Solution Manual for Launching New Ventures An Entrepreneurial Approach 8th Edition By Kathleen R. Al

SOLUTION MANUAL FOR LAUNCHING NEW VENTURES AN ENTREPRENEURIAL APPROACH 8TH EDITION BY KATHLEEN R. ALLEN CHAPTER 1-17

CHAPTER 1

Understanding Entrepreneurship SUMMARY AND AUTHOR’S NOTE This chapter sets the stage for a course in entrepreneurship that delves into how to conceive, create, develop, launch, and grow a new business. At a macro level, the chapter addresses the role of entrepreneurs in the global economy, their impact on industry and business formation, and their economic role through disruptive innovation and the creation of new value and new jobs. Importantly, the chapter clearly distinguishes entrepreneurial ventures from the more common small lifestyle or economic core businesses, which is critical to understanding the fundamental theme of this book--to encourage an entrepreneurial way of thinking about any business To put entrepreneurship into a historical context, the chapter offers a brief history of the entrepreneurial revolution as well as major current trends:: intelligent technology, such as artificial intelligence; augmented and virtual reality; synthetic biology; and genomics. It also includes a breakdown of the rest of the book so students enjoy a complete picture of the depth and complexity of the field of entrepreneurship.

I have always believed that it is important for students to understand their entrepreneurial roots, their potential impact on business and society as entrepreneurs, and the effects of their entrepreneurial efforts on the global economy. So, even though many students may want to skip this first chapter, you should encourage a discussion on the issues raised. The better they understand the importance of entrepreneurship to the world, the greater the possibility they may choose to start meaningful businesses that have a positive impact on society.

CHAPTER OBJECTIVES After reading this chapter, students will be able to: 

Define entrepreneurship.



Explain the role of entrepreneurship in economic growth.

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

Distinguish entrepreneurial ventures from small businesses in terms of their purpose and goals.



Describe the evolution of entrepreneurship as a field of study since the 1960s.



Identify today’s broad trends in the field of entrepreneurship.

CHAPTER OUTLINE 1.1 The Role of Entrepreneurship in the Economy 1.1a Entrepreneurs Spur Economic Growth 1.1b Entrepreneurs Create New Industries 1.1c Entrepreneurs Create Jobs 1.2 The Nature of Entrepreneurial Startups 1.2a Risk and the Entrepreneurial Venture

1.2b New Business Failure

1.3 Why Entrepreneurship Is What It Is: A Brief History That You Need to Understand 1.3a The Decades of Entrepreneurship 1.4 Current Entrepreneurial Trends 1.4a Intelligent Technology 1.4b Digital 1.4c Disruption 1.5 Looking Ahead: The Organization of the Book

SUGGESTIONS FOR QUESTIONS ON KEY ISSUES The following questions can be used for discussion purposes or as short-response exam questions.

1.

Define the term entrepreneurship.

Entrepreneurship is a mindset or way of thinking that is opportunity-focused, innovative, and growth-oriented. Entrepreneurs recognize opportunity, gather the resources required to act on the opportunity, and drive the opportunity to completion.

2. How do entrepreneurial ventures differ from small businesses?

Schumpeter described entrepreneurs as equilibrium disrupters who introduce new products and processes that change the way we do things, whereas small business owners typically operate a business to make a living or create a job. Examples of small businesses include shops, restaurants, and professional service businesses. They form what has been called the “economic core.” Entrepreneurial ventures, by contrast, tend to be innovative, growth oriented, and value creating, meaning they solve problems in new ways.

2.

As the mayor of your community, what incentives would you put into place to encourage entrepreneurship?

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Students’ answers will vary, but they may suggest tax incentives for locating the business in a developing area of the community or labor incentives such as paying half the wages of workers who are trained for positions in the new company. They may also suggest a community incubator with low-cost space and services for startup businesses. But they should also be encouraged to think “out of the box” about what would attract new businesses to start or locate in their community.

3.

Describe the current environment for entrepreneurship. Compare that environment to another country in a different part of the world. To introduce this topic, you might want to have students look at the current GEM (Global Entrepreneurship Monitor) study, arguably the most comprehensive on entrepreneurship at a global level. It can be found at https://www.gemconsortium.org/ Students’ responses will vary, but in general, the current environment is providing more opportunities, more resources, and more support for new entrepreneurs than at any time in history. Paradoxically, we have seen a continuous decline in entrepreneurship in the U.S. at the same time as ”necessity entrepreneurship is sparking new growth in other parts of the world.

4.

Which of the entrepreneurial trends discussed in the chapter will have the biggest impact, and why?

Most students will probably say that virtual reality and augmented reality are the most impactful, often because they are familiar with applications of these technologies in video games.

Of course, students can make equally strong cases for any of the other trends discussed in the chapter and should be encouraged to do so. Acquiring a good understanding of how we define impact would be important to deciding which trends are most impactful. In fact, agreeing on a definition before considering the trends discussed in the chapter might be the most effective way to deal with this question.

SUGGESTIONS FOR EXPERIENCING ENTREPRENEURSHIP If your course includes experiential activities, the experiential exercises in each of the chapters will help students apply what they have learned in real-life situations. The entrepreneur interview has been a staple of entrepreneurship courses for years and you will find some form of it in many of the exercises. To be effective, it’s important that students prepare their questions so they can elicit the maximum amount of free-flowing conversation and insights from the entrepreneur. Students can only accomplish this if they do some background research on the entrepreneur so that they don’t waste time asking questions about things that were easy to find online. The questions below will help the student interviewer to formulate some questions for the entrepreneur.

1.

Interview an entrepreneur in an industry or business that interests you. Be sure to choose someone you don’t know (no relatives or friends); choose someone who has started and is still running his or her business. Focus the interview on how and why this entrepreneur started his or her business. Think about the following when deciding on the questions you will ask: a.

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a. Why is this person an entrepreneur? b. What influenced the entrepreneur to identify and pursue this opportunity? c. How did the entrepreneur’s background (family history, prior education, and work experience) affect the opportunity discovered? d. Describe the opportunity that the entrepreneur decided to pursue and the process the entrepreneur used to evaluate the opportunity. e. How did the entrepreneur evaluate the opportunity? f. What criteria did the entrepreneur use to decide whether to pursue the opportunity? g. What were the perceived risks of this opportunity and how did the entrepreneur expect to manage them? h. What did the entrepreneur do to turn the opportunity into a business? i. Identify specific activities the entrepreneur undertook to develop the opportunity into a business. j. Identify when the entrepreneur did these activities (provide dates: month and year). k. Identify important contacts and individuals who were helpful during the startup process. l. What major problems did the entrepreneur encounter along the way? m. How were these problems solved? n. What advice would the entrepreneur give to someone thinking about pursuing an opportunity? o. Why was this entrepreneur successful?

Be sure to collect the following demographic information online if possible and to demonstrate that you chose an entrepreneur who was not a relative or close friend. o Contact information o The entrepreneur’s name, address, title, company name, and phone number o How did you find this person and why did you choose her or him?

2.

Analyze how the factors in Question 1 affect this entrepreneur’s success.

This exercise extends the learning from the first exercise. Assuming the chosen entrepreneur is successful, students will have a natural tendency to want to focus on the business when considering why they became successful. Therefore, you will have to help them understand that the business resulted from the entrepreneur’s decisions, his or her experiences, and how that entrepreneur created the opportunity in the first place.

Ask the students to investigate the entrepreneur’s motivations, networking efforts, and decision strategy BEFORE starting the business.

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CHAPTER 2

Preparing for the Entrepreneurial Journey SUMMARY AND AUTHOR’S NOTE Entrepreneurship is very much a way of thinking and a personal journey that incorporates a set of learned skills that can be applied in a variety of settings. This concept of learned skills is important because about two-thirds of students will go to work for someone else after graduation, either as their career or to prepare themselves to go out on their own with a business.

Although we don’t expect everyone to become entrepreneurs, we can enlighten our students and help them to see that learning some entrepreneurial skills and thinking like an entrepreneur can give them huge advantages in their career, whatever they choose to do.

Research has never proven that there are specific traits uniquely characteristic of entrepreneurs, not even my personal view that it takes passion to be an entrepreneur. The fact is that in any field or endeavor, similar characteristics apply—passion, perseverance, creativity, and so forth— whether you’re an artist or an entrepreneur. However, entrepreneurs do have a set of behaviors and skills that enables them to more effectively recognize an opportunity and pull together the resources necessary to turn that opportunity into a commercial venture. Fortunately, these behaviors and skills can be taught. This chapter will give students a good sense of what those entrepreneurial skills are and how they can apply the entrepreneurial mindset in their lives.

The chapter focuses on students as individuals to help them discover their personal likes and dislikes relative to business, to prepare for the challenges of entrepreneurship, and to refine their life goals.

CHAPTER OBJECTIVES After reading this chapter, students will be able to: 

Dispel the myths about entrepreneurs.



Understand the many pathways to entrepreneurship.



Appreciate the challenges and opportunities of entrepreneurship.



Prepare to become an entrepreneur.

CHAPTER OUTLINE Profile 2.1: One Journey That Inspired an Industry 2.1 Saying Goodbye to Stereotypes 2.1a Myth 1: It Takes a Lot of Money to Start a Business 2.1b Myth 2: It Takes a Great Idea

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2.1c Myth 3: The Bigger the Risk, the Bigger the Reward 2.1d Myth 4: A Business Plan Is Required for Success 2.1e Myth 5: Entrepreneurship Is for the Young and Reckless 2.1f Myth 6: Entrepreneurship Cannot Be Taught 2.2 Paths to Entrepreneurship 2.2a The Home-Based Entrepreneur 2.2b The Serial or Portfolio Entrepreneur 2.2c The Nonprofit Entrepreneur 2.2d The Corporate Entrepreneur

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2.3 The Challenges and Opportunities of Entrepreneurship 2.4 Preparing to Become an Entrepreneur 2.4a Find a Mentor 2.4b Build a Professional Network 2.5c Learn about Entrepreneurs 2.5d Understand Personality and Business Preferences 2.5e Improve or Acquire Critical Skills 2.5f Study an Industry

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RELEVANT CASE STUDY The following case study offers an opportunity to discuss how one entrepreneur prepared to become an entrepreneur. Instructor notes for the case can be found at the end of this manual.

Case 3: Andrew Mason and Groupon, Inc.

ANSWERS TO QUESTIONS ON KEY ISSUES These questions can be used to lead a class discussion or as short-answer questions on a quiz or test.

1.

Why are there so many myths about entrepreneurs?

In general, people rely on myths and stereotypes to categorize or explain behavior or to characterize individuals so that they can be compared to others. The media often rely on myths and stereotypes to convey information quickly and those myths become part of the culture. However, because entrepreneurs are such a diverse group, it is nearly impossible to formalize these generalizations.

2.

How do corporate entrepreneurs differ from other types of entrepreneurs?

Corporate entrepreneurs—those who act like entrepreneurs inside large companies—are distinct from other entrepreneurs in that they take on projects for their firms that the company would normally not touch. That is because these projects involve activities that are typically new to the company, so the risk of failure is high, or outside the company’s core competencies. Such projects operate under a high degree of uncertainty, so they are

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often managed separately from the core business activities. Recognizing that it is nearly impossible to re-engineer and redesign an entire organization, many companies have chosen from several options to simulate the entrepreneurial environment required for innovation to occur: Opportunistic model, enabler model, advocate model, or producer model.

3.

What are the steps you should take to prepare yourself for entrepreneurship?

To prepare for entrepreneurship, it is important to consider your reasons for wanting to own a business, assess your physical and emotional readiness to start a business, identify the kind of lifestyle you want to have, and determine the type of business environment that best suits you.

4.

What might explain the rise in interest in social or nonprofit entrepreneurship?

One could debate whether there is more interest in social entrepreneurship now or whether we’re simply reading more about it or hearing more about it in the news. In any case, entrepreneurs who focus on solving social issues and problems or finding sustainable solutions in their businesses are increasing in number. The Internet, blogs, video sharing, and other means of communication have served to create a heightened awareness of problems around the world. Entrepreneurs are problem solvers, so it is natural that students would see opportunity in solving social problems.

5.

Why are more ventures started by teams than by solo entrepreneurs?

More ventures are started by teams because the global business environment is more complex and no one person has all the knowledge and experience to successfully launch a new venture. With a team, responsibility and risk are shared, and the team benefits from the aggregate experience, contacts, and financial statements.

SUGGESTIONS FOR EXPERIENCING ENTREPRENEURSHIP The following experiential exercises can help students think about and apply what they have learned.

1.

Identify an entrepreneur who is leading the kind of personal and business life that you aspire to lead. Interview that person to find out more about how he or she achieved that lifestyle. During the interview, and ONLY if the two of you have developed a rapport, approach the entrepreneur about the possibility of becoming your mentor.

