Entrepreneurship Midterm ENTR-27056-003
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This 9 page Study Guide was uploaded by Megan Angelo on Friday March 11, 2016. The Study Guide belongs to ENTR-27056-003 at Kent State University taught by Kipp A. Krukowski (P) in Spring 2016. Since its upload, it has received 75 views. For similar materials see Intro to Entrepreneurship in Entrepreneurship at Kent State University.
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Date Created: 03/11/16
Entrepreneurship Midterm Study Guide Module 6- The Industry and the Market Module 7- Product and Service Development and Intellectual Property Module 8- The People Element of Entrepreneurship Module 9- Start-up Financials Module 6: Industry: a group of similar businesses that interact in a common environment Market: a grouping of customers to which an entrepreneur wishes to sell to Primary/Target Customer: segment of the market that most needs the product/service Overview: How it is described? It is growing? Opportunities? Who are the opinion leaders? Future outlook? Threats? Margins? Money? Resources: Survey, Encyclopedia, U.S. Census, trade magazines, customers, trade shows Emerging Industries- recent changes in demand of technology Ex. Wearable tech Fragmented Industries- large number of firms of approximately equal size Ex- Chipotle Mature Industries: decrease in demand, repeat customers, and limited product innovation Changes: Progressive: -most common -grow geographically -increase profits through innovation processes, distribution, and technology Intermediating: major shifts in the value chain forward/backward integration EX. Selling straight to the buyer Radical: obsolescence of previous technology and drives old-line companies out of business Ex. PC took out the typewriter Creative: resources turn over frequently and must continually be replaced Ex. Film and music industries Porters 5 Forces Model: 1.) Barriers to entry: a. Brand loyalty b. Switching costs c. Access to distribution channels d. Economies of scale – cheaper price for volume purchase e. Proprietary factors f. Government regulations ( license, zoning-FDA approved) g. Capital requirements 2.) Threats from substitute products a. Products/services i. Ex. Bowling alleys v. mini golf 3.) Threats from buyers bargaining power i. Ex. Walmart 4.) Threats from suppliers bargaining power i. Ex. Intel 5.) Competitive Rivalry among existing firms i. Cell phone service Module 7: Five Impacts of Insufficient Resource 1.) Poor execution 2.) Time to market increases-not enough people 3.) First to market opportunities are missed 4.) Projects are made simpler-key features deleted 5.) Team morale declines How products/ services are developed Design right first time Shorten the time to market Outsource certain product development tasks Outsourcing -component design -Materials specifications -packaging design -assembly drawing specifications -operators and owners manuals Intellectual Property: the group of legal rights associated with patents, trademarks, copyrights, and trade secrets Patent: primary means of protecting an original invention Designed by Thomas Jefferson 1790 Financial incentive to invent Patents: 5 Classes Established by Congress 1.) Machine/moving parts 2.) Process/method for producing 3.) Article of manufacture 4.) Composition of matter 5.) A new use or improvement for one of the above that does not infringe on the other patents Trade Secret: formula, device, idea, process, pattern, or compilation of information-gives the owner a competitive advantage in the market place -choose not to patent to keep the secret a secret -Not Protected by Federal Law Utility Patent: useful process, machine, manufacture, useful improvement 90% of patents Fees 20 years Design Patent: exclusion for others to make No fees 15 years if filed on or after May 13, 2015 Plant Patent: asexually reproduced Provisional patent (not required) “patent pending” Non-provisional (full): file within 12 months of filing the provisional patent -12 months of first sale/public disclosure Patent Infringement: give holder right to enforce it, defense cost in terms of money and time often to make it difficult for small businesses to enforce their patents Foreign Patents: only extended to the borders of the U.S. -every country is different -hire someone who knows Trademark: a symbol, logo, word, sound, color, design, other device that is used to identify a business or products -longer life than a patent - Exclusive right to it- continue to use it R with a circle- registered trademark TM- Non- registered trademark Can’t Trademark -anything immoral -official symbol of the U.S. -Flag -names without permission Copyright: protects the form of the original works of authors, composer, screenwriter, and computer programs Does not protect the idea itself Life of the holder plus 70 years Hire/ anonymous 95 years from date Digital Millennium Copyright Act of 1998 -False, alter, remove, copyright, management data on digital copies Crime to circulate work without authorization International Protection: fairly consistent, life of author plus 50 years Module 8: Partner: key man insurance policy buy/ sell agreement Success with a partner- -share the work load -Loss