Section 1: Entrepreneurship Overview
Entrepreneurship is defined as
starting and running your own company while being willing to risk loss to make money. The entire process consists of the initial vision, applicable skill sets, financial investment, organizational structure, risks and rewards.But why is entrepreneurship important to an economy? Entrepreneurs can drive change and alter the way an industry conducts business as a whole. New businesses see an opportunity to solve a problem and often bring new vision to stagnant business methods. In this way, new jobs are created which aids in flourishing the economy.
Areas with high levels of entrepreneurship have been directly correlated with higher levels of productivity, as well. To be competitive, entrepreneurial leaders are highly concerned with efficiency. How can we do more with less? How can we keep costs down? These matters are crucial to growing a new business that is forging ahead on a limited budget to essentially disrupt and grow a marketplace.
Entrepreneurship is also important because:
Entrepreneurs generate new wealth. Unlike existing businesses, new business is able to offer new and improved products and services without the confines traditionally seen in established companies.
It can drive social change more quickly. Conformity is generally not an issue for entrepreneurs. This allows them to step outside the box to create untraditional solutions to both common and uncommon problems.
Entrepreneurs often invest in their own communities through charitable organizations or supporting economic efforts.
Although each entrepreneurial venture will have its own vision, in all instances the main goal is to create value. That value could be defined as creating social change, changing the way people do business or achieving financial success.
What do you think?How do you see entrepreneurship impacting the economy?Do you have an innovative idea that could be turned into a business?Additional Resources for Entrepreneurship OverviewSection 2: Terms to Know
Entrepreneurship requires a vast vocabulary of business terminology. In order to carefully analyze and comprehend a particular situation, you must fully grasp the meaning of some of the most important entrepreneurship words.
Let's examine terms often found in the entrepreneurship vocabulary.
Advertising: A paid, public method of gaining attention to a product or service
Angel investor (aka, private investor): An affluent person willing to invest their own capital into a startup company in exchange for convertible debt or ownership equity
Assets: A business' cumulative financial holdings
Balance sheet: A financial document that shows a business' assets, liabilities and owner's equity
Corporation: A legal entity that is separate and distinct from its owners
General partnership: An arrangement where each partner in the organization shares in the administration, profits and losses. Personal assets are also a liability in the partnership's obligations
Expenses: Money spent to operate a business
Independent contractor: A person who offers their services to the public or other businesses
Intrapreneur: A person, usually a manager, within a large company who uses their entrepreneurial skills to develop a project using available company resources
Joint venture: A legal entity created by two or more businesses joining together to conduct specific business with both parties sharing profits and losses
Liabilities: Debts your business owes another person or company
Limited partnership: This type of business arrangement occurs when the daily operations of a business are controlled by one or more partners but funded by silent or limited partners who are legally responsible for losses based on their investment
Net profit: Total revenues less total expenses
Outsourcing: Acquiring operational services from another business
Revenue: Income from a business activity
Strategic alliance: A consistent relationship between two businesses in which they combine efforts for a specific purpose
Sole proprietorship: A business owned and operated by one person
Of course, this is just a sampling of the industry's terms. Continuous study of the field combined with real-world experience will aid in putting these terms into perspective.
What do you think?What essential terms would you add that are important for every entrepreneur to know and understand?Additional Resources for Term to KnowSection 3: Entrepreneurial Leadership
Effective leadership within any organization is valued and appreciated. But entrepreneurial leadership is unique in that the person leading must have a complete vision and passion for the company's success. The qualities of a good leader include effective communication, employee selection and development, listening skills and flexibility. The importance of skilled leadership for an entrepreneur can't be understated.
You'll always find leaders that are stronger in one aspect more than another. These traits will guide leaders in their style of entrepreneurial leadership which include:
Laissez-Faire: Allows the ultimate freedom for employees to make their own choices in how they complete their work and set deadlines
Autocratic: Leaders make decisions without consulting their teams
Transactional: Sets tasks and rewards those who finish while punishing those who fall short
Democratic: Values input from employees and involves them in decision making
Pacesetting: Sets a high standard of performance from team members
Transformational: Uses effective communication to inspire the team and instill accountability
Poor leadership is the number one reason startup companies fail. Leaders are not necessarily expected to just inherently possess specific skills. Like others, these skills can instead be developed. Leadership training for entrepreneurs is available and should be pursued as a form of continuing education. Opportunities for training could be:
Professional organizations: Networking with like-minded professionals can prove extremely beneficial.
