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111 Cards in this Set
- Front
- Back
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Intrapreneurship
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entrepreneurship within large organizations/businesses
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Gazelles
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A “gazelle” is a business establishment with at least 20% sales growth every year (for five years), starting with a base of at least $100,000.
Gazelles produce twice as many product innovations per employee as do larger firms. |
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Gazelles survival
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The common myth is that 85% of all firms fail in the first year.
The more accurate statement is that about half of all start-ups last between 5 and 7 years |
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Emerging Trends: Internet and E-Commerce
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Smaller ventures use the Internet for a variety of operations, including customer-based identification, advertising, consumer sales, business-to-business transactions, e-mail, and private internal networks for employees.
#1 use of company internet sites – for Company Information |
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Developping a website
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Attractive and Useful
Marketing the Website “Stickiness” – keeping people on your website longer |
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The Evolution of Entrepreneurship
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Entrepreneur is derived from the French entreprendre, meaning “to undertake”.
Most people think Entrepreneurs are Doers, not Thinkers (Myth #1) |
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The Corridor Principle
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With every venture launched, new and unintended opportunities often arise.
Example of the Corridor Principle: 3M’s Post-it Notes |
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Entreprenerial Schools of thought:
Macro |
The Environmental School of Thought
The Financial/Capital School of Thought The Displacement School of Thought 1. Political Displacement 2. Cultural Displacement 3. Economic Displacement |
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Displacement School of thought: 3 things
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Political Displacement
Cultural Displacement Economic Displacement |
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Entreprenerial Schools of thought:
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The Entrepreneurial Trait School of Thought
The Venture Opportunity School of Thought The Strategic Formulation School of Thought |
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Strategic Formulation as a Leveraging of Unique Elements
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Unique Markets: mountain gap strategies
Unique People: great chef strategies Unique Products: better widget strategies Unique Resources: water well strategies |
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Process approaches
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Integrative Approach
Entrepreneurial assessment approach Multidimensional approach |
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Integrative approach
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provides a logical framework for organizing entrepreneurial inputs
1. enviironmental opportunities (demographic change, new technology, modifiicattion to current regulations) 2. Individual entrepreneurial 3. An organizational context 4. Unique business consepts 5. Resources |
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Entrepreneurial Assessment approach
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making assesments qualitavitely, quantitatively, strategically, and ethically in regards to the entrepreneur, the venture, and the environment.
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Multidimensional Approach
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entrepreneurship is a complex, multidimensional framework that emphasizes the individual, the environment, the organization, and the venture process
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3M’s Innovation Rules
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Don’t kill a project
Tolerate failure Keep divisions small Motivate the champions Stay close to the customer Share the wealth |
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Corporate Entrepreneurship Assessment Instrument (CEAI) (measured key entrepreneurial climate factors)
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Management Support
Autonomy/Work Discretion Rewards/Reinforcement Time Availability Organizational BounARY |
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Developing Venture Teams (V-Teams)
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A venture team is composed of two or more people who formally create and share the ownership of a new organization.
The leader is called a “product champion” or an “intrapreneur” – someone inside a large company who is an entrepreneur. |
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Twenty-First Century Characteristics of Entrepreneurs
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The Top Ten Characteristics Today’s Entrepreneurs Share:
Recognize and take advantage of opportunities Resourceful Creative Visionary Independent thinker Hard worker Optimistic Innovator Risk taker Leader |
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The Dark Side of Entrepreneurship(3 things)
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Confrontation with Risk
Stress Ego |
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1. (darkside to entrepreneurship)
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Confrontation to risk:
Financial Risk Career Risk Family and Social Risk Psychic Risk |
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third darkside to entrepreneurship
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Ego: Out of control:
Extreme Sense of Distrust Overbearing Need for Control Overriding Desire for Success Unrealistic Optimism |
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The role of creativity
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Creativity is the generation of ideas that result in the improved efficiency or effectiveness of a system.
- Background or Knowledge Accumulation is Phase 1 in the Creative Process. |
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Right side of brain...
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The right brain hemisphere helps an individual understand analogies, imagine things, and synthesize information.
