LECTURE 3 1

The Concepts of
Entrepreneurship and
Entrepreneurial Success
 START-UP SUCCESS

(Ries 2011, p. 27): defines “Start-up as a human

institution designed to create a new product or
service under conditions of extreme uncertainty.”
Start-ups contain the potential for exceptional
growth but also unforeseen and repeated failures.
•Start-ups developed their business idea during their
research (about 1.5 years) from an advanced
prototype (3.66) to first sales/revenues (4.36).
• The advancement, success and survival of the start-
up usually depends on the quality of its business
model, team and business strategy.
• A model is a tool for
• developing,
• verifying and
• implementing an entrepreneurial idea,
a team is a small social group that creates a start-
up personal background and the
business strategy is a manifestation of the
deliberate action of a start-up in a competitive
environment.
• A start-up as an incomplete and imperfect
enterprise has to build a business model to
implement its business idea.
• The model contains all the components and
conditions that are necessary for the operation of
an enterprise.
• KPMG Research Report of 2014, p. 34) states that,
the start-up weaknesses are financial planning,
expansion to new markets, fundraising, business
modelling and other deficiencies.
• Investors in the next KPMG Report of 2016, p. 23)
say that significant investment criteria, along with
the quality of the management team, are the
product and its sales potential.
• Challenges that constrain the ability of start-
ups to grow into high-impact businesses are:-
• lack of market orientation,
• the lack of an entrepreneurial
• culture, a small domestic market,
• the lack of early-stage capital
• The business model is considered a serious
condition for a successful business, it has various
partial features, partial proposal for its
improvement are commended or suggestions for
improving start-up business making conditions.
• Kopera et al. (2018) explain that a source of success
is rarely a technological superiority alone but rather
a business model that stays behind.
• The business model supports the complex business
endeavor, resulting in better product design and its
business model configuration.
• “it is difficulty to find investors for a start-up which
is still not yielding profit, as well as potential users.”
• The business model and/or its parts are considered
to be a significant factor of start-up viability.
• Knowing the structure of the business model and its
effect on the business performance of the start-up
may increase the likelihood of its survival.
• Distribution channels are formulated at the
beginning of the research as conceptual ideas on a
high-level (3.62), which are transformed into
implementation attempts (4.16) after approximately
one and a half year.
• Start-ups strongly prefer their own distribution.
• In the structure of distribution, only minor changes
have occurred in favor of indirect own channels.
The most popular distribution channels are direct
and own ones.
Growth and growth models
Analyzing business growth
 Measuring business growth
• Financial determinant has
been used as a
predominant measure of
business growth.
• Others use the capacity to
invest in R&D
• Internationalization
• Exploiting opportunities
• Indebtedness
• Internal financing
• Future growth opportunities
• Process and product
innovation
• Org change
• Change in sales(revenue)
• Number of employees
• Value of assets
• Market share,
• Profit
(Šarlija et al., 2016)
Introduction to Business Plan
• A Business Plan is a document that defines the goals
of your business and describes how you will attain
those goals.
• Business planning is the process of determining a
commercial enterprise’s objectives, strategies and
projected actions in order to promote its survival and
development within a given time frame.
• A Business Plan considers your:-
• investment of time,
• effort, and
• energy.

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 BUSINESS PLANNING
• A Business Plan sets:-
–objectives,
–defines budgets,
–engages partners, and
–anticipates problems before they occur.
• Business planning mostly focuses on two key aspects:
• dealing with risks and
• making profits (Peterson, Jaret & Schenck 2010.)
Business planning process requires:-
–deep investigation,
–careful evaluation of all factors, which might have an impact on
the result, and
–study of possible company’s actions results.

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• Business planning determines management
actions for
• expansion process,
• designs new ways of acting and
• includes revision of all enterprise’s operations. (Becket
2016.)
• A Business Plan identifies key areas of your
business for the purpose of maximizing the
time you spend in generating income.
• Key investors will want to look at your
Business Plan before providing capital.
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• A Business Plan helps you start and keep your
business on a successful path.
• Business Plans are critical for the success of a
company.
• Different businesses will require different types of
Business Plans.
• All Business Plans have some essential sections that
explain the core aspects of the company.

