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.