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Left side of brain...
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The left brain hemisphere helps the person analyze, verbalize, and use rational approaches to problem solving
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Innovation
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The process by which entrepreneurs convert opportunities into marketable ideas.
More than just a good idea. |
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Types of innovation
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Invention-new product
Extension-new use or different application of already existing product Duplication- creativie replication of an existing product Synthesis- combination of existing concepts and factors into a new formulation or use |
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Sources of innovation
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Unexpected Occurrences
Incongruities Process Needs Industry and Market Changes Demographic Changes Perceptual Changes Knowledge-Based Concepts |
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Managerial rationalizations - 4
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The four rationalizations are believing….
…..that the activity is not “really” illegal or immoral; …..that it is in the individual’s or the corporation’s best interest; …..that it will never be found out; and …..that because it helps the company, the company will condone it. |
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Types of morally questionable acts
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nonrole- against firm- expense account cheating
role failure-against firm- superficial performance appraisal role distortion- for firm- bribery role assertion-for firm-Not withdrawing product line in face of initial allegations of inadequate safety |
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Code of conduct
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A code of conduct is a statement of ethical practices or guidelines to which an enterprise adheres.
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Approaches to managerial eithics
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Immoral management- Managerial decisions, actions and behavior imply a positive and active oppositions to what is moral (ethical).
Decisions are discordant with accepted ethical principles. An active negation of what is moral is implied. Amoral Management- Management is neither moral or immoral, but decisions lie outside the sphere to which moral judgments apply. Managerial activity is outside or beyond the moral order of a particular code. A lack of ethical perception and moral awareness may be implied. Moral Management- Managerial activity conforms to a standard of ethical, or right, behavior. Managers conform to accepted professional standards of conduct. Ethical Leadership is commonplace on the part of management. |
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A Holistic Approach- 4 principles
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Principle 1: Hire the right people
Principle 2: Set standards more than rules Principle 3: Don’t let yourself get isolated Principle 4: The most important principle is to let your ethical example at all times be absolutely impeccable. |
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Social responsibility challenge
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Some firms simply react to social issues through obedience to the laws – social obligation; others respond more actively; accepting responsibility for various programs – social responsibility; still others are highly proactive and are even willing to be evaluated by the public for various activities – social responsiveness.
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Social obligation
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Some firms simply react to social issues through obedience to the laws
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Social responsibility
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others respond more actively; accepting responsibility for various programs
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Social responsivernes
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still others are highly proactive and are even willing to be evaluated by the public for various activities
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Pitfalls in Selecting New Ventures
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Lack of Objective Evaluation
No Real Insight into the Market Inadequate Understanding of Technical Requirements Poor Financial Understanding Lack of Venture Uniqueness Ignorance of Legal Issues |
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Critical Factors for New-Venture Development
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Uniqueness
Investment Sales Growth Lifestyle ventures Small profitable ventures High-growth ventures Product Availability Customer Availability |
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Why new ventures fail...
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Product/Market Problems
Financial Difficulties Managerial Problems |
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Types and Classes of First-Year Problems
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1. Obtaining external financing
2. Internal financial management 3. Sales/marketing 4. Product development 5. Production/operations management 6. General management 7. Human resource management 8. Economic environment 9. Regulatory environment |
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Slide 43
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know
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Business incubator
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Business incubator is a facility with adaptable space that small businesses can lease on flexible terms and at reduced rents.
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Types of Incubators
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Publicly Sponsored
Nonprofit-sponsored University-related Privately sponsored |
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Trends in Policy Formation
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The Regulatory Flexibility Act
The Equal Access to Justice Act The Congressional Review Act The Small Business Regulatory Enforcement Fairness Act The Paperwork Reduction Act The Unfunded Mandates Reform Act page 251-252 |
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A market...
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A market is a group of consumers (potential customers) who have purchasing power and unsatisfied needs. A new venture will survive only if a market exists for its product or service.
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Marketing Philosophy?
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Production-driven philosophy
Sales-driven philosophy Consumer-driven philosophy |
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Market Segmentation
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Market segmentation is the process of identifying a specific set of characteristics that differentiate one group of consumers from the rest (market niche).
