2. Appendix 2

3. The Context of Entrepreneurship
Entrepreneurship - the process of starting new businesses, generally in response to opportunities.
Entrepreneurial ventures - organizations that pursue opportunities, are characterized by innovative practices, and have growth and profitability as their main goals.

4. The Context of Entrepreneurship (cont.)
Small business - an organization that is independently owned, operated, and financed; has fewer than 100 employees; doesn’t necessarily engage in any new or innovative practices; and has relatively little impact on its industry.

5. Why Is Entrepreneurship Important?
Innovation
Engage in the creative destruction process
Act as agents of change
Number of New Startups
Increasing numbers of new firms
Job Creation
New ventures create 60-80% of net new jobs

6. Exhibit A-1: Evaluating Potential Ideas
Evaluating entrepreneurial ideas revolves around personal and marketplace considerations. Each of these assessments will provide an entrepreneur with key information about the idea’s potential. Exhibit A-1 describes some questions that entrepreneurs might ask as they evaluate potential ideas.

7. Start-Up and Planning Issues
Feasibility study - an analysis of the various aspects of a proposed entrepreneurial venture designed to determine its feasibility.
Venture capitalists - External equity financing provided by professionally managed pools of investor money.

8. Appendix A-2: Feasibility Study
Exhibit A-2 provides an outline of a possible approach to a feasibility study. Yes, it covers a lot of territory and takes a significant amount of time, energy, and effort to prepare it. However, an entrepreneur’s potential future success is worth that investment.

9. Appendix A-2: Feasibility Study (cont.)

10. Appendix A-2: Feasibility Study (cont.)

11. Venture Feasibility—Financing
Venture capitalists - external equity financing provided by professionally managed pools of investor money.
Angel investors - a private investor (or group of private investors) who offers financial backing to an entrepreneurial venture in return for equity in the venture.
Initial Public Offering (IPO) - the first public registration and sale of a company’s stock.

12. Appendix A-3: Possible Financing Options
Because funds likely will be needed to start the venture, an entrepreneur must research the various financing options. Possible financing options available to entrepreneurs are shown in Exhibit A-3.

13. Developing a Business Plan
Business plan - a written document that summarizes a business opportunity and defines and articulates how the identified opportunity is to be seized and exploited.

14. Elements of a Business Plan
Executive summary
Analysis of opportunity
Analysis of context
Description of the business
Financial data and projections
Supporting documentation

15. Legal Forms of Organization
Sole proprietorship - a form of legal organization in which the owner maintains sole and complete control over the business and is personally liable for business debts.
General partnership - a form of legal organization in which two or more business owners share the management and risk of the business.

16. Legal Forms of Organization (cont.)
Limited Liability Partnership (LLP) - a form of legal organization consisting of general partner(s) and limited liability partner(s).
Corporation - a legal business entity that is separate from its owners and managers.
Closely held corporation - a corporation owned by a limited number of people who do not trade the stock publicly.

17. Legal Forms of Organization (cont.)
S corporation - a specialized type of corporation that has the regular characteristics of a C corporation but is unique in that the owners are taxed as a partnership as long as certain criteria are met.
Limited Liability Company (LLC) - A form of legal organization that’s a hybrid between a partnership and a corporation.

18. Legal Forms of Organization (cont.)
Operating agreement - the document that outlines the provisions governing the way an LLC will conduct business.

19. Exhibit A-4: Legal Forms of Business Organization
Exhibit A-4 summarizes the basic information about each organizational alternative.

20. Exhibit A-4: Legal Forms of Business Organization (cont.)

21. Exhibit A-4: Legal Forms of Business Organization (cont.)

22. Exhibit A-5: Achieving a Supportive, Growth Oriented Culture
Exhibit A-5 lists some suggestions that entrepreneurs might use to ensure that their venture’s culture is one that embraces and supports a climate in which organizational growth is viewed as desirable and important.

23. Human Resource Management Issues in Entrepreneurial Ventures
Employee Recruitment Concerns
Locating high potential employees who:
can perform multiple roles
are willing to “buy-in” (commitment)
Filling critical skill gaps
Employee Retention Issues
Potential for damage to client/customer relationships due to loss of employees
Need to offer desirable benefits
Compensation: base pay and incentives

24. Leading Issues Personality Characteristics of Entrepreneurs
High level of motivation, abundance of self-confidence, ability to be involved for the long term, high energy level, persistent problem solver, high degree of initiative, ability to set goals, and moderate risk-taker
Proactive personality – a personality trait that describes individuals who are more prone to take actions to influence their environments.

25. Leading Issues (cont.) Motivating Employees Through Empowerment
Giving employees the power to make decisions and take actions on their own to solve problems
Benefits of Empowerment
Improved flexibility and speed
Stronger work motivation
Higher morale
Better work quality
Higher job satisfaction
Lower turnover
Higher productivity
Improved quality

26. Leading Issues (cont.) Empowering Employees
Participative decision making
Delegation
Redesigning jobs

27. The Entrepreneur as Leader
Leading Employee Work Teams
Empowered teams
Have the authority to plan and implement process improvements
Self-directed teams
Are nearly autonomous and responsible for many managerial activities
Cross-functional teams
Are composed of individuals from various specialties who work together on various tasks

28. Controlling Issues (cont.)
Managing Growth
Planning for growth
Organizing for growth
Financing growth
Finding people
Creating a growth-oriented culture
Controlling for growth
Managing Downturns
Recognizing crisis situations—avoiding the boiled frog phenomenon
Dealing with downturns, declines, and crises

29. Recognizing Crisis Situations
“Boiled frog” phenomenon - a perspective on recognizing performance declines that suggests watching out for subtly declining situations.

30. Exiting the Venture Why Leave? Business Valuation Methods
Desiring to harvest the value of the venture
Facing serious organizational performance problems
Desiring to pursue other interests/opportunities
Business Valuation Methods
Asset valuations
Earnings valuations
Cash flow valuations

31. Exiting the Venture (cont.)
Harvesting - exiting a venture when an entrepreneur hopes to capitalize financially on the investment in the venture.

32. Terms to Know Entrepreneurship Entrepreneurial ventures Small business
Feasibility study
Venture capitalists
Angel investors
Initial public offering (IPO)
Business plan
Sole proprietorship
General partnership
Limited liability partnership (LLP)
Corporation
Closely held corporation
S corporation
Limited liability company (LLC)
Operating agreement
Proactive personality
“boiled frog” phenomenon
Harvesting 32