages
1. Understand the objective of the interview. Choose carefully whom you will
interview, and know what kind of information you need to get during the interview.
2. Write the questions in advance. This includes doing research to create the
questions and being prepared with potential follow-up questions. Types of questions
include the following:
3. Do not send the questions in advance. This often results in answers during the
interview that do not stray from established thinking. The follow-up questions are
where you will get a lot of the detail you need.
4. Choose a comfortable location. A neutral location, neither your office nor the
interviewee’s, helps both of you to feel comfortable.
5. Get to know the interviewee. Ask a couple of personal questions or have a brief
opening conversation before jumping in with the questions. This is the time to build
rapport.
6. Listen to the answers. This is why you are there. Really listening enables you to get
answers and be able to ask appropriate follow-up or clarifying questions.
7. Be open. You may not get the answers you were expecting, and it is important to be
open to learning what the interviewee really thinks about a topic, as the interviewee
has information that is potentially very important to your venture.
Segmenting
Segmenting customers is a process of using specific criteria to divide a larger
diverse group of customers into smaller groups that share similar characteristics. For
example, demographic segmentation is a way to divide customers into groups based on
demographic information such as age, gender, income, and occupation. This may be
combined with geographic segmentation—dividing the market by the location where the
individuals live, work, or play.
Targeting
Once you have segmented the market, it is time to find your target market. That
is, you choose the segment that is most ideal for your venture, product, or service. You
can target a segment on the basis of many criteria: number of potential customers,
frequency of purchase, a segment that is currently underserved by the competition, or
the segment whose needs are best aligned with the features of your product or service.
Starting a new venture is an exciting experience, and many entrepreneurs see multiple
uses and many potential customers for their product or service. The real value in
segmenting and targeting a market is that you can focus your limited marketing
resources on reaching and acquiring the most profitable customers.
Positioning
Once you have segmented and targeted your market, it is time to position the
product or service in relation to the competition. Positioning is the process of creating
an identity or image for the brand, product, or service in the minds of the target
customers relative to the competitive offerings.
This is where you help your customers to understand why they want or need to
buy your product or service at this time. For example, if you sell fruit beer to
professional women in their thirties, you could position it as the beer of choice for
professional women because it is refreshing, low-calorie, and inexpensive.
Once you have completed the segmentation, targeting, and positioning, it is time
to start thinking about the marketing mix. The marketing mix is a tool that helps you to
identify the unique selling proposition of your product or service. It is a way to think
about your product in the market—what it is, where to sell it, how much it should cost,
and how you will promote it. The marketing mix is often called the four Ps: product,
place, price, promotion.
Product is what you are selling to the customer, such as fresh drinking water or
automobile supplies. Place is how you will distribute the product to your customers,
such as online or in retail outlets. Price is how much the customer will pay for the
product. Promotion is how you will communicate the value of your product or service to
your target market, such as with radio advertisements or with a direct sales force.
Now that you have analyzed the technical feasibility and have examined
the potential market for your product or service, it is time to understand
the characteristics of the industry as a whole. An industry feasibility
analysis enables you to evaluate various factors to determine the
attractiveness and potential profitability of an industry. If the industry has
various factors that contribute to low profit margins, this is an
opportunity to learn that and possibly to reconsider entering this
industry.
Industry definition
Before examining how an industry operates, it is useful to understand what the
industry is and what its boundaries are. Industries can be defined in many ways and with
varying scope. For example, we might define the industry in which Acme Brewery
operates as beer, alcoholic beverages, or all beverages. Analyses based on these
different classifications will produce different results, so it is important to identity the
correct scope for the objectives of your analysis.
In general, it is best to use a narrow scope of your industry definition, but access
to information or industry structure may point you in one direction over another.
Additionally, you may consider analyzing various industry classifications. If a narrow
view of the industry seems unattractive, you could broaden the scope.
There are many publicly available resources to help define industries and their
characteristics. In North America, the industry classification system is known as the
North American Industry Classification System (NAICS). In the European Union, the
industry classification system is known as NACE (Nomenclature statistique des activitiés
économiques dans la Communauté européenne).