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Consumer Behavior 5 major classifications
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Convenience goods
Shopping goods Specialty goods Unsought goods New products pg 289 |
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pg 302
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look
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The Balance Sheet
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Represents the financial condition of a company at a certain date. It details the items the company owns (assets) and the amount the company owes (liabilities). It also shows the net worth of the company and its liquidity.
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Income statement
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Commonly referred to as the P & L (profit and loss) statement, which provides the owner/manager with the results of operations.
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Statement of Cash Flow
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An analysis of the cash availability and cash needs of the business.
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Operating Budget
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statement of estimated income and expenses over a specified period of time.
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cash budget
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statement of estimated cash receipts and expenditures over a specified period of time.
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capital budget
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statement of estimated cash receipts and expenditures over a specified period of time.
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Operating budget
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Typically, the first step in creating an operating budget is the preparation of the sales forecast. An entrepreneur can prepare the sales forecast in several ways. One way is to implement a statistical forecasting technique such as simple linear regression. Y = a + bx
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The Cash-Flow Budget
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The first step in the preparation of the cash-flow budget is the identification and timing of the cash inflows. For the typical business, cash inflows will come from three sources: (1) cash sales, (2) cash payments received on account, and (3) load proceeds.
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Pro Forma Statements
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Pro forma statements are projections of a firm’s financial position over a future period (pro forma income statement) or on a future date (pro forma balance sheet).
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Capital Budgeting
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The first step in capital budgeting is to identify the cash flows and their timing. The inflows, or returns as they are commonly called, are equal to net operating income before deduction of payments to the financing sources but after the deduction of applicable taxes and with depreciation added back, as represented by the following formula:
Expected Returns = X(1 – T) + Depreciation |
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Payback Method
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In this method the length of time required to “pay back” the original investment is the determining criterion
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Net Present Value (NPV method)
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The concept works on the premise that a dollar today is worth more than a dollar in the future. The cost of capital is the rate used to adjust future cash flows to determine their value in present period terms. This procedure is referred to as discounting the future cash flows, and the discounted cash value is determined by the present value of the cash flow.
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Internal Rate of Return (IRR method)
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This method is similar to the net present value method in that the future cash flows are discounted. However, they are discounted at a rate that makes the net present value of the project equal to zero.
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Contribution Margin Approach
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The difference between the selling price and the variable cost per unit. It is the amount per unit that is contributed to covering all other costs. 0 = (SP –VC)S – FC or FC = (SP – VC)S
where SP = Unit selling price VC = Variable cost per unit S = Sales in units FC = Fixed cost |
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Inventory turnover
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`cogs/inventory
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inventory tur-days
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360/inventory turnover
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accounts recieveable turnover
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sales/AR
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Average collectuion period
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360/accounts recievable turnover
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Pitfalls to Avoid in Planning in a business plan- 5 pitfals
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Pitfall 1: No Realistic Goals
Pitfall 2: Failure to Anticipate Roadblocks Pitfall 3: No Commitment or Dedication Pitfall 4: Lack of Demonstrated Experience (Business or Technical) Pitfall 5: No Market Niche (Segmen |
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Putting the Package Together in a businesss plan
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Appearance
Length – no more than 40 pages The cover and title page The executive summary – nore more than 2 pages The table of contents |
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What To Do When a Venture Capitalist Turns You Down
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Confirm the decision
Sell for the future Find out why you were rejected Ask for advice Ask for suggestions Get the name Find out why Work on an introduction Develop a reasonable excuse Know your referral |
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Sole Proprietorship
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A sole proprietorship is a business that is owned and operated by one person. The enterprise has no existence apart from its owner.
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Partneship
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A partnership is an association of two or more persons acting as co-owners of a business for profit.
The Uniform Partnership Act is generally followed by most states as the guide for legal requirements in forming partnerships. The articles of partnership clearly outline the financial and managerial contributions of the partners and carefully delineate the roles in the partnership relationship. |
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Corporation
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A corporation is “an artificial being, invisible, intangible, and existing only in contemplation of the law”*. As such, a corporation is a separate legal entity apart from the individuals who own it. *Supreme Court Justice John Marshall
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Limited Partnerships
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Permits capital investment without responsibility for management and without liability for losses beyond the initial investment.
