What is Entrepreneurship and Why Is It Important?

Entrepreneurship is defined as the process by which individuals

pursue opportunities without regard to resources they currently control for the purpose of exploiting future goods and
services. We want to note here that established firms with an orientation toward acting entrepreneurially practice
corporate entrepreneurship.All firms fall on a conceptual continuum that ranges from highly conservative to highly
entrepreneurial. Corporate Entrepreneurship. The conceptualization of entrepreneurship at the company level. Highly
entrepreneurial companies are proactive, innovative, and risk taking. The position of the firm on continuum that ranges
from highly conservative entrepreneurial is the entrepreneurial intensity. Why Do People Become Entrepreneurs?
Three primary reasons people decide to become entrepreneurs and start their own firms:1To be their own boss 2To
pursue their own ideas 3To pursue financial rewards. Characteristics of successful Entrepreneurs Four primary
characteristics of successful entrepreneurs:1Passion for the business2Product/customer focus3Tenacity despite failure
4Execution intelligence.Five Reasons Why Passion is important.1The ability to learn and iterate.2A willingness to work
hard for an extended period of time.3Ability to overcome setback and no’s.4The ability to listen to feedback on the
limitations of your organization and yourself.5Perseverance and persistence when the going gets tough. Common
Myths about entrepreneurs. Five Common Myths regarding entrepreneurship.1Entrepreneurs are born, not
made.2Entrepreneurs are gamblers.3Entrepreneurs are motivated primarily by money.4Entrepreneurs should be young
and energetic.5Entrepreneurs live the spotlight. Types of start-up firms. Three types of Start-up firms:1Salary
Substitute Firms.2Lifestyle Firms.3Entrepreneurial Firms. Changing Demograhpics of Entrepreneurs;1Woman
Entrepreneurs.2 Senior entrepreneurs3 Millennial Entrepreneurs. The Entrepreneurial Process.1 Deciding to become
an entrepreneur: 2Developing successful business ideas:A Business Model:B Business Plan:3 Moving from an idea to an
entrepreneurial firm:4 Managing and growing the entrepreneurial firm: Developing Skills for your Career: After
studying this book, some readers will decide they do not want to become entrepreneurs, others will conclude that
becoming an entrepreneur at some point is desirable, while still others will decide to launch an entrepreneurial venture
as quickly as possible – but, for all readers though, the tools, techniques, and concept discussed in this book will further
develop some of your “employability skills”.1Business ethics and social responsibility 2Critical thinking 3Collaboration
4Data literacy. The Difference between Opportunities and Idea. An opportunity is a favorable set of circumstances that
creates a need for a new product, service, or business.Four Essential Qualities of an Opportunity1Attractive2Timely
3Durable 4Anchored in a product that creates value for the end user.An idea is a thought, an impression or a notion. An
idea may or may not meet the criteria of an opportunity. Three Ways to Identify Opportunities Three are three
approaches entrepreneurs use to identify an Opportunities:1Observing Trends Trend 1: Economic Forces . Trend 2:
Social Forces. Trend 3: Technological Advances. Trend 4: Political Action and Regulatory Changes. 2Solving a problem
3Finding gaps in the marketplace. Personal Characteristics of the Entrepreneurs. Characteristics that tend to make
some people better at recognizing opportunities than others: 1Prior Experience 2Cognitive Factors 3Social
Networks4Creativity. Five Steps to Generating Creative Ideas. 1Preparation 2Incubation 3Insight 4Evaluation
5Elaboration Techniques for Generating Ideas Several Techniques are used to stimulate and facilitate the generation of
new ideas for product, services and businesses such as1Brainstorming2Focus Group3Library and internet
Research4Other Techniques. Feasibility Analysis:is the process of determining whether a business idea is viable. The
most effective businesses emerge from a process that includes. - Recognizing a business idea 2- Testing the feasibility
of the idea 3- Writing a business plan 4- Launching the business. A mental transition must be made when completing a
feasibility analysis from thinking of a business idea as just an idea to thinking if it as a business  A feasibility analysis is
an assessment of a potential business rather than strictly a product or service idea.  Feasibility analysis is investigative
in nature and is designed to critique the merits of a proposed business.  A business plan is more focused on planning
and selling. When to conduct a 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.