To fully understand how an industry operates, an entrepreneur must understand
things such as barriers to entry, what the existing competition is like, substitute
products, buyer power, and supplier power. Looking at this information helps an
entrepreneur to understand where the industry is heading, what opportunities there are
now or may be in the future, and whether the industry is attractive and is expected to
remain so.
Knowledge of how the industry works is critical to the success of any venture in
that industry. In conducting an industry feasibility analysis, you first analyze the
attractiveness of the industry to determine whether its structure is conducive to making
a reasonable profit. Then you use that information to determine whether you should
proceed with the venture. If the industry appears unattractive, you can choose to
abandon this opportunity, find ways to mitigate the negative factors, or look for
opportunities in another industry.
One way to analyze the attractiveness of an industry is to use a framework such
as Porter’s Five Forces Model. Michael Porter is a professor at Harvard Business School
and an expert on competitive strategy. Use the five elements discussed below to
Barriers to entry
Examine what is necessary to start a venture by understanding the obstacles that
may make it difficult to enter the industry. Low barriers to entry mean that it is relatively
easy for new companies to enter the industry. Numerous new entrants have the
tendency to expand the overall capacity of the industry, potentially beyond the existing
customer demand. This expanded capacity may force competitors to decrease price
points over time in an effort to maintain or expand their market share despite the
increase in industry supply. Competition for the same customers might also require an
increase in marketing and promotional expenses. All of these actions result in lower
levels of profitability for all companies operating in the industry. In contrast, high
barriers to entry make the industry more attractive or profitable because of the minimal
competition; however, high barriers to entry also usually present challenges for new
entrepreneurs who wish to enter the industry. Barriers to entry include economies of
scale (savings or cost advantages due to increased production), brand loyalty, cost for
the buyer to switch to another supplier, financial requirements, technology, access to
distribution channels, government regulations, and proprietary factors unique to the
industry.
CASE STUDY
Buyer power
Before you start a venture in a specific industry, it is advisable to take the time to
understand the bargaining power of customers in that industry. Buyer power is the
effect that customers have on the price of a product or service. Industries with high
buyer power are often unattractive because buyers have a lot of leverage to negotiate,
forcing businesses to lower their prices to compete. It is critical to understand generally
what type of bargaining power customers have in your industry so that you can work to
create a business model with strategies that mitigate their power.
Customer bargaining power includes the volume of business customers do, price
sensitivity, access to information about the product or service, costs for them to switch,
and the availability of substitutes.
Supplier power
Learn about the bargaining power of suppliers to help you understand the
impact on the profitability of a specific industry. Businesses with limited options for the
purchase of raw materials rely on the dependability of those partners and suppliers.
Suppliers have bargaining power when it costs a lot to change to another
supplier, they have strong existing relationships with customers, and few substitute
supplies are available. High supplier power usually means that the industry is
unattractive or has lower profit margins because suppliers have negotiating leverage.
Rivalry
As you research an industry, it is helpful to understand the characteristics and
behavior of competitors that are already part of that industry. Understanding the
rivalries among existing firms includes learning about growth rate, number and size of
competitor firms, product or service differentiation, costs for customers to switch to
competitors, and exit barriers (the factors that may make it difficult to leave the
industry).
External factors
Industries are affected by that state of the world, not just by the behavior of the
industry itself. To assess industry feasibility, it is also critical to understand the business
environment or context in which the venture will be doing business. Depending on the
industry, that may require you to research and analyze how social, technological,
economic, environmental, political, and global forces could affect your venture.
CASE STUDY
Competitive analysis
As part of your research into the industry, this is the time to look into your
competitors’ businesses as much a possible. Competitive analysis is the process of
learning about the key players in the industry and how well they meet the needs of the
market.
