DETERMINING THE CAPITAL NEEDED

3. DETERMINING THE CAPITAL NEEDED

-It is mandatory in the entrepreneurial process to calculate the resources needed to establish the business.
-Careful calculation must be applied in computing the complete set of resources needed and include only those
items that are considered as the real needs in venture creation.
-Allowance must also be considered.
RUNNING THE BUSINESS
4. RUNNING THE BUSINESS
-This is the part where the entrepreneur should use the resources allocated for the new venture.
-All aspects of the business plan should be critically observed from operations, marketing and sales, human
resources, finance, and the strategy implementation.
-The entrepreneur should have a control and monitoring system
COMPONENTS AND STEPS IN THE ENTREPRENEURIAL PROCESS
(Hisrich, 2010)
Developing a Business plan
-Come up with a business description and analysis
-Perform industry analysis
-Come up with marketing plan
-Prepare the operations plans including the organization plan.
-Come up with the financial plan.
-Identify strategies and tactics.
-Perform monitoring and control.
Opportunity Spotting and Assessment
-Evaluate the identified opportunity.
-Conceptualize and measure the opportunity.
-Identify the perceived value of the opportunity to the company and the customers.
-Do cost-benefit analysis of the opportunity including risk analysis.
-Match the opportunity with the entrepreneur's skills and objective
-Scan the strengths and weaknesses of competitors.
Running the Business
-Practice Leadership as a way of life.
-Recognize critical success factors
-Identify existing and foreseeable problems and issues.
-Employ risk-mitigating controls and monitoring systems.
Determining the Capital Needed
- Calculate the intrinsic and extrinsic
capital needed.
-Calculate the existing capital.
-Calculate the difference
between the needed capital and
the existing capital. Choose the
most cost-efficient suppliers
or service providers.
-Develop contract and relationship
with suppliers and service providers.
SCANNING THE MARKETING ENVIRONMENT
-Scanning the marketing environment is the starting point of any new venture that involves
understanding and knowing the intricacies of the macro-environment, micro-environment and internal
environment.
Through scanning the environment an entrepreneur can recognize various opportunities and
understand thoroughly the arena where the future business will operate.
SEEKING,SCREENING, AND SEIZING
-The 3S of opportunity spotting and assessment is the framework that most of the promising entrepreneurs use to
finally come up with the ultimate product or service suited for a specific opportunity. An opportunity is an
entrepreneurs business idea that can potentially become a commercial product or service in the future. The
entrepreneur serves as the catalyst of creating value for the customers through the new or innovated product or
service. As a reward, the entrepreneur earns profits when the customers are satisfied and delighted.
THE 3S OF OPPORTUNITY SPOTTING AND ASSESSMENT
S1: Seeking the Opportunity
-Opportunity seeking is the first step and is the most difficult process of all due to the number of options that the
entrepreneur will have to chose from.
I. Macro-environmental Sources
I. Macro-environmental Sources
A. STEEPLED- This is a mnemonic for sociocultural, technological, economic, environmental, political, legal, and
demographic factors. This represents the general environment where the future business is about to operate.
B. Industry
-This is the source of current trend on what is happening in the industry where the future business will belong to.
C. New discovery or knowledge
-These are new trends that can be the core business model of a new venture.
D. Futuristic Opportunities
-These are projected new opportunities that can possibly affect the new business while it is running.
2. Micro-market
2. Micro-market
-These are the current needs and wants of potential customers that should be discovered right away by a budding
entrepreneur. A need is recognized when a customer believes that there is a difference between his or her current
situation versus his or her desired condition. A want is recognized when a customers believes that there is a
specific product or service that can perfectly suit the need.
A. Consumer preferences, interest and perception
B. Competitors
-Recognizing and understanding potential competitors will aid the entrepreneur to develop a product or service
that is unique and will stand out from the competitor.
C. Unexpected Opportunities from customers
-The most brilliant ventures come from the most unexpected opportunities. It may happen in unlikely situations,
unlikely places, and with unlikely people.
D. Talents, hobbies, skills, and expertise
-Business opportunities do not first come from outside forces, but also from within. The entrepreneur's talents,
hobbies, skills, or expertise can be a source of business opportunity.
E. Irritants in the marketplace, such as deterrents, problems, complaints and delays
-Entrepreneurs see opportunities in situation where there is a recurring problem or sometimes when there is no
more hope in solving the problem.
F. Location
-Entrepreneur first have to look at their ecosystem and they will be able to spot a business opportunity right away.
Methods of Generating Ideas
1. Focused group discussion (FGD)
3. Methods of Generating Ideas
-In this method, a moderator handles a very open, free-range flowing, and in-depth discussion with a group of
people who can provide insightful ideas about a new product or service that will fill a market need.
2. Brainstorming Similar to an FGD
-brainstorming is an activity that allows the participants to share creative ideas using the following rules:
a. No destructive criticism on judgement is allowed
b. Wilder ideas are accepted
c. More ideas are preferred
d. Improvement of other's ideas is allowed
In short, brainstorming is a fun discussion with linient rules.