of one-company still exists -credibility Multiple opportunities for expertise Benchmarks: shared vision, shared passion, industry experience relevant to venture High-Tech Firms: Funding-angels/venture capital -stat team- Scientist/ engineer Little sales, business experience -requires professional management Investors –found out functional areas Professional management-no glitches Advising Board: (Private) -panel of experts -overcome “tunnel vision” -Payment-honorarium 250/500/1000 per meeting -only after venture is profitable Mentor Board: personal- coach/advisor -share fears, concerns, hopes/dreams -Mentor- entrepreneur personal and professional life Employees: -single biggest expense Hiring- time consuming/challenge -legal issues with hiring -must avoid discriminatory practices CAN’T ASK- How old are you? Religion? Married? Terminating and replacing =more time consuming Outsourcing / Independent Contractor -Own their business-avoid medical benefits, pay roll, taxes -hired for a specific job -Hidden cost-“up to speed” “in house” with your business -strict rules Employee vs. independent contractor IRS regulations -penalties and interest Module 9: Critical Questions: Start-up capital requirement? Working capital requirement? Revenue? Positive cash flow? Break-even point? Start- up resources: people, employee, advisor-physical assets-equipment, inventory, Financing-cash, equity Resource Mix: maintain flexibility/mobility ownership at first can debate $$ - start- up revenue Bootstrapping: minimize owned resources-keep low overhead -beg, borrow, lease, and barter -smart decisions with resource management Ex.) Require deposits from customers- ask for temporary rent free- trade resources Business Process May -Who does the work? -where do they work? -What do they need? -what information is generated? Where does the information go? Make lists 1.) Tasks needed to be completed 2.) Equipment, people, other resources needed Pricing Strategies Marketing Strategy -how do you want to position your product/service in the market? Financial: goal is maximize cash flow: up price lower direct cost - Up market share lower prices - -customer goals-influence price - Price sensitive? - Cash and has a problem? Premium Pricing: - Up price - Unique product/service - Competitive advantage Price Skimming -start out high Drop price as competitors enter Demand-based Find out what customers are willing to pay- price accordingly Captive Product Low price- base products High price counter part Ex. Printer / ink Keurig/ k- cup Psychological Complex pricing- combine must products Ex.) Cell service Product Bundle Home, phone, cable, internet Geographic Price tolerance Ex. Ohio vs. Hawaii Forecasting First Year DON’T -straight line upward -DO- consider seasonality -DO- consider lead times-product prepped for sale -DO- consider effect of planned milestone Ex.) Moving, add on parts, accessories Pro Forma (Projected Financials Write down assumptions -monthly schedule of costs begin (pre-revenues) balance –sheet, monthly 1 year income end of year balance sheet, annual income statement (2-5 years) Basic Income Statement Sales, cost of good, gross profit, operating other experience Cash Flow Statement Beginning Cash, plus Experience Cash Breakeven Analysis: variable costs, fixed costs Unit contribution= sales price-variable costs Breakeven- fixed costs/ unit contribution Net Income= Unit contribution X # of units sold after break-even point Module 10: The Business Plan: -serves as a reality check -operating guide -intent of interest Comprehensive -discusses operational/ financial aspects -execution of concept Investors: - Rate of growth - Return on investment - Degree of risk - Degree of protection against risk - Market driven business - Predictions based on solid evidence through market industry - When/ how investment will be paid back - Know entrepreneur knows risks/ challenges and has a plan - Margins - Cash flow projections - Specific amount needed - Understand positive impact - Money to grow business not pay off debts - Assets for collateral - Plan B/Plan C - Stake in Business Strategic Partners/ Alliances - License another firm to test/ manufacture/ assemble products - Supply raw materials-exchange for equity - Co-create a needed part via joint venture - Formal/ informal agreement What need is being served? Can the founding team/product serve the need? What is this ventures competitive advantage? Make money? Why is NOW the right time to launch? What needs to be done? Who-what? Timeline Select a leader Can be successful without a plan- first to market, traction, and get up and running, learn the industry first Mistakes-project too quick growth Success 100% of efforts on entre Projection exceeds above industry average without reason why Underestimate need for capital Mistake tactics for strategy Entrepreneur not personally invested Presentation: less than 30 minutes Tell a story, don’t use a podium, and move w/o distraction. Don’t pace, eye contact visuals are simple, CEO presents, Perform demonstration when possible, practice Answer Investors ask questions they already know -It’s ok not to know- Get back with them -founding team joins CEO for questions
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