Limited partnerships are governed by the Revised Uniform Partnership Act (RUPA). |
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Limited Liability Partnerships
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The limited liability partnership (LLP) is a relatively new form of partnership that allows professionals the tax benefits of a partnership while avoiding personal liability for the malpractice of other partners.
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S Corporations
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Formerly termed a Subchapter S corporation, the S corporation takes its name from Subchapter S of the Internal Revenue Code, under which a business can seek to avoid the imposition of income taxes at the corporate level yet retain some of the benefits of a corporate form (especially the limited liability).
Commonly known as a “tax option corporation”, an S corporation is taxed similarly to a partnership. |
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Limited Liability Companies
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The LLC is a hybrid form of business enterprise that offers the limited liability of a corporation but the tax advantages of a partnership.
Perhaps the greatest disadvantage is that LLC statutes differ from state to state, and thus any firm engaged in multi-state operations may face difficulties. |
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Other Corporation Classifications
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Domestic and Foreign Corporations
Public and Private Corporations Nonprofit Corporations – 501(c)3 Professional Corporations Close Corporations – 30 partners maximum! |
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Franchising
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A franchise is any arrangement in which the owner of a trademark, trade name, or copyright has licensed others to use it in selling goods or services. A franchisee (a purchaser of a franchise) is generally legally independent but economically dependent on the integrated business system of the franchisor (the seller of the franchise).
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Franchise Law: The Uniform Franchise Offering Circular (UFOC)
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The UFOC is divided into 23 items that provide different segments of information for prospective franchisees.
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Patent
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A patent provides the owner with exclusive rights to hold, transfer, and license the production and sale of the product or process. It is basically a “right to exclude”.
Design patents last for 14 years; all others last for 20 years. |
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A Patent Application Has Two Parts:
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Specification is the text of a patent and may include any accompanying illustrations.
Claims are a series of short paragraphs, each of which identifies a particular feature or combination of features that is protected by the patent. |
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Copyrights
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A copyright provides exclusive rights to creative individuals for the protection of their literary or artistic productions.
Duration: life of the author plus 70 years (for publishing houses, it is 95 years from date of publication or 120 years from date of creation for works for hire). |
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Understanding Copyright Protection
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For the author of creative material to obtain copyright protection, the material must be in a tangible form so it can be communicated or reproduced. It also must be the author’s own work and thus the product of his or her skill or judgment.
Formal registration of a copyright with the Copyright Office of the Library of Congress. |
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Trademarks
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A trademark is a distinctive name, mark, symbol, or motto identified with a company’s product(s) and registered at the U.S. Patent and Trademark Office.
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Trademark Duration
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The current registrations are good for 10 years with the possibility for continuous renewal every 10 years. It is most important to understand that a trademark may be invalidated in four specific ways:
Cancellation proceedings Cleaning-out procedure Abandonment Generic Meaning |
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Bankruptcy
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Bankruptcy occurs when a venture’s financial obligations are greater than its assets.
Remember 7 & 11 can be involuntary |
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Chapter 7: Straight Bankruptcy
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Sometimes referred to as liquidation or straight bankruptcy, Chapter 7 bankruptcy requires the debtor to surrender all property to a trustee appointed by the court
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Chapter 11: Reorganization
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Reorganization is the most common form of bankruptcy. Under this format, a debtor attempts to formulate a plan to pay a portion of the debts, have the remaining sum discharged, and continue to stay in operation. (can be “fast-tracked). Also known as “Debtor in Possession"
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Chapter 13: Adjustment of Debts
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Individuals or sole proprietors with unsecured debts of less than $100,000 or secured debts of less than $350,000 are eligible to file under a Chapter 13 procedure. In the petition the debtor declares an inability to pay his or her debts and requests some form of extension through future earnings (longer period of time to pay) or a composition of debt (reduction in the amount owed).