Encourage students to think boldly about whom they might want to interview. It is probably best to find someone within a reasonable distance of where the student lives, although phone or Skype mentoring sometimes works. Students should go to the interview having already done some background research on the entrepreneur and also prepared to give a compelling story about themselves to elicit interest from the entrepreneur in becoming a mentor.

2.

Entrepreneurship is a journey, and many people contribute to that journey. Begin a contact portfolio that will contain the names of all the people you meet as you network. Record

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their contact information, how you met them, and what they contributed to your journey.

Strive to meet three to five new contacts a week.

Three to five “strangers” a week is a lofty goal, but I have found that it is very doable. You might suggest to students that they average three to five per week. That way, if they attend one or two networking events during the course, they will probably pick up ten or more contacts that will balance the weeks in which they met only a couple of people. The point is to help them understand that networking is part of an entrepreneur’s job. You never know when that one person you took the time to meet has the answer to a challenge you’re facing or might lead you in a new, more profitable direction. This exercise is a nice setup for a more in-depth discussion of networking in Chapter 8 on team building.

CHAPTER 3

Creating Opportunity SUMMARY AND AUTHOR’S NOTE The essence of entrepreneurship is opportunity. To become more opportunistic, students first need to energize their creative skills and work to improve them. The ability to look at the world upside down, backwards and from multiple perspectives is critical to recognizing opportunities that others don’t easily see.

This chapter helps students understand the creative process and how connections are made that can result in great businesses. It also explores the topic of problem finding, framing, and solving, which is an essential skill if entrepreneurs want to create opportunities that meet compelling, real-world customer needs. The chapter also helps students learn more about their creative capabilities and how to remove roadblocks through exercises that will encourage them to become more creative. Finally, the chapter considers sources of new product/service ideas.

CHAPTER OBJECTIVES After reading this chapter, students will be able to: 

Use design thinking to understand opportunity.



Understand the nature of creativity and the creative process.



Learn how to develop creative skills.



Experience how to find and frame problems.



Understand the innovation process and types of innovation.

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CHAPTER OUTLINE 3.1 Creativity and Inspiration 3.1a Challenges to Creativity 3.1b Tools for Creativity and Inspiration 3.2 3.3

Opportunity/Ideation Find and Frame the Problem 3.3a Restate the Problem 3.3b Identify Attributes 3.3c Force Fitting 3.4 Develop Solutions 3.5 Innovation and Commercialization 3.5a Commercialization 3.5b Incremental versus Disruptive Innovation

RELEVANT CASE STUDY The following case offers an opportunity to explore how opportunities are created and developed. Instructor notes for the case can be found at the end of this manual.

Case 2: Raising a CleanBeeBaby

ANSWERS TO QUESTIONS ON KEY ISSUES These questions can be used to lead a class discussion or as short-answer questions on a quiz or test.

1.

Give an example to demonstrate that you understand the difference between an idea and an opportunity.

You might also consider having students start with an idea and turn it into an opportunity.

The bottom line is you’re trying to get students to understand that we generate lots of ideas during a day, but few of those ideas have the potential to become real business opportunities. For example, the following idea suggests a need: “Wouldn’t it be nice if there were a way to get the information from all the business cards I collect into my computer without having to type it all in manually?” That idea was turned into a business opportunity by the person who made a connection between paper business cards and scanning devices to develop a business card scanner that had market potential.

2.

Identify the challenges you face in becoming more creative. What three things will you do to address those challenges?

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This question gets students to reflect on their creative talents and how they spend their days. Often the reason a student does not consider herself creative is that she doesn’t leave herself any undistracted time in the day for creative thought. Now what can she do to make that happen? Today’s students (particularly undergraduates) may believe that they are most creative when they’re doing many things at once. This question can spark an interesting conversation about how this generation thinks and comes up with ideas. It is also an excellent opportunity to talk to students about the effects of distraction on goal achievement and innovation. An interesting take on this can be found in MIT professor Sherry Turkle’s 2011 book, Alone Together. It will provide a lot of fascinating material and examples to supplement your discussion.

3.

What is the value of early and thorough product definition?

When you first have an idea for a new product, it’s important to take time to validate that this product actually solves a real and compelling need that customers have. If you get customer input early and often, you will save money in developing the product and your customers will likely pay more for your product because it solves their specific problem.

3.

Pick a business in your community and find a creative way to change either the product/service or the way that product/service is delivered to the customers. How does your innovation add value to the business and how can that value be captured?

This can be a very creative exercise, particularly if you encourage students to pick fairly mundane businesses (pizza parlors, shoe repair, etc.) and find ways to give them new life by changing the distribution channel, finding a need that hasn’t been served, or--like Starbucks--turning the ordinary into an extraordinary experience. Students’ answers will vary on how their innovations add value to the businesses they select. Capturing value happens when a business model enables an entrepreneur to make money from an innovation. Customers are not likely to pay extra for small tweaks to an existing idea, so encourage students to think in terms of creating new value that customers will pay for.

Incidentally, this is precisely the same way you can turn a small business into an entrepreneurial enterprise—by creating NEW value.

4.

How is invention different from innovation? Which is more common today, and why?

Invention is fundamentally discovering or creating something that did not exist before.

Innovation is finding a new way to do something or improving on an existing product or service. Today incremental innovation is the most common form of innovation, probably because it’s easier to devise variations and improvements on something that exists than to start from nothing—and also because the marketplace is changing so rapidly that many inventions are obsolete by the time they’re ready to enter the market.

SUGGESTIONS FOR EXPERIENCING ENTREPRENEURSHIP The following experiential exercises can help students think about and apply what they have learned.

1.

Spend an afternoon walking around your community or your university or college campus.

Don’t look for anything in particular. Simply observe the things that you don’t normally

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pay attention to when you’re in a hurry. Watch people—what they do and don’t do. At the end of the afternoon, write down all the thoughts that come to you based on your afternoon of observation. Which of these ideas could possibly become a business opportunity and why?

You might ask students to bring a list of three to five ideas they generated from their day of observation. Have them describe the opportunities they see in those ideas and why they believe them to be commercially viable ideas.

2.

Pick one of the sources of new product/service ideas discussed in Table 3.3. Using that source, come up with an opportunity that has business potential. Then, searching the Internet or talking to people in that industry (always the best approach), develop a brief report that supports the viability of this opportunity.

Encourage students to limit their discussion to two or three pages and to focus on innovative opportunities that meet a real need in the market.

SUPPLEMENTARY LECTURE MATERIAL My Favorite Creative Exercises These exercises have been handed down from many colleagues, and some form of them can be found in almost any book on creativity. Have fun with them, and your students will too.

Creative Activity 1: Find Your Team Purpose: To discover common backgrounds and form teams for experiential exercises.

In this exercise, the goal is for students to introduce themselves to as many people as possible in a two-minute time frame. At the end of two minutes, the instructor will ask them to form into groups of three. Then they have two minutes to find three unique things that they all have in common—these uncommon commonalities cannot be job related or ordinary (e.g., you all work for the same company or you’re all women). As soon as a group has its three most uncommon commonalities, it should shout out, “We’re done.”

The discussion will revolve around looking at the types of commonalities found and at the advantages and disadvantages of those commonalities for forming a team. This exercise also provides an opportunity to talk about how creative the team was in coming up with its uncommon commonalities.

Creative Activity 2: Pass the Problem Purpose: To discover multiple solutions and opportunities from a single problem.

In teams, each person individually should think about a current problem or concern that needs a solution or a pressing need that hasn’t been met. Students should try to come up with a problem that a typical consumer or business is facing. They will have five minutes to think and write their problem or need on a piece of paper.

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When the instructor cues the students, each should pass his or her paper to the person on the right. That person reads the problem or need just received and jots below it the first thoughts that come to mind to solve the problem or address the need. The students have thirty seconds to do this and then they pass the note to the person on their right.

This process is repeated every thirty seconds until each person gets his or her own problem sheet back.

Discussion Questions 1.

Did anyone discover novel solutions that you had not previously considered?

2.

Can you see any value in trying some of these suggestions?

3.

Do some of these suggestions trigger other ideas or solutions for you?

Creative Activity 3: Taking Advantage of a Disconnect Purpose: To experience the opportunity-creation process; to learn that one core invention can produce multiple applications and opportunities.

This exercise is based on the premise that many opportunities are created by going through a process that involves 

Connecting dissimilar concepts



Experimentation



Inventing something new based on connections and experimentation



Finding applications for the invention or opportunity created

The students divide into groups of three to five with the groups forming a circle to the extent possible. Each group decides on a word that they are going to write on a piece of paper. It should be a noun. When all the groups have written a word on their papers, at the signal of the instructor, each group delivers its paper to the group next to it in clockwise fashion. It is that group’s job to add another word to the paper in the form of an adjective—any adjective (it does not have to relate to the noun). At the instructor’s signal, the groups pass their papers to the next group. This time the groups add a verb, which does not have to relate to any of the previous words. At the instructor’s signal, the groups pass their papers to the next group. This final time the groups add an adverb and then pass the paper on. This entire process should take place quickly so that groups do not spend too much time thinking about a word.

At the completion of the four rounds, each group takes the paper they end up with that has four words on it and moves into Phase One—connecting the words in a relationship such that a potential invention opportunity appears. Write that opportunity on the paper and label it “Opportunity.” Once all of the groups have completed this phase, and at the signal of the instructor, each group delivers its paper to the next group. Phase Two begins. It is the job of each group to consider the invention opportunity and enhance it by adding new information.

Write this information next to the “Opportunity.” At the signal of the instructor, each group then delivers their paper to the next group. Phase Three begins. Each group determines the final invention opportunity based on the information given them and writes it on the paper. At a signal from the instructor, Phase Four begins. Each group delivers the final invention opportunity

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paper to another group. It is that group’s job to find (and record on the paper as “Application 1”) an application for the invention—in other words, how it can be used. At the signal of the instructor, each group then delivers the paper to another group, and that group finds a different application for the invention and writes it as “Application 2” on the paper. The instructor then asks the groups to return the original invention to the group that came up with it and after some time for group discussion, each group reports on the applications created for their invention.

This exercise provides a chance for students to experience the notion that great opportunities are often found by juxtaposing unrelated concepts or finding interesting relationships among unrelated items.

CHAPTER 5

Analyzing the Industry and Market SUMMARY AND AUTHOR’S NOTE Know your industry or be buried by it. Every industry is distinct and has a different personality—a different culture, if you will. Yet, one thing is consistently true—if you don’t understand how the industry works, it will be impossible to build a sustainable business. How business is conducted varies by industry. Some industries offer more opportunities than others; some are more hostile than others. This chapter looks at the industry life cycle and at various frameworks used to characterize and understand an industry. It delves into some of the methods for analyzing an industry and then moves into a discussion of the target market and first customer for the business. Two critical areas considered are how to effectively gather competitive intelligence and how to calculate how much potential demand there is for a new company’s product or service.

It is amazing to me how many students do not understand the difference between an industry and a market. Therefore, it is a worthwhile exercise to ask students to discuss the difference. An industry is a group of companies with common interests along the value chain, such as manufacturers, suppliers, distributors, retailers, and so forth that focus on, for example, electronics. The industry is the environment in which the business operates—its context. This chapter looks at how an industry can be analyzed to reveal its risks and benefits. It discusses how to examine the characteristics of an industry, how to seek out competitive entry strategies, and how to deal with the competition.

A market, by contrast, is a grouping of customers. Getting to the customer is, perhaps, the most critical step in feasibility analysis. Without customers, there is no business. Beyond that, customers provide important information to an entrepreneur about the design, features, and benefits desired in the product or service being offered. This chapter explores methods for understanding customers and their needs. It also provides a methodology for studying the customer and the market. The chapter then examines how to forecast customer demand.

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CHAPTER OBJECTIVES After reading this chapter, students will be able to: 

Explain the difference between an industry and a market.



Discover effective ways to research and analyze an industry.



Determine first customer and the characteristics of the market.



Use ethnographic techniques for understanding customers.



Gather competitive intelligence.

CHAPTER OUTLINE 4.1 An Overview of Industry Analysis 4.1a Gathering Secondary Sources of Industry Information 4.1b The Importance of Primary Industry Data 4.1c Understanding Industry Life Cycles 4.2 Analyzing an Industry 4.2a Porter’s Five Forces 4.3 Market Research for Customer Discovery

4.3a Gathering Secondary Customer Data 4.3b Customer Discovery Up Close 4.3c Segmenting the Market with a Customer Matrix 4.3d Drawing Conclusions from Market Research 4.4 Gathering Competitive Intelligence 4.4a Identifying the Competition 4.4b Finding Information about Competitors

RELEVANT CASE STUDY The following case offers an opportunity to explore the effects of the industry and market on the business. Instructor notes for the case can be found at the end of this manual.

