Entrepreneur – someone who conceives of new or improved
goods or services and exhibits the initiative to develop that
idea by making plans and mobilizing the necessary resources to
convert the idea to reality
Entrepreneurship and small business
 Entrepreneurs are also small business managers
 Fixed cost – business expenses that do not vary with
the quantity of organizational output
 Economies of scale – cost savings that arise from
producing a large volume of output
 Liability of smallness – small organization’s greater
chance of failing compared to larger organizations in
the same industry or situation
 Liability of newness – new organizations’s greater
chance of failing compared to older organizations in
the same industry or situation
Entrepreneurship and Family Business
 Family business – controlled by two or more members of
a single family, cooperation or succession
 Family – group of people—typically connected by
marriage or kinship ties—who have shared history
 Hallmark of Family business – strong interpersonal
relationships associated with being family members.
ADVANTAGES
1. Family members are often highly motivated to see
the organization succeed.
2. Family firm can help attracting customers and
partners
3. The higher level of trust and cooperation in families
can simplify management and reduce the financial
cost of control
 Agency cost – expenses that owners pay to ensure that
managers act in the interest in the firm rather than their
own self-interest,
 Moral hazard – risk that managers might use the firm’s
resources to benefit other interest to the detriment of
owners’ financial gain.
Arises when:
 Managers and owners have misaligned
incentives
 There is information asymmetry between
managers and owners
 Nepotism – preferential treatment of relatives and friends
esp. by giving them jobs for which they are not the most
qualified.
FBL, TBL AND SET MGT IMPLIFICATIONS
 ANG HABA ARALIN NIYO NALANG =)
THE FOUR STEP ENTREPRENEURIAL PROCESS
STEP 1: IDENTIFY THE OPPORTUNITY
 Process of selecting promising entrepreneurial ideas
for fiurther development.
 Good ideas – ideas that fit a genuine opportunity or
need in the marketplace.
 Entrepreneurial mindset – which enables
entrepreneurs to look at situations in new ways
SOURCES OF POTENTIAL OPPORTUNITIES
1. Trends: large-scale, ongoing patterns
2. Industry changes
3. Unexpected events
4. Gaps: demands and needs that are not being met
in the best way
5. Personal experience
STEP 2: TEST THE IDEA
 Elevator pitch – succint description of the
entrepreneur’s plan and the value it offers
 Identify the problem you propose to address
 Describe your proposed solution
 Recognized the major challenge or obstacle
 Have a solution for the challenge
 Explain how your plan benefits the customer
 Be 30 to 60 long
 Be focused, clear, and delivered in compelling and
enthusiastic fashion.
 Persuasive – most effective pitches and idea; they will
change the audience thinking or motivate them to take
some action; pitch must have goal.
STEP 3: DEVELOP A PLAN
 Business plan – written document that describes the
key features, actions, structure and system for a
proposed new organization that is designed to take
advantage of an entrepreneurial opportunity.
 Entrepreneurial Start-Up Plan (ESUP) – subset of a
business plan
o Includes the elements of a business plan that are
relevant for general management, but does not
focus on aspects related to specific functional areas
like marketing, finance and operations.
BUSINESS PLAN ELEMENT
1. Summary of the plan
2. Description of the new venture
 The opportunity
 Target market
 Market – group of people or organanization
that are, or could be, interested in in using
your particular product or service.
 Mission and vision – ch8, ongoing purpose of
the organization, as well as your vision of that
organization will look like in 5 yrs
 Business strategy – ch8 and 9, new venture’s
strategy is based on having low financial cost
 Legal form (4)
 o Sole proprietorship – owned and operate 2. They did not have entrepreneurial qualities called
by one entrepreneur who is responsible for to put their plans into action.
all or its debts 3. Unable to find the necessary financial resources to
o Partnership – established when two or launch their new org
more entrepreneurs own and operate the Qualities of Entrepreneurs
firm and are responsible for all of its debts Self-efficacy – which one’s confidence and belief that they
o Corporation – legal entity separate from its can accomplish a task successfully
Managerial social skills
owners that has many legal rights of a
Leadership
person and limits the financial liabity of the
Being able to build and maintain a cohesive team
owner to the amount of their investment in Ability to communicate with others
the corporation.
o Co-operative – jointly owned and run by its
owners, primarily to provide goods and
services for their own benefit
3. Description of product and competitors
 Competitors – other organizations that offer
similar products or services, or offer products or
services that meet the same customer need.
4. Management
5. Staffing
6. Marketing
 Total Available Market(TAM) – includes everyone
who could potentially benefit from product or
service
 Service Available Market (SAM) – includes
everyone in the TAM who is likely to actually use
the product or service.
 Target market – includes everyone in the SAM that
the organization will intentionally try to make into
a customer or client in the near future.
 First mover advantage – performance advantage
enjoyed by the first organization or product to
reach a large portion of the potential market.
7. Operations
8. Finances
 Debt financing – entrepreneurs borrow money
that must paid back at some future date.
 Equity financing – venture receive shares and
become part owners of the organization
 Venture capitalists – companies or individuals that
invest money in an organization in exchange for a
share of ownership and profits
9. Timeline and contingency plans

STEP 4: TAKE ACTION

One study found that, even among plans that won at
business plan competitions, only 30% of those plans
were put into action.
Reasons:
1. Prize winners pursued an even better idea for new
set up