3. Brainwriting or Internet Brainstorming
-Same as brainstorming except that the channel used is not face-to-face, but in writing or online.
4. Problem Inventory Analysis
-This method is similar to the FGD except that the participants are already given an inventory of product or service
problems.
Macro-environmental Sources:
Examples of Findings
STEEPLED Analysis
The result of the STEEPLED scan will aid the entrepreneur in deciding what product or service to set up and
whether this new venture will succeed or not. The focus of this scan is only on the macro-environment. Again, not
all factors can have an effect on the new venture. The important things is for the entrepreneur to fully scan these
factors so he or she can decide if there is a compelling business opportunity or an impending threat.
Macro-environmental Sources: Examples of Findings
1. Socio-cultural factors
These factors represent a general view of a locality's tradition,customs,beliefs,norms, and perceptions. These
factors affect how a person of the locality behaves and reacts to marketing and selling activities.
The entrepreneur should take note of the following Socio-cultural factors:
• Health consciousness
• Education level
• Attitudes toward imported goods and services
• Attitude toward the person's life style
• Attitude toward product quality and customer service
• Attitude toward saving and investing
• Emphasis on safety
• Buying habits
• Religion and beliefs
2. Technological factors
These are composed of innovations of an existing technology or an invention of a new one mostly on applied
science and engineering research areas. Entrepreneurs should always be up-to-date with the technology changes,
as these are catalyst in improving a product or service or replacing them entirely.
The entrepreneur should take note of the following Technological factors:
• Basic in-fastructure level
• Rate of technological change
• Spending on research and development
• Technology incentives
• Legis nation regarding technology
• Communication infrastructure
• Access to newest technology
• Internet infrastructure and penetration
3. Economic factors
These factors play a title role in the scanning of marketing in environment because economic factors directly affect
any business venture. These factors include income, expenses, and resources that can influence because of doing
business generating income.
The entrepreneur should take note of the following Economic factors:
• Growth rates
• Inflation rates
• Interest rates
• Exchange rates
• Unemployment trends
• Labor costs
• Stages of business cycle
• Trade flows and patterns
• Level of consumers disposable income
• Monetary policies
• Fiscal policies
• Prices fluctuations
• Stock market trends
4. Environmental or ecological factors
These factors should be given much importance in conducting a business especially when the world has already
suffer severely from human induced calamity. The scan of these factors will help the entrepreneur determine in
the business he/she is entering into will comply with the environmental standards or will just be a hazard to
people, animals, nature. Moreover, the entrepreneur will know if the business venture will be suited with the
weather conditions in his or her locality.
The entrepreneur should take note of the following Environmental factors:
• Weather
• Climate change
• Laws regulating environment pollution
• Air and water pollution
• Recycling
• Waste management
• Attitudes towards "green" or ecological products
• Endangered species
• Attitudes toward and support for renewable energy
5. Political factors
These factors are mostly induced by government policies and administrations, which can have a strong effect in the
entrepreneur's business
The entrepreneur should take note of the following Political factors and examples:
• Government stability likely changes
• Bureaucracy
• Corruption level
• Tax policies (rates and incentives)
• Freedom of press
• Rule of law
• Government effectiveness
• Political rights
6. Legal factors
Related with political factors are government laws and regulations that can restrict or allow business activities.
The entrepreneur should take note of the following Legal factors and examples:
• Anti-trust law
• Discrimination law
• Copy rights, patents/ intellectual property rights
• Consumer protection
• Employment law
• Health and safety law
• Data protection law
7. Ethical factors
These are the factors that will serve as entrepreneur's guide on how to be ethical in running in the business.
The entrepreneur should take note of the following Ethical factors:
• Ethical advertising and sales practices
• Accepted accounting, management, and marketing standards
• Attitude toward counterfeiting and breaking patents
• Attitude toward development and well-being of employees
8. Demographic factors
These are the characteristics of the people in the target market.
The entrepreneur should take note of the following Demographic factor:
• Population growth rate
• Age distribution and life expectancy rates
• Gender distribution
• Social classes
• Family size and structure
• Minorities
S2-SCREENING THE OPPORTUNITY
- This concept is inculcated to see the universe of opportunities.
- Effective choosing or careful diligence.
- It is the process of cautiously selecting the best opportunity.
- Internal intent and external intent
- Time must be considered by the entrepreneur in screening the opportunities.
1. Has superior value to customers
2. Solves a compelling problem, issue, a need, or a want
3. Is a potential cash cow
4. Matches with the entrepreneur's skills, resources and risk appetite
THE OPPORTUNITY ATTRACTIVENESS TEST
- It aims to assist entrepreneur s in ensuring the opportunity that they will venture into is an attractive and feasible
prospect. (Young leson, 2009)
- This test is designed to detail each entrepreneurial aspect into small chunks.
- The answer in this test is the guide for the entrepreneur for the business plan.
- The entrepreneur can also customize this test to better suit in screening.