Completing a feasibility analysis requires: 1Primary research: is research that is collected by the person or persons
completing the analysis. It normally includes talking to industry experts, obtaining feedback from prospective customers,
conducting focus groups, and administering surveys. 2- Secondary research: probes data that is already collected. The
data generally includes industry studies, Census Bureau data, analyst forecasts, and other pertinent information gleaned
through library and internet research. Feasibility Analysis. Part 1: product/service feasibility A. Product/service
desirability B. Product/service demand Part 2: industry/target market feasibility A. Industry attractiveness B. Target
market attractiveness Part 3: Organizational Feasibility A. Management prowess B. Resource sufficiency Part 4: Financial
Feasibility A. Total start-up cash needed B. Financial performance of similar businesses C. Overall financial attractiveness
of the proposed venture overall assessment. Part 1: Product/service feasibility analysis  Is an assessment of the overall
appeal of the product or service being proposed.  Before a prospective firm rushes a new product or service into
development, it should be sure that the product or service is what prospective customers want.  Components to
Product/service feasibility analysis: a) Product/service desirability: is to affirm that the proposed product or services is
desirable and serves a need in the marketplace. b) Product/service demand: is to determine if there is demand for the
product or service. a) Product/service desirability  Questions to determine the basic appeal of the product or service.
1- Does it make sense? Is it reasonable? Is it something consumers will get excited about? 2- Does it take advantage of
an environmental trend, solve a problem, or take advantage of a gap in the marketplace? 3- Is this a good time to
introduce the product or service to the market? 4- Are there any fatal flaws in the product or service’s basic design or
concept?  Administer a Concept Test  Concept test involves showing a preliminary description of a product or service
idea.  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 o A sense of the viability or the product or service idea. o Suggestions for how the
idea can be strengthened or “tweaked” before proceeding further. Product/service demand :Steps to assessing
product/service demand:- Step 1 Administer a Buying Intentions Survey  Is an instrument that is used to gauge
customer interest in a product or service.  It consists of a concept statement or a similar description of a product or
survey with a short survey attached to gauge customer interest.  Internet sites like SurveyMonkey make administering a
buying intentions survey easy and affordable. Step 2 Conduct 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 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. If your
idea is to sell educational toys, spend a week volunteering at a day care center and watch how children interact with
toys.  One of the most effective things an entrepreneur can do to conduct a thorough product/service feasibility
analysis is to hit the streets and talk to potential customers.  This potential entrepreneur is administering a survey
about a new product idea. Part 2: Industry/Target Market Feasibility Analysis  Industry/Target Market Feasibility
Analysis: 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: 
Industries vary in terms of their overall attractiveness.  Particularly important—the degree to which environmental and
business trends are moving in favor rather than against the industry. 2- 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. Part 3: Organizational Feasibility Analysis  Part 3: Organizational Feasibility Analysis 
Organizational Feasibility Analysis: 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.  Components of organizational feasibility analysis:- 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: a) The passion that the solo
entrepreneur or the founding team has for the business idea. b) The extent to which sole entrepreneur or the founding
team understands the markets in which the firm will participate.  An indication of passion is the willingness of a new
venture team to complete a comprehensive feasibility analysis.  New-venture team: is the group of founders, key
employees, and advisers that either manage or help manage a new business in its start-up years. 2. Resource Sufficiency
 Is to determine whether an entrepreneur has sufficient resources to move forward.  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.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.  Components of
organizational feasibility analysis:- 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: a) The passion that the solo entrepreneur or the founding team has
for the business idea. b) The extent to which sole entrepreneur or the founding team understands the markets in which
the firm will participate.  An indication of passion is the willingness of a new venture team to complete a
comprehensive feasibility analysis.  New-venture team: is the group of founders, key employees, and advisers that
either manage or help manage a new business in its start-up years. 2. Resource Sufficiency  Is to determine whether an
entrepreneur has sufficient resources to move forward.  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. Part 4: Financial Feasibility
Analysis  Financial Feasibility Analysis: is the final component of a comprehensive feasibility analysis.  A preliminary
financial assessment is sufficient; indeed, additional rigor at this point is typically not required because the specifics of
the business will inevitably evolve making it impractical to spend a lot of time early on preparing detailed financial
forecasts.  Components of financial feasibility analysis:- 1. 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 ne 2. Financial Performance of
Similar Businesses  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. 3. Overall Financial
Attractiveness of the Proposed Venture  A number of other financial factors are associated with promising business
startups.  In the feasibility analysis stage, the extent to which a business opportunity is positive relative to each factor
is based on an estimate rather than actual performance. Financial Factors Associated With Promising Business
Opportunities  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. What is a
