ENTREPRENEURSHIP

What is Entrepreneurship? and who is an Entrepreneur?

Entrepreneurship

 The capacity and willingness to develop, organize and manage a business venture along with any
of its risks in order to make a profit.

Who is an Entrepreneur?

o Entrepreneur is a person who starts and or operates a business. An entrepreneur is creative and
innovative. A person who starts something new.

o An entrepreneur may be male or female, young or old, professional, college graduate or school
dropout, comes from A,B,C,D and E economic group.

Opportunity Seeking, Screening and Seizing

Opportunity Seeking

 Entrepreneurs are innovative opportunity seekers.

 They have endless curiosity to discover new or different ideas and see whether these ideas will
work in the market place.
 Entrepreneurs create value by introducing new products or services or finding better ways of
making them.

Entrepreneurial Mind Frame, Heart Flame and Gut Game

Essential to an entrepreneur’s opportunity seeking are the opportunity entrepreneurial mind frame,
heart flame and gut game.

Entrepreneurial mind frame

 Allows the entrepreneur to see things in a very positive and optimistic light in the midst of crisis
or difficult situations.

Entrepreneurial heart flame

 If there is one commonality between an inventor and an entrepreneur, it is their surging passion
or the entrepreneurial heart flame.
 Passion is that great desire to attain a vision or fulfill a mission
 The heart flame is also about emotional intelligence or EQ.
Entrepreneurial gut game

 This refers to the ability of the entrepreneur to sense without using the five senses. This is also
known as intuition.

THE MANY SOURCES OF OPPORTUNITIES

There are many ways to uncover or discover opportunities. These are:

1. Macro Environmental sources of opportunities

2. Industry sources of opportunities

3. Market sources of opportunities

4. Micro market

5. Consumers preferences, piques and perceptions

6. Other sources of opportunities

1. Macro Environmental sources of opportunities

 The macro environment refers to the “big or macro forces” that affect the area, the industry,
and the market which the enterprise belongs to
 The macro environment forces can be divided into five categories composed of the Social,
Political, Economic, Ecological and Technological dimensions or SPEET.

1.1 Socio-cultural environment

 The socio-cultural environment includes the demographics and cultural dimensions that govern
the relevant entrepreneurial endeavor.

1.2 Political Environment

 The political environment defines the governance system of the country or the local area of
business.

1.3 Economic Environment

 Supply and demand forces mainly drive the macro economic environment.

1.4 Ecological Environment

 The ecological environment includes all natural resources and the ecosystem, habitat of men,
animals, plants and minerals.
1.5 Technological Environment

 New scientific and technological discoveries, which often lead to the launch and
commercialization of new products with superior attributes or to rendering the old ones
obsolete, are the entrepreneur’s nightmares.

Examples of opportunities that are present within the macro environment of a fast-growing fast food
chain offering chicken meals and other Filipino favorites

2. Industry sources of opportunities

After the macro environment, the next biggest sources of opportunities are the industry and the market.

Participants in an industry include:

1. Rivals or competitors in a particular type of business. True rivals or competitors are those
competing for the same or similar markets

2. Suppliers of input to rivals as well as suppliers of machinery and equipment, suppliers of

manpower and expertise and suppliers of merchandise.

3. Consumer market segments being served by rivals or competitors

4. Substitute products or services, which customers shift or turn to
5. All other support and enabling industries

3. Market Sources of opportunities

 The entrepreneur must also be able to measure the actual demand and supply as well as the
potential demand and supply of the industry that the enterprise belongs to.

4. Micro market

 Refers to the specific target market segment of a particular enterprise. These are the target
customers that represent the immediate customers of an enterprise.
 It likewise pertains to a clearly defined location or specific customer group that an enterprise
whishes to serve
 The need for segmentation would be crucial in micro market analysis because the definition of
value for money differs from group to group.

5. Consumers preferences, piques and perceptions

 Consumer preferences, piques and perceptions can be sources of opportunities

 Consumer preferences - Refer to the tastes of particular groups of people. The consumers age,
culture and status affect their preferences.
 In contrast, consumer dislikes refer to the things that irritate customers. Either way, the
entrepreneur can explore opportunities brought about by consumer preferences or dislikes.
6. Other sources of opportunities

Another potential source of opportunity is the entrepreneur’s own set of skills or expertise, or hobby.