- Key: Effective diligence
1. THE CONCEPT AND THE STRATEGY
2. OPPORTUNITY METRICS
TABLE 2.2a Opportunity metrics for market potential
TABLE 2.2b Opportunity metrics for financial feasibility
TABLE 2.2c Opportunity metrics for exit strategies or harvest options
TABLE 2.2d Opportunity metrics for competitive advantage
TABLE 2.2e Opportunity metrics for management team
TABLE 2.2f Opportunity metrics for STRATEGIC DIFFERENTIATION
Table 2.2G Opportunity metrics for assessment of personal resources
Lena's concepts and strategies:
VISION STATEMENT
Envision her business as a one-stop beautification and relaxation show where families bond, relax, and feel and
look better.
VALUE PROPOSITION
Business will cater to the families holistic needs of beautification, relaxation, and bonding with their love ones. It
will remove the problem of going to different shops. Family package and bundled services will also be offered to
entice more customers.
2. If you were in lena's shop, how will you evaluate the feasibility of the business venture? Should she
continue pursuing the business venture? Use the OAT to evaluate the factors involved. Use 5 points as
the highest score and 1 as the lowest score. You should be very careful in evaluating the factors, and it
should be based on actual facts and intensive research. To know how the OAT works, a sample gas been
given for you, based on the table.2.2a
• The score in the first row is acquired by getting the average of all the sub-factors in the first column (criteria)
Jamaeca sent February 27 at 8:19 PM
After getting the initial score and multiplying them with the weight or percentage, compute the total attractiveness
score. Use the sample tiered scale form the discussion as your basis for the assessment.
S3 - Seizing the Opportunity
OPPORTUNITY SEIZING
-is the last step in opportunity spotting and assessment. This is the "pushing through" with the chosen opportunity.
Entrepreneurs should make the best out of this opportunity, and they should exert effort and full dedication for
the success of the new venture. The entrepreneur's idea can be any type of innovations listed here.
INNOVATION
-is the process of positively improving an existing product or service. It is a key driver for economic growth.
Innovation is inevitable as the world constantly changes. Therefore, products and services must also adapt o these
these changes. There are three types of innovations according to the degree of distinctiveness.
1. BREAKTHROUGH INNOVATION
-These innovation, which may also include inventions, occur infrequently as these establish the platform on which
future innovations in an area are developed. Breakthrough innovations must be protected by a patent, a trade
secret, or a copyright. Examples of breakthrough innovations include the internet, the computer, or the airplane.
2. TECHNOLOGICAL INNOVATION
-These innovations occur more frequently than breakthrough innovations. These innovations are technological
advancements of an existing product or service. These innovations need to be protected, too. In relation to the
examples given, technological innovations include the wireless fidelity or wifi, the laptop, and the jet airplane.
3. ORDINARY INNOVATION
-These innovations occur ordinarily as the name implies. They are commonly originating from market analysis and
technology pull instead of a technology
Entrepreneur often encounter a problem in defining a new product or service, of identifying its components of
features.
Example of these include drastically improving the packaging ans not the product itself, adding one extra step in
the service delivery process or simply augmenting a product or service. The "newness" is also independent on the
eyes of the market ans the company.
PRODUCT OR SERVICE PLANNING AND DEVELOPMENT PROCESS
-In the seeking , one opportunity stood out from a number of source. This opportunity was tested according to its
attractiveness and feasibility in the screening process. The last process, called the seizing process, involves refining
and developing this opportunity. The refining process is called PRODUCT OR SERVICE PLANNING AND
DEVELOPMENT PROCESS. It has five key stage.
1. IDEA STAGE
In this stage, the entrepreneur determine what are the feasible products and/or service that will perfectly suit the
opportunity. Usually, a market evaluation is conducted by the entrepreneur to assess whether the new product or
service ideas will be accepted by the market using value and benefits to consumers as metrics. On the other hand,
the value of the new product and/or services should also be assessed if these will benefit the entrepreneur.
Product and services that are unappealing to the market should be eliminated at this stage.
2. CONCEPT STAGE
Once the acceptable product or service has already been identified, it will g through the concept stage. In the
concept stage, the idea will undergo a consumer acceptance test. This test include getting INITIAL reactions of the
primary target market and the distribution channel
3.Product development stage
-In this stage, the entrepreneur leverages on the information generated from the prospective customers via the
concept stage. Actual reactions from prospective customers are determined. The entrepreneur will conduct a
consumer panel where the actual product samples or actual service samples will be given or rendered to panel of
potential customers.
The participants’ task is to critique the actual product or service and record the good qualities and inferior
attributes. They are also given samples of competitors’ products or services for comparative purposes.
4.Test marketing stage
-This stage validates the work done from the first three stages to measure success in the commercialization of the
product or service. Actual sales results will be the foundation of the customer’s acceptance level and will be the
basis in commercializing the product or service
Recognizing the potential market is really one of the most difficult task to do. It involves tedious
research and research to ensure success.
Once the 3s of opportunity spotting and assessment have been diligently done. The entrepreneur
should now be ready to prepare a comprehensive business plan that covers the marketing, operations,
and financial plans