Entrepreneurship Management

1) WHAT ARE VARIOUS SOURCES OF EQUITY INVESTMENT?

Some sources of equity investment are Public Stock and Private Equity. Public Stock consists in new issues of stock offered to the public, whereas, Private Equity consists of  different asset classes consisting of equity securities and debt in operating companies that are not publicly traded on a stock exchange; some of these are: venture capital, leveraged buyout, growth capital, special situations and mezzanine capital.

3) WHAT GUIDELINES SHOULD ENTREPRENEURS FOLLOW WHEN THEY ARE SELECTING A VENTURE CAPITALIST?

Somo guidelines entrepreneurs should follow when they are selecting a venture capitalist are: Scrutinize the business with a critical eye, Beef up management, Keep a high profile so the VCs will visit, Target the search, Keep a lookout, and Investigate possible venture partners.

5) WHAT ARE THE DIFFERENCE BETWEEN A SINGLE-HIT AND A HOME-RUN BUSINESS?

The limited funds are used to build the essential assets for an early sale to a larger company in 2 to 3 years in a single- hit whereas in a  home-run, it would have to wait and take high risks which may take seven to eight years.

6) WHAT ARE THE FOUR KEY FACTORS THAT A BANKER SEEKS BEFORE PROVIDING A CORPORATE LOAN?

The four key factors that  a banker seeks before providing a corporate loan are:

Character: for example traits as talents, reliability, and honesty

Cash flow: for example cash flow used to cover debt service must be available throughout the term of obligation

Collateral: to support at least part of the loan should the company be unable to meet its obligations

Contribution: by the entrepreneur towards the funding requirement

1) WHAT SOURCES OF FUNDING ARE AVAILABLE TO ENTREPRENEURS AT THE EARLY STAGE OF THE COMPANY?

The sources of funding that are available to entrepreneurs at the early stage of the company are:

• Self-funding
• Moonlighting and consulting
• Bootstrapping
• Family and friends/angels
• Micro-equity, Micro-loans
• Personally secured bank loans
• Factoring and supplier financing
• Government programs

2) WHAT ARE “VIRTUAL” COMPANIES? WHAT TOOLS HELP THEM FUNCTION? WHY ARE THEY OF INTEREST TO AN ENTREPRENEUR?

Virtual companies are companies that move quickly, change direction without disruption, and use the best resources without taking on long-term liabilities. They  have no offices, and have very few employees, no communication costs, and also low legal costs. Some tools that help them function are some virtual applications such as Skype for video conferencing, BaseCamp for project team and document management, ADP for payroll and tax management. Virtual companies are of interest to an entrepreneur because they help conserve cash, help reduce the level of fixed costs to a minimum while also maintaining flexibility, and  help the entrepreneur collect validated learning about customer with the least effort.

3) DESCRIBE SEVEN TECHNIQUES FOR BOOTSTRAPPING THAT YOU COULD USE IF YOU STARTED A COMPANY.

Some techniques for bootstrapping that could be used when starting a company are:1) No or low rent: saving money by trying to minimize  rent expenditure and keeping it to a minimum, 2) Renting of leasing equipment: some equipment are only needed at the start-up phase, it is better to rent than buy in this kind of case, 3) Used equipment: reduce expenses by using used equipment that help achieve the same results as a new equipment would instead of spending more money buying a new equipment. 4) Contingent litigation: a lot of money can be saved if we can find a law firm that would take the case “on contingency,” 5) Access to expensive equipment: access to equipment can be obtained through the programs offered at universities and government labs. 6) Outsourcing: some services needed for the company can be obtained  by outsourcing; activities such as bookkeeping, tax-return preparation, payrol services. 7) Cooperative purchases: companies can work with small companies and create a buyer’s club and this could help reduce some costs in certain areas such health insurance costs for example.