Case 1 AdRoll: A Case Study of Entrepreneurial Growth

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ANSWERS TO QUESTIONS ON KEY ISSUES These questions can be used to lead a class discussion or as short-answer questions on a quiz or test.

1.

Which primary and secondary information will tell you whether an industry is growing and favorable to new entrants?

Revenues, profit levels, number of employees, number of companies, and volume of products are some measures of growth and favorability to new entrants in an industry.

2.

What kinds of information can suppliers and distributors provide?

Suppliers and distributors can tell you about the industry and how it works and about the customers within certain markets—who they are, when they buy, and how much they buy.

They can also help you understand how the distribution channel works.

3.

How should a market entry strategy be determined? What factors should be considered?

Your entry strategy will depend on barriers to entry in the industry, such as economies of scale and brand loyalty, as well as the five forces suggested by Porter: threat from substitute products, buyers’ bargaining power, suppliers’ bargaining power, rivalry among existing firms, and technology. Your strategy will also be a function of your competitive analysis and the initial market you have targeted.

4.

What is the value of defining a market niche?

Defining a niche allows you to enter a market that you can control. It gives you a chance to succeed before others enter. Most important, you are usually addressing a customer need that hasn’t yet been served.

5.

Suppose you are introducing a new type of exercise equipment to the fitness industry. What would your strategy for research on the customer look like?

The first assumption here is that students have discovered real customer needs that informed the development of this product. Students should suggest a variety of secondary and primary research methods discussed in the chapter that will reveal how their product is differentiated in the market and how it might meet particular customer needs. Given the type of product, methods that involve a working prototype of the equipment will probably provide the most valuable information from potential customers. This feedback can be accomplished through focus groups where customers can actually try the equipment or compare it against competitors in the market.

6.

Given the definitions of direct and indirect competitors, provide an example of each for a product of your choosing.

In general, students need to remember that direct competitors are those businesses that serve the same customer needs with the same types of resources, while indirect competitors serve the same customer needs but with different resources, such as substitute products or services.

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SUGGESTIONS FOR EXPERIENCING ENTREPRENEURSHIP The following experiential exercises can help students think about and apply what they have learned.

7.

Choose an industry that interests you. Create a status report using the Internet, LexisNexis or other industry source, current periodicals, and interviews with people in the industry. In your estimation, does this industry have potential for new business opportunities? If so, where do those opportunities lie? Write your analysis in a two-page report, indicating sources you used to develop your conclusions.

I find that students today rely heavily on opinion and unsubstantiated sources to support their arguments. This exercise gives them an opportunity to learn how to create a strong argument supported by facts and credible sources. Students should present their industry analysis in a logical format, building a case for industry support of new ventures. This exercise will help students understand the importance of knowing the industry and finding evidence for new business opportunities.

8.

Pick a product or service that interests you, and formulate a plan for researching customer needs. Identify what information must be collected (secondary and primary) and how to collect it. Justify the plan in a two-page report.

You might want to begin by having the students graphically depict the value chain for the specific product or service they are considering. From that graphic they can determine who their customer is based on where their business lies in the value chain. The students’ plans should contain questions that their research will answer, secondary resources that they will use, and a methodology for conducting primary research with the customer to determine the customer profile and level of demand.

CHAPTER 5

Developing and Testing a Business Model SUMMARY AND AUTHOR’S NOTE One of the most critical stages of the entrepreneurial process is the development of a business model. A business model is how a company creates and captures value; therefore, it addresses all the areas of the business: value proposition, customer segments, distribution changes, business activities and resources, strategic partners, revenue sources, and cost drivers. This chapter explains how to turn an idea into an effective concept for a new business through the development and testing of a business model that creates value for the customer and enables the entrepreneur to capture that value through a monetization plan.

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It is important to spend sufficient time on the components of the business model, in particular, the customer definition and the benefit to the customer. The easiest way to help the students understand the customer is to tell them that the customer is “the one who pays you, whether that be an individual or a company.” That way they can better differentiate between a customer and an end-user. For example, a concept that involves manufacturing a product and selling it through a distributor to a retailer means that if the entrepreneur is the manufacturer, his or her customer is the distributor, so the benefits the entrepreneur must provide have to be benefits that the distributor wants, such as great margins. Students will argue that their product must meet the needs of the end-user (sometimes a consumer), and they are right—they need to consider the benefits to the end-user and the retailer as well so that they can convince the distributor to carry their product by proving that there is sell-through on the other end. But the primary customer they need to satisfy is the distributor.

I have found it effective to ask students to distill their business concept into two concise sentences that express four elements: 1) what’s the problem and who has it; 2) how we are solving it; 3) why you should care (is it a big market?); and 4) how we will win (what’s our sustainable competitive advantage?) Then I ask them to present the two sentences in front of the class to see whether the class understands the concept completely. After a few questions like “Who is the customer?” and “What is the benefit?” students come away with a new appreciation for how difficult it is to develop a clear and compelling business concept.

CHAPTER OBJECTIVES After reading this chapter, students will be able to: 

Explain what a business model is and what it accomplishes.



Discuss the process for developing and testing a business model.



Explore how to innovate a business model.

CHAPTER OUTLINE 5.1 Understanding the Business Model 5.1a Value Proposition 5.1b Customer Segments 5.1c Distribution Channels 5.1d Strategic Partners 5.1e Business Activities and Resource Requirements 5.1f Revenue Sources 5.1g Cost Drivers 5.1h Business Models Change 5.2 Testing and Validating Business Model Feasibility 5.2a Developing and Testing Hypotheses 5.2b Considering the Impact of the Macro Environment

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5.3 Innovating with Business Models 5.3a When the Customer Doesn’t Want to Pay 5.3b Facing Dominant Players Global Insights: Business Models for the Developing World 5.4 Drawing Conclusions from Feasibility Analysis

RELEVANT CASE STUDY The following case offers an opportunity to evaluate a business model. Instructor notes for the case can be found at the end of this manual.

Case 3: Andrew Mason & Groupon, Inc.

ANSWERS TO QUESTIONS ON KEY ISSUES These questions can be used to lead a class discussion or as short-answer questions on a quiz or test.

1.

What is the purpose of the business model and why do business models typically fail?

The business model addresses the issues of how the company will make money and how it will create and capture value for its shareholders, investors, customers, and value chain partners. An effective business model also provides a competitive advantage. Business models typically fail because they lack a compelling story, they are not carefully conceived, the numbers don’t make sense, or they are not executed well.

2.

What are thecharacteristics of an effective business model?

An effective business model will convey a compelling story about how thecompany will make money, will demonstrate a real value proposition for stakeholders, will contain financial projections that make sense, and will create a competitive advantage for thecompany.

3.

What is thepurpose of feasibility analysis?

Feasibility analysis enables theentrepreneur to reduce some of therisk of theunknown in starting a business. It helps theentrepreneur think through thebusiness and test theconcept in themarket to insure that there are customers who will be interested in what thebusiness is offering.

4.

What are some ways to innovate in a business model?

Four ways to innovate are eliminate something that theindustry has traditionally done, reduce something below theindustry standard, raise something above theindustry standard, or create something theindustry has never done. Every component of thebusiness model is open to innovation.

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SUGGESTIONS FOR EXPERIENCING ENTREPRENEURSHIP The following experiential exercises can help students think about and apply what they have learned.

1.

Compare and contrast thebusiness models of two early-stage companies. How are their business models sources of innovation for thecompany?

Students will probably want to compare two companies in thesame industry. It would be important, however, that they choose companies with very different business models. A more interesting approach might be to compare business models from two different industries. Then they could answer thequestion, “could thebusiness model from industry A work in industry B?” Applying a business model from one industry to another is one form of innovation.

2.

Suppose you intend to start a theme restaurant that can be replicated and franchised. Based on an analysis of some existing theme restaurants, what types of revenue streams could this business generate?

Students will come up with a variety of typical revenue sources: catering, selling gift items, holding cooking classes, developing a branded line of foods. Encourage them to think beyond thetraditional revenue sources to find a niche that is not being served.

CHAPTER 6

Prototyping and Validating a Solution SUMMARY AND AUTHOR’S NOTE It is a rare entrepreneurship text that treats theissue of product development; and yet, I have found in my courses that fully half of all thebusiness concepts developed are related to products that require prototypes. How entrepreneurs move from an idea to a fully developed product that has commercial value is an important topic for entrepreneurs to understand. Far too often, a great product idea can’t be manufactured at a cost that will allow it to be priced at a level customers will pay. If product development issues aren’t considered during feasibility analysis, that fact may not come to light until theentrepreneur has already spent a lot of time and money on an infeasible concept. Furthermore, developing a prototype of a new product is critical to determining thefinal specifications, as well as what features customers want in theproduct. Since thecost of creating a prototype typically is approximately ten times thecost of a productionquality product, it’s important to understand how to keep those costs down as much as possible.

Moreover, it is not just product companies that require prototypes; service companies benefit from well-developed prototypes of all thesystems involved in providing theservice. thestrategies

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and tactics related to product development apply equally well to service companies. It is through theprototype that an entrepreneur learns what works and what doesn’t.

CHAPTER OBJECTIVES After reading this chapter, students will be able to: 

Discuss thecurrent trends in new product design and development.



Describe theproduct development cycle.



Understand therequirements of a minimum viable product.



Compare theadvantages and disadvantages of outsourcing product development.

CHAPTER OUTLINE 6.1 Entrepreneurs and New Product Design and Development 6.1a New Product Failure 6.2 Overview of theProduct Development Cycle 6.2a Customer Identification or Discovery 6.2b Customer Validation and Design 6.2c Business Creation and Launch 6.2d Product Development Tradeoffs 6.3 Building a Minimum Viable Product 6.3a Outsourcing Product Development

RELEVANT CASE STUDY The following case offers an opportunity to understand theprocess of product development.

Instructor notes for thecase can be found at theend of this manual.

Case 3 Raising a CleanBeeBaby

ANSWERS TO QUESTIONS ON KEY ISSUES These questions can be used to lead a class discussion or as short-answer questions on a quiz or test.

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How has theenvironment for product development changed in thelast decade, and what does that mean to entrepreneurs starting new businesses?

A global marketplace, coupled with thefact that most new products are derivatives of something that already exists, means that an intensely competitive arena for product development has emerged. Today’s customers can differentiate products on a very subtle level; therefore, they demand products that reflect their individual lifestyles and value systems. As a result, product designers must create offerings that distinguish themselves on many levels in themarketplace. Whereas product performance and price were themain competitive measures in thepast, today these two factors are givens. This means that entrepreneurs must offer superior performance and value-based pricing to even begin to be competitive and then they must offer products and services that address niche markets. A manufacturing company can never stop improving its design and manufacturing processes, and a service company must continually find ways to improve its delivery methods and customer service.

2.

What are theprincipal reasons why new products fail?

The principal reasons include lack of good product-market fit, poor market and industry analysis; overlooking theintellectual property environment and industry architecture; technical problems; and thehuman factor—the lack of theright talent.

3.

Suppose you are going to develop and market a new device for tracking calories consumed during theday. What will your product development strategy be, and why?

Students will come up with a variety of responses, but their strategies should address customer discovery and validation of real needs, thecreation of a minimum viable product, and a plan for funding product development and testing theprototype in themarket.

SUGGESTIONS FOR EXPERIENCING ENTREPRENEURSHIP The following experiential exercises can help students think about and apply what they have learned.

1.

Visit an entrepreneurial company that is developing new products. What is thecompany’s product development strategy, and how effective is that strategy? What criteria did you use to measure effectiveness? You may want to use outside sources to confirm what thecompany tells you.

Students may find that companies are reluctant to talk about their product development strategy, particularly if it is a critical component of their competitive advantage. You may have to infer thestrategy from information provided.

This exercise works equally well for services. An interesting extension of theexercise might be to compare thestrategies of a product developer and a service developer in thesame industry.

2.

Interview an entrepreneur who uses thelean approach to new product development. How did they test their MVP?

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Depending on thevariety of entrepreneurs chosen, this exercise could prompt an interesting discussion around approaches to validating an MVP with customers.

3.

Interview an entrepreneur who outsourced his or her product development overseas. What challenges did they face? Is outsourcing typical in this industry? Was this a good decision?

Why? Why not?

This exercise gives students theopportunity to apply what they have learned about outsourcing and prototyping to evaluate theeffectiveness of a decision an entrepreneur made. Be sure that students justify their conclusions about theeffectiveness of thedecision.

CHAPTER 7

Protecting Startup Assets SUMMARY AND AUTHOR’S NOTE All startups have assets that must be protected because they are an important part of thecompany’s competitive advantage. This chapter is designed to give students theinformation they need to safeguard their proprietary assets through intellectual-property protections: patents, trademarks, copyrights, and trade secrets. It also covers theimportant topics of patent infringement, which is a common problem across many industries, and intellectual property strategy, which needs to be an integral part of any startup and growth strategy.