Business mentors: Mentoring can prove extremely valuable and is quite often a free service. Organizations such as SCORE pair experienced professionals with business owners that could use seasoned guidance.
Industry conferences: Conferences are designed to bring together peers to discuss and solve industry-related issues. Oftentimes, breakout sessions are scheduled for additional training opportunities.
New and established business leaders should never shy away from expanding their leadership skills.
What do you think?Which type of leader do you see in yourself?What can you do to grow your leadership skills?Additional Resources for Entrepreneurial LeadershipSection 4: Creativity and Opportunity in Entrepreneurship
Perhaps the most intriguing aspect of entrepreneurship is the potential for unlimited creativity and opportunity. Creativity drives innovation, and innovation is where new doors are opened and markets are disrupted.
Entrepreneurs are driven by new ideas and new ways of doing business. And because of the budget constraints startup companies encounter, entrepreneurs must look for the most cost-efficient and time-saving methods possible. Innovative ideas combined with revolutionary cost and time-saving tactics gives entrepreneurs a competitive edge over the competition. The fact is that creativity nor business knowledge alone can make a company competitive or successful. The two must create, transform and lead as one.
The best entrepreneurs recognize opportunities and have a thirst for solving problems with a good or service. Unlike large companies, entrepreneurs benefit from having the freedom to openly pursue ideas and solutions. Larger companies implement many more checks and balances at various departmental levels that can slow down processes or extinguish them before they even begin.
Creative entrepreneurship can be put to one of its best uses in an economy that is underdeveloped or experiencing difficulty from big businesses pulling out. New, smaller businesses can seize the chance to come in and simultaneously offer new goods or services while also creating jobs. Although the entrepreneurs may have to use a new or differentiated method of distribution or products and services, the possibilities are almost endless. Some even argue that the success of these struggling economies depends on the success of entrepreneurial businesses.
What do you think?What do you see as an ideal opportunity for entrepreneurship? What can an entrepreneur do to utilize their creativity in a business? Additional Resources for Creativity and Opportunity in EntrepreneurshipSection 5: Technology and Entrepreneurship
There is no area of business that can escape the need for technology, and that spills over into entrepreneurship. Entrepreneurs should take advantage of technological options available from laptops and tablets to specialized apps and programs. Of course, the costs of each must be weighed against the benefits the company will reap.
When we speak of technology, one of the first things that come to mind is the internet. What was entrepreneurial and corporate life like before the internet? Mind-numbing. Slow. Costly. Some of the most mundane tasks that used to take hours to complete in day-to-day business functions now take only minutes. Need an updated balance sheet? A few clicks of your accounting software will serve it right up. Trying to get a quick meeting with team members spread out over different locations? An emailed link to recipients will have everyone chatting together onscreen in minutes. Within seconds, information and real people are easily accessible. In an age where time equals money, technology has proven to be an immeasurable money saver.
The internet arena provides an array of platforms for conducting business. Online-based stores, video-sharing sites and blogging continue to flourish. As a bonus, this has allowed entrepreneurs of all ages to grow their own ideas and snag their piece of the market share.
Computers and smartphones are a given in any type of profession, but capitalizing upon business-focused apps and programs could prove extremely useful, as well. Take a look below for popular trends based on core business areas.
Accounting and FinanceQuickbooks
Freshbooks
Gusto
Basecamp
Asana
Trello
Salesforce
HubSpot
Mailchimp
Shopify
Slack
Google Hangouts
Zoom
The programs and software an entrepreneur chooses will tend to be based on price, ease of use and how well it may interface with other software.