4) WHY IS BOOTSTRAPPING IMPORTANT FOR (A) CLOSELY HELD COMPANIES AND (B) EARLY-STAGE, HIGH-GROWTH COMPANIES SEEKING EQUITY INVESTORS?

Bootstrapping is important for closely held companies and also early-stage, high-growth companies seeking equity investors because it can reduce costs from the current operation and overhead, helps become more efficient and costs conscious. Bootstrapping will help the entrepreneurs  to be in a stronger position to qualify for additional financing and in this way they can get through the early stages either to defer the search for equity funding or to retain control of the company.

5) WHAT IS MEANT BY FACTORING OF PURCHASE ORDERS?

Factoring of purchase orders consists in using purchase orders from reputable customers as security for a loan.  This method is an alternative to conventional bank loans and the lenders are private, they lend only a percentage of the sales order and charge high interest rates.

6) HOW CAN SUPPLIERS HELP IN PROVIDING WORKING CAPITAL?

Suppliers can help in providing working capital by sharing market data, reports, access to experts, access to supplies of test materials, access to theirs customer networks, technical support, all with the hopes that in the future, that the company becomes a major customer to them.

1) WHAT FINANCIAL MEASUREMENTS SHOULD BE PREPARED TO MEASURE COMPANY PERFORMANCE?

Some of the financial measurements that should be prepared to measure the company’s performance are 1) Measuring sales volume: this provides a better view of the business’s overall sales, whether they have increased or decreased. 2) Measuring profit: which consists in the difference between revenues and expenses as reported in the income statement curing an accounting period, and 3) Measuring cash generated: this helps identify the cash flow whether there is an increase or decrease in cash and the changes in cash position that occur  during  certain period of time. All these financial measurements are important because they serve as management directions and help to make the necessary adjustments to the business’s operations

2) WHAT ARE THE CATEGORIES AND STEPS  IN PREPARING A FINANCIAL BUDGET?

The categories in preparing a financial budget are:

-Sales

– Cost of goods sold

-Gross profit

– Operating Expenses

-Operating profit/loss

-Other income and expenses

-Pretax income

-Income taxes

-Net income

-EBIT

-EBITDA

The steps in preparing a financial budget are: 1) estimating an average number of sales for each month or the average cash flow revenue of the business, 2) estimating  the business’s cash flow disbursement of expenses.  and 3) analyzing the cash inflows and outflows of a certain period of time  and obtaining a balance which will be the base of the next month’s  and which cash flow activity will be added or subtracted.

4) DESCRIBE THE BREAKEVEN TECHNIQUE IN THE DECISION-MAKING MODEL TO DETERMINE PROFIT AND LOSS

The break-even technique indicates the point where the business’s sales have generated enough income to cover all of the fixed costs and expenses.This technique helps us know at what point a business starts making profits or helps us identify is there is loss so decisions can be made properly.

6) WHY IS BUILDING A CORPORATE CULTURE TO MATCH A COMPANY’S MISSION IMPORTANT?

I believe that a corporate culture and its mission should go hand in hand,  the culture should be consistent with the company’s mission, and the mission should be consistent with the company’s culture. I think building a corporate culture to match a company’s mission is important because the company will have certain goals that can only be met if the mission and culture support each other, These two help members of the company be aware of what the company is looking for, the company’s values and also makes them aware of how they should behave and what tasks must be performed in order to reach the company’s goals.

7) SELECT SIX LEADERSHIP ATTRIBUTES THAT YOU FEEL ARE THE MOST IMPORTANT WHEN BUILDING A STRONG CULTURE. WHY?

-Honesty

-Alignment

-Teams

-Empowerment

-Support

-Engagement

-Communication

I think honesty is very important not just in a business but in life in general; it helps build confidence among people, and in this case among members of the company, and it also helps create a good work environment. Alignment is important for the performance of the business, if employees’ interests and actions don’t support the company’s goals then the company’s performance  can suffer and be negatively impacted. Communication and support as well as engagement are also important; most of the time employees will have to work in teams  and interact with each other so they must communicate effectively to perform well as a team. I think that empowerment is also imperative because each employee is able to make a difference in the company, not just as teams, but individually, so empowering each employee to make a decision and have the freedom to take action without the supervision of a manager for example, is beneficial for the company too.