Other sources

1. Customer preferences change over time

2. People’s tastes in clothes, music, shoes, entertainment, dance, sports, hobbies and even careers
have evolved over the years

3. What piques customers is a great source of opportunities

4. Before the customer won over, there is first a battle for the mind. Next there is a battle for the
heart. Finally, there is a battle for the wallet.

5. The longer the customer wants to use the product, the greater the chances of creating lasting
loyalty
6. Opportunities abound in shaping consumer perceptions or occupying spaces in their minds or
places in their hearts that have not yet been filled.
7. New inventions, new systems and work processes, new insights about the human psyche, new
applications for old knowledge, new revelations about how the physical world works, new
interpretations, new combinations based on the converge of previous technologies, new
outlooks about how life should be led, and a host of other new things are tremendous sources
of opportunities.
8. Determining personal preferences and competencies lay the foundation for a new business
venture
9. Unexpected occurrences in both the external and internal environment of the enterprise
indicate that significant changes are happening and opportunities are sprouting

Opportunity Screening

After opportunity seeking comes the rigorous process of opportunity screening.

The personal screen

 In screening opportunities, the entrepreneur first has to consider his or her preferences and
capabilities by asking three basic questions:

1. Do I have the drive to pursue this business opportunity to the end?

2. Will I spend all my time, effort, and money to make the business opportunity work?

3. Will I sacrifice my existing lifestyle, endure emotional hardship, and forego my usual comforts to
succeed in this business opportunity?
The 12 Rs of Opportunity Screening

1. Relevance to vision, mission and objectives of the entrepreneur.

2. Resonance to values.

3. Reinforcement of Entrepreneurial Interests.

4. Revenues. In any entrepreneurial endeavor, it is important to determine the sales potential of

the products or services you want to offer.

5. Responsiveness to customer needs and wants.

6. Reach. Opportunities that have good chances of expanding through branches, distributorships,
dealerships, or franchise outlets in order to attain rapid growth are better opportunities.

7. Range. The opportunity can potentially lead to a wide range of possible product or service
offerings, thus, tapping many market segments of the industry.

8. Revolutionary Impact.

9. Returns

10. Relative ease of implementation

11. Resources required

12. Risks.

The pre-feasibility study

 The ultimate goal of doing the opportunity screening matrix is to narrow down the many
opportunities into one or two most attractive ones. The next step is to conduct a pre-feasibility
study to ascertain the viability of the opportunity.
 The entrepreneur must go down to the details and take time to consider the following factors
that are contained in a pre-feasibility study:
A. Market potential and prospects
B. Availability and appropriateness of technology
C. Project investment and detailed cost estimates
D. Financial forecast and determination of financial feasibility

Market potential and prospects

 Market potential is based on the estimated number of possible customers who might avail of
the product or service.
Segmenting the market

 Using a set of demographics will be the most basic approach in determining the target segment.

Assessing competition

 Market potential can also affected by the number of establishments supplying and serving your
target customers.

Estimating market share and sales

 After estimating the number of potential target market or segment, the next thing that the
entrepreneur should assess is the potential market share he or she can attract.

Technology Assessment and Operations Viability

In order to get the enterprise going, the entrepreneur must go through the intricacies of detailing the
operations that would be required by the business, which also includes technology assessment.

There are at least four target customer expectations affecting the scale and complexity of an
enterprise’s operations:

1. Quantities demanded.

2. Quantity specifications demanded. This would dictate the following

2.1 quality of input or raw materials

2.2 quality assurance process in transforming input to output
2.3 quality output that meet the operations, standards set; and
2.4 quality outcomes for the customers who will be looking for specific results
3. Delivery expectations.
4. Price expectations

Investment Requirements and Production/Servicing Costs

 Now comes the challenging part, the entrepreneur needs to determine how much money is
needed to start the business opportunity with consideration to the technologies and operating
levels required.
Three investments that need to be funded:

1. Pre-operating cost- These are the costs related to the preparation for launch of the business.

2. Production/Service facilities investment- This refers to the long term investment for the actual
business establishment.

