M2 Chapter 5 Enterprise Development Flashcards
An entrepreneur
someone who sees an opportunity and takes a known risk for a perceived future reward.
Traits of Entrepreneurs
- Self-confidence (past experience in industry?)
- Need for achievement (goal-oriented)
- High level of energy (first in last out)
- Impatient (why set backs??)
- Masters of their own destiny
- Tolerance for disorder (adaptable)
- Visionary
5 Different Motivations (discovered by Yankelovich Partners) for Why People Start Businesses
▫Sustainers – those looking for work-life balance
▫Idealists – those who enjoy working on something new and challenging
▫Optimizers – those who are rewarded by the personal satisfaction of beginning a business
▫Hard workers – those that know of a better way to do things
▫Jugglers – those who like to handle every aspect of a business
Small businesses employ close to ___ of the U.S. population and account for ____ of all firms.
70%
97%
Small businesses have been responsible for ____ of all new innovations and ____ of all radical innovations.
70%
95%
5 Main steps in the development of business
- Idea Generation
- Opportunity Recognition
- Resource Accumulation and Launch
- Management/Growth
- Harvest
In order for an idea to be feasible, it must consist of two parts:
1) An unmet need in the market
2) A way of delivering that need in a manner that creates value for the customer and a profit for the entrepreneur.
Two main resources must be gathered to begin a business
1) People (those with skills the entrepreneur lacks)
2) Money (debt, equity, or both)
To minimize the risk of a new venture, an entrepreneur should have:
1) Access to market – potential customers, demographics
2) Access to supply – vendors, price
3) Access to capital – debt and/or equity
4) A business plan – highlight revenues, costs, cash flows, needed assets, etc.
5) Experience in the industry – most important item to have
Four F’s of Financing
- Founder – Using your own money to finance your business
- Family – Immediate and extended family can provide capital
- Friends – People you know who believe in you and your product
- Friends of friends (fools) – If a person invests on a friend’s advice and not personal research, he/she is a fool.
Debt vs. Equity
Debt:
• Preserves ownership in the company.
• Increases financial risk.
• Use when more risk tolerant.
Equity:
• Decreases ownership in the company.
• Limits future financial return.
• Use when more risk averse.
What correlates with being an entrepreneur?
1) If you have a parent or close relative who is an entrepreneur
2) if you are the oldest sibling in a family
3) if you’ve taken classes in college
What an entrepreneurial environment needs
- Good socio/cultural background
- Right to own property
- Legal system for recording the ownership of property
- Favorable laws governing commerce
Proprietorship
business form started by an individual who may or may not reserve the name with the state and uses the name as DBA (doing business as).
- you and the business are the same
Partnership
Same as proprietorship, but is an enterprise formed by two or more people.
