3a. Entrepreneurship and Business Planning

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Entrepreneurship and Business

PlanningChapter 6


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Learning Objectives

Identify the advantages and disadvantages ofbeing an entrepreneur and creating abusiness.

Identify the market conditions that should be

assessed before entering a market. Explain how a new business can develop a

competitive advantage.

Explain how to develop a business plan.

Identify the risks to which a business isexposed, and explain how they can bemanaged

Je Madura, th Edition, Introductionto !usiness. "outh #estern


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What is Entrepreneur?

(ne who creates a )* new business %* in theface of risk and uncertainty for the purpose of+* achieving prot and growth by *identifying opportunities and assembling the

necessary resources to capitali-e on them. Entrepreneur is an INNOVATORof businessenterprisewho recogni-es opportunitiestointroduce a new product, a new processor an

improved organization, and who raises thenecessary money, assembles the factorsforproduction and organizesan operation toexploit the opportunity



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Why Do People Become Entrepreneurs?

nsatisfactory current /ob 0egative displacement 1etting red 2ivorce

(ther 3ife transitions

4riends and colleagues



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So What is Entrepreneurship?

Entrepreneurship is creating and buildingsomething of valuefrom practically nothing.

5hat is, entrepreneurship is the process of

creating or sei-ing an opportunityand

pursuing it, regardless of resourcespresently controlled.6

Jerey 5immons



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Advantages on being an Entrepreneur

(btaining larger income !ecoming your own boss

"tay on the business and stay working

"elf7satisfaction



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Disadvantages on being an Entrepreneur

$ossibility to incur large losses 8igh responsibility to ensure that the business

functions properly

3ose sources of income if the business fails



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Entrepreneurship Profile

9reative 2riven by vision Moderate risk takers $ersistent

Intuitive and analytic 8onest rule breakers 4ace reality: use feedback



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Assessing Market Conditions

2emand 9ompetition

3abor conditions

;egulatory conditions



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Developing a Competitive Advantage

$roduce $roducts E


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Developing a Business Plan

> detailed description of the proposedbusiness, including a description of theproduct or service, the types of customers itwould attract, the competition, and the

facilities needed for production5he plan will be used as a guide for making

business decisions throughout the life of thebusiness.



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Assessing Business Environment

Economic Environment Industry Environment

1lobal Environment



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Management Plan

(rgani-ational "tructure $roduction

8uman ;esource



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Marketing Plan

5arget Market $roduct 9haracteristics

$ricing

2istribution

$romotion



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Financial Plan

4inancing 4easibility



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Summary of Business Plan (p.215)



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Business Risk

;eliance on repeat orders made by existingcustomers

;eliance on one supplier

;eliance on key employees



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Business Plan


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What is Business Plan?

> business planis )* a formal statement of aset of business goals, %* the reasons they arebelieved attainable, and +* the plan forreaching those goals.

It may also contain background informationabout the organi-ation or team attempting toreach those goals.


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Why Take Time to Make a Business Plan?

>lthough building a plan does not guaranteesuccess, it does increase your chances ofsucceeding in business.

> plan is like a road map that serves as aguide on a /ourney through unfamiliar, harsh,

and dangerous territory.


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Who is the Audience of a Business Plan?

Internal "takeholders? the development of anew product, a new service, a new I5 system,a restructuring of nance, the refurbishing ofa factory or a restructuring of the organi-ation

External "takeholders? detailed informationabout the organi-ation or team attempting toreach the goals.


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Thus Business Plan in our context is

!usiness $lan is a written summary of)* proposed business venture %* itsoperational and nancial details,and +* its marketing opportunitiesand strategy


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Content of Business Plan

). 9over page and table of contents

%. Executive summary

+. !usiness description

. !usiness environment analysis

@. Industry background

A. 9ompetitor analysis

'. Market analysis

B. Marketing plan

C.

(perations plan)&. Management summary

)). 4inancial plan

)%. >ttachments and milestones


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Typical Questions Addressed to a BusinessPlan #hat problem does the companyDs product or service solve #hat

niche will it ll #hat is the companyDs solution to the problem

#ho are the companyDs customers, and how will the company market

and sell its products to them

#hat is the si-e of the market for this solution

#hat is the business model for the business Fhow will it make money* #ho are the competitors and how will the company maintain a

competitive advantage

8ow does the company plan to manage itsD operations as it grows

#ho will run the company and what makes them Gualied to do so

#hat are the risks and threats confronting the business, and what can

be done to mitigate them

#hat are the companyDs capital and resource reGuirements

#hat are the companyDs historical and pro/ected nancial statements


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Uses of Business Plan

Henture capital 4undraising

5=M

M!(

"trategic $lanning


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A Business Plan must Pass Three Tests

The Reality Test - proving that? a market really does exist for your product or

service. you can actually build or provide it for the cost

estimates in the plan.

The Competitive Test 7 evaluating? a companys position relative to its customers. managements ability to create a company that

will gain an edge over its rivals.

The Value Test proving that? a venture oers investors or lenders an

attractive rate of return or a high probability ofrepayment.

Documents

3a. Entrepreneurship and Business Planning