Entrep Exam Reviewer 1 1

1.
Definition of Entrepreneurship
 Perhaps one of the most straightforward definitions is that an entrepreneur is someone

who perceives an opportunity and creates an organization. to pursue it.
 And the most thought-provoking: Entrepreneurship is the pursuit of opportunity
without regard to resources currently
2. Concept of Entrepreneurship
Pattern Among Successful Entrepreneurs
 10 or more years of relevant experience

 Established business contacts
 Established a track record in the industry
 Possess the know-how
 They prepare by gaining relevant business experience
3. Proactivity
 controlling a situation by causing something to happen rather than waiting to respond
to it after it happens.
 serving to prepare for, or control an expected occurrence or situation, especially a
negative or difficult one.
4. Begin with the End in Mind – Idea created mentally and Ideally
5. Common learnable characteristics of successful entrepreneurs
ATTITUDES AND BEHAVIOURS

 Commitment, Determination, and Perseverance
 Success Orientation
 Opportunity and Goal Orientation
 Action Orientation and Personal Responsibility
 Persistent Problem Solving, Need to Achieve
 Reality Orientation
 Seeking and Using Feedback
 Self-Reliance
 Self-Confidence
 Tolerance of Ambiguity and Uncertainty
 Moderate Risk-Taking and Risk-Sharing
 Response to Failure
 Low Need for Status and Power
 Integrity and Reliability
 Team Builder
6. The three categories of business (Hint: The first one is “Lifestyle is Business”
 LIFESTYLE BUSINESSES
Lifestyle ventures include most one-person shows; mom-and-pop stores; and other lifestyle
businesses, such as gas stations, restaurants, dry-cleaning shops, and small independent
retail stores. Typically, their owners make modest investments in fixed assets and inventory,
put in long hours, and earn considerably less income than the average unskilled autoworker
or union craftsperson. The profit in reselling these businesses tends to be quite low.
 SMALL PROFITABLE BUSINESSES

Small manufacturing firms, larger restaurants and retail firms, small chains of gas stations,
and other multi-establishment enterprises commonly fall into the category of small,
profitable ventures. Usually, they involve a substantial capital investment-$500,000 or more.
 HIGH-GROWTH BUSINESSES
Much rarer than lifestyle ventures or small, profitable ventures, but typically more highly
publicized, are small firms that have the capability of becoming large ones. They include
many high-technology companies formed around new products with large potential markets
and also some of the small, profitable firms that, due to such factors as having amassed
substantial capital or having hit on a successful formula for operating, can be expanded
many times. Ventures of this type are often bought and absorbed by larger companies. The
potential for significant capital gain on resale of such a business can be substantial.
7. Franchising
Advantages of Franchising
 Tap into the name recognition of a well-known trademark
 or trade name
 May receive assistance in such areas as site selection, equipment purchasing, national
advertising, bookkeeping, the acquisition of supplies and materials, business counseling and
employee training
 Your risk of failure is considerably lower than starting from scratch
 Take advantage of large-scale, centralized buying
 Franchisor may provide financing and credit arrangements
 Well known franchises provide a proven system that has already been developed, tested
and refined
Disadvantages of Franchising
 Franchisors will retain much control over their franchisees

 Regular and frequent reports and inspections by the franchisor may seem intrusive by some
franchisees
 May have to pay royalties even when you are losing money
 You will be required to purchase most supplies from the franchisor, sometimes at prices
higher than you could buy them elsewhere
 You must make regular payments to the franchisor for franchise fees, royalty payments and
advertising costs.
8. How to Distinguish between a Business Idea and a Viable Business Opportunity
How do you tell an idea from an entrepreneurial opportunity? Harvard professor J. A.

Timmons says "an opportunity has the qualities of being attractive, durable, and timely and is
anchored in a product or service that creates or adds value for its buyer or end user." Many
ideas for a prospective new business do not add much value for customers or users. To help you
distinguish between a list of ideas and real opportunities, you might start by asking yourself the
following questions:
 Does the idea solve some fundamental consumer or business want or need?
 Is there a demand? Are there enough people who will buy the product to support a
business, and how much competition exists for that demand?
 Can the idea be turned into a business that will be profitable?
 Do you have the skills needed to take advantage of the opportunity? Why hasn't anyone
else tried this concept? If anyone has, what happened?
9. Ideal business attributes

 No investment required
 A recognized, measurable market
 A perceived need for the product or service
 A dependable source of supply for required inputs
 No government regulation
 No labor force required
 I00 percent gross margin
 Frequent purchases by buyers
 Favourable tax treatment
 A receptive, established distribution system
 Great publicity value
 Customers who pay in advance
 No risk of product liability
 No technical obsolescence
 No competition
 No fashion obsolescence
 No physical perishability
 Imperviousness to weather conditions
 Some proprietary rights
10. Reasons for selling a business
Reasons to Sell a Business - - not to be concerned with
 They wish to retire

 They want to move to another city
 Illness of the owner
 Family pressures
 Marital problems
 Owner sees a better opportunity elsewhere
Note: None of these reasons are a cause for concern
Reasons to Sell a Business - these should concern you
 Company is running out of cash

 Market for the company’s product is depressed
 Getting killed by the competition
 The current plant and equipment are worn out or
 obsolete
 The firm cannot no longer compete successfully
 New government regulations are causing problems
 Key employees are leaving to set up similar businesses
Note: These reasons are causes for concern for a potential buyer.
11. Buying a corporate Business
What to Consider When Buying an Existing Business:
 Spend plenty of time checking the company

