1. Entrepreneurship Chapter 3 Creating Business from Opportunity

2. Entrepreneurship, 2 nd Edition Mariotti and Glackin with NFTE © 2010 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. 2 The Business Definition The offer—what will the business offer the customers? Target market—who will it serve? Production and delivery capability— how will it provide the products & services it sells?

3. Entrepreneurship, 2 nd Edition Mariotti and Glackin with NFTE © 2010 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. 3 Types of Business  Manufacturing—makes tangible products & sells them through distributors or directly.  Wholesale—buys in bulk from manufacturers & sells smaller quantities to retailers.  Retail—sells individual items to consumers.  Service—sells time/expertise to consumers.

4. Entrepreneurship, 2 nd Edition Mariotti and Glackin with NFTE © 2010 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. 4 Defining an Organization Core Values Mission Vision Culture

5. Entrepreneurship, 2 nd Edition Mariotti and Glackin with NFTE © 2010 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. 5 Organizational Core Beliefs Beliefs entrepreneurs use to guide organizations. Example: My restaurant will support local organic farmers. Core beliefs affect: materials used in production prices charged how customers are treated

6. Entrepreneurship, 2 nd Edition Mariotti and Glackin with NFTE © 2010 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. 6 Mission Statement A concise statement of Target customers Products & services Markets served Use of technology Importance of public issues & employees Focus on survival, profitability, & growth

7. Entrepreneurship, 2 nd Edition Mariotti and Glackin with NFTE © 2010 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. 7 Vision Overall view of desired company future state Built upon core values & beliefs Compelling across the organization Employees need to be empowered to fulfill it

8. Entrepreneurship, 2 nd Edition Mariotti and Glackin with NFTE © 2010 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. 8 Culture Largely shaped by leadership Core values in action Includes Risk tolerance & innovation Orientation with respect to people, teams, & outcomes Attention to detail Communication norms

9. Entrepreneurship, 2 nd Edition Mariotti and Glackin with NFTE © 2010 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. 9 Routes to Finding Opportunities Self- or group-developed business ideas Research on “hot” business ideas or growth areas Product or service idea first & search for a market or business second

10. Entrepreneurship, 2 nd Edition Mariotti and Glackin with NFTE © 2010 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. 10 Factors of Competitive Advantage 1.Quality 2.Price 3.Location 4.Selection 5.Service 6.Speed/turnaround

11. Entrepreneurship, 2 nd Edition Mariotti and Glackin with NFTE © 2010 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. 11 What Is Your USP? Unique Selling Proposition—what attracts customers away from the competition and toward a business? 1.Compare what your business offers to what competitors offer. 2.Are you at a cost advantage or disadvantage?

12. Entrepreneurship, 2 nd Edition Mariotti and Glackin with NFTE © 2010 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. 12 Competitive Analysis Your Company Competitor #1 Competitor #2 Competitor #3 Quality Price Convenience Selection Service TOTAL

13. Entrepreneurship, 2 nd Edition Mariotti and Glackin with NFTE © 2010 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. 13 Define the Unit of Sale Manufacturing—one order Wholesale—a dozen Retail—one item Service—one hour of time or one completed task Combination—average sale per customer

14. Entrepreneurship, 2 nd Edition Mariotti and Glackin with NFTE © 2010 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. 14 Average Sale Per Customer Average sale per customer – Average cost of sale per customer Average gross profit per customer

15. Entrepreneurship, 2 nd Edition Mariotti and Glackin with NFTE © 2010 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. 15 Unit of Sale as a Combination of Different Items

16. Entrepreneurship, 2 nd Edition Mariotti and Glackin with NFTE © 2010 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. 16 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

17. Entrepreneurship, 2 nd Edition Mariotti and Glackin with NFTE © 2010 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. 17 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

18. Entrepreneurship, 2 nd Edition Mariotti and Glackin with NFTE © 2010 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. 18 Economics of One Unit (EOU) — Manufacturing

19. Entrepreneurship, 2 nd Edition Mariotti and Glackin with NFTE © 2010 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. 19 Economics of One Unit (EOU) — Wholesale

20. Entrepreneurship, 2 nd Edition Mariotti and Glackin with NFTE © 2010 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. 20 Economics of One Unit (EOU) — Retail Business

21. Entrepreneurship, 2 nd Edition Mariotti and Glackin with NFTE © 2010 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. 21 Economics of One Unit (EOU) — Service Business

22. Entrepreneurship, 2 nd Edition Mariotti and Glackin with NFTE © 2010 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. 22 Economics of One Unit (EOU) — Example

23. Entrepreneurship, 2 nd Edition Mariotti and Glackin with NFTE © 2010 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. 23 The Entrepreneur’s Strategy:  Start a business with a profitable EOU  Hire others to create the units  Increase volume of units being sold  Start new businesses or expand opportunities Result: The entrepreneur creates jobs and wealth.