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Business Plan needs to evolve over time due
to
• Change in ownership
• Company growth
• A Wide variety of External Factors
• Economic downturn / upturn
• Change in competition
• New or changing Regulations / legislation
• Pro-active response to positive or negative
•Various ‘Standard’ techniques and questions can
help you produce a credible Business Plan like
• SWOT
• PESTLE
• Business Model Canvas (lots of versions)

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• Business plans differ widely in their:-
• length,
• appearance,
• content, and
• the emphasis placed on different aspects of the
business.
• Depending on your business and your intended use,
you may need a very different type of Business Plan:
• Mini-plan: Less emphasis on critical details. Used to test
your assumptions, concept, and measure the interest of
potential investors.
• Working Plan: Almost total emphasis on details. Used
continuously to review business operations and progress.
• Presentation Plan: Emphasis on marketability of the
business concept. Used to give information about the
business to bankers, venture capitalists, and other external
resources.

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Assembling a Business Plan
Every Business Plan should include some essential
components:
• Overview of the Business: Describes the business,
including its products and services.
• The Marketing Plan: Describes the target market for
your product and explains how you will reach that
market.
• The Financial Management Plan: Details the costs
associated with operating your business and explains
how you will pay for those costs, including the amount
of financing you may need.
• The Operations and Management Plan: Describes how
you will manage the core processes of your business,
including use of human resources.

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 Outline of a Business Plan

• Cover Sheet 5) Market Analysis

• Executive Summary a. Customers
b. Competition
• Table of Contents
c. Marketing Strategy
1) Statement of 6) Management
Purpose
7) Operations
2) Company History
8) Financial Plan
3) Business Description
9) Appendices
4) Products and
Services

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 Cover Sheet
• Identity information
• The words “Business Plan”
• Your name and business name
• Company logo
• Address
• Telephone number
• Fax Number
• Email Address
• Web Address (URL)
• Submission date
• Looks vs. content

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 Executive Summary
• Very critical, because many
individuals (including
venture capitalists) only read the summary.
• The Executive Summary of a Business Plan is a 3-5 page
introduction to your Business Plan.
•The Executive Summary section includes:
• A first paragraph that introduces your business.
• Your business name and location.
• A brief explanation of customer needs and your products or
services.
• The ways that the product or service meets or exceeds the
customer needs.
• An introduction of the team that will execute the Business
Plan.
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Executive Summary
• projected sales and profits,
• unit sales, profitability, and
• keys to success.
• highlight charts,
• market share projections, and
• customer demand charts.
• Venture objectives and Market prospects
• Financial forecasts, Sources and uses
• WRITTEN LAST

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Table of Contents

• Include page numbers

• List of headings
• Major
• Subsections
• Same font

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Company History
• Mission Statement
• Basic product description
• Names of principals and brief background on each
• Legalities: business type
• Company location
• Number of employees
• Customer highlights
• Your niche and unique qualities
• Strategic alliances
• Awards and merits
• Company milestones (business formation, opening date, hiring
employees, revenue levels/ growth)
• 1-3 year plan – future milestones to reach (sales goals, hiring
employees)

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 Business Description
Shows evidence that, a product or service is viable and capable
of fulfilling an organization's particular needs.
•Mission statement
•Legalities: business type
•Basic product or service description
•New, takeover, expansion, franchise
•General strategy plan
– List of planned milestones (business formation, opening date, hiring
employees, reaching certain revenue goals)
•Planned strategic alliances
•Work already done
•Experience in the business
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 Market Analysis
• A Market Analysis defines the target market so
that you can position your business to get its
share of sales.
• A Market Analysis section:
• Defines your market.
• Segments your customers.
• Projects your market share.
• Positions your products and services.
• Discusses pricing and promotions.
• Identifies communication, sales, and distribution
channels.

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Market Analysis

• Industry analysis
• Customers: individual, business
• Competition
• Marketing Strategy
• Cite Sources

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Market Analysis: Industry Analysis

• Market background
• Industry-wide information, trends
• Local industry information, trends
• Market capture and expectations
• Social, economic, legal, technological issues

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Market Analysis: Customers

• Customer definition, consistency

• Individual customer demographics
• Location, age, gender, occupation
• Ethnic group, lifestyle, education, income
• Business customer demographics
• Sector, location, structure
• Sales level, distribution classification, number of
employees

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Competition

• Rule of Three for Competitive Study

• Why your company is superior
• Trends in competitive companies
• Similar and dissimilar
• SWOT (strengths, weaknesses, opportunities,
threats)
• Lessons learned
• Advertising
• Eye on the future
• Competitive grid and explanation

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Marketing Strategy

• Obtaining a profitable share of the entire

marketplace
• Product: sellable aspects, brand image
• Pricing: cost-plus or economic value
• Placement
• Promotion

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 Management Team
The Management Team section outlines:
• Organizational Structure: Highlights the hierarchy and outlines responsibilities
and decision-making powers.
• Management Team: Highlights the track record of the company’s managers.
You may also offer details about key employees including qualifications,
experiences, or outstanding skills, which could add a competitive edge to the
image of the business.
• Working Structure: Highlights how your management team will operate
within your defined organizational structure.
• Expertise: Highlights the business expertise of your management and senior
team. You may also include special knowledge of budget control, personnel
management, public relations, and strategic planning.
• Skills Gap: Highlights plans to improve your company’s overall skills or
expertise. In this section, you should discuss opportunities and plans to
acquire new information and knowledge that will add value.
• Personnel Plan: Highlights current and future staffing requirements and
related costs.

