Entrepreneurial

Management
Week 4
Entrepreneurial Process
• The Entrepreneur is a change agent that acts as an
industrialist and undertakes the risk associated with forming
the business for commercial use. An entrepreneur has an
unusual foresight to identify the potential demand for the
goods and services.
• The entrepreneurship is a continuous process that needs to
be followed by an entrepreneur to plan and launch the new
ventures more efficiently.
1) Discovery:
• An entrepreneurial process begins with the idea generation,
wherein the entrepreneur identifies and evaluates the
business opportunities.
• The identification and the evaluation of opportunities is a
difficult task; an entrepreneur seeks inputs from all the
persons including employees, consumers, channel partners,
technical people, etc. to reach to an optimum business
opportunity.
• Once the opportunity has been decided upon, the next step
is to evaluate it. An entrepreneur can evaluate the efficiency
of an opportunity by continuously asking certain questions to
himself, such as, whether the opportunity is worth investing
in, is it sufficiently attractive, are the proposed solutions
feasible, is there any competitive advantage, what are the
risk associated with it.
• Above all, an entrepreneur must analyze his personal skills
and hobbies, whether these coincides with the
entrepreneurial goals or not.
2) Developing a Business Plan:
• Once the opportunity is identified, an entrepreneur needs to
create a comprehensive business plan. A business plan is
critical to the success of any new venture since it acts as a
benchmark and the evaluation criteria to see if the
organization is moving towards its set goals.
• An entrepreneur must dedicate his sufficient time towards its
creation, the major components of a business plan are
mission and vision statement, goals and objectives, capital
requirement, a description of products and services, etc.
3) Resourcing:
• The third step in the entrepreneurial process is resourcing,
wherein the entrepreneur identifies the sources from where
the finance and the human resource can be arranged. Here,
the entrepreneur finds the investors for its new venture and
the personnel to carry out the business activities.
4) Managing the company:
• Once the funds are raised and the employees are hired, the
next step is to initiate the business operations to achieve the
set goals. First of all, an entrepreneur must decide the
management structure or the hierarchy that is required to
solve the operational problems when they arise.
5) Harvesting:
• The final step in the entrepreneurial process is harvesting
wherein, an entrepreneur decides on the future prospects of
the business, i.e. its growth and development.
• Here, the actual growth is compared against the planned
growth and then the decision regarding the stability or the
expansion of business operations is undertaken accordingly,
by an entrepreneur.
• The entrepreneurial process is to be followed, again and
again, whenever any new venture is taken up by an
entrepreneur, therefore, its an never ending process.
• It is useful to break the entrepreneurial process into Five
Phases:
1) Idea generation,
2) opportunity evaluation,
3) planning,
4) company formation/launch and
5) growth.
• These phases are summarized in this table, and the
Opportunity Evaluation and Planning steps are expanded in
greater detail below:
1. Idea Generation: every new venture begins with an idea. In our context, we take an idea to be a description of a need or problem of some
constituency coupled with a concept of a possible solution. (A characterization of this phase is still work in process on this site.)

2. Opportunity Evaluation: this is the step where you ask the question of whether there is an opportunity worth investing in. Investment is
principally capital, whether from individuals in the company or from outside investors, and the time and energy of a set of people. But you should
also consider other assets such as intellectual property, personal relationships, physical property, etc.

3. Planning: Once you have decided that an opportunity, you need a plan for how to capitalize on that opportunity. A plan begins as a fairly simple
set of ideas, and then becomes more complex as the business takes shape. In the planning phase you will need to create two
things: strategy and operating plan.

4. Company formation/launch: Once there is a sufficiently compelling opportunity and a plan, the entrepreneurial team will go through the process
of choosing the right form of corporate entity and actually creating the venture as a legal entity.