What do you think?Which app or program would you like to know more about?Additional Resources for Technology and EntrepreneurshipSection 6: Risks and Rewards of Entrepreneurship
The mindset of a typical entrepreneur is one that embraces challenges and is willing to take on risk. In many cases, the more you risk, the more rewards you can reap. But those rewards are not guaranteed, and the risks can be daunting. But in business, risk cannot be avoided.
When starting a company, entrepreneurs either have to invest their own funds or borrow money from a financial institution. Banks will often not loan to a company if they have not been in business for a certain amount of time or will require a fair amount of collateral in exchange for a loan. The collateral could be a vehicle, equipment or even a home.
Overall, entrepreneurial risks include:
The business will fail and entrepreneurs will lose the investment of their time and money
Personal liability for debts
Stigma of failure should the business not succeed
Understanding where the risks lie is of extreme importance so you can then manage and mitigate those risks. The steps in a risk management assessment are:
Identify the risks of business activities
Assess the likelihood of an event occurring
Plan how to respond to the event
Implement systems to deal with the consequences
Monitor the effectiveness of the event controls
Once a thorough risk management process is in place, you can then allocate capital and resources more efficiently. It will also improve management-level decision making. But a major benefit of entrepreneurship is that swift action in any direction can happen more quickly.
On the other side of risks, we can find rewards. The rewards aren't just monetary. They are personal, too. These include:
Freedom to be your own boss and pave your own way
Building an idea from its vision to its inception
Financial gain
Personal and professional pride
Creation of jobs which also benefits the economy
Entrepreneurs should enter a business venture fully recognizing the big picture. While it won't prove easy, it is possible for the rewards to far outweigh the risks.
What do you think?What do you see as the risks and rewards of entrepreneurship?Additional Resources about Risks and Rewards of EntrepreneurshipSection 7: Business Planning and Business Model Design
A business plan is typically considered the first step before proceeding with any business venture. This process requires a vast amount of research and planning. If you wish to secure a loan, the financial institution will often want to see a solid business plan first. The same is true if you seek funding from private investors.
Overall, a traditional business plan describes the nature of the business, defines the customers, sets the sales and marketing strategy and includes the financial background along with a projected profit and loss statement. Every business plan should have the following parts according to the Small Business Association (SBA):
Executive summary: business snapshot
Company description: what the company will do
Market analysis-: research on the industry, market and competitors
Organization and management-: organizational management structure
Product or service: good or service that will be offered
Marketing and sales: marketing and sales strategy
Funding request: the amount of money needed for the next three to five years
Financial projections: projected profit and loss statement
Appendix: this optional section could include resumes, certificates or permits
Taking the time to devise a business plan will help to ensure that the venture has been well defined. Within the business plan will lie the business model. This piece is important because it explains how and where you choose to operate your business. A business model canvas can help by providing a visual chart to outline and elaborate on various business segments.
The best business model for a startup will depend on the goal you're seeking to accomplish. Types of business models could be:
Manufacturer
Distributor
Retailer
Franchise
A thorough business model design will answer the following questions:
Who is your customer?
What does the customer value?
How do you deliver value at an appropriate cost?
The four basic components within a business model are:
Core strategy
Strategic resources
Partnership network
Customer interface
That said, it's important to understand that both business plans and business models are ever-changing. For example, you may find that your online store has grown so much that a brick and mortar retail space would aid in growing the business even more. Thus, it's necessary to reevaluate the business plan and business model regularly.
What do you think?What do you see as the most challenging part of writing a business plan? Is there a type of business model you are interested in pursuing?Additional Resources for Business Planning and Business Model DesignSection 8: Financial Management
As part of your planning process, it is vital to develop a solid system for financial management. Poor finance management is a top reason for business failures. The top business expense areas are mortgage/lease payments, legal costs, payroll, insurance and production expenses.
A wise option is to seek out financial consulting expertise to create a meaningful, trackable system. Financial experts can help you understand your options, create a budget and set attainable goals. To continually be proactive about financial management, it is beneficial to review financial statements like the balance sheet, income statement and cash flow statements monthly.