Although students will come away with sufficient knowledge about intellectual property to begin to think about its implications for their ventures, thechapter encourages theuse of qualified intellectual property attorneys to insure that their companies are effectively protected.

CHAPTER OBJECTIVES After reading this chapter, students will be able to: 

Explain therole of intellectual property in a business.



Discuss how to protect assets with trade secrets.



Understand how copyrights and trademarks can be protected.



Explain how to acquire and defend patents.

CHAPTER OUTLINE

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7.1 theNature of Intellectual Property Rights 7.2 Trade Secrets 7.3 Trademarks 7.4 Copyrights 7.4a theDigital Millennium Copyright Act 7.4b Obtaining Copyright Protection 7.5 Patents 7.5a Is theInvention Patentable?

7.5b Patent Types 7.5c thePatent Process 7.5d Patent Infringement 7.5e Intellectual Property Strategy

RELEVANT CASE STUDY The following case offers an opportunity to explore how to protect critical business assets.

Instructor notes for thecase can be found at theend of this manual.

Case 3: Andrew Mason & Groupon, Inc.

ANSWERS TO QUESTIONS ON KEY ISSUES These questions can be used to lead a class discussion or as short-answer questions on a quiz or test.

1. Of thethree categories of knowledge, which category has legal rights associated with it and what are those rights?

Intellectual property carries excusive legal rights in theform of patents, trademarks, and copyrights that offer remedies through thecourts for theprotection of intangible assets.

2. What are three ways you can preserve theconfidentiality of your trade secrets?

You can maintain confidentiality by 1) marking documents as trade secrets, 2) using confidentiality agreements, and 3) not allowing any one person to have access to theentire trade secret.

3. What actions can you take that will cause you to infringe another company’s trademarks?

You can infringe another’s trademark if you create a mark that is so similar as to be confusing or deliberately copy another’s trademark.

4. What types of assets in your business might you want to protect with copyrights?

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You would want to protect any original works such as brochures and manuals and software programs not eligible for patents.

5. Under what circumstances would you decide to patent your new technology?

You would decide to patent if 1) your invention met all therequirements for a patent (fit into one of thefive classes of inventions, had utility, contained no prior art, and was nonobvious); 2) if you have a significant investment in development; 3) if having a patent gives you a bargaining chip against dominant players in theindustry; and 4) if you plan to license your technology.

SUGGESTIONS FOR EXPERIENCING ENTREPRENEURSHIP The following experiential exercises can help students think about and apply what they have learned.

1.

Visit theU.S. Patent Office at www.uspto.gov. Pick a patented invention that interests you and for which a product has been developed and commercialized. Alternatively, start with a patented product and go back to find theoriginal invention patent. Students should read thesummary of thepatent and thekey claims specified to thebest of their ability.

Ask students to write a brief report about thespecific aspects or claims in thepatent as to what is original about theinvention and subsequent product. How strong does this patent appear to be? In other words, have many products been developed off thecore invention.

2.

Interview an entrepreneur who is producing a product. What is their IP strategy? What forms of IP are they using to protect their assets?

Students will find that some entrepreneurs are more willing than others to disclose their strategies. Generally, if a company has received some press about their inventions, they may be more amenable to a conversation. Alternatively, students can study a company using secondary data sources and attempt to deduce thestrategy that way.

CHAPTER 8

Building theFounding Team SUMMARY AND AUTHOR’S NOTE Due to thecomplexity and rapid pace of today’s business environment, themajority of new ventures are started by teams of two or more people. Technology has shrunk theglobal marketplace and brought our international competitors and partners closer. Technology has also changed theway we do business and thespeed at which business activities occur, so it is difficult for a solo entrepreneur to move quickly and effectively enough without a team of one sort or

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another. This is not to say that it is impossible to start an entrepreneurial venture as a solo entrepreneur, but at thevery least, you will need access to advisors and others who can fill in thegaps in your knowledge and experience.

Starting a new venture with a team enables entrepreneurs to access expertise in all thefunctional areas of thebusiness and to start from a stronger position. However, teams are also fraught with challenges and decisions made in haste when forming a team can haunt theventure throughout its life. This chapter explores theissues around putting together an effective team that will help thenew venture succeed. thefounding team includes not only thecore members—those who hold an equity interest in thecompany—but also those who contribute to thebusiness in a variety of ways—employees, professional advisors, independent contractors, and other stakeholders.

CHAPTER OBJECTIVES After reading this chapter, students will be able to: 

Explain how to effectively build a founding team.



Understand what causes teams to fail.



Discuss theimportance of roles, responsibilities, and rewards.



Explain how boards of directors work in a private company,



Compare and contrast thepros and cons of outsourcing with independent contractors versus hiring employees.

CHAPTER OUTLINE 8.1 theScience of Founding Teams 8,1a Why Startup Teams Fail 8.2 Building theFounding Team 8.2a Who Should Be on theTeam?

8.2b Who Does What: Deciding on Roles and Responsibilities 8.2c What’s in It for Me: Rewarding Co-Founders 8.3 When Entrepreneurs Don’t Scale 8.4 Expanding theTeam 8.4a Seeking Professional Advisors 8.5 Seeking Personal Advisors 8.5a Building a Board of Directors 8.5b Advisory Board 8.5c theMentor Board 8.5d Outsourcing with Independent Contractors

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RELEVANT CASE STUDY The following case offers an opportunity to consider theissues related to forming a founding team. Instructor notes for thecase can be found at theend of this manual.

Case 4 Vision to Learn

ANSWERS TO QUESTIONS ON KEY ISSUES These questions can be used to lead a class discussion or as short-answer questions on a quiz or test.

1.

For what kinds of businesses is starting as a solo entrepreneur sufficient? Are there advantages to starting even these types of businesses with a team?

Team efforts have a higher rate of startup success than solo ventures. You can share thestartup effort, share expertise, and share financial resources. Some service businesses, such as consulting, can succeed as solo ventures, but bringing on additional partners, either as equity stakeholders or as members of strategic alliances, can add a new dimension and capability to thebusiness and allow it to grow more quickly. Students may suggest that many online businesses such as blogs are usually started by solo entrepreneurs who work with others as needed. It is important that students understand thevalue of having core functional expertise in thebusiness, that is, thecritical functions of thebusiness.

2.

What strategy should an entrepreneur employ when selecting a personal board, an advisory board, or a board of directors?

You should have an advisory board from theinception of thebusiness and a board of directors if you use a legal form that requires one. theadvisory board will help fill in theknowledge and experience gaps and will not be a cost to theentrepreneur as will a board of directors. theinitial board of directors will probably be an insider board made up of theprincipals in thecompany. Before thegrowth phase begins, however, it will be valuable to bring on a working board of directors. If you bring in outside investment, a formal board will be required, and you may need to add theinvestor to your board. Entrepreneurs should identify a personal board early in thedevelopment of a business idea. themembers of this board are not stakeholders in theventure but rather provide personal, trusted advice to theentrepreneur as leader of thecompany

3.

How might theneed for an attorney differ for a service business and a high technology company?

A variety of responses are possible, but in general, a high-technology company is likely to deal in products, so there are product liability issues that generally don’t arise in a service company (unless that service is related to theinstallation of products). Furthermore, it is more likely that a technology company will require theservices of a patent attorney; however, all businesses require theassistance of an attorney for contracts and to protect thebrand.

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How can you ensure that you are using independent contractors correctly and in accordance with thelaw?

Follow theIRS 20-point test for independent contractors, and consult with an attorney.

5.

Suppose you are starting an apparel company where you will design and manufacture a unique line of clothing. What kinds of independent contractors can help you start this venture?

You can outsource to independent contractors manufacturing, assembly, distribution, and payroll, among other things.

SUGGESTIONS FOR EXPERIENCING ENTREPRENEURSHIP The following experiential exercises can help students think about and apply what they have learned.

6.

Interview an entrepreneur who started a venture as a soloist, and then visit an entrepreneurial venture started by a team (two or more people). Based on your interviews, write a two-page report discussing theadvantages and disadvantages of each approach for theparticular businesses you visited If thestudent wishes to do a direct comparison, he or she should choose two businesses in thesame industry and in thesame place on thevalue chain--one started by a team, theother by a soloist. You can have thestudent prepare a brief report to include such things as thecompanies’ startup strategies, level of growth, and size, and other factors that would capture any potential differences between thebusinesses that might account for why one was started as a solo venture and theother as a team.

7.

You need to choose a lawyer, accountant, or banker as a potential professional advisor to your business and you want to interview that person. What information will you need to secure from him or her during theinterview to make your decision?

In general, students will want to gather information on thepotential advisor’s expertise, whether he or she has worked with small businesses, and what he or she expects to contribute to theentrepreneur’s success. Students should also recognize theneed to spend time with this person to make that they share thesame core values and view of business.

CHAPTER 9

Calculating Startup Capital Requirements SUMMARY AND AUTHOR’S NOTE One of themost difficult tasks for thestartup entrepreneur is calculating how much money it’s going to take to start a new venture. thetask is complicated by thedifficulty of estimating demand for a new product or service. If a new product or service is unique (and for entrepreneurs it

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typically is), thecalculation becomes that much more difficult because there is no exact precedent that theentrepreneur can look to for guidance. Students seem to have great difficulty accepting theambiguity of forecasting demand. They will expect theinstructor to provide a precise formula for accurately estimating demand, and no such formula exists.

Typically, I walk students through a scenario based on theresults of their primary research with thecustomer. For example, suppose a student interviewed 20 potential customers and determined their level of need and desire for theproduct or service thestudent was offering. Now let’s say that 15 of the20 people interviewed said that they would be willing to try theproduct/service because it seemed to solve their problem. Great. But thestudent can’t assume that 75 percent of theavailable market will actually be willing to buy because, typically, theresults of research at this level are rather optimistic at best.So thestudent must discount thepercentage to take a more conservative point of view—say, 60 percent (which is still pretty optimistic!). Thus, if theoriginal total market is 100,000 people, thestudent might estimate that 60,000 people represent his or her potential total market.

But startups don’t address total markets at launch. Entrepreneurs need to identify thefirst customers who need thesolution most. Furthermore, it’s important to remember that not all of these customers will buy right away. thestudent must consider buyer purchasing habits and seasonality to create an adoption curve. thepoint of this exercise is to demonstrate to students that there are many things that must be considered when estimating demand and that there is no one right way to do it. thestudent needs to come up with an approach that makes sense for thebusiness and thekinds of customers that thebusiness will deal with at different points in time.

This chapter looks at how to estimate sales and capital expenditures for a new venture and how to present these and other necessary figures in cash flow statements. thechapter also discusses analyzing how much startup capital is needed to fund a new venture.

CHAPTER OBJECTIVES After reading this chapter, students will be able to: 

Discuss how entrepreneurs acquire theresources they need to launch a business.



Identify typical startup financial metrics



Explain therole of financial assumptions.



Discuss how entrepreneurs should assess risk when calculating financial needs.

CHAPTER OUTLINE 9.1 Identifying Startup Resource Requirements 9.1a Construct a Business Process Map 9.1b Position theVenture in theValue Chain 9.1c Create a Timeline and Milestones for Resource Requirements 9.1d Define Your Launch Strategy to Reduce Risk 9.2 Startup Financial Metrics

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9.3 Develop Financial Assumptions 9.3a Estimate New Product/Service Demand 9.3b Pricing Assumptions 9.3c Estimate Revenues, Expenses, and Startup Costs 9.4 Calculating a Startup’s Cash Requirements 9.4a Assessing Risk

RELEVANT CASE STUDY The following case offers an opportunity to explore how to calculate startup cash requirements for an actual business. Instructor notes for thecase can be found at theend of this manual.

Appendix: Currency13

ANSWERS TO QUESTIONS ON KEY ISSUES These questions can be used to lead a class discussion or as short-answer questions on a quiz or test.

1.

Describe thetypical metrics for a startup business.

Typical metrics include customer acquisition costs; average order size, time to reorder, and lifetime value per customer; revenues per salesperson; and time to revenue for direct sales.

For Internet ventures, students will need to look at acquisition costs, retention costs, revenue, theviral coefficient, contribution margin; and themonthly burn rate.

2.

What are thetypes of resources that entrepreneurs need to gather to start a new venture?

Startup resources include 1) people, such as thefounding team, advisors, and independent contractors; 2) assets, such as equipment and office or plant space; and 3) finances, such as cash, equity, and debt. thegoal is to create a mix of resources that will enable thenew venture to start and operate until theincome of thebusiness is sufficient to produce a positive cash flow—that is, until income exceeds expenses.

3.

Why is thecash flow statement themost important statement for an entrepreneur?