 Do not fall in love with the business, stay objective
 Do not pay too much for goodwill, this will be difficult to quantify
 Stay within the industry that you know the best
 Ensure that the return on your investment will be adequate to pay you and your investors
 Make sure you have plenty of cash for operating the company
12. Pros and Cons of Buying an existing business
Advantages of Buying an Existing Business
1. Decrease the risk of failure
2. A successful track record
3. Already has a good location
4. Already has a product or service
5. Has existing customer base
6. Banking and supplier relationships are developed
7. Can begin with steady cash flow on Day One
8. May be able to buy business at a good price
Disadvantages of Buying an Existing Business
1. The buildings may be old and in need of replacement
2. Relations with employees may be poor
3. Current employees may be unproductive
4. Inventory might be old and difficult to sell
5. The Accounts receivable might be dated and difficult to collect
6. Location may be undesirable
7. The business might be in trouble financially
8. The company may have very little “goodwill” with the market
9. You may have less flexibility to make changes to the business
13. How is it different, and important to work “on” a business, not ”in” it?
https://www.youtube.com/watch?v=r6hlYqgw5jI skip to 11:52
14. The concept of Goodwill: When and When not to pay for it?
*PPT Based explanation:
What is Goodwill?
Purchase Price – Tangible assets = Goodwill
$10,000 – $1000 = $9,000 Goodwill
Factors determining Goodwill:

 Customers attitude toward the business
 Relationships with suppliers, bankers, employees
Can Goodwill be Transferred to the New Owner?
 Is the goodwill attached to the previous owner or is it attached to the business, the
location, reputation and other characteristics of the business?
 If the goodwill is attached to the owner it may not be transferable so you should not pay
much for it.
15. What to do if you want to take over the family business?
HOW CAN YOU PREPARE TO RUN THE FAMILY BUSINESS?
1. Tell others of your interest in being involved in the family business.
Do not keep your aspirations secret. Announce your goals to others, and look to them for
assistance, advice, and support in helping you achieve them. It is especially important that your
intentions be made clear to the principal stakeholders in the business, such as parents, siblings,
and employees.
2. Take responsibility for your personal development.

This might include an informal apprenticeship in the business, perhaps starting with summer
and part-time jobs. You should also consider an appropriate educational program, perhaps
taking a diploma or degree in business or a related field so that you understand the general
parameters of operating a company.
3. Gain experience outside the family business.

Working for another firm outside the family enterprise, even in another industry, can be an
effective way of gaining valuable experience and building your credibility as a manager or the
boss in your own business. It can also be a useful learning experience, as you have an
opportunity to see different management styles, observe different operating techniques, and
solve different problems-valuable skills that you can bring back to the family business. It is also
an opportunity to obtain accountability training by holding positions that teach responsibility
and provide important opportunities for decision-making.
4. Build relationships.
Build contacts with individuals who are part of the family business's current network, including
customers, suppliers, lawyers, bankers, and other professional advisers. These connections are
often made in community-service settings and social situations, such as at sporting events, at a
golf club, or in similar circumstances. You might also start building up your own network through
school alumni and membership in the Chamber of Commerce, service clubs, professional
associations, and other organizations.
5. Avoid family feuds.

Work with other members of the family, not against them. Learn to blend family traditions and
values with your business goals. This will help pave the way for a smooth transition when a clear
takeover plan is in place.
16. Potential Sources of Business Ideas
SOURCE OF IDEA
 Prior business experience

 Business associates
 Seeing a similar business somewhere else
 Suggestion by friends or relatives
 Hobby/personal interest
 Personal research
 An idea just coming to mind
 Seeing something in a magazine/newspaper
 Seeing or hearing something on radio/television
17. The difficulties of Succession in a Family Business

 Grooming an Heir
 Family Acceptance of the Plan
 The Use of Outside Assistance

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1.

 Perhaps one of the most straightforward definitions is that an entrepreneur is someone

Pattern Among Successful Entrepreneurs

 10 or more years of relevant experience

ATTITUDES AND BEHAVIOURS

 SMALL PROFITABLE BUSINESSES

 Franchisors will retain much control over their franchisees

8. How to Distinguish between a Business Idea and a Viable Business Opportunity

How do you tell an idea from an entrepreneurial opportunity? Harvard professor J. A.

9. Ideal business attributes

10. Reasons for selling a business

Reasons to Sell a Business - - not to be concerned with

 They wish to retire

Note: None of these reasons are a cause for concern

Reasons to Sell a Business - these should concern you

 Company is running out of cash

11. Buying a corporate Business

What to Consider When Buying an Existing Business:

 Spend plenty of time checking the company

Disadvantages of Buying an Existing Business

1. The buildings may be old and in need of replacement

2. Relations with employees may be poor

3. Current employees may be unproductive

4. Inventory might be old and difficult to sell

5. The Accounts receivable might be dated and difficult to collect

6. Location may be undesirable

7. The business might be in trouble financially

9. You may have less flexibility to make changes to the business

Factors determining Goodwill:

2. Take responsibility for your personal development.

3. Gain experience outside the family business.

5. Avoid family feuds.

 Prior business experience

17. The difficulties of Succession in a Family Business

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