Entrepreneurial Process Part 2 CFA 201 March 2, 2016

Quick Update from SEA Handouts etc

Entrepreneurial Enterprise #1 Organization Contexts Opportunities #2 & 3 Opportunities #2 & 3 The Entrepreneur #4 & 5 The Entrepreneur #4 & 5 The Concepts Resources Find (2) Evaluate (3) Types of Ventures (11) Life cycles/stage s (12) Types of Entrepreneurs (4) Type(s) of investments they make (5) Types and strategies (9) Prioritizing sources (10) Types of Innovation (6) Competitive Entry Wedge (7) Economic models (8)

#8 Economic Models/ Logic of the Enterprise Degree/type of operating leverage – “leverage” = ways to balance gains (profits/benefits) v. loses (risks/costs) – There are many ways to juggle leverage aspects. Here are two examples: If you have to borrow a LOT of money at high interest rates, your business is highly leveraged (and you have narrow profit opportunities & high risks) As your business acquires fixed assets, your operating revenue can increase (think of Jeff/ArcLight after they own their own building—they would then have more leverage space to work within)

#8 Economic Models/ Logic of the Enterprise Volumes – Base your business on high volume & you can lower price, but then you have to do the high volume to survive) – Base your business on low volume, you have to charge more. You don’t have to do much business, but you have to do at least some

#8 Economic Models/ Logic of the Enterprise Contribution margin – How much does the product/service cost (to make/provide) against it’s price (when sold)? (in effect, the “profit margin”) High profit margins=lower sales requirements Low profit margins=higher sales requirements

#8 Economic Models/ Logic of the Enterprise Revenue Drivers – Certain activities/positions “drive” success & profit. How many can (or do you need to) achieve for success? Marketing Strength Leadership/management strength New opportunity developments Performance excellence

#9 Resources Types and Strategies Types of Resources you’ll need (some more, others less) – Physical – Relational – Organizational – Financial – Intellectual – Human – Technological

#9 Resources Types and Strategies Strategies for acquiring needed resources – Purchase them – DIY – Sell shares/give equity – Borrow/Share/Barter – Lease/Rent – Outsource – License/Partner

#10 Prioritizing Financing Sources Variables when considering financing – Founder’s need for control (high to low) – Risk (high to low) – Amount of Money needed (high to low) Potential Sources – Self – Friends/Family – Bank loans – SBA loans – Angels/VCs – Public Offering

#10 Prioritizing Financing Sources Variables when considering financing – Founder’s need for control (high to low) Self --- F&F --- Bank loan --- SBC loan --- angels --- VCs – Risk (high to low) Self --- F&F --- angels --- VCs ---SBA --- Bank loan – Amount of Money needed (high to low) VCs --- Angels --- Bank loan --- SBA --- F&F --- self

#11 Venture Types Start Up Small Business Family Business Social Venture Corporate Venture (Intre-preneurial) Public sector Entrepreneurship

#11 Venture Types Growth Orientation Marginal/Survival Lifestyle Managed Growth High Growth

#12 Venture Life Cycle Pre-Start Up Existance/Survival Sustainable Business Model Success Maintenance or Success-Growth Resource Maturity Harvest (or not) Re-cycle/start over/serial

Entrepreneurial Enterprise #1 Organization Contexts Opportunities #2 & 3 Opportunities #2 & 3 The Entrepreneur #4 & 5 The Entrepreneur #4 & 5 The Concepts Resources Find (2) Evaluate (3) Types of Ventures Life cycles/stage s Types of Entrepreneurs (4) Type(s) of investments they make (5) Types and strategies (9) Prioritizing sources (10) Types of Innovation (6) Competitive Entry Wedge (7) Economic models (8)