5. Growth: After launch, the company works toward creating its product or service, generating revenue and moving toward sustainable performance.
The emphasis shifts from planning to execution. At this point, you continue to ask questions but spend more of your time carrying out your plans.
• Although it is natural to think of the early steps as occurring
sequentially, they are actually proceeding in parallel. Even as
you begin your evaluation, you are forming at least a
hypothesis of a business strategy.
• As you test the hypothesis, you are beginning to execute the
first steps of your marketing plan (and possibly also your
sales plan). We separate these ideas for convenience in
description but it is worth keeping in mind that these are
ongoing aspects of your management of the business. In the
growth phases, you continue to refine your basic idea, re-
evaluate the opportunity and revise your plan.
Opportunity evaluation
(investment prospectus) Company’s plan Execution

Strategy •Market research

•Target customer •Marketing
•Business model •Business development
• Need / problem •Position •Forecasting
•Solution •Milestones / company •Sales planning
•Competitive position objectives •R&D management
•Team Operating plan •Operations management
•Risk / reward profile •Company timeline •People management
•Staffing plan •Process and infrastructure
•Budget •Budgeting
•Financing plan •Financing
Opportunity Evaluation
• It is helpful to think of the evaluation step as continually
asking the question of whether the opportunity is worth
investing in. You are actually constructing and then
continually revising an “investment prospectus.”
• There are five basic questions that you should ask as you
evaluate an opportunity.
1.Is there a sufficiently attractive market opportunity?
2.Is your proposed solution feasible, both from a market
perspective and a technology perspective?
3.Can we compete (over a sufficiently interesting time
horizon): is there sustainable competitive advantage?
4.Do we have a team that can effectively capitalize of this
opportunity?
5.What is the risk / reward profile of this opportunity, and
does it justify the investment of time and money?
If you can answer all of these questions affirmatively, then
you have persuaded yourself that this opportunity is worth
investing in. This is the first step toward being able to
convince others, whether they be prospective customers,
employees, partners or providers of capital.
Planning
Strategy
There are four main areas of strategy:
1) determination of the target customer set,
2) business model,
3) position and
4) objectives.