If you are starting a venture in an industry that has many public companies in it,
the job of conducting the initial analysis may be a little bit easier. Public companies
Sales
Profit
Number of customers
Income statements
Income statements are also called profit and loss statements (or P&Ls). A pro
forma or forward-looking income statement contains information about the projected
profit or loss for the venture for a stated period of time and includes estimates of both
expenses and revenues. Revenue is money received from transactions through normal
business operations. Expenses are the costs associated with running the venture. The
purpose of a pro forma income statement is to assess feasibility, conduct internal
budgeting, determine the types and amounts of resources needed, and communicate
this information to your investors and other stakeholders. The best place to begin a
financial feasibility analysis is with the expense forecasting.
Expense forecasting
Expense forecasting is the process of making financial assumptions on the costs
associated with starting and operating your venture. It is helpful to look at your
projected expenses over a set period of time, often three to five years.
Examples of common expenses include the following:
o Raw materials
o Direct labor
o Overhead such as rent and utilities
Selling
o Advertising
o Marketing
To forecast expenses for your income statement, you will need information
about the costs to conduct business, including the initial start-up investment and the
ongoing costs associated with operating your venture.
If you are already operating your venture, you can use your expenses for the first
months or years of operations to estimate projected expenses for the next several years
of operation—things such as rent, Internet access, salaries and benefits, supplies,
marketing, and any known costs to produce and deliver the product or service. If the
venture is not yet operating and you do not have any historical data, then you may need
to use industry averages or other information gleaned from your competitive and
industry analysis as a starting point. (See the sample Pro Forma Statement on page 32.)
As you estimate expenses for your pro forma income statement, you will likely
make many assumptions, such as the projected cost of raw materials, expenses
associated with renting and renovating space, and the cost of hiring employees. You can
get some actual data by calling suppliers, looking at the average rent per square foot, or
making assumptions about labor costs based on the minimum wage.
When they are available, you can also use competitive data to help estimate your
projected expenses. For example, if on average, competitors in your industry spend 30%
of revenue on the cost of the raw materials and 15% of revenue on marketing, then you
might assume that your expenses will be comparable. You can then use these industry
averages to determine your projected cost of raw materials and marketing expenses by
multiplying these percentages by your projected revenue. Of course, the danger with
this logic is that your own expenses may vary significantly from the industry average for
any number of reasons. So if you use this method, you will want to account for any
significant differences between your venture and competitive offerings.
As part of forecasting expenses, it is important to understand the types of costs
you are dealing with: fixed, variable, or mixed. A fixed cost is one that stays constant in
terms of dollar amount regardless of sales volume or the number of units produced and
would be difficult to cut back on without a significant impact on the operations. Fixed
costs may include things such as office rent, purchase of equipment, and managerial
salaries.
A variable cost is one that changes in direct proportion to the level of
operations such as the number of units produced and sold. Examples include the cost of
fuel per passenger, packaging per unit, or raw materials per unit. A mixed cost is one
that has both a fixed component and a variable component, such as telephone costs
with a standard monthly fee and variable charges for long-distance calls.
To forecast revenue for your income statement, you will need to make
assumptions about the source and timing of revenues. If you have historical revenue
from the sales of your product or service, you can use these real data to estimate future
sales If you do not have actual data from your venture because you do not yet have a
product or service or any sales, you can use data from your competitors or industry
averages to estimate projected revenue.
Start by projecting the demand or number of units you anticipate selling over the
next three to five years. Creating a demand forecast, especially in a new industry or
market segment, can be a challenge. As you forecast demand, be sure to take into
account reasonable expectations of how demand will change over time. Sales often do
not increase in a linear fashion; they can slow down or speed up owing to many different
factors such as changes in consumer purchasing habits, influence of economic forces,
amount of money invested in marketing, or new competitive products that enter the
market.
Another important element of revenue forecasting is the price at which you will
sell your product or service. There are many different pricing strategies to choose from.
The one that works best for your venture may be determined by the type of product or
service, the industry, the behavior of your customers, or other factors (see Table 6-1).
Knowledge of the market will help you to choose the best pricing strategy for reaching
your financial goals.
Strategy Explanation
To apply the top-down forecasting technique, you will use data such as the size
of the market, market share of competitors, average sales price, or growth rate to
estimate revenue. For example, assume that the total revenue for your industry was $1
million last year. You think that it is reasonable for your venture to capture about 10%
the market next year. In that case, your projected revenue using the top-down approach
would be $100,000 for next year.