The cash flow statement is themost important financial statement for an entrepreneur because it depicts thecash position of thecompany at specified points in time and lets an entrepreneur know when thecompany is expected to generate a positive cash flow based on sales. Cash is thelife blood of thebusiness, and an entrepreneur must be constantly aware of thecash position of a new venture.

4.

What are some ways to forecast sales effectively for a retail business? For a manufacturer?

For a service business?

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You will need to estimate revenues, expenses, and startup costs from theindustry, themarket and thecustomer; and from your own knowledge—in other words, you’ll have to triangulate a number of sources.

For a retail business, if theproduct does not currently exist in themarket, you will need a competing product or service that is similar or is a substitute one to study. Consider thevolume of sell-in to theretailer and thevolume of sell-through to thecustomer. Sales figures will also be a function of growth rates in your market segment, thenumber of innovations offered, and any technological innovations that permit you to produce theproduct or service at a lower cost. Service businesses generally follow thesame patterns as manufacturers of consumer products because they deal directly with thecustomer.

For a manufacturer, it is important to understand thebuying cycles of theindustry. You will need sales figures from noncompeting product manufacturers in thesame industry, and you will need to determine thesize of themarket niche you intend to enter.

5.

What are thethree categories of funds in thecash needs assessment, and how are they used to calculate how much money is needed to start thebusiness?

The cash needs are separated into types of capital resources that will be required: capital expenditures, startup expenses, working capital, and a safety margin, which is a contingency amount based on theprobability that theentrepreneur’s estimates might be incorrect. Breaking out thetotal funding requirements by types of capital helps an entrepreneur make decisions that might bring down thecost of starting thebusiness.

SUGGESTIONS FOR EXPERIENCING ENTREPRENEURSHIP The following experiential exercises can help students think about and apply what they have learned.

1.

Make a list of all thesources of friendly money you can tap to start a new business. Be sure to include your personal resources. How much startup money could you reasonably raise?

At what points in thedevelopment of your business will you need what types of capital?

Students should consider at what points their particular venture is likely to require capital and theevents that will trigger that need. Then they must determine what types of capital are appropriate for a particular stage in theventure’s evolution. Creating a timeline for funding a new venture is an important exercise to do well before theventure launches

2.

Interview an angel investor and a banker to learn what his or her expectations are when reviewing business plans for new ventures. In a two-page report, compare their criteria for choosing to fund or not fund a new business.

Interviewing both an angel and a banker enables students to compare and contrast theneeds and requirements of thetwo financial sources. Students often talk about needing venture capital to start a business. Interviewing a venture capitalist is one way to dispel thenotion that venture capital is a primary source of funding for most businesses. Interviewing a banker is a good way to learn what a business must achieve before thebanker will risk thebank’s money.

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CHAPTER 10

Preparing a Business Plan SUMMARY AND AUTHOR’S NOTE The business plan seems to be theHoly Grail for every business student and for many entrepreneurship professors. Many students don’t believe that they have gotten a complete education unless they have taken a business plan course. Although creating thebusiness plan is a valuable skill to acquire, a professionally crafted business plan is less important at startup than a clear and compelling story about thebusiness model and evidence from customers to validate that story, all of which are accomplished in a feasibility analysis. Investors and others want to see that thenew venture has customers and a track record, however brief. They want to see that thebusiness model actually works. How can you prepare a credible business plan if you haven’t tested thebusiness model?

The new environment for business planning actually makes thecase for theimportance of a feasibility study and micro strategies to prove theconcept and enable thefounding team to launch theventure and test it before completing a formal business plan document and seeking outside investment capital. Doing a business plan without having conducted feasibility analysis is simply creating work of fiction. Rather than spending hours crafting a well-written plan, students should be encouraged to spend their time getting traction with thebusiness, particularly if they intend to seek outside capital at some point. thebest proof of concept is a business that has customers and is operating. Fortunately, for many entrepreneurs, theInternet has made it easy to launch a business quickly to test themarket. (See theSupplementary Lecture Material.)

This chapter explores a new way to look at thebusiness plan process that is not only more in alignment with current practices but also makes sense in a changing business environment where speed, flexibility, and fast innovation are thenew normal. In this context, however, we’ll look at thepurpose and methodology for completing a business plan and making a successful pitch for thebusiness.

CHAPTER OBJECTIVES After reading this chapter, students will be able to: 

Describe how to prepare to write a business plan.



Identify stakeholder interests.



Explain how to demonstrate proof of concept.



List thecomponents of a compelling executive summary.



Discuss theelements of an effective business plan.

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Describe how to successfully pitch a new business.

CHAPTER OUTLINE 10.1 Preparing to Write theBusiness Plan 10.1a Identify Stakeholder Interests 10.1b Proof of Concept Demonstration 10.2 Starting With a Compelling Story 10.2a How Will You Grab My Attention?

10.2b What Pain Is Being Addressed and Who Has It? 10.2c How Is Your Venture Solving theProblem?

10.2d What is Your Venture’s Competitive Advantage 10.2e Can Your Venture Make Money?

10.2f Can theFounding Team Execute thePlan?

10.2g Why is Now theRight Time to Launch This Venture?

102h What is theTeam Seeking from Investors?

10.2i Guidelines for Executive Summaries 10.3 Preparing theFull Business Plan: Strategy and Structure 10.3a Components of theBusiness Plan 10.4 Successfully Pitching theBusiness 10.4a Answering Questions 10.5 Final Thoughts on Business Plans

RELEVANT CASE STUDIES The following cases offer an opportunity to explore theeffects of business planning. Instructor notes for thecase can be found at theend of this manual.

Case 3 Andrew Mason and Groupon, Inc.

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Case 4 Vision to Learn

ANSWERS TO QUESTIONS ON KEY ISSUES These questions can be used to lead a class discussion or as short-answer questions on a quiz or test.

1.

What is thedifference between a feasibility study and a business plan?

A feasibility study is a process of analysis that enables entrepreneurs to test a new business concept in themarketplace. By contrast, a business plan focuses on theexecution of theconcept and thebuilding of a feasible company. It is a more comprehensive analysis that includes, in addition to themarket research, a discussion of theoperational and financial management and controls of thenew business. .

2.

When might it be better to start thebusiness: after completing thefeasibility study or after completing a business plan?

The feasibility study provides enough answers to critical questions to enable an entrepreneur to start a business slowly to better gauge themarket response and prove thebusiness model. thenew environment for business planning actually makes thecase for theimportance of thefeasibility study to prove theconcept and enable thefounding team to launch theventure and test it so that theformal business plan better represents theactual performance of thebusiness.

.

3.

How might thebusiness plan change if thereader were an investor, a potential management hire?

An investor is looking at how a business will provide an excellent return on theinvestment and an exit strategy to realize that return, whereas a potential management hire is looking at how he or she fits into thebig picture of thebusiness and how great his or her chance for advancement is.

2.

What are three key elements of a successful business plan pitch?

Three key elements are answering thefundamental questions, catching theaudience’s attention in thefirst 60 seconds, and keeping thepresentation under half an hour.

SUGGESTIONS FOR EXPERIENCING ENTREPRENEURSHIP The following experiential exercises can help students think about and apply what they have learned.

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Interview someone who invests in small businesses (generally an angel investor) about what she or he looks for in a business plan. On thebasis of your discussion, what will you need to remember when you write your business plan?

Answers will vary depending on theinterests of the“angel;” but in general, theangel will be very interested in theexpertise and track record of thefounding team that will be executing this business. He or she will also be interested in thegrowth potential for thebusiness and that requires demonstration of a large and expanding market, which will increase thechances for an excellent return on theinvestor’s capital. Arguably most important is demonstrating that there are sufficient customers willing to buy.

2.

Go to www.bplans.com and select a business plan to review. Using theguidelines for an effective plan given in this chapter, evaluate theplan in about two to three pages. What are theplan’s strengths and weaknesses? How can it be improved?

Evaluations will vary based on students’ understanding of thekey factors to present in a business plan. Answering thequestions Why you? Why now? Why should we care? How will you win? and offering a well-crafted and validated business model should be theminimum requirements.

SUPPLEMENTARY LECTURE MATERIAL TEN Mistakes That Entrepreneurs Make 1.

No compelling story. They don’t answer thequestions Why you? Why now? Why should we care? How will you win? In other words, they don’t give an investor, or anyone else for that matter, a reason to be interested.

2.

The business plan is too long and too wordy. You must capture thelistener’s attention in thefirst thirty seconds, or you have lost theopportunity. Shorter is better if you have covered all thebases in a clear and concise manner.

3.

The plan has no focus. Often theentrepreneur tries to do too much—too many markets, too many products, and so on. Entrepreneurs also forget to clearly define thevalue proposition and show how it fits with customer needs. You need to focus on thecore concept, theentry strategy, and thebusiness model, providing evidence and support for all of them.

4.

Not enough market research. Entrepreneurs often fail to prove that themarket exists and that they have an effective strategy for reaching it. You need to demonstrate that you have observed and talked with real customers and other stakeholders.

5.

No cockpit gauges. In other words, you have no direction and no way to measure progress.

What are themetrics for thebusiness? How will you know when you have achieved success?

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6.

Fuzzy business model. Entrepreneurs are often careless about carefully defining how they will make money and how they intend to earn a profit. A good business model contains a timeline, milestones, and multiple sources of revenue. And thebest business models have been validated with real customers and can tell a story about how thecompany will grow and scale.

7.

Weak competitive analysis. Everyone has competition, so you need to emphasize how you will distinguish yourself from thecompetition. You also need to know your competitor’s business as well as you know your own.

8.

Weak founding or management team. Investors invest in theteam first and in everything else second. You must prove you can execute this business concept. You also need to understand thegaps in your management team and suggest a solution.

9.

Poorly defined leverage points. Who is going to help you reach your goals? Who has a vested interest in your success? One of those leverage points should be thecustomer.

10.

No timeline to success. You must present milestones for thepath to success. You also need a capital acquisition plan and trigger points that move thecompany from milestone to milestone.

CHAPTER 11

Designing an Entrepreneurial Company SUMMARY AND AUTHOR’S NOTE The design of a new organization is a critical component of any business plan. Decisions about organization design made at launch can impact thebusiness positively or negatively as it grows and scales. thechapter takes a design thinking approach in that theentire organization is considered while, at thesame time, looking at how thevarious company components and activities are interconnected. theultimate design of a company should be a reflection of a compelling story about how thecompany solves problems for customers. This chapter is divided into three parts to deal with business design (how thebusiness works), location strategy, and people strategy. Chapter 12 deals specifically with operations in terms of theproduction of goods and services while this chapter focuses on strategies for organizing thebusiness and its many processes, finding a superior location (including theInternet), and putting together a team or work force that will implement thecompany’s processes and build thecompany’s culture.

CHAPTER OBJECTIVES After reading this chapter, students will be able to: 

Explain how your business works.

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

Discuss how entrepreneurs make thedecision about thedesign of their company



Explain how to identify theappropriate business site.



Understand how to effectively hire, compensate, and create a company culture.

CHAPTER OUTLINE 11.1 Design: Understanding theWay theBusiness Works 11.1a Identifying Business processes 11.1b Making Decision: Doing It All or Outsourcing

11.2 Location Strategy: Finding theAppropriate Business Site 11.2a Choosing theRegion, State, and Community 11.2b Economic Base and Population Demographics 11.2c Choosing an Offline Retail Site 11.2d Choosing a Service/Wholesale Site 11.2e Choosing a Manufacturing Site 11.2f Alternatives to Conventional Facilities 11.3 People Strategy: Organizing human Resources 11.3a Creating theCompany Culture 11.3b Hiring theRight People 11.3c Planning for Ownership and Compensation 11.3d Stock and Dilution 11.3f Alternatives to Equity Incentives

RELEVANT CASE STUDY The following case offers an opportunity to explore theissues around business design. Instructor notes for thecase can be found at theend of this manual.

Case 4 Vision to Learn

ANSWERS TO QUESTIONS ON KEY ISSUES These questions can be used to lead a class discussion or as short-answer questions on a quiz or test.

1.

How can design thinking principles be employed to organize your business?

Design thinking methodology looks at theentire business and how thevarious components and activities are interconnected. It does this by putting theentrepreneur in theshoes of thecustomer and looking at thebusiness from thecustomer’s perspective. Design thinking

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can guide theorganization of thebusiness to allow for taking risk and being customer focused. Beyond theeconomic value of good design, design thinking encourages an entrepreneur to think about how every aspect of thebusiness is created to serve both theneeds of thecustomers and theneeds of theemployees.

2.

What is thepurpose of theimaginary tour of thebusiness?

The tour enables you to visualize and list all thefunctions, people, equipment, supplies, and space required to run thebusiness. You get a more complete picture of how thebusiness will operate. This information will be important when it comes time to develop financial projections.

3.