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Debt Versus Equity
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The use of debt to finance a new venture involves a payback of the funds plus a fee (interest for the use of the money. Equity financing involves the sale of some of the ownership in the venture.
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Debt Financing
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Commercial Banks
Other Debt-Financing Sources: Trade Credit Accounts Receivable Financing Factoring Finance Companies |
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Public Offerings
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“Going public” is a term used to refer to a corporation’s raising capital through the sale of securities on the public markets. Here are some of the advantages to this approach:
Size of capital amount Liquidity Value Image (new issues, referred to as initial public offerings IPOs) |
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Private Placements
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The SEC provides Regulation D, which eases the regulations for the reports and statements required for selling stock to private parties – friends, employees, customers, relatives, and local professionals. Regulation D defines four separate exemptions, which are based on the amount of money being raised:
Rule 504a – placements of less than $500,000 Rule 504 – placements up to $1,000,000 Rule 505 – placements of up to $5 million Rule 506 – placements in excess of $5 million |
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Accredited Purchaser
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As noted in Rules 505 and 506, Regulation D uses the term “accredited purchaser”. Included in this category are the following:
Institutional investors such as banks, insurance companies, venture capital firms. Any person who buys at least $150,000 of the offered security and whose net worth, including that of his or her spouse, is at least 5 times the purchase price. Any person who, together with his or her spouse, has a net worth in excess of $1 million at the time of purchase. |
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Sophisticated” Investors
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“Sophisticated” investors are wealthy individuals who invest more or less regularly in new and early- and late-stage ventures. They are knowledgeable about the technical and commercial opportunities and risks of the business in which they invest.
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Informal Risk Capital – “Angel” Financing
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Many wealthy people in the United States are looking for investment opportunities. They are referred to as “business angels” or informal risk capitalists.
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Strategic Planning
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Strategic Planning is the formulation of long-range plans for the effective management of environmental opportunities and threats in light of a venture’s strengths and weaknesses.
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The Lack of Strategic Planning
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Time scarcity
Lack of knowledge Lack of expertise/skills Lack of trust and openness Perception of high cost |
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Reported Benefits of Long-Range Planning
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Cost savings
More efficient resource allocation Improved competitive position More timely information More accurate forecasts Reduced feelings of uncertainty Faster decision making Fewer cash-flow problems |
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Strategic Planning Levels
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Structured strategic plans (SSP)
Structured operational plans (SOP) Intuitive plans (IP) Unstructured plans (UP) |
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Milestone Planning Approach
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Using incremental goal attainment to take a venture from start-up through strategy reformulation. Each step has to be completed before moving to the next one. The three major advantages of Milestone Planning are:
The use of logical and practical milestones; The avoidance of costly mistakes caused by failure to consider key parts of the plan; A methodology for replanning, based on continuous feedback from the environment. |
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slide 108
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llook
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slide 109
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look
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Key Factors During the Growth Stage
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Control
Responsibility Tolerance of failure Change |
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Methods of Going International
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Importing
Exporting- freight forwarding, export management, foreign sales Joint Venture Direct Foreign Investment Licensing – patents, copyrights, trademarks |
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The Importance of Business Valuation
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Buying or selling a business
Establishing an employee stock option plan (ESOP) Raising growth capital through stock warrants A complete “due diligence,” which means a thorough analysis of every facet of the existing business – first question – Why is this business being sold? |
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Establishing A Firm’s Value valuation methods
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Valuation Methods
Adjusted Tangible Book Value – goodwill plus patents Price/Earnings Ratio (Multiple of Earnings) Method Discounted Earnings Method |
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The Leveraged Buyout: An Alternative for Small Ventures
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This allows the entrepreneur to finance the transaction by borrowing on the target company’s assets. This method is the leveraged buyout (LBO).
IPO – initial public offering (Going public) |
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Entrepreneurial Leveraged Buyout (E-LBO) is characterized by having...
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At least two-thirds of the purchase price generated from borrowed funds,
More than 50% of the stock after acquisition owned by single individuals or their family, and, The majority investors devoting themselves to the active management of the company after acquisition. |