3. Working capital investment- This includes the investment needed to operationalize the
business.

In effect, this part of the pre-feasibility study asks two questions:

1. Do I have enough resources to cover the necessary investments?

2. Would my sales estimates be significantly higher than my monthly production/service costs in

order to produce profit

Financial forecasts and determination of financial feasibility

Upon completing the first three parts of the pre-feasibility study, the entrepreneur should now be able
to proceed in constructing his or her enterprise’s financial forecast for the business.

Financial forecasting calls for the creation of the four critical financial statements: namely, (1) income
statement; (2) balance sheet, (3) cash flow statement; (4) funds flow statement.

Income Statement

The income statement is a financial statement that measures an enterprise’s performance in terms of
revenue and expenses over a certain period

REVENUES-EXPENSES=INCOME OR ROFIT (LOSS)

Balance Sheet

Creating a balance sheet is a bit more complicated because one has to look at three different things:
assets, liabilities and equities.

Asset represent all the investments in the enterprise including the initial investments that you
considered in the pre-feasibility study.

Liabilities –represent the enterprise’s debts to suppliers, to banks, to government to employees and
other financiers.

Stockholders equity –represents the investors’ investments in the stock (or shares) of the business.

The balance sheet equation is:

ASSETS = LIABILITIES + EQUITY

Financial Ratios and Measurements

In any business endeavor, the investor or the entrepreneur himself or herself will always be interested
in knowing the payback period or how long will it take for him or her to get back what he or she has
invested in the enterprise.

PAYBACK PERIOD = Initial Investment

The feasibility study

For bigger projects that entail millions of pesos worth on investments, a full-blown feasibility study
might required more than the pre-feasibility study.

In writing the feasibility study, the entrepreneur should take into consideration the following:

1. A more in-dept study of market potential to ensure that the business proposal will reach the
forecasted sales figures;

2. Proof that the product or service being offered has the right design, attributes, specifications,
and preferred features;

3. Proof that the entrepreneur and his or her team have the necessary experience, skills and
capabilities to maximize the venture’s chances of success;
4. Legal visibility
5. More detailed costing on the different assets and more justification for the production and
operating expenses; and
6. More thorough analysis of the technology and its sustainability

Opportunity Seizing

 After opportunity seeking and screening, the entrepreneur is ready for Opportunity Seizing, the
final stage.
 It is important for the entrepreneur to establish the positioning of the business enterprise in the
marketplace.

Crafting a positioning statement

In order to craft a positioning statement, the entrepreneur is advised to look at other competitors (or
substitutes) in the marketplace.

Going through the process of questioning the entrepreneur will be able to come up with each of the
competitors Main Value Proposition (MVP) and from there, work on his own positioning.
The following key points can help out the entrepreneur on how to go about this questioning.

1. What are the main customer segments?

2. What are the different product attributes and features of each of the competitors?

3. What are the existing marketing practices of the various competitors?

4. What are the market preferences of consumers when it comes to the products being offered?

Conceptualizing the product or service offering

After making an assessment of the competing products, the entrepreneur must then conceptualize his
or her own products.

A concept is an idealized abstraction of the product or service to be offered to the preferred market of
the entrepreneur.

In order to come up with the product or service concept, the following options or directions may be
considered by the entrepreneur:

1. The first is to create a concept similar to the winning products in the marketplace and ride with
the obvious market trends.

2. The second is to find a market niche that has not been filled by the competitors.

3. The third is to conceptualize a product in an positioning category where the participants are
rather weak

4. The fourth is to conceptualize a product that would change the way customers think, behave
and buy, thus, making existing products ‘obsolete’ and ‘old fashioned’

Designing, Prototyping, and Testing the Product

From conceptualization, the entrepreneur proceeds to the design, prototyping and testing of the
concept.

Designing means that the entrepreneur must render the concept and translate it into its very physical
and very real dimensions.

Implementing, Organizing and Financing

Good planning and good programming are essential to have good implementation.

A good planner and programmer must make several important choices to achieve the desired results.

First is to choose the correct technology

Second is to choose the right people who can perform the technical and the managerial functions.

Third is to design the operating workflow

Fourth is to specify the systems and procedures that would govern the enterprise, motivate and
discipline the work force, and satisfy the customers.

Fifth is to design the organizational architecture that would allow the people to function at their best.