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Michael Smith
ENTR 510 Week 8 Final Assignment
1. Why are small businesses an important consideration for state and federal politicians? There are numerous reasons as to why small businesses are an important consideration for state and federal politicians. For starters, small businesses make up half of the work force, meaning that it helps the economy. Politicians need to provide special attention to small businesses because they are a stabilizing force in the economy. Small businesses keep unemployment rates low and it puts money back into the economy. By showing support of small businesses, politicians can win over hundreds of thousands of workers. 2. Explain, in your own words, Schumpeter’s view of entrepreneurship’s role in an economy and society. The role of an entrepreneur according to Schumpeter is a person who is an innovator in society and plays a very significant role in the development of the economy. The entrepreneur comes with new ideas or concepts to turn the small businesses in the society into very a big enterprise that employ thousands of people in the society. 3. What are the stages described in the model of the entrepreneurial process? What are the factors that give birth to a new enterprise and influence how it develops from an idea to a viable enterprise? The stages are in the entrepreneurial process are: idea generation, evaluation of the opportunity, formation of the company and lastly the growth of the company. There are four major factors which are: Personal, Environmental, Sociological and organizational.
Michael Smith
4. Explain the rationale behind the statement, “A first class team with a second class idea is better than a second class team with a first class idea.” Given a situation where you have identified an excellent opportunity; if your team lacks the experience to implement it, you will not be able to use all of the idea’s potential or may even fail. The crucial ingredients for entrepreneurial success are an excellent entrepreneur with a first- rate management team and an excellent market opportunity. Entrepreneurship is not a matter of luck, but an ability to combine your experience knowledge to bring the idea to life. 5. Why is the statement, “My startup has no competition,” always wrong? How can you find out about your competitors? Competition is everywhere these days, some startups fail to keep up and ultimately fold under pressure. Even if you feel that you don’t have any competition right now, there is always a possible that someone will enter the market at any time. You can find out about your competitors by employing competitors’ employees, learning from competitors’ customers, and attending conferences and exhibitions of competition. Competition can be really healthy, and I think it actually pushes companies to work that much harder. Your strategy is especially crucial in regards to how you deal with competition. It is important to set yourself up in a way that interests your niche market? 6. What can an entrepreneur do when there are no business opportunities at all? When an entrepreneur thinks there are “no business opportunities at all”, they should look at opportunities that are already in existence and expand on these opportunities and make them
Michael Smith
9. Why is the marketing done by entrepreneurs different from marketing done by established companies? Entrepreneurial marketing is different from marketing done by established companies for a number of reasons: First, entrepreneurial companies typically have limited resources - both financial limitations and time constraints. Entrepreneurs have little or no market share and a restricted geographic market. Not only is market information limited, but decision-making can be cluttered by strong, personal preferences and beliefs. Early-stage companies often stumble in their marketing because of a product focus that is excessively narrow. 9. Explain why solo entrepreneurs are generally less successful than team players. It is really hard for any entrepreneurs to succeed- Whether solo or a part of a team, it is hard. There are different difficulties to each. Solo entrepreneurs suffer from a number of shortcomings, including limited perspective, little moral support, and a small network. There is no one to share your load, no one to give you advice and no one to cover for you if you are having an off day. Also, it requires certain management skills that not everyone has, so you either need to hire the right people or find the right partners. Being a solo entrepreneur isn’t easy because all of the effort has to come directly from you. The level of success is a direct reflection, and a tangible representation of "the best you can do", there's no blaming anyone else for errors. The hardest part really knowing what to spend your time on to deliver the largest benefit, what should be assigned to outside vendors, and what to forget about. Staying flexible is also part of the experience. Teams have a higher chance of success due to an increased skill set, an improved capacity for innovation, and a higher social level of support.
Michael Smith
10. Describe the pros and cons of a dual job strategy at the early stages of the venture. The Pros of a dual job strategy is that you can maintain a salary or some sort of cash flow before your venture becomes profitable. However, every waking hour is devoted to your job or your new venture and it generally only works during the planning stages of the venture but you likely cannot launch the venture while working full-time elsewhere. 11. Three major problems your team may face are burnout, interpersonal conflicts, and family pressure. Describe how you can prevent and overcome them. You can prevent burnout by having daily face to face communication with every member of your team; have planned stress-relieving activities, offer stress reliving activities in the workplace as well as food and other refreshments. Interpersonal conflicts can be resolved by mediating between the parties, hiring an outside expert that is perceived as a neutral party, and in extreme cases firing somebody. Family pressure can be prevented by inviting families to planned stress reliving activities and making sure that the families of team members understand from the outset the commitment the team members are making and what will be required of them.
Michael Smith
16. Describe venture capital investing from the perspective of the firm’s general partners. Venture Capital is any money provided by investors to a company. Though the investment is typically high risked for the investor, the company is generally viewed as having long-termed growth potential with the potential for above average returns. Venture capitalist usually looks at a company’s management, the size of the market, the risk vs. reward, the company’s competitive edge, and any risks. 17. Name the ways of valuing a business, and explain why none of them can be called ideal. When valuing a business, you look at the company as a whole, not just financially. For example, investors would look at the business’ assets on the balance sheet. They would look in detail at projected revenue, past revenue and expenses, as well as asset valuations, and liquidation value. I would also add that a business that has a competitive edge over competition can be valued into this calculation as well. If the market is untouched and your business is offering a unique service, that can add value to the company as well.
- Give a list and a brief description of the possible ways to finance a new venture. Many new entrepreneurs use the bootstrapping method by using their own savings or investments from the family and friends to raise the initial money they need for the new ventures. Some can get a SBA loan that will cover the initial startup cost and an added benefit to this is that the bank takes no ownership share of the company. Angel investors are also used but they often take an ownership stake in exchange for their investment. Venture capital firms can also give funding to new venture. In return, many firms seek a large portion of ownership stake
Michael Smith and seats on the funded company’s board of directors. Though grants are also a great way to finance a new venture; they are extremely hard to come by. This is because there are so many new businesses opening each year, and many want to qualify for grant money. This money doesn’t have to be paid back, so it attracts a lot of company owners.
- Name at least eight criteria an ideal candidate for venture capital has to meet. An ideal candidate for venture capital must meet the following criteria:
- Skilled: The ideal candidate must have expertise in their field which must be related to their respective fields where they have experience and valuable knowledge
- Financial forecast: An ideal candidate should be built with capital efficiency in mind. First round funding must take the company to meaningful milestones that build tangible business value in the long.
- The ideal candidate should be able to make the product or service address a large, growing and measurable new or existing market. In addition, a clearly defined go-to-market strategy is critical.
- The candidate must be able to make product or service based on intellectual property that provides a competitive distinction with demonstrable, measurable benefits.
- The candidate should have an experienced management team that is able to perform all tasks with the skills required.
- The candidate must be able to make efficient use of capital that is allocated to him in order to meet the company needs.
- The candidate should be able