Because top-down forecasting uses industry-level information, it is less accurate
than a bottom-up approach. If you are in a position in which you need to use this type of
forecasting, make sure to verify that sources are accurate, and consider making very
conservative estimates. Whichever approach you choose, it may be helpful also to look
at the other approach as a point of comparison.
As you create your financial forecast, be aware that revenues and expenses
behave differently depending on the industry and type of business. For example, a
venture may operate at a loss for several months or years before it attracts a loyal
customer base and revenue sufficient to generate a profit.
After you have forecasted expenses and revenue, it is time to compile the
income statement and analyze whether the venture looks viable. The important thing to
remember about creating a pro forma income statement is that you are making
assumptions. In reality, you have no idea what will happen with the venture next year,
let alone three years from now. The more information you are able to validate and verify,
the better, but in the end, these are just assumptions.
Acme Brewery
Pro Forma Income Statement
Operating Expenses
Rent and equipment lease 8,000 8,000 26,000
Marketing 2,500 50,000 73,000
Labor and wages 7,000 16,000 39,000
General administrative 2,000 5,000 20,000
Total Operating Expenses 19,500 79,000 158,000
Breaking even
A critical reason for estimating revenues and expenses is to understand when
the venture will break even. The break-even point is the point at which revenues equal
expenses or the venture generates $0 in profit. After that point, the venture should start
generating a profit.
Evaluation of assumptions
After you have compiled your pro forma income statement, it is time to evaluate
your assumptions about the attractiveness and viability of the venture. There are several
metrics that you can evaluate as you prepare an income statement. Each of these
metrics will give you a picture of the future profitability and allow you to compare with
competitive or industry averages.
For example, here is how to calculate the gross margin for Acme Brewery using
the data in the pro forma income statement in the case study.
$33,750 (Revenue)
− 15,356 (COGS)
= 18,394 (Gross income or profit)
Now that you have proved through research and analysis of the market,
industry, and financials that your venture is viable, it is time to create a
business model and write a venture plan. Finding the right business
model is a very important step in the venture-planning process.
Remember that the core of any entrepreneurship is value creation. The
value that your venture delivers affects what business model you choose.
Ventures create and deliver value in a variety of ways. One
venture, for example, may provide products or services at a lower cost
within an industry. Another venture may provide premium products in the
same industry. Those choices affect how the businesses will operate,
including what kind of suppliers they will use, how they will market the
product, and the best distribution channels.
As you consider what type of business model will work for your
venture, think about the competitive analysis that you conducted of
participants in your industry and the business models they use. With the
information that you gathered during the research phase, you can also
identify specific things that you can do to make your venture stand out
from the crowd.
Business models
A business model is the description of how the business will operate, including
details such as the purpose of the business, what it will sell and how, strategy,
operational policies, and organizational structure. You compiled all the information you
need to create a business model during the feasibility analysis. At this stage in the
process, it is just a matter of finding fit and alignment among these nine factors:
Customers. Defining and describing your customer is a critical step that enables you
to define what product or service you will offer and the value that you will create.
Value proposition. This is the reason a customer will buy your product or service.
Distribution channels. This is how you will get your product to the customer. Retail
distribution means that you will sell directly to the consumer or end user. Wholesale
means that you will sell to retailers or other distributors. Online means that you will
sell directly to customers, retailers, and/or intermediaries via the Internet.
Pricing. This is what customers are willing to pay for the value they receive.
Expenses. These are the costs of running your business, such as production,
marketing, distribution, salaries, and overhead. Expenses can be fixed, variable, or
mixed.
Resources required. These are the resources and assets that you need to create the
product or service and conduct business operations. These resources can be
physical such as raw materials, financial such as a line of credit, intellectual such as
a patent, or human such as sales staff.
Partnerships. These are strategic partners, suppliers, distributors, and others with
whom you create alliances to conduct your business operations.
CASE STUDY
1. Executive summary: What type of venture is this and why is it unique? What are the
main points from each section of the venture plan that are important to this
audience?