business plan? A business plan is a written a narrative, that describes what a new business intends to accomplish and
how it intends to accomplish it. What are the advantages of preparing a business plan? It forces a firm’s founders to
intently study every aspect of their business, a process that’s hard to replicate in any other way. - Another reason to
write a business plan is that it will provide company with a selling document. It provides a mechanism for a young
company to present itself to potential investors, suppliers, business partners, key job candidates, and others. - A
business plan suggest that an entrepreneur have thought through each element of the business and is committed
enough to invest time and the energy necessary to prepare the plan. - A business plan also gives an investor something
to react on. - It helps the company develop a road map to follow to execute its strategies and plans - It introduces
potential investors and stakeholders to the business opportunity the firm is pursuing, and it plans to pursue it. When is
the appropriate time write a business plan? Writing a business plan is the last activity completed in the process
entrepreneurial process - A business plan should be written after having: o Generated and recognized an idea -
Conducted a thorough feasibility analysis of the idea and come the to the conclusion that the idea is feasible or viable -
Developed an effective business model o Conducted and thorough industry and competitor analysis. What are the two
primary reasons for writing a business plan? - The two primary reasons for writing a business plan consist of internal
reasons and external reasons. Internal reasons:Forces the founding team to systematically think through every aspect of
its new business External reasons:Communicates the merits of a new venture to outsiders, such as investors and
bankers. Why is writing a business plan the last activity to be completed in the entrepreneurial process? - The business
plan is the last activity to be completed because the business plan must be substantive enough and sufficient details
about the merits of the new venture in order to convince the reader(investor) that the new business is exciting and
should receive support. Who reads the business plan and what are they looking for when doing so? - There are two
primary audiences for a firm’s business plan; A firm’s employees and Investors and other external stakeholders. A firm’s
employees: A business plan can help a firm’s rank-and file employees operate in sync and forward in consistent and
purposeful manner. - Particularly useful for the functional department heads of a young firm. investors and other
external stakeholders: A firm’s business plan must make the case that the firm is a good use of an investor’s funds or
the attention of others. - The business plan credibility - The business viability - Looking for red flags . What are the
differences among a summary business plan, a full business plan, and an operational business plan? Summary
business plan: - - works best for new businesses in the early stages of development and are not prepared to write a full
business plan but want to “test the waters” to see if the investors are interested in their idea. A full business plan: - -
Works best for new ventures that are at the point where they need funding or financing. This plan contains a company’s
operations and plans in much more detail than a summary business plan. This format is usually used to prepare a
business plan for an investor. Operational business plan: - - Is meant primarily for an internal audience; It works best as
a tool for creating a blueprint for a new venture’s operations and providing guidance to operational managers. How will
investors typically react if they think a business plan is based on estimates and predictions rather than on careful
analysis and facts? - Investors and potential business partners will base their assessment of a proposed firm’s future
prospects of facts, not guesswork or platitudes. - A business plan based on an entrepreneur’s predictions of business
future prospects is insufficient and investors will not use their time and money on badly prepared business proposals.
Why is it important for a business plan to follow a conventional structure rather than be highly innovative and
creative? - To make the best impression, a business plan should follow a conventional structure. Departing from a
conventional structure is usually a mistake. Typically, investors are very busy people and want a plan where they can
easily find critical information. Why should the executive summary, which is one of the first things that appears in a
business plan, be written last? - The business plan itself will evolve as it’s written, so not everything is known at the
outset. In addition, if you write executive summary first, you run the risk of trying to write a plan that fits the executive
summary rather than thinking through each piece of the business plan independently. What is the purpose of an
executive summary? The executive summary is a short overview of the entire business plan. - The purpose with the
executive summary is to provide a busy reader with everything the person needs to know about the new venture’s
distinctive nature. What should be mentioned in company description? - A brief description of the company - Company
history - Mission statements - Tagline - Position - Milestones - Key partnerships. What is purpose of a mission
statement? - The purpose is the define why the company exist and what it aspires to become. - A well written mission
statement can define the path a company takes and acts as its financial and moral compass. What is the difference
between the industry analysis section and the market analysis section of a business plan? - The industry analysis
focuses on the industry in which a firm intends to compete whereas the market analysis breaks the industry into
segments and zeroes in on the specific segment (target market) to which the firm will try to appeal. What is a
competitor analysis? - A detailed analysis of a firm’s competitors. - A competitor analysis should be included along the
market analysis. Why should an entrepreneur keep an open mind about the elements of a business plan changing? -
It’s important to keep an open-minded attitude to feedback or new suggestion because it potentially can improve the
business plan which in the long term can contribute to strengthen the future business. What is the purpose of “The
