Entrepreneurship

1. Entrepreneurship Chapter 3 Creating Business from Opportunity

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. 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. Defining an Organization • Core Values • Mission • Vision • Culture

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. 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. 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. 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. 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. Factors of Competitive Advantage • Quality • Price • Location • Selection • Service • Speed/turnaround

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

12. Competitive Analysis

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. Average Sale Per Customer Average sale per customer – Average cost of sale per customer Average gross profit per customer

15. Unit of Sale as a Combination of Different Items

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. 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. Economics of One Unit (EOU) —Manufacturing

19. Economics of One Unit (EOU) —Wholesale

20. Economics of One Unit (EOU) —Retail Business

21. Economics of One Unit (EOU) —Service Business

22. Economics of One Unit (EOU) —Example

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.