But it is still extremely important to educate yourself and not solely rely on the advice of others. Research finance-related articles on your industry and market. Many seasoned professionals have already recommended best practices based on prior lessons learned. Learn from their mistakes so you won't be led to make the same ones. A few prudent tips for successful financial management are:
Establish clear goals
Accurately track expenses
Set a lean budget
Keep a good credit score
Establish an emergency fund
Managing working capital, or cash on hand, is a tricky piece of the financial management puzzle. Consistently tracking your cash flow will help to mitigate working capital disasters that could stop a company in its tracks. Businesses will most certainly see a gap in working capital while waiting for accounts receivable payments. Banks often offer lines of credit to assist in bridging the gaps in cash flow and to help ensure business continuity.
What do you think?Which parts of financial management are easy for you to understand? Are there areas your need to seek expertise? Additional Resources for Financial ManagementSection 9: Market Research
The role of marketing in entrepreneurship is to build brand awareness. Marketing is the process of acquiring and retaining customers. Given the lean startup nature of entrepreneurship, the entrepreneur is often tasked with establishing the marketing strategies based on their own research.
First, they must define the four "P's" of marketing:
Product- What are you selling?
Price- How much is the product?
Place- Where are you going to sell the product?
Promotion- How are you going to inform customers about the product?
These components cannot be properly defined without thorough market research. Market research is defined as gathering information about consumer needs and preferences. Various methods of market research are surveys, interviews, customer observation and focus groups. Some entrepreneurs balk at market research because they don't want to hear any negative comments or because the price may be too expensive. But the side effects of not conducting market research can be catastrophic. After all, the research lets you know if there is a need for your good or service in the marketplace.
The benefits of effective marketing are evident, and the marketing strategy you choose will be based upon the market research. Marketing strategies fall into two main categories: business to business (B2B) or business to consumer (B2C). Within these categories, other marketing strategies include:
Paid advertising
Cause marketing
Relationship marketing
Undercover marketing
Word of mouth marketing
Internet marketing
Transactional marketing
Diversity marketing
Additionally, entrepreneurs should think outside of the box and look for strategic partnerships to aid in keeping marketing costs manageable.
What do you think?Is there a marketing strategy you are familiar with or most interested in?Additional Resources for Market ResearchSection 10: New Product Development
Many established companies have entire departments and teams dedicated to research and development (R&D), but R&D is not solely limited to large scale corporations. Startups can and should do it, too. However, they must be mindful to do it smartly.
New product development involves bringing a new product into the marketplace. Creativity and innovation can contribute to this process by keeping an existing company relevant or by introducing a brand new company.
New product development can benefit the company and consumer by:
Creating value for consumers
Contributing to the betterment of society
Growing the company via sales and reputation
Increased competition
Technological advancement
Boost company brand and reputation
Before beginning the product development process, some factors should be evaluated to lessen the chance of product failure. Those factors include:
Adequate market demand
Economic conditions
Market trends
Availability of funds
Gestation period
Legal and social impacts
If a thorough evaluation shows that any of these factors are less than favorable, then the prudent decision would likely result in not moving forward with the process. Should all evaluation factors show positive results, then the development team can move forward. The new product development lifecycle should occur via five distinct stages:
Idea generation
Research and development
Testing
Analysis
Rollout
Upon completion of the final stage, a company will bring an idea from a concept to a fully functional product. If a company dedicates its efforts to solving a problem and ensuring a product-market fit, there is a greater chance it will be accepted and successful in the marketplace.
What do you think?Which part of the new product development process challenges you?Additional Resources for New Product DevelopmentSection 11: Typical Entrepreneur Courses
If you are planning to start your own business, you'll encounter a variety of entrepreneurial courses. Some may only mildly seem to pertain to the type of business you choose to pursue while others will be perfectly aligned with your direction. Below is a listing of the typical entrepreneur courses:
Entrepreneurship Overview
Intrapreneurship
Entrepreneurial Revenues
Entrepreneurial Costs and Budgets
Entrepreneur Capital
Entrepreneur Strategy and Perspectives
Entrepreneurship Business Plan and Perspective
Human Resource Management
Business Law
Management for Organizations
Personal and Organizational Ethics
Principles of Marketing
Creativity and Innovation