8) NAME THREE IMPORTANT FACTORS THAT YOU MUST TAKE INTO ACCOUNT WHEN HIRING KEY PEOPLE.

There are several factors that must be taken into account when hiring key people, some of these factors are: 1) the potential employee’s values should match the company’s values and culture, 2) potential employee’s skills can be trained and improved whereas values can’t, 3) sometimes using a professional recruiter can be the best choice when looking to hire key people since a bad hire can be fatal.

1) Name three factors that impact how a new technological innovation fits existing markets conditions.

One factor would be the early users’ experience as well as its positive qualities and already determined standards in the market, these can serve as samples to follow. Another factor would be the already set government regulations; they would impact how new technological innovation fits existing market conditions. Another factor would be the involvement of the early users in developing the product or service, this would help getting their feedback and enable the development of the product or service.

3) Name two factors that impact the “market window of opportunity.”

Two factors that impact the “market window of opportunity” are: 1) the experimentation with early adopters as the marketing plan is polished and 2) the awareness of where you stand on the hype cycle as innovation is promoted.

5) Name a product that is currently being used by early adopters only.

The first iPhone. It was launched in 2007 and its price was $600, two months later, Apple lowered the price; nonetheless, early adopters camped out in front of Apple stores to get their hands on the first version.

• WHAT IS THE PRIMARY DRIVER OF THE SOCIAL ENTREPRENEUR?

I believe that the primary driver of the social entrepreneur is the interest of making a difference and finding innovative solutions to social problems such as global warming, natural resources conservation, pollution, and water or food shortages.

• SHOULD A GREEN OR CLEANTECH VENTURES BE CLASSIFIED AS SOCIAL ENTERPRISE? IF SO, WHY?

I think green or cleantech ventures should be classified as social enterprise as long as they are concerned about social problems and as long as they are doing something about it. Since green ventures do care about social problems such as global warming, pollution and natural resource conversation, I think they should be considered social enterprise; these ventures are trying to minimize and avoid damage to the environment.

• WHAT ARE SOME OF THE NEGATIVES OF FORMING THE SOCIAL VENTURE AS A NONPROFIT?

Some of the negatives of forming the social venture as a nonprofit is that  there is a limited potential that can be developed. The venture unfortunately would have to rely on other sources to perform, if the social venture lacks of these resources (such as volunteering, government help,  etc) it will not be able to support itself unless it is funded by the founder of the venture. Another negative to this is even if the  social entrepreneur is willing to fund and sustain the social venture with his/her own money, unfortunately, he/she wouldn’t be able to benefit or get some money back if the nonprofit  are sold or stops operations because the money from the venture would have to go into another nonprofit.

• WHY DO STAKEHOLDERS VIEW THE SOCIAL VENTURE DIFFERENTLY FROM A TRADITIONAL VENTURE?

I believe that stakeholders view the social venture differently from a traditional venture because the venture is not focused on their own benefit or success but they are focused on finding innovative solutions to society’s most social problems not necessarily on making wealth for them. So, stakeholders view the social venture as a “change agent” that can make a difference and impact the world for better not as a primary way of making a living or money for themselves.

• WHAT ARE SOME OF THE GROWTH CHALLENGES OF A SOCIAL VENTURE?

Some of the growth challenges that a social venture faces is how to manage their team and how to keep them satisfied and motivated.  If the employee feels to be more of a follower than an employee, there is a risk that at some point of the growth period, the employee might feel like the company is losing its mission and the company must make sure that there is good communication and that employees don’t feel betrayed but are aware of the important function they play in the company.  The company have to decide whether it would be better to hire   “passionate employees who are likely to be true believers in the social goal of the venture” or just hire someone who wants the job. The challenge is that the communication must be efficient with all of its members and the mission must keep clear and consistent.

