Entrepreneurship and Business

Planning
Chapter 6

Learning Objectives

Identify the advantages and disadvantages of

being an entrepreneur and creating a
business.
Identify the market conditions that should be
assessed before entering a market.
Explain how a new business can develop a
competitive advantage.
Explain how to develop a business plan.
Identify the risks to which a business is
exposed, and explain how they can be
managed
Jeff Madura, 4th Edition, Introduction
to Business. South Western

What is Entrepreneur?

One who creates a 1) new business 2) in the

face of risk and uncertainty for the purpose of
3) achieving profit and growth by 4)
identifying opportunities and assembling the
necessary resources to capitalize on them.
Entrepreneur is an INNOVATOR of business
enterprise who recognizes opportunities to
introduce a new product, a new process or an
improved organization, and who raises the
necessary money, assembles the factors for
production and organizes an operation to
exploit the opportunity
Jeff Madura, 4th Edition, Introduction
to Business. South Western

Why Do People Become Entrepreneurs?

Unsatisfactory current job

Negative displacement
Getting fired
Divorce
Other
Life transitions
Friends and colleagues

Jeff Madura, 4th Edition, Introduction

to Business. South Western

So What is Entrepreneurship?
Entrepreneurship is creating and building
something of value from practically nothing.
That is, entrepreneurship is the process of
creating or seizing an opportunity and
pursuing it, regardless of resources
presently controlled.
Jeffrey Timmons

Jeff Madura, 4th Edition, Introduction

to Business. South Western

Advantages on being an Entrepreneur

Obtaining larger income

Becoming your own boss
Stay on the business and stay working
Self-satisfaction

Jeff Madura, 4th Edition, Introduction

to Business. South Western

Disadvantages on being an Entrepreneur

Possibility to incur large losses

High responsibility to ensure that the business
functions properly
Lose sources of income if the business fails

Jeff Madura, 4th Edition, Introduction

to Business. South Western

Entrepreneurship Profile

Creative
Driven by vision
Moderate risk takers
Persistent
Intuitive and analytic
Honest rule breakers
Face reality; use feedback

Jeff Madura, 4th Edition, Introduction

to Business. South Western

Assessing Market Conditions

Demand
Competition
Labor conditions
Regulatory conditions

Jeff Madura, 4th Edition, Introduction

to Business. South Western

Developing a Competitive Advantage

Produce Products Efficiently

Produce High-Quality Products
Web-based businesses
Using SWOT Analysis to Create Competitive
Advantage

Jeff Madura, 4th Edition, Introduction

to Business. South Western

Developing a Business Plan

A detailed description of the proposed

business, including a description of the
product or service, the types of customers it
would attract, the competition, and the
facilities needed for production
The plan will be used as a guide for making
business decisions throughout the life of the
business.

Jeff Madura, 4th Edition, Introduction

to Business. South Western

Assessing Business Environment

Economic Environment
Industry Environment
Global Environment

Jeff Madura, 4th Edition, Introduction

to Business. South Western

Management Plan

Organizational Structure
Production
Human Resource

Jeff Madura, 4th Edition, Introduction

to Business. South Western

Marketing Plan

Target Market
Product Characteristics
Pricing
Distribution
Promotion

Jeff Madura, 4th Edition, Introduction

to Business. South Western

Financial Plan

Financing
Feasibility

Jeff Madura, 4th Edition, Introduction

to Business. South Western

Summary of Business Plan (p.215)

Jeff Madura, 4th Edition, Introduction

to Business. South Western

Business Risk

Reliance on repeat orders made by existing

customers
Reliance on one supplier
Reliance on key employees

Jeff Madura, 4th Edition, Introduction

to Business. South Western

Business Plan

What is Business Plan?

A business plan is 1) a formal statement of a

set of business goals, 2) the reasons they are
believed attainable, and 3) the plan for
reaching those goals.
It may also contain background information
about the organization or team attempting to
reach those goals.

Why Take Time to Make a Business Plan?

Although building a plan does not guarantee

success, it does increase your chances of
succeeding in business.
A plan is like a road map that serves as a
guide on a journey through unfamiliar, harsh,
and dangerous territory.

Who is the Audience of a Business Plan?

Internal Stakeholders: the development of a

new product, a new service, a new IT system,
a restructuring of finance, the refurbishing of
a factory or a restructuring of the organization
External Stakeholders: detailed information
about the organization or team attempting to
reach the goals.

Thus Business Plan in our context is

Business Plan is a written summary of
1) proposed business venture 2) its
operational and financial details,
and 3) its marketing opportunities
and strategy

Content of Business Plan

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.

Cover page and table of contents

Executive summary
Business description
Business environment analysis
Industry background
Competitor analysis
Market analysis
Marketing plan
Operations plan
Management summary
Financial plan
Attachments and milestones

Typical Questions Addressed to a Business

Plan

What problem does the company's product or service solve? What

niche will it fill?
What is the company's solution to the problem?
Who are the company's customers, and how will the company market
and sell its products to them?
What is the size of the market for this solution?
What is the business model for the business (how will it make money)?
Who are the competitors and how will the company maintain a
competitive advantage?
How does the company plan to manage its' operations as it grows?
Who will run the company and what makes them qualified to do so?
What are the risks and threats confronting the business, and what can
be done to mitigate them?
What are the company's capital and resource requirements?
What are the company's historical and projected financial statements?

Uses of Business Plan

Venture capital
Fundraising
TQM
MBO
Strategic Planning

A Business Plan must Pass Three Tests

The Reality Test - proving that:

a market really does exist for your product or
service.
you can actually build or provide it for the cost
estimates in the plan.
The Competitive Test - evaluating:
a companys position relative to its customers.
managements ability to create a company that
will gain an edge over its rivals.
The Value Test proving that:
a venture offers investors or lenders an
attractive rate of return or a high probability of
repayment.