2. Venture: What are the venture’s goals or mission? What is the organizational type
and structure? Who are the key executives and management team? How does this
company fit into the industry?
4. Market: What are the buying habits of your customers? What is your target market
and how big is it? How is it segmented?
6. Market strategy: How will you sell your product or service? How will you market or
advertise it? What is your pricing strategy? What is your distribution strategy?
7. Operations: Who and where are your supply sources? What are your facilities like?
8. Risks and threats: What are inherent risks in your industry and with your venture?
What are potential problems? How can you avoid or manage them?
9. Financial data: What are your start-up and development costs? What are your
projected revenues, expenses, and margins? How do your financials compare to
others in the industry? What is the potential return on investment for investors?
What is your exit strategy?
As you create your venture plan and prepare to approach investors, take some
time to remember why you started down the entrepreneurial path. Think about your
personal and business goals and how you created this opportunity for yourself. At this
point in the process, you have done a lot of research and analysis, and your head is
probably filled with numbers and facts so that you can answer any questions a potential
investor or partner asks.
Good work! You are right where you need to be in the process. But do not forget
the enthusiasm and excitement that you had at the beginning of the process and the
drive that kept you going through late nights at the computer, and long days doing
research. Do not forget your belief that this is a good idea for a venture, maybe the best
ever. So when you are in the room with an investor or potential partner, remember that.
This idea started with you and your passion. Don’t be afraid to show it.
Entrepreneurship starts with you. You might desire to start a small family
business that allows you the freedom to be your own boss. Or you might
plan to start a venture to solve a problem in your community. Or you
might want to be the founder of a global venture that disrupts the
business world. If your goal is to create value through a venture, you are
an entrepreneur.
1. Identify an opportunity. This is your chance to use your knowledge of the industry
or the world to find an opportunity or create one of your own. This is the time to
question the status quo, to innovate, to find your niche in the world of
entrepreneurship.
2. Conduct a feasibility analysis. This is the time to learn about the industry and
market and discover the attractiveness and profit potential. This stage involves a lot
of work, but it is critical to the future success of any venture.
3. Develop the concept. This is the stage at which you start to create a model of your
new venture and plan for some of the details. This is also when you set the stage for
funding the venture and its future.
4. Determine the resources needed. Now that the venture is almost real, it is time to
identify what you need to launch and operate your venture.
5. Acquire the resources. This is the phase at which you hire people, rent space, buy
materials, and acquire other supplies. It is also a good time to take a moment to
reflect on how far you have come from your original idea and where you are
heading.
7. Harvest/exit the venture. This is your opportunity to reflect on the value you
created. Whatever the future of your venture—you may be ending it, selling it, or
transforming it into something new—take time to remember both the positive and
the more challenging aspects of the experience. Then get ready for the next chapter
in your life.
Each entrepreneur takes his or her own journey from the original idea all the way
to the day when the entrepreneur leaves the venture. You can follow the process and
plan your steps, but every entrepreneur experiences some detours and surprises along
the way. The best way to be ready for them is to start by knowing yourself and your
goals and understanding the entrepreneurial process.
Are you ready?
Spinelli, S., & Adams, R. (2012). New venture creation. Entrepreneurship for the
21st century (9th ed.). New York, NY: McGraw-Hill/Irwin.
Chapters in books
Abrams, R., & LaPlante, A. (2008). Passion to profits: Business success for new
entrepreneurs. Palo Alto, CA: The Planning Shop. Chapter 14.
Megginson, L., Byrd, M., & Megginson, W. (2006) Small business management:
An entrepreneur’s guidebook. Toronto: McGraw-Hill/Irwin. Chapter 13.
Mullins, J. The new business road test (2nd Ed.). London: Prentice Hall/Financial
Times. Chapters 11 and 12.
Articles
Economic growth. (2012). In Encyclopædia Britannica. Retrieved from
http://www.britannica.com/EBchecked/topic/178400/economic-growth
Ernst & Young LLP. (1997) Outline for a business plan. New York, NY: Author.
Hill, R., & Gatewood, E. (Ed.). Business planning guide. Fresno, CA: Author.