Which factors that are important in choosing a brick-and-mortar retail site would not be relevant to a manufacturing site—and vice versa?

With a retail site, you need to determine thetrade area and accessibility to thesite and provide a facility that is attractive to consumers (curb appeal). Normally, consumers or end-users do not go to manufacturing facilities so factors like curb appeal and display would probably not come into consideration. Unlike many retail sites, a manufacturing site needs to be located in less expensive areas, especially those that offer economic incentives.

2.

What are theadvantages and disadvantages of using stock as compensation and incentives?

Giving someone ownership rights in thecompany through equity is a way to avoid having to use limited cash resources for compensation. It is generally believed that providing stock increases commitment, reduces cash outlay for salaries, and induces loyalty to thecompany in thelong term. However, a new venture does not want to find itself stuck with someone who does not meet its needs or who, upon leaving, retains an ownership interest in thecompany through stock granted at thepoint of hire. In general, you want to hire key talent with thepromise of stock once they pass a pre-defined probation period.

Alternatively, you can give stock that vests over time.

3.

How can an entrepreneur improve thechances of choosing thebest job candidate?

To have thebest chance of hiring theright people, entrepreneurs should seek candidates from among current employees, subcontractors, or professional adviser recommendations first. Entrepreneurs should run background checks and call references, as well as conduct in-depth interviews that reveal thecharacter of theindividual.

4.

List three alternatives to equity incentives for key managers.

1) Deferred compensation plans 2) Bonus plans 3) Capital appreciation rights or phantom stock

SUGGESTIONS FOR EXPERIENCING ENTREPRENEURSHIP The following experiential exercises can help students think about and apply what they have learned.

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1.

Choose an industry in which you have an interest. Find a business in that industry and do thefollowing: (1) Arrange to visit thebusiness and talk with key personnel; (2) Do a flowchart of thebusiness process that reflects what you learned on your visit. Did you find any inefficiencies that, if corrected, could improve theprocess flow?

Follow thebusiness process from order taking to customer payment. For manufacturing businesses, this will also include themanufacturing process. Students should discover that most businesses have many processes that are linked in some manner to accomplish thepurpose of thebusiness.

2.

Interview an entrepreneur about his or her hiring practices. How successful have those practices been in getting and retaining good employees?

It might be interesting to compare thefindings of thestudents to come up with a “best practices” list that students can refer to when they start their businesses or when they go to work for someone else and have to hire employees.

CHAPTER 12

Planning Startup Operations SUMMARY AND AUTHOR’S NOTE This is another chapter that is left out of most entrepreneurship books; yet, manufacturing, production, and craft are making a comeback in theUnited States. Because of technology and theglobal marketplace, more and more entrepreneurs are trying their hands at product development and manufacturing. In any case, it always seemed odd to me that entrepreneurs were not expected to understand theprocesses by which their products are produced even if, perhaps especially if, they’re produced overseas by someone else. Today, with more businesses offering both products and services, and with technology making manufacturing easier, faster, and less expensive, it is important for entrepreneurs to have at least a basic understanding of this important process.

This chapter explores thecomponents of production and how entrepreneurs can prepare to produce both products and services; it includes quality issues, outsourcing, and supply chain management.

CHAPTER OBJECTIVES After reading this chapter, students will be able to:

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

Identify thecomponents of theproduction process for products and services.



Explain thecritical aspects of supply-chain management.



Discuss how to manage quality.



Explain how outsourcing can benefit an entrepreneurial venture.

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CHAPTER OUTLINE 12.1 Producing Products and Services 12.2 Supply Chain Management 12.2a Purchasing 12.2b Inventory Management 12.3 Production and Manufacturing 12.3a Quality 12.3b Logistics 12.3c Warranting theProduct 12.4 Outsourcing to Reduce Costs 12.4a Manufacturing Overseas 12.4b Lessons from Outsourcing Overseas.

RELEVANT CASE STUDIES The following cases offer an opportunity to look at processes around manufacturing products.

Case 2 focuses more on developing new products and themanufacturing decision. Case 4 is more focused on a core product that needs to be cost effective to support thebusiness model. Instructor notes for thecase can be found at theend of this manual.

Case 2 Raising a CleanBeeBaby Case 4 Vision to Learn

ANSWERS TO QUESTIONS ON KEY ISSUES These questions can be used to lead a class discussion or as short-answer questions on a quiz or test.

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1.

Why is it important to consider a manufacturing plan in theearliest stages of a new venture?

Building a complex production system (even if it’s outsourced) while thecompany is in startup or even later when it’s rapidly growing is a recipe for disaster. If you plan for production, you will know where potential delays could occur, and you can design your production processes to be compatible with your product design and your customers’ needs—in other words, you can integrate product and process to make production more efficient. If you consider manufacturing overseas, it’s critical to plan for backup suppliers, delays, and shipping as well as building relationships with your manufacturer.

2.

What are three factors that an entrepreneur must take into consideration when choosing vendors to meet materials requirements?

Factors to consider when choosing vendors include: 1) Can thevendor deliver enough of what you need when you need it? 2) What is thecost of transportation? 3) What services is thevendor offering you? 4) Is thevendor knowledgeable about theproduct line? 5) What are thevendor’s maintenance and return policies?

3.

Suppose you launched a new advertising firm where you create copy, graphics, videos, etc. for print, broadcast, and online distribution. How could you schedule activities to create more efficiency in your operations and better insure that thedelivery dates you give your customers will be accurate?

Students may give a variety of answers including theuse of project management software, Excel spreadsheets, and graphs. This assignment presents an opportunity to discuss theconcept of critical path. thecritical path is thelongest path through theproject activities considering theminimum length of time that each task takes. thecritical path will tell your customers theearliest date by which they will get what they have commissioned. Therefore, thekey thing to look for in all themethods thestudents suggest is theidentification of thecritical path for completing theproject.

4.

Characterize thecritical aspects of an effective supply chain for any business.

A supply chain consists of upstream and downstream business activities that move a product through thestages of designing, making, sourcing, and delivering to thefinal customer. Entrepreneurs must have a clear understanding of what is important to their customers—what level of service they are expecting and what performance level they are willing to pay a premium for. thecritical aspects of thesupply chain are purchasing, materials management, inventory requirements, and logistics.

SUGGESTIONS FOR EXPERIENCING ENTREPRENEURSHIP The following experiential exercises can help students think about and apply what they have learned.

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1.

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Interview an entrepreneur with a product company about his or her views on quality. How is this entrepreneur implementing quality control in his or her organization?

Students should be aware that theentrepreneur may not describe his or her quality system in theexact same terms that they found in their textbooks. They must extrapolate from what theentrepreneur says and relate it to theinformation in thetext.

1.

Choose a young company that has a global supply chain. Develop a process flow chart depicting thesupply chain, and analyze it for efficiency and flexibility based on information provided in thechapter.

Ask students to do this assignment using a product in which they’re interested. They should trace theproduct up thesupply chain to its source of raw materials. Then they can begin their analysis to comment on theefficiency of thesupply chain, any threats, and any alternative approaches that may make sense.

CHAPTER 13

Choosing theLegal Form of Organization SUMMARY AND AUTHOR’S NOTE One of theimportant decisions made during thedevelopment of a business is choosing thelegal form of organization under which thebusiness will operate. It is a decision that affects thecompany’s legal liability, its tax ramifications, and theactual cost of creating thebusiness.

Entrepreneurs have many choices of legal form, each with a different purpose and each appropriate at a particular point in thelife cycle of thebusiness. In fact, it’s very likely that an entrepreneur will start with one form and evolve into one or more different forms as thecompany grows.

This life-cycle view of thelegal form of organization comes from theauthor’s personal experience and that of many others who formed a corporation too early when there was no need. There seems to be an eagerness on thepart of entrepreneurs to look legitimate as quickly as possible.

Being able to report that you have a corporation seems to make it more real even when you haven’t yet built a product, let alone sold a product or delivered a service. It takes time,

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sometimes months or even years, to develop a product (and maybe even a service) to thepoint where it is market-ready. During that time, an entrepreneur is incurring expenses, but there is no revenue coming in. Often thecompany has no employees and no real liabilities. That being thecase, it makes no sense to endure theexpense of forming a corporation and incur themandatory minimum taxes that some states impose.

This chapter explores thevarious types of legal entities and how they might be most effectively employed.

CHAPTER OBJECTIVES After reading this chapter, students will be able to: 

Distinguish between sole proprietorships and partnerships.



Discuss corporate forms and their advantages and disadvantages.



Explain thelimited liability company.



Make a decision about which legal form to use for which purpose.



Discuss how a business entity can evolve from one legal form to another.

CHAPTER OUTLINE 13.1 Making theDecision About theLegal Form 13.2 Simple Forms: Sole Proprietorships and Partnerships 13.2a Sole Proprietorship 13.2b Partnership

13.3 Corporate Forms 13.3a C-Corporation 13.3b S-Corporation 13.3c theB-Corporation 13.3d theNonprofit Corporation 13.4 Limited Liability Company 13.4a Advantages of an LLC 13.4b Disadvantages of an LLC 13.5 Choosing theRight Legal Form at Each Milestone

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RELEVANT CASE STUDY The following case offers an opportunity to explore one type of corporation: thenonprofit.

Instructor notes for thecase can be found at theend of this manual.

Case 4 Vision to Learn

ANSWERS TO QUESTIONS ON KEY ISSUES These questions can be used to lead a class discussion or as short-answer questions on a quiz or test.

1.

Assume you are running a successful consulting practice as a sole proprietor. What would induce you to change thelegal form to a corporation?

You might want to change to a corporate form if you are planning to grow thebusiness by issuing and selling shares of stock, if you need liability protection because of thetype of work you are doing, or if you want to ensure that thebusiness survives your death.

2.

Why would you choose an LLC form over a partnership or an S-corporation?

Like a corporation, theLLC benefits from continuity of life, limited liability, and free transferability of interests. As a limited member in an LLC, you don’t have to forfeit theright to participate in themanagement of theorganization to retain limited liability status.

You can have more members than is possible in an S-corporation; you can also have foreign investors (an S-Corp cannot), and you have liability protection that you don’t have in a partnership.

3.

What kinds of businesses are well suited to thenonprofit legal structure?

Businesses established for charitable, public (scientific, literary, or educational), or religious purposes, or for mutual benefit (such as trade associations, tennis clubs), as recognized by federal and state laws can organize as nonprofits. To gain tax-exempt status from theIRS, your nonprofit must fall into one of these categories and meet therequirements for a 501©3 exemption.

SUGGESTIONS FOR EXPERIENCING ENTREPRENEURSHIP The following experiential exercises can help students think about and apply what they have learned.

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1.

Employing this text and additional online research, acquire a basic understanding of thedifferent legal forms of organization. Then, using a business that you are considering launching, create an initial strategic plan for thebusiness that includes thebest legal form to use for your type of business. Write a two-page summary of your findings to justify thechoice of legal form at launch and perhaps beyond.

I suggest that you (the instructor) invite an attorney or a panel of attorneys to speak in your class and provide several examples of businesses for students to analyze. Students can also present thetwo-page analysis that they completed in this exercise for comments from thepanel.

2.

Visit an entrepreneur whose business is set up as a partnership. How do these partners describe theexperience of setting up thebusiness? How have they divided up theduties and responsibilities? What key issues have they covered in their partnership agreement?

Summarize your findings in a two-or-three-page paper.

You might want to expand on this by having some students visit an LLC so that you can have a vibrant class discussion comparing thepros and cons of each.

CHAPTER 14

Developing a Startup Marketing Plan SUMMARY AND AUTHOR’S NOTE Determining how to make customers aware of a product or service you’re offering and recognize thebenefits requires a plan in much thesame way that starting a business did. themarketing plan includes all thestrategies, tactics, and techniques used to raise customer awareness and to promote a product, service, or business.

This chapter takes a more entrepreneurial approach to marketing, recognizing that startup entrepreneurs have limited resources and must make every marketing dollar count. It begins by considering theproduct adoption/diffusion curve, which is important to understanding how many and how quickly customers might adopt a new product. It then covers thecomponents of an effective marketing plan, theforms of advertising and promotion that can be employed as tactics, and therole of publicity as an entrepreneurial tool to save money. A significant part of this chapter is devoted to thetopic of social media—that is, user-generated advertising and promotion using social media platforms such as Google and Facebookand cost-effective production tools that now make it possible for anyone to become a successful marketer at a much lower cost than ever before. thechapter concludes with a discussion of personal selling, one of theimportant skills that entrepreneurs must acquire.

Chapter 1: Understanding Entrepreneurship

CHAPTER OBJECTIVES After reading this chapter, students will be able to: 

Discuss therole of theproduct adoption/diffusion curve for marketing strategy.



Explain how to create an effective marketing plan.



Discuss theforms of advertising and promotion that entrepreneurs can tap.



