Entrepreneurship: From Idea to Business Launch
Topic 1: Discovering, Evaluating, and Exploiting Business Opportunities
“Entrepreneurship is the process of discovery, evaluation, and exploitation of opportunities; and the set of individuals who…”
Discovering an Opportunity
An opportunity is anchored in a product or service, which creates or adds value for its buyer or end-user. A chance to meet a market need. To perceive a possibility for a new profit.
Evaluating an Opportunity
The value, rarity, inimitability, and fit of an opportunity. Intuition, personal interest.
Exploiting an Opportunity
The founding and formation of a new venture, or the significant improvement of an existing venture.
Phases of Exploiting Business Opportunities
- Pre-launch phase: Identification of business opportunity. Evaluation of it. Identification to proceed further (psychology, prior knowledge, creativity, useful ideas).
- Launch: Assembling resources, legal form, new products, marketing plans, strategy.
- Post-launch: Managing the business, conducting negotiations, human resource management.
“Opportunities emerge from a complex pattern of changing conditions. Changes in technology, economic, political, social, and demographic conditions. They come into existence at a given point in time because of a juxtaposition or confluence of conditions which did not exist previously but is now present.”
All individuals are not equally likely to recognize a given entrepreneurial opportunity. People’s prior knowledge about markets, customers, and other products influence their discovery of business opportunities.
Knowledge Corridor
Primes people to identify certain market opportunities but be blind to others.
Escaping the knowledge corridor:
- External knowledge sources
- Combine different concepts
- Use analogies
- Use different sources of information
Topic 2: Passion; To Succeed You Have to Believe in Something with Such a Passion that it Becomes a Reality (Passion is at the Heart of Entrepreneurship)
Entrepreneurial Passion
Composite of feelings + identity: Consciously accessible, intense positive feelings experienced by engagements in entrepreneurial activities associated with roles that are meaningful and salient to the self-identity of the entrepreneur.
Passion for:
- Inventing
- Founding
- Developing
The central role (topic 2)
Confidence / Overconfidence: At the beginning.
Personality: Influence behavior; creative, openness, energetic, talkative, dominant, enthusiastic, curious, innovative.
Start-up and Development Activities
- Discuss a business idea with friends or family
- Discuss a business idea with advisors, colleagues, potential investors, or other business men
- Gather information about your customers, competitors, or the industry you are going to enter
- Gather information about the product
- Save money for (starting) the business
- Check laws and regulations
- Develop a vision for your business
- Develop a development plan for your business (i.e., next steps you have to take)
- Develop an operations plan for your business (get raw material, produce, sell)
- Develop a marketing strategy for your business (e.g., based on a customer analysis)
- Develop a business strategy for your business (e.g., based on a SWOT-analysis)
- Make agreements with suppliers
- Organize contact information for your business (email, phone, address, web-page, business cards)
- Register your business (also for VAT or TIN) or apply for trade licenses
- Do marketing (e.g., promotion, advertising, media, inform people)
- Sell products or services to customers
The Importance of Taking Action
- Start-up activities
- Writing a business plan
- Protecting the idea
- Raising funds
- Assembling resources (raw materials, facilities)
- Hiring employees
- Deciding on the legal form
- Planning the marketing
- Registration
Psychological Performance Models
- Proficiency -> Fulfills the prescribed or predictable requirements of the role
- Adaptivity -> Copes with, responds to, and supports change
- Proactivity -> Initiates change, is self-starting and future-directed
Topic 3: Transforming Ideas into Opportunities
Idea vs. Opportunity
Ideas are essential but not a sufficient condition for opportunities to emerge.
Need to consider:
- Commercial viability
- Potential market demand
- Profitability
- Competition
- Sustainability
Opportunity Development Process
- Continuous process of shaping and developing the idea
- Engagement of other social actors to further develop the idea
- Refine, elaborate, change
- Different insights shape the raw idea into a valid opportunity
Topic 4: Feasibility Analysis
Good or bad business opportunity? To pursue or not to pursue?
According to which criteria did you evaluate the business opportunity?
Phase 1: Product / Service Feasibility
- Product / service desirability
- Product / service demand
Phase 2: Industry / Target Market Feasibility
- Industry attractiveness
- Target market attractiveness
Phase 3: Organizational Feasibility
- Management prowess (skill or expertise in a particular activity or field, synonyms: expertise, ability, experience)
- Resource sufficiency
Phase 4: Financial Feasibility
- Total start-up cash needed
- Financial performance of similar businesses
- Overall financial attractiveness of the proposed venture
Topic 5: Business Planning, Bricolage, and Effectuation
Starting a business is very much a series of fits and starts. Brainstorms and barriers. Creating a business is a round of chance encounters that leads to new opportunities and ideas. (Spinelli & Adams, 2012).
Advantages of planning:
- Action – regulatory function
- Legitimacy function
- Communication
- Learning
Disadvantages of planning:
- Insufficient knowledge about planning
- Lack of knowledge about the future
- Lack of time
- Stickiness of plans
Causation: A given goal, is useful in scenarios where there is a given goal and one only chooses the ways.
Effectuation: A given set of means; works better for unpredictable futures where there is only a general idea of business, so chances appear along the way.
Topic 6: Assembling Resources
Financial Bootstrapping
The use of methods to meet the need for resources, without relying on long-term external finance.
Different Economic Perspective
The probability of individuals becoming entrepreneurs is found to increase with their wealth and the size of the assets that they control (see Evans & Jovanovic).
Van Auken (1999) found that financial constraints were the most important obstacle standing in the way of business launch.
Lack of funding might be a reason for nascent entrepreneurs to abandon the start-up process (Holtz-Eakin et al., 1994).
Lower capital requirements and better access to capital raises the likelihood of firm formation (Van Gelderen et al., 2005).
Bootstrap is a situation in which an entrepreneur starts a company with little capital. An individual is said to be bootstrapping when he or she attempts to found and build a company from personal finances or from the operating revenues of the new company.
Financial and liquidity constraints: the most important obstacle that hinders commercial launch.
The lack of funding could be a reason to abandon the start-up.
In other words, this concept is about the”star” (EL ARRANQUE), when small companies start with not too much money.
Most businesses start with 5000-10000e.
95% of small businesses start using bootstrapping.
Types:
- Private-owner financed bootstrapper
- Income-oriented bootstrapper
- Relationship-oriented bootstrapper
- Delaying bootstrapper
- Subsidy-oriented bootstrapper