1. Creating Business from Opportunity: The Economics of One Unit
Entrepreneurship
Chapter 2
Creating Business from Opportunity: The Economics of One Unit
Mariotti: Entrepreneurship

2. Market
A group of people who may be interested in buying a particular product or service.
Marriotti: Entrepreneurship

3. 4 Types of Business Manufacturing—makes tangible product
Wholesale—buys in bulk from manufacturer; sells smaller quantities to retailers
Retail—sells one piece at time to consumers.
Service—sells time/expertise to consumers.
Marriotti: Entrepreneurship

4. The Business Definition
The offer—what will you sell?
Target market—to whom will you sell?
Production and delivery—how will you sell?
Before you can start your business, you must define it.
Marriotti: Entrepreneurship

5. Competitive Advantage
What can you do better than the competition that will draw customers to your business?
Think about what your customers need.
You have unique knowledge of your market!
Marriotti: Entrepreneurship

6. Competitive Strategy
Business definition + competitive advantage = competitive strategy
Strategy: plan for outperforming the competition
Tactics: ways to carry out strategy
Marriotti: Entrepreneurship

7. Recipe for Success Understand the needs of your customers.
Offer them a sustainable competitive advantage.
Deliver a product or service that meets customer needs at a fair price.
sustainable = can be kept going over time
Marriotti: Entrepreneurship

8. 6 Factors of Competitive Advantage
Quality
Price
Location
Selection
Service
Speed/turnaround
Marriotti: Entrepreneurship

9. Naming Your Business Keep it simple. Don’t use your last name.
The best name is one that tells customers what the company does, sells, or makes.
Marriotti: Entrepreneurship

10. What Are Your Core Beliefs?
Beliefs you will use to guide your business.
Example: My restaurant will support local organic farmers.
Core beliefs affect:
-materials you choose
-prices you charge
-how you treat customers
Marriotti: Entrepreneurship

11. What Is Your USP?
Unique Selling Proposition—what attracts customers away from the competition and toward your business?
Compare what your business offers to what competitors offer.
Are you at a cost advantage or disadvantage?
Marriotti: Entrepreneurship

12. Check Out the Competition!
The offer
Target market
Production and delivery capability
Marriotti: Entrepreneurship

13. Mission Statement A concise statement of: Your strategy
Your business definition
Your competitive advantage
Marriotti: Entrepreneurship

14. Entrepreneurs Use Profits:
To pay themselves
To expand their businesses
To start or invest in other businesses
Gross profit = price – cost of goods sold
Marriotti: Entrepreneurship

15. Define Your Unit of Sale
Manufacturing—one order (e.g., 100 watches)
Wholesale—a dozen (e.g., 12 watches)
Retail—one item (e.g., 1 watch)
Service—one hour of time (one hour mowing) or one completed task (one lawn mowed)
Combination—average sale per customer
Marriotti: Entrepreneurship

16. Average Sale Per Customer
– average cost of sale per customer
Average gross profit per customer
Marriotti: Entrepreneurship

17. Unit of Sale as a Combination of Different Items
Marriotti: Entrepreneurship

18. Cost of Goods Sold (COGS)
COGS = cost of labor and materials required to make one additional unit
COSS (cost of services sold) = cost of labor and materials required to provide one additional unit of service
Marriotti: Entrepreneurship

19. Economics of One Unit (EOU)
Method for seeing if a business can be profitable
If one unit of sale is profitable, the whole business is likely to be profitable.
Selling price per unit – COGS per unit = Gross profit per unit
Marriotti: Entrepreneurship

20. Economics of One Unit (EOU) —Manufacturing
Marriotti: Entrepreneurship

21. Economics of One Unit (EOU) —Wholesale
Marriotti: Entrepreneurship

22. Economics of One Unit (EOU) —Retail Business
Marriotti: Entrepreneurship

23. Economics of One Unit (EOU) —Service Business
Marriotti: Entrepreneurship

24. Economics of One Unit (EOU) —Example
Marriotti: Entrepreneurship

25. The Entrepreneur’s Strategy:
Start a business with a profitable EOU
Hire others to create the units
Increase volume of units being sold
This frees the entrepreneur to start new businesses
Result: The entrepreneur creates jobs and wealth.
Marriotti: Entrepreneurship