Describe therole of publicity in marketing strategy.



Explain how entrepreneurs can employ social media to their advantage.



Discuss therole of personal selling in a marketing strategy.

CHAPTER OUTLINE 14.1 Product Adoption and theCustomer Journey 14.2 theMarketing Plan 14.2a Creating Customer Value 14.2b Setting Marketing Goals 14.2c Brand Strategy 14.2d Assessing Effectiveness 14.2e Advertising and Promotion

14.3 Entrepreneurial Market Strategies 14.3a Traditional Advertising 14.3b Publicity and Referrals 14.3c When It Makes Sense to Give It Away 14.3d Internet Marketing and Social Media 14.4 Personal Selling 14.4a Selling at Trade Shows and Exhibits 14.5 Managing Customer Relationships 14.5a Identifying and Rewarding Lifetime Customer Value 14.5b Complaint Marketing

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RELEVANT CASE STUDY The following case offers an opportunity to look at a new type of advertising company.

Instructor notes for thecase can be found at theend of this manual.

Case 1: AdRoll

ANSWERS TO QUESTIONS ON KEY ISSUES These questions can be used to lead a class discussion or as short-answer questions on a quiz or test.

1.

What are thedifferences between an entrepreneurial marketing strategy and a large corporation’s marketing strategy?

Entrepreneurial strategies mimic what big companies do, but they do it for much less money and for a shorter period of time. Entrepreneurial companies tend to seek out opportunities for free publicity and ways to build long-term customer relationships so that they don’t have to continually spend money seeking new customers. In short, entrepreneurs avoid having to depend on push strategies like advertising and promotion and instead design products and services to meet specific needs that customers recognize.

2.

Is it important to stick with your marketing plan even if it isn’t returning immediate results?

Why or why not?

Stick with themarketing plan, because it takes time to make customers aware of theproduct or service and for a particular marketing strategy to take hold and build confidence in thecustomer. In thecurrent environment, patience is in short supply, but patience is exactly what’s required to test a marketing plan. Having said that, if thedesired response does not manifest, you need to figure out why and make an immediate correction.

3.

What role should social networking play in your marketing strategy?

Especially if an entrepreneur is dealing with consumer products, social networking tactics provide customers with targeted messages that are anticipated, personal, and relevant.

4.

What are thecritical factors that should be considered in building a brand?

Entrepreneurs should develop a brand concept, identify brand extensions that can take thebrand into new product areas, and measure theeffectiveness of thebrand, or its brand equity in themarketplace.

5. What role does a product adoption/diffusion curve play in creating a marketing strategy?

The product adoption/diffusion curve helps entrepreneurs understand their product/service life cycle so that they can put theappropriate effort and resources forward at theright time. theadoption cycle also makes clear thefact that early adopters are a relatively small group that does not represent mainstream customers. Understanding thedifferent types of

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47

customers, what they need, and when they will buy helps entrepreneurs plan their product launch more effectively.

SUGGESTIONS FOR EXPERIENCING ENTREPRENEURSHIP The following experiential exercises can help students think about and apply what they have learned.

1.

Identify two companies in thesame industry whose businesses you understand and can find information about online. Alternatively choose two local companies you can visit. Compare and contrast themarketing strategies of thetwo companies. What is each trying to accomplish with their specific strategy?

Students should write up their findings to include how successful thecompanies’ strategies have been and what their takeaways are. in a two-page report.

2.

Find an startup Internet company that interests you. Contact theentrepreneur or theperson in charge of implementing their marketing strategy to discuss their plan for building a brand.

Are they undertaking any of thestrategies or tactics discussed in this chapter? What is working and what is not? Present your findings in a brief PowerPoint presentation.

It might be interesting to have theclass come up with a list of thestrategies and tactics they discovered and to note which ones seemed to be used in particular types of businesses or under particular circumstances.

SUPPLEMENTARY LECTURE MATERIAL You Can Brand Your Product It’s one thing to make your packaged product stand out on a cluttered shelf in a retail outlet; it’s quite another to make a product or service that can’t be physically packaged stand out. Suppose you have a financial services firm that consults to clients on their financial portfolios. Here are some ways you can make this type of company stand out in a crowd. 

Identify an important core value of thecompany that is related to thecustomer, such as reliability or theprinciple that thecustomer is always right, and make that value a mantra.

Put it into every piece of communication and promotion you create.



Partner with a cause that means something to you. (Reebok linked itself to Amnesty International; Kellogg connected with theKids Helpline). Then be a visible part of any major decisions or opinions related to that cause.



Invest in your employees and showcase their achievements.



Be theopinion leader in your niche and in your industry trade association.



Differentiate your company on emotional values more than on functional differences.

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Source: Anish Koshy, “If You Can See It, You Can Brand It,” MarketingProfs.com, www.marketingprofs.com.

CHAPTER 15

Incorporating Ethics and Social Responsibility into theBusiness SUMMARY AND AUTHOR’S NOTE In an ideal world, thetopic of ethics and social responsibility would not be a separate chapter in thebook but, rather, infused throughout thebook. Notwithstanding its position in this book, theissues around how to operate a business in an ethically and socially responsible manner should be considered before thebusiness is in operation and theentrepreneur’s time is strained.

We encourage instructors to consider dealing with this topic throughout thecourse at appropriate times.

At no previous time in history have ethics and social responsibility been more vital topics of discussion. In a global economy that juxtaposes multiple cultures, each based on a different value system, ethics and social responsibility issues are never far from anything we do as business people. theglobal marketplace places a premium on speed and quick returns; shareholder value is often more important than basic human values. thepressure to obtain unattainable goals also puts stress on those values. As a result, we see corporations in thenews whose CEOs have displayed unethical and illegal behavior. So, it is important that in our multicultural classrooms, we take advantage of theunique opportunity to play out many business scenarios and deal directly with all these issues.

In recent years, I have given an ethics quiz to students. Using software that displays their responses immediately and anonymously in a bar graph on a screen, thestudents can see theclass’s responses to thequestions. theresults have always been quite remarkable, if not troubling, with a large portion of students displaying conduct that most instructors would find unethical. For example, when asked in one of my courses whether students would violate thehonor code for their own gain, more than 50 percent answered in theaffirmative. Needless to say, these results lead to some interesting discussions about theimportance of integrity when you’re in business.

This chapter, which contains a number of short exercises and hypothetical situations, will help students define their vision and values and learn how these values play a role in theethical decisions they must make as entrepreneurs. It will also consider therole of social responsibility as a component of any business or as thebusiness’s specific mission.

Chapter 1: Understanding Entrepreneurship

CHAPTER OBJECTIVES After reading this chapter, students will be able to: 

Explain therole of ethics in entrepreneurship.



List thetypes of ethical situations entrepreneurs may face.



Discuss how entrepreneurs can demonstrate social responsibility.



Describe how an entrepreneur’s vision and values contribute to theculture of thenew venture.



Discuss therelationship of core values to success.

CHAPTER OUTLINE 15.1 Ethics 15.1a Conflicts of Interest 15.1b Survival Tactics 15.1c Responding to Incentives 15.1d Stakeholder Pressure 15.1e Pushing theLegal Limit 15.1f Learning from Real-Life Dilemmas 15.1g theImportance of Developing a Code of Ethics 15.2 Social Responsibility 15.2a Effective Ways to Become Socially Responsible 15.3 Vision and Values 15.3a Core Values 15.3b Purpose 15.3c Mission 15.3d Strategies and Tactics 15.4 Core Values and Success 15.4a Constants of Success

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RELEVANT CASE STUDIES The following case studies offer an opportunity to consider ethics and social responsibility inside real businesses. Instructor notes for thecase can be found at theend of this manual.

Case 3 Andrew Mason and Groupon, Inc. Case 4 Vision to Learn

ANSWERS TO QUESTIONS ON KEY ISSUES These questions can be used to lead a class discussion or as short-answer questions on a quiz or test.

1.

Do you believe that your code of ethics should remain firm in any situation? Why or why not?

This is a question that should stimulate a provocative discussion in class and easily demonstrate different value systems among thestudents. Given a culturally diverse class, it will become apparent that there are no right or wrong answers. It is important where differences of opinion exist to examine whether any of these are cases where there really is a correct answer, for example, in instances of lying, cheating, and stealing.

2.

Suppose you are doing business in a country where paying fees (bribes) to get through theprocess more quickly is standard practice. In theUnited States, bribery is against thelaw.

How will you deal with this conflict taking into account your ethical standards when you’re doing business in that country?

Again, this question will provoke a variety of different responses. Try to relate theresponses to theresearch discussed in thechapter. For example, some students may respond with “When in Rome….” This is a type of situational ethics. Is it right that your ethics change because thesituation changes? What role does thelaw play in these situations?

3.

In addition to thesuggestions given in thechapter, name two ways your company can demonstrate its social responsibility.

Students will come up with a variety of ways, and their responses will reveal their understanding of what social responsibility means. We encourage you to make a list of these ways and try them on various types of businesses to learn how they might be implemented.

4.

Would you require your employees to give back to thecommunity as part of their work contract with your company? Why or why not? If yes, how could you implement this policy?

This question raises theissue of whether social responsibility can and should be required by employers. Students will probably engage in a lively discussion of this issue alone. Then lead them to consider whether there are less dictatorial ways to accomplish thesame thing—perhaps an incentive system that rewards socially responsible behavior both within theorganization and in thecommunity.

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5.

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How do you define your personal success? How can your definition be applied to your business?

The answers to this question will be very personal. You might want to create a spectrum of answers ranging from those related specifically to thebusiness to those related to thestudents’ personal goals. This way it will be very clear that we all define success differently.

SUGGESTIONS FOR EXPERIENCING ENTREPRENEURSHIP The following experiential exercises can help students think about and apply what they have learned.

1.

Choose an industry that interests you and interview a manufacturer, a distributor, and a retailer about thecode of ethics in that industry. In a two-page report, discuss whether these three industry players agree on theethics of theindustry. If so, what are those ethics? If not, how are these unethical behaviors affecting theindustry?

Have students categorize their findings from thevarious industries they studied to see if they can create a general code of ethics for a business they’re interested in starting. Then ask thestudents whether they found different ethical standards among various types of businesses in thevalue chain of theindustry.

2.

Choose two companies in different industries. Interview a manager in each company about how thecompany practices social responsibility. In a two-page paper, compare these managers’ answers and account for any basic differences.

This exercise helps students learn that different businesses may have different views about and approaches to social responsibility. There may be some commonalities, but there are usually differences based on theenvironment in which thebusiness operates.

CHAPTER 16

Funding Startup and Growth SUMMARY AND AUTHOR’S NOTE Finding money for a new venture or a growing one is always a topic of great interest to students.

If thefirst question they typically ask is “Where will I find an idea for a business?” thesecond is certainly “Where will I find themoney to get started?” thegoal should be that students come away from a discussion of startup capital with an understanding that money is not thedriver of a successful venture. A successful venture is built on a compelling value proposition, a business

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model that works, and a team that can execute theplan. With all of those things in place, money becomes an enabler of success. thepurpose of this chapter is to give students an optimistic yet realistic view of sources of money at thestartup stage and later in thegrowth stage. thepremise is that if thenew venture makes it through thestartup phase, many more financial resources become available.

The chapter focuses on bootstrapping techniques, recognizing that theaverage startup cannot attract professional venture capital. Finding a way to start with theleast amount of capital possible and giving up little or no equity in return gives theentrepreneur a chance to build a business to thestage where it has more clout when seeking growth funding. thechapter begins with a discussion of how to develop a resource strategy for thebusiness and then looks at thenature of startup financing with both equity and debt.

Although growth is thenatural by-product of a successful business, it is costly and usually puts a strain on theresources of thebusiness. In most cases, funding in excess of internal cash flows will be required. To theextent that an entrepreneur has met thesales and earnings targets estimated in thestart-up business plan, available financing choices increase substantially. It is important that students understand thetime and cost involved in raising capital, and this chapter addresses that issue. I have found consistently that students underestimate theamount of time it will take to raise thecapital they require, so I encourage them to at least double thetime on which they have settled to be closer to a realistic number. Another area that students seem to focus on is venture capital.

They typically don’t understand thekinds of businesses that venture capitalists invest in and assume that venture capital is where they need to begin their search for money. This chapter will disabuse them of that belief and give them a more realistic view of venture capital. thechapter also discusses theinitial public offering and how it is used to rapidly grow a company that has been successful in theearly stages. Strategic partners are another great way to grow some companies, especially those where tapping into thepartner’s manufacturing and distribution capabilities is critical.