DIFFERENCE BETWEEN CORPORATE SOCIAL RESPONSIBILITY,  SOCIAL ENTREPRENEURSHIP AND PHILANTHROPHY:

A Social Entrepreneur is characterized by the pursue of an innovative and creative idea to solve a social problem; the focus is not on solving the need or problem of a market, but of a community. A corporate social responsibility has some similarity with a social entrepreneur but they are not the same, they are similar in that it also cares about social concerns; however, they are different it is more  about the integration of not just one person but  the companies who  try to do business and generate profit while also concerning about the society and environment. Philanthrophy is characterized by the efforts of supporting charities and non profits companies to improve the human welfare, also not driven by the desire of making a profit.

DIFFERENCE BETWEEN SOCIAL ENTREPRENEURSHIP AND BUSINESS ENTREPRENEURSHIP:

Social Entrepreneurship and Business entrepreneurship are not the same; social entrepreneurship focuses on wealth creation just like the business entrepreneur does; however, this one not only does it for its own benefit but for the benefit of society, without the financial resource or profit they can’t achieve their social mission and impact society in a positive way. In the other hand, business entrepreneurship pursues wealth for its own benefit and the benefit of its stakeholders not necessarily for the benefit of the community.

Obesity is a problem throughout the population; therefore, I believe there is a need for a healthy diet and overall a healthy lifestyle. My venture idea is to provide and deliver pre-packed Paleo meals that will help people get the nutrients they need while also helping them get in shape and save money and time.

We would offer affordable meals delivered to our customers starting as low as $8 per meal. We would encourage our clients to choose their own meals for the week from our menu, and we would strive to update our menu twice every 3 weeks, and if our customers want to buy on bulk we would offer them discounts.

We would try to eliminate middlemen and connect directly with local farms, in this way we can reduce costs and as a result, we can reduce our prices for our customers.  Another key partners would be FedEx and UPS to deliver our pre-packed Paleo meals.

I believe that the best customers would be people in New York who are already aware of the benefits of the Paleo diet; however, people who are new to this kind of diet, will see huge positive changes in their bodies and will be satisfied with the results and our service. A challenge would be to keep these customers long enough for them to see the changes because at the beginning they might not like the idea that the diet is composed mainly of vegetables, lean meats, nuts and seeds and very little starch and no sugar.  Our society is used to eating more carbohydrates than healthy fat and protein. So one of our challenges would also be the need to educate people about the importance of a good nutrition and why we believe in the benefits of our Paleo meals.

One way to market our service would be through local papers and magazines as well as our own website. We would also use social channels such as Facebook and Instagram. We would provide our service to people in New York and we would focus on this market segment and depending on how well we do and the demand for our service, we will then decide how to expand.

Some of our competitors (Blue Apron, Hello Fresh and more) provide their service not only in New York but nationwide, they have the money and brand as an advantage, but I want to remain positive and I believe we can succeed if we focus first in New York area, and help New Yorkers get healthier, in better shape, and save money and time.

• WHAT ARE THE FACTORS IN DECIDING WHAT FORM OF OWNERSHIP IS BEST SUITED FOR THE POTENTIAL BUSINESS?

There are several factors that need to be considered when deciding what form of ownership is right for a business. Some of these important factors are:  how many owners the business will have, what kind of product or service will be provided, the capital that will be needed to start the business, the financial situation in general, and also what sources of income there will be.

• BRIEFLY DESCRIBE THE ADVANTAGES AND DISADVANTAGES OF A SOLE PROPRIERTORSHIP AND PARTNERSHIP.