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 Part 5: Marketing Plan
 The Marketing Plan section details what you propose to accomplish, and
is critical in obtaining funding to pursue new initiatives.
 The Marketing Plan section:
• Explains (from an internal perspective) the impacts
and results of past marketing decisions.
• Explains the external market in which the business is
competing.
• Sets goals to direct future marketing efforts.
• Sets clear, realistic, and measurable targets.
• Includes deadlines for meeting those targets.
• Provides a budget for all marketing activities.
• Specifies accountability and measures for all activities.

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Financial Plan

• THE PRIMARY EVALUATING TOOL

• Support all information
• Make conservative projections
• Start-up Budget: amount needed to open
• Operating Budget: ongoing expenses once
open
• Sources and Uses Sheet

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 Financing Your New Business

• Start up loans are very difficult to obtain

• Chances are you have to rely on the funds you can
personally raise

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Financial Plan: Startup Budget
• Personnel (costs prior to opening)
• Occupancy (lease, rent, or mortgage)
• Legal/ Professional Fees
• Equipment
• Supplies
• Salary/ Wages
• Utilities
• Payroll Expenses
• Internet
• Licenses/ Permits
• Insurance
• Advertising/ Promotions

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Financial Plan: Operating Budget
• Personnel • Insurance
• Lease/ Rent/ • Advertising/ Promotions
Mortgage • Depreciation
• Payroll Expenses
• Loan Payments • Internet
• Legal Fees • Payroll Taxes
• Accounting • Travel/ Entertainment
• Supplies • Miscellaneous
• 3-6 Months of Operating
• Salaries/ Wages Capital
• Dues/ Subscriptions/
Fees
• Repairs/ Maintenance

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 Financial Plan: Sources and Uses

• Sources of funds
• Details of requested financing
• Amount
• Use
• Terms

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Entrepreneurial opportunity
 Assessment levels of entrepreneurial
opportunity
• Assessing entrepreneurial opportunities (idea
screening) should be done at
• different levels and
• Different types of analyses to help develop STRATEGIES
Entrepreneurs starting ventures and running existing businesses should
also regularly analyze their operating environments at the
• Societal level -look at how PESTEL will have an impact on a venture based on a
particular idea.
• Industry level -Apply Porter’s (1985) Five Forces Model, or a similar
tool designed to assess industry-level factors by focusing specifically
on the sector of the economy in which you intend to operate.
• Market level – use appropriate tool like MKT profile analysis with set
of questions to assess the proposed position withing the
industry( attractiveness, size of MKT, MKT growth rate, profit level,
proportion of MKT to capture and the cost as well as MKT stage of
development cycle.
• Firm-levels-Use an appropriate tool like a SWOT Analysis/TOWS Matrix or VRIO
Framework to formulate and evaluate potential strategies
• TOWS matrix – develop strategies to:
• leverage strengths to take advantage of opportunities
• leverage strengths to overcome threats
• mitigate weaknesses by taking advantage of
opportunities
• mitigate weaknesses while minimizing the potential
threats or the potential outcomes from threats

• Initial scan should be high-level, designed to

assist in making key decisions (i.e. determining
if there is a viable market opportunity for the
venture).  
• Secondary scans should be continuously
conducted to support each part of the business
plan (i.e. operations, marketing, finance).
•VRIO Framework for assessing firm’s
• capacity,
• determine competencies a venture should
have, and
• determine whether competences are
• Valuable- resources (financial, physical, technological,
organizational, human, reputational, innovative)
• Rare- resource are controlled by or available to
relatively few to others
• imitability- particular resource should be difficult to
to retain cost advantages over those
imitate
who might try to obtain or duplicate it.
• exploitable/organizable-Are the resources
available to a firm useful to it?
Marketing challenges for entrepreneurial
venture

• TAKE HOME TASK

Financial preparation for entrepreneurial
ventures
Assessing the worth of a business/project

• Pay back Period

• NPV
• IRR
• Break even analysis