Valuation is a tricky subject. When looking at how to value a business, students usually fall back on theformulas they learned in finance, in particular discounted cash flow and earnings multiples. theproblem with those formulas is that they’re not easily applied to new ventures, and even when they are applied to growing ventures, they don’t tell thewhole story. thebottom line on valuation is that it comes down to a negotiation between theparties, and theone with themost clout determines theultimate price. Students should think of valuation methods simply as guides or tools they can use to triangulate on a number. This chapter presents a variety of valuation methods with different purposes. Approaching a valuation task from several points of view is encouraged.

CHAPTER OBJECTIVES After reading this chapter, students will be able to: 

Understand theimportance of a financial plan.



Explain methods of funding with equity or debt.

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

Explore non-dilutive funding sources.



Describe thevaluation process for pre-revenue companies.



Understand theIPO process.

CHAPTER OUTLINE 16.1 theFinancial Plan 16.1a theCost and Process of Raising Capital 16.1b It Takes Money to Make Money 16.1c Growth Stage Identification 16.1d theUnique Funding Issues of High-Tech Ventures 16.1e theUnique Funding Issues for Social Ventures 16.2 Funding Startups Through bootstrapping

16.3 Funding with Equity 16,3a Friends and Family 16,3b Private Investors—Angels 16.3c Venture Capital 16.4 Financing with Debt 16.4a Commercial Banks 16.4b Commercial Finance Companies 16.4c Small Business Administration Loan 16.5 Other Non-Dilutive Funding Sources 16.5a Crowdfunding 16.5b Strategic Alliances 16.5c Grants 16.6 Valuing a Pre-Revenue or Very Early-Stage Company 16.6a Two Venture Capital Models 16.6b Divergence and Dilution 16.7 Accessing thePublic Markets 16.7a Advantages and Disadvantages of Going Public 16.7b thePublic Offering Process

RELEVANT CASE STUDY The following case offers an opportunity to consider theissues related to funding startup and growth. Instructor notes for thecase can be found at theend of this manual.

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Case 1 AdRoll

ANSWERS TO QUESTIONS ON KEY ISSUES These questions can be used to lead a class discussion or as short-answer questions on a quiz or test.

1.

How does bootstrap financing fit into thestrategic plan of a new venture?

Bootstrapping is a critical part of a new venture strategy because, at theearliest stages of theventure, it is difficult to raise capital from outside investors or debt-financing sources. In general, most startup capital comes from “friends, family, and fools” or from begging, borrowing and bartering.

2.

What is therole of angels as a source of startup funding?

Angels are typically former entrepreneurs who make up theinformal risk-capital market.

They are more likely to invest in early-stage ventures than are professional venture capitalists. They generally take an interest in mentoring theentrepreneur, and they usually stay with theventure longer than a VC would. Essentially, they fill thegap between friendly money and venture capital.

3.

Contrast funding with equity and funding with debt or non-dilutive sources.

When someone invests money in a venture, it is normally done to gain an ownership share in thebusiness. This ownership share is termed equity. It is distinguished from debt in that equity investors put their capital at risk; typically there is no guaranteed return and no absolute protection against loss. For this reason, most entrepreneurs with startups seek investment capital from people they know who believe in them—friendly money. There are a variety of sources of equity financing including informal capital--such as personal resources--“angels,” private placement, and formal sources such as venture capital.

Entrepreneurs who need funding but don’t want to dilute ownership in their company choose debt if it’s available and other sources where thereturn to thesource is not based on ownership, such as a strategic alliance. When entrepreneurs choose a debt instrument to finance a portion of startup expenses, they typically provide a business or personal asset as collateral in exchange for a loan bearing a market rate of interest.

4.

Why are commercial banks not usually a reliable source of new venture financing?

Commercial banks are highly regulated and do not like to take risks. Therefore, they prefer to see a track record of positive cash flow so they can feel comfortable that theentrepreneur will pay off any loans they issue.

5.

What are thebenefits of a private offering as compared to a public offering?

Often a private offering is used first, because to complete it, a growing venture is not required to have a great many assets or credit references (which it would need for bank financing) or a lengthy track record. theentrepreneur does not have to file with theSEC if

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theventure qualifies under therules of Federal Regulation D, so it’s easier and less expensive for smaller companies to sell stock with a private offering.

SUGGESTIONS FOR EXPERIENCING ENTREPRENEURSHIP The following experiential exercises can help students think about and apply what they have learned.

1.

Make a list of all thesources of friendly money--including your personal resources--that you can tap to start a new business. How much startup money could you reasonably raise?

Students should explain how they arrived at how much money is needed to start their business. To extend this exercise, students should consider at what points their particular business is likely to require outside capital and theevents that will trigger that need. Then they must determine what types of capital are appropriate for a particular stage in their venture’s evolution.

2.

Interview an angel and a banker to learn what his or her expectations are when reviewing business plans for new ventures. In a two-page report, compare their criteria for choosing to fund or not fund thenew business.

Interviewing both an angel and a banker enables thestudent to compare and contrast theneeds and requirements of thetwo. Students often talk about needing venture capital to start a business. Interviewing a venture capitalist is one way to dispel thenotion that venture capital is a primary source of funding for most businesses. Interviewing a banker is a good way to learn what a business must achieve before a banker will risk thebank’s money.

SUPPLEMENTARY LECTURE MATERIAL The Money May be Coming to You It has been a tradition in theventure capital community to invest in companies that are located within a couple hours’ drive from theVC’s office. So if you lived in Bozeman, Montana, in Rapid City, South Dakota, or even in parts of thesunshine state of Florida, thenation’s fourth most populous state, you were out of luck for finding outside capital to launch your venture. You had to be able to fund it through your personal resources or face moving your company to theSilicon Valley region of California or thesuburbs of Boston. But times are changing.

Enterprising VC firms are now looking for superior ideas in places where they won’t have as much competition from their counterparts. And they’re looking because there isn’t enough “good deal flow” in theregion where they’re located.

This new breed of VC seems to be more entrepreneur-focused (more human, if you will), and this is appreciated by firms that want to remain in theless intense areas of thecountry. They still have high standards for theventures in which they invest, but they also typically achieve higher rates of return because firms in outlying areas command lower valuations than firms in Silicon Valley. Underserved areas are now forming local and regional equity funds to cover thelaunch

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gap and get thenew venture to a place where it may be attractive to a larger VC firm.

Entrepreneurs receive relatively small amounts of capital from these regional funds, up to about $1 million. But having these investors on board can make theconnection with larger funds in later stages easier. thebest way to find these local VCs is still by networking in thebusiness community.

CHAPTER 17

Planning for Growth SUMMARY AND AUTHOR’S NOTE The natural by-product of a successful launch is growthso it’s important that entrepreneurs plan for this critical time in thelife of thebusiness. After startup, thegrowth phase is often theriskiest phase if a plan for execution and theright people with theright skills are not in place. This chapter considers a number of strategies that entrepreneurs may use to grow their companies, but it also explores theidea that some business owners choose not to grow. Often entrepreneurs who are in business for thelong haul choose to grow very slowly and organically, making use of internal cash flows. theprimary reason is that they don’t want to lose control of thebusiness, something that can happen when growth occurs too rapidly and without preparation.

Managing controlled growth is every bit as complex as managing rapid growth. There is a fine line between controlling growth and putting on thebrakes so much that thecompany stalls and falls behind competitors. Students should be encouraged to consider their values and goals in talking about growth and how they might choose to grow a venture.

As important as growth is, planning for change and managing potential risks that will confront any entrepreneur. Change is one of thecertainties of business life; but unfortunately, a good many entrepreneurs don’t take thetime to prepare proactively for it. Knowing how their venture might respond to typical changes in theindustry and in theeconomy in general will help them set up organizations that are more flexible and capable of adapting to that change. This chapter deals with how to respond to major changes or threats to thebusiness and thedecisions that should be made before these events occur.

Succession planning and harvest strategies are important parts of planning for change. At some point most entrepreneurs would like to harvest thewealth they have created. If they know in advance how they might want to do this, they will make better decisions along theway to ensure that they’re able to when thetime comes. This chapter reviews some of thekey issues that entrepreneurs should consider when planning their harvest strategy. .

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CHAPTER OBJECTIVES After reading this chapter, students will be able to: 

Explain thestages of growth in a new venture



Discuss thedifferences between market exploitation and market exploration.



Explore ways to go global.



Identify thevarious risks facing a growing venture and how to mitigate them.



Discuss how to plan for harvest and exit.

CHAPTER OUTLINE 17.1 Stages of Growth in a New Venture

17.1a Startup Success 17.1b Initial Growth 17.1c Rapid Growth 17.1d Stable Growth and Maintenance 17.1e Factors That Affect Growth 17.2 Growing theMarket 17.2a Market Exploitation 17.2b Market Exploration 17.3 Growing Within theIndustry 17.3a Vertical Integration Strategies 17.3b Horizontal Integration Strategies 17.3c Alliance Strategies 17.4 Growing by Going Global 17.4a Finding theBest Global Market 17.4b Export Financing 17.4c Foreign Agents, Distributors, and Trading Companies 17.4d Choosing an Intermediary 17.5 Preparing for Change 17.5a Identifying Potential Risks 17.5b Calculating Risk Probability and theCost to theBusiness 17.6 Leadership Succession 17.6a Change of Ownership in Small Enterprises

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17.6b Succession Planning in Family-Owned Businesses 17.7 Planning for Harvest and Exit 17.7a Selling theBusiness 17.7b Cashing Out but Staying In 17.7c Being Acquired 17.7d Dealing with Failure: Bankruptcy 17.8 Some Final Thoughts

RELEVANT CASE STUDY The following case offers an opportunity to explore theissues of growth and uncertainty.

Instructor notes for thecase can be found at theend of this manual.

Case 2 Raising a CleanBee Baby

ANSWERS TO QUESTIONS ON KEY ISSUES These questions can be used to lead a class discussion or as short-answer questions on a quiz or test.

1 1.

How can both market and management factors affect thegrowth of a new venture?

The market and management strategies you choose can affect thegrowth rate of thenew venture. Market factors include thesize, characteristics, and buying power of thetarget market, thenature of thecompetition, thedegree of product innovation in themarket, thestatus of intellectual-property rights, thevolatility of theindustry, and thebarriers to entry.

It will be more difficult to achieve thespectacular growth and size of thefastest growing companies if these factors are not favorable to a new venture.

Management factors include theinertia of success, an entrepreneur’s ability or inability to move from control to delegation, and theaptitude to encourage entrepreneurship in theentire founding team.

2.

What questions should you ask at each level of a new venture’s growth?

Startup: Do I have a compelling solution that meets a real need, sufficient startup capital, customers, a way to deliver theproduct or service, and a team that can make this happen?

Initial Growth: Can thebusiness generate sufficient cash flow to pay all theexpenses and support thegrowth of thecompany?

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High Growth: How can I maintain control of rapid growth? Am I willing to give up control to professional management?

Stable Growth and Maintenance: How can thebusiness continue to be innovative, competitive, and flexible? .

3.

Why is it important to start a growth-oriented business with a plan for globalization from thebeginning?

Due to rapidly changing technology, product lives are shorter and companies are now forced to enter several major markets at once to gain themaximum advantage from thewindow of opportunity. With increasing competition and saturated markets in some industries, global markets can add a new dimension to an entrepreneur’s business and should be considered and planned for.

4.

What are thepossible exit strategies that entrepreneurs can employ?

Entrepreneurs who want to harvest thewealth they have created can look at selling thebusiness outright, cashing out but staying in by doing a phased sale, or being acquired. It should also be noted that doing a public offering is also an exit strategy because theentrepreneur has effectively sold thecompany to thepublic.

SUGGESTIONS FOR EXPERIENCING ENTREPRENEURSHIP The following experiential exercises can help students think about and apply what they have learned.

1.

You are launching a business to create custom, short-form documentary films for businesses that want to use these films to engage with their customers to inform, to advise, to entertain, and to encourage loyalty for their company or brand. You know that once you have a core group of customers, growth will likely come quickly due to referrals. Sketch out a plan for growing thebusiness. You can use a simple matrix to lay out thestages of growth, what needs to happen to get to a stage--such as tapping a new market or adding to your product service line--how much money you might need, and what changes in thebusiness need to happen such as adding new employees or equipment.

It might be interesting to divide theclass in to groups of three to work on this. In that way, you can highlight different approaches to growth and it should lead to a lively discussion.

2.

Interview an entrepreneur whose new venture is in its early stages, and question him or her about thegrowth strategy for thebusiness. Has theentrepreneur given sufficient thought to a growth strategy? Can you identify thetype of strategy being used?

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Students will typically find that most early-stage ventures are involved in intensive growth strategies such as market penetration. This is because they have not yet exploited all of thepotential in their current market, which could take several years. It would not be unusual to find that an entrepreneur has given no thought to future growth beyond saying that their goal is to become thebiggest, thebest, and ideally a unicorn. If your students hear this, they should remain skeptical because without a plan for reaching a goal, it’s not likely this entrepreneur will achieve these lofty goals.