There are some advantages and disadvantages for both a sole proprietorship and partnership. A sole proprietorship is a very simple type of business structure; an advantage is that it is easy to start compared to a partnership since it is only owned and managed by the same person. Unlike a sole proprietorship, a partnership is owned by more than one person and can be more complex.  A sole proprietorship is required to do some filing, but these filings are not as complex as and the requirements set up for a partnership.  Another advantage of a sole proprietorship is that the owner of the business can report the business income and expenses as his/her own individual tax return, and all the profit that is made does not have to be share, it is only collected by the owner. A disadvantage, however, is that a sole proprietorship can be very risky because having a business is a lot of responsibility and if the business is sued, then the owner will be sued too, if the business goes bankruptcy the owner will be the only and most affected one too because since there is no separation between the owner and the business, if the business goes bankruptcy, the owner will too.

• EXPLAIN THE CORPORATE FORM OF OWNERSHIP AND HOW A BUSINESS IS INCORPORATED

The form of ownership in a corporation consists in that the business is declared separate, legal entity and it incorporated and guided by a group of officers known as the board directors.

• LIST THE DIFFERENCES BETWEEN THE S-CORPORATION AND THE LIMITED LIABILITY COMPANY.

Some of the differences between the s-corporation and the limited liability company are:  In a S-Corporation the ownership is restricted by the IRS, and they can have directors and officers, whereas, in a LLC, owners can choose whether to have managers manage the corporation.  S-corporation can sell stocks while the LLC can’t; and also unlike the LLC, the S- corporation can be transferable as long as the IRS ownership restrictions are met.

Writing a business plan is so important for a business because it serves as a design for building a successful company. There are many reasons why business plans fail; however, I found some that to me are really important to take in consideration when designing a business plan. For example, a lot business plans do not target potential investors properly, fail to identify the objectives, or sometimes even fail to review and update the plan. A business plan can also fail when it lacks of an adequate marketing analysis, or lacks a plan on how to react to the market conditions which are always changing. Some business plans focus on the service or product too much and fail to understand how to actually generate sales. Sometimes the business knows there is a demand and need for their product or service, but fails to get to know really well the competition and fails to create a pricing plan. I believe the probability for a business plan to fail can be considerably reduced if these points already mentioned above are considered and taken seriously. Setting realistic and achievable goals is also essential in the progress and success of a business plan. A really well implemented market research is imperative and vital part of a business plan; a business must understand the competition and the marketplace and develop a plan accordingly.

QUESTION 1: WHAT DEFINITION OF BUSINESS MODEL DO YOU FIND MOST  USEFUL AND WHY?

First, to me, both definitions are pretty much the same; however, I find the first one to be most useful because  it clearly states that a company must create value through not just the combination of products, or services image but also  “the underlying organization of people, and the operational infrastructure that they use to accomplish their work.” A lot of companies focus too much on the service or product they offer, but what about the other essential aspects of a business plan, such as the organization of the people that make up the company and the tools used to provide the service or products to customers. The second definition is too broad; therefore, to me, the first one can be most useful since it specifies in more detail the aspects that are essential and must be considered when companies examine business plans.

QUESTION 2: WHAT ARE THE SIMILARITIES AND DIFFERENCES BETWEEN THE TWO TOOLS FOR DESIGNING  BUSINESS MODELS?

Some similarities I was able to find between these two models is that  both emphasize the importance of identifying the company’s  customers  or “market segment” as well as “key partners,” also the importance of creating and contributing to the “value proposition.” I also find   that in Model 1’s component # 3 and Model 2’s topic # 4 are very similar, both ask to identify the key resources or assets that are needed  for the firm to perform its activities and function  in the business environment.

A difference  between these two models, is that Model #2 is more creative  and innovative and  I believe can generate more ideas than Model #1, the reason is that it is composed specifically of questions made to each participant and is recommended to be used in team-sessions, and the more brains  working together, the better results.  Another difference is the vocabulary used to refer to customers. Model 1 mentions “market segment” and “users” (in component #2), where as Model 2 refers as “customers” in most of all its key topics.