economics of the business” section of a business plan? The purpose if “The economics of the business” is that it
addresses the basic logic of how profits are earned in the business and how many units of business’s product or service
must be sold for the business to “break even” and then start earning a profit. What is turnover, gross margin, costs of
goods, contribution margin, variable costs, fixed costs and operating leverage? Turnover/Revenue: Turnover/revenue
is the net sales generated by a business - Gross margin: Selling price minus the costs of goods sold or variable costs -
Costs of goods: The materials and direct labour needed to produce the revenue driver - Contribution margin: The
surplus per unit of sale which is available to contribute to covering the business fixed costs and producing a profit. -
Variable costs: A variable cost is a corporate expense that changes in proportion with production output. Variable costs
increase or decrease depending on a company's production volume; they rise as production increases and fall as
production decreases. - Fixed costs: Are costs a company incurs whether it sells something or not an example of a fixed
costs is rent. - Operating leverage: Operating leverage is the degree to which a firm can increase operating income by
increasing revenue. A business that generates sales with a high gross margin and low variable costs has high operating
leverage. Describe marketing strategy? - Marketing strategy refers to its overall approach for marketing its
products/services. A firm’s overall approach typically boils down to how it positions itself on its market and how it
differentiates itself from competitors. What is a product/service design and development plan? - If you’re developing a
completely new product/service, you need to include a section in your business plan that focuses on the status of your
new product/service development efforts. If you’re developing a completely new product/service, what type of
information should you include in your business plan regarding the status of the development efforts? - Describe the
present stage of the development of your product/service - Products follow a logical path of development that includes
product conception, prototyping, initial production, and full production. Describe the point that your product/service is
at and provide a timeline that describes the remaining steps. - If you are early in the business stage and only have an
idea you should carefully explain how a prototype will be produced or have s virtual prototype made to show. - Include a
section called challenges and risk. This should disclose any major anticipated design and development challenges and
risks that will be involved in bringing the product/service to market. What is the difference between product prototype
and a virtual prototype? - A prototype is the first physical manifestation of new product/service, often in crude or
preliminary form - Whereas a virtual prototype is a visual is prototype which is seen through a computergenerated 3D
image. What is the purpose of the “operations plan” section in the business plan? - The operations plan section of the
business plan outlines how your business will be run and how your product/service will be produced. - The purpose is to
give the reader an overall sense of how the business will be run. Why is the management team and company structure
section of a business plan often touted as one of the most important ones? - Investors read more business plans with
interesting ideas and exciting markets than they are able to finance. As a result, investor often first look at the executive
summary and the go directly to the management team and company structure plan to assess the strength of the people
starting the business. As a result, its often not the idea or market that wins funding among competing plans, but the
perception of that one management team is better prepared to execute its idea than others. - Organizational chart: The
most effective way to illustrate how a company will be structured and the lines of authority and accountability that will
be in place is to include anorganizational chart. And organizational chart is a graphic representation of how authority
and responsibility are distributed within the company. The management team and company structure section of a
business plan should include: - Title of the position - Duties and responsibilities of the position - Previous industry and
related experience - Previous success - Educational background Describe the financial projections section? - The
financial projections section of a business plan presents a firm’s pro forma (projected) financial projections. This section
takes the plans you have developed and express them in financial terms. What should the financial projections include?
- The financial projections section should include: o Sources and uses of funds statement o Assumption sheet o Pro
forma (projected) financial statements o Ratio analysis - Sources and uses of funds statement is a document that lays
out specifically how much money a firm needs, where the money will come from, and how the money will be used. -
Assumption sheet is an explanation of the most critical assumptions on which financial statements are based. Some
assumptions will be based on general information and other assumptions will be based on very specific information. -
Pro forma (projected) financial statements represents the finale of the entire business plan. It includes the pro forma
income statements, the pro forma balance sheet, and the pro forma cash flow statement. Its recommended to include
three to five years of pro forma statements. - Ratio analysis consist of return of assets and return of sales which are
computed by taking numbers out of financial statements and forming ratios with them. Each ratio has a particular
meaning in regard to the potential of the business How should a business plan be presented to investors? - Follow
instructions. If an investor tells you that you have one hour to present, and it should consist of a 20-minute presentation
and 40 min for question you shall not use more time than 20 min presenting the business plan. - The presentation
should be smooth and well-rehearsed - The power point slides should be sharp and cluttered with material - Arrive at
the appointment on time well prepared - Don’t spend too much time on talking about the technology itself, it’s better to
talk about the business in general.