These are described briefly below and in more depth in the

sections devoted to these topics.
oTarget customers
• The target customer is the set of potential buyers who are
your focus as you design your company’s solution. The more
you know about them, the better off you are. Your
characterization should be both qualitative and quantitative.
• You should investigate any alternatives the customer has for
solving or working around the problem or need that you are
targeting. You should understand the buying process in
detail, including who are the decision makers and who
influences the decision.
oBusiness Model
• The business model is your theory about how you will make
money. It involves a definition of a solution to the customer’s
need, an hypothesis about how and how much the customer
will pay for that solution.
• If there are any assumptions required for your theory to be
true (such as the existence of complementary product or
services, or the customer’s willingness to change business
processes) these should also be articulated.
oPosition
• “Position” refers both to how your company is differentiated
from any competitors and also how it relates to other companies
in the value chain. This is an opportunity to define, at a
fundamental level, what your company will do and what it will
not do.
• An element of position is your company’s vision: how it wants to
be known or thought of. A compelling vision is necessary to
inspire investors, recruit and motivate employees, and to excite
customers and partners.
oMilestones / Objectives
• As a first step toward creating your operating plan, you
should create a set of high level objectives for your business.
This should include:
 Key milestones (prototype, product, customer, partnerships,etc.)
 Share or penetration into your chosen market
 A clear articulation of objectives will allow you to set priorities for
your venture, which will be critical as you face the many tough
decisions that any entrepreneur must face.
Operating plan
• Your operating plan is where you spell out all of the things
that you plan to do and what they will yield for your
business. The activities will cover all areas of the business:
marketing, selling, engineering, etc.
• These activities should yield products by a certain
date, possibly partners, customers, etc. These activities will
drive the financial performance of the company.
• Your operating plan will be a combination of plans, i.e., these
people working on this topic for this period of time will
produce result X, and forecasts or projections, i.e.
predictions about what results will occur.
• The primary and most important forecast concerns revenue,
but predictions about costs of materials and other things
may be important as well. The operating plan is the core of
your business, and you should make it as good as you can –
your plans should be as thorough as possible and your
forecasts should be based on the best and most complete
evidence you can compile.
• Begin with your strategy and break down what needs to be
accomplished to achieve your objectives – this is the basis of
your plan. The more detailed and fine grained analysis you
can develop, the more accurate and reliable your plan will
be.
oCompany timeline
This is a representation of all the major accomplishments or
deliverables that are necessary for you to achieve your
strategy.
oStaffing plan
This is the document where you capture all of the hiring your
firm will do (skills, experience and timing).
oBudget
The budget is where all the pieces of the operating plan
come together and are expressed in financial terms. This is a
critical document for managing your business.
oFinancing plan
This includes the capital needs of the company, the timing of
those needs and the desired/expected sources of that capital.
Planning Process
Here are a few important principles:
• The actual budget, staffing plans, etc. are then driven by
estimates of what it takes to accomplish the tasks in the
required timeframe.
• Build a plan that captures everything (so that you are not
hurt by surprises or unexpected expenses)
• Revenue: detailed bottom up plan, based on best
information about customer groupings, conversion rates,
sales activity
• Expenses: usually people driven – build in realistic hiring
timetables, training, learning curve, benefits, travel, etc.
• Program expenses: mostly marketing – must support the
plan and estimates should be equally comprehensive
• The plan must close – all pieces tie together.
• The plan becomes more manageable when you break it
down into major functional areas. The traditional breakdown
is as follows, but you don’t have to be bound by this except
in so far as you should follow Generally Accepted Accounting
Practice.
• Marketing
• Sales
• Research and development
• Operations
• Finance
• People management
• Processes & infrastructure
You should monitor your budget carefully and continually, and make adjustments as needed.
7 Roles of Entrepreneurship in Economic
Development
1) Wealth Creation and Sharing:
• By establishing the business entity, entrepreneurs invest
their own resources and attract capital (in the form of debt,
equity, etc.) from investors, lenders and the public.
• This mobilizes public wealth and allows people to benefit
from the success of entrepreneurs and growing businesses.
• This kind of pooled capital that results in wealth creation and
distribution is one of the basic imperatives and goals of
economic development.
2) Create Jobs:
• Entrepreneurs are by nature and definition job creators, as
opposed to job seekers. The simple translation is that when
you become an entrepreneur, there is one less job seeker in
the economy, and then you provide employment for multiple
other job seekers.
• This kind of job creation by new and existing businesses is
again is one of the basic goals of economic development.
This is why the Govt. of India has launched initiatives such
as StartupIndia to promote and support new startups, and
also others like the Make in India initiative to attract foreign
companies and their FDI into the Indian economy.
• All this in turn creates a lot of job opportunities, and is
helping in augmenting our standards to a global level.
3) Balanced Regional Development:
• Entrepreneurs setting up new businesses and industrial units
help with regional development by locating in less developed
and backward areas.
• The growth of industries and business in these areas leads to
infrastructure improvements like better roads and rail links,
airports, stable electricity and water supply, schools,
hospitals, shopping malls and other public and private
services that would not otherwise be available.
• Every new business that locates in a less developed area will
create both direct and indirect jobs, helping lift regional
economies in many different ways.
• The combined spending by all the new employees of the new
businesses and the supporting jobs in other businesses adds
to the local and regional economic output. Both central and
state governments promote this kind of regional
development by providing registered MSME businesses
various benefits and concessions.
4) GDP and Per Capita Income:
• Philippines Gross Domestic Product (GDP) per Capita reached 3,623.316
USD in Dec 2022, compared with 3,576.145 USD in Dec 2021.
• In the latest reports, Philippines GDP expanded 7.147 % YoY in Dec
2022.
• Philippines Nominal GDP reached 112.472 USD bn in Dec 2022.
• Its GDP deflator (implicit price deflator) increased 6.304 % in Dec 2022.
• Gross Savings Rate of Philippines was measured at 10.806 % in Dec
2022.
5) Standard of Living:
Increase in the standard of living of people in a community is
yet another key goal of economic development. Entrepreneurs
again play a key role in increasing the standard of living in a
community. They do this not just by creating jobs, but also by
developing and adopting innovations that lead to
improvements in the quality of life of their employees,
customers, and other stakeholders in the community.
• For example, automation that reduces production costs and
enables faster production will make a business unit more
productive, while also providing its customers with the same
goods at lower prices.
6) Exports:
• Any growing business will eventually want to get started with
exports to expand their business to foreign markets. This is an
important ingredient of economic development since it provides
access to bigger markets, and leads to currency inflows and
access to the latest cutting-edge technologies and processes
being used in more developed foreign markets.
• Another key benefit is that this expansion that leads to more
stable business revenue during economic downturns in the local
economy.
7) Community Development:
• Economic development doesn’t always translate into
community development. Community development requires
infrastructure for education and training, healthcare, and
other public services.
• For example, you need highly educated and skilled workers in
a community to attract new businesses. If there are
educational institutions, technical training schools and
internship opportunities, that will help build the pool of
educated and skilled workers.