QUESTION 3: WHY WAS GREIF PACKAGING, DESCRIBED IN CHAPTER 2, ABLE TO CAPTURE  MORE OF THE VALUE  IN THE SUPPLY CHAIN? WHERE DID THE EXRA VALUE COME FROM, AND WERE THERE OTHERS WHO LOST THE VALUE THEY WERE SELLING?

Grief Packaging was able to capture more of the value in the supply chain because the company focused on identifying customers’ needs. It realized what customers really wanted which was the efficient and safe transportation of the toxic chemicals. The extra value came from being able to identify the unmet needs and develop new solutions; Grief created a way to solve the trip problems for customers. It took care of the details that customers did not want to deal with which were “finding a licensed trucker; filling in the government forms; and washing, cleaning, and refurbishing the drums.” I think that the drum suppliers  are some who lost the value they were selling because now Grief was the one capturing more of the value in the supply chain by dominating and taking care of customer’s  needs and wants.

QUESTION 6: NAME THREE SIMILARITIES AND THREE DIFFERENCES BETWEEN A FRANCHISE AND A LICENSE.

Three similarities between a franchise and a license are: 1)Both require a type of agreement or contract between an issuing party and a receiving party, 2) both  require  that the contract clearly defines and identifies each  party based on the reasons for entering into the agreement, and 3) both can provide intellectual property which has to be precisely defined. Both agreements may give patent numbers, trademarks, or list of secrets.

Three differences between a franchise and a license are: 1) in  a franchise agreement the limitations of the franchisee’s business are clearly defined, whereas,  in a license one, the licensee  could have more freedom if  these limitations are not indicated in the agreement, 2) in contrast to a franchise agreement, a license agreement clearly defines the territory where a licensee would be doing business, and 3)a franchisor is required by law to provide the franchisee with the Uniform Franchise Offering Circular document, so that  the purchase is aware of the risks and dangers of the franchise agreement; this is not necessarily required in a license agreement.

QUESTION 1: WHY IS INNOVATION IMPORTANT, AND HOW IS IT CHANGING?

Innovation is important because we live in a globalized world, in a world where people from different countries find themselves interchanging products or services, cultural ideas and beliefs, as well as work ethic between each other. Because the market place is always changing a company’s target market and consumers will also change; for instance, technology keeps developing and so the consumer’s needs and wants keep changing too. More consumers want fast solutions and expect technology to be involved, thanks to technology consumers can sometimes get faster solutions, have access to information, products or services from anywhere and at any time.

I believe innovation is important because it enables a company to grow in a very competitive world and have the opportunity to use it as its advantage  and obtain competitive edge. Without innovation and adaptation, a company will eventually be out of business. The economy also keeps changing from country to country even though we are all connected and depend on each other at a certain degree; the company might find new potential customers in developing countries for example, a country in South America, where they don’t have locations yet or know much about the country’s cultural aspects, so they must innovate, learn and adapt, and use different approaches and techniques to be successful in the new place and be able to grow and expand.

QUESTION 9: WHY DO YOU THINK DELL WAS SUCCESSFUL WHEN OTHER COMPANIES TRYING THE SAME  MODEL FAILED?

I think that innovation was what  made Dell successful while their competition failed. The other companies failed because they could not respond quickly to the new kind of service and supply provided by Dell. It no longer was about selling computers, but selling computers that would satisfy specifically each and every consumer’s demands and needs. Dell was not trying to sell to a large market anymore like its competition was, it focused on customer satisfaction and so it enabled the consumers to design their own product according to their needs and wants. Dell focused on customer satisfaction also by supplying printers that would connect to the internet and  with a software  that would forecast the need of ink replacement and enable consumers to have ink drop shipped on time. By making consumers happy with the company’s service and product, Dell was able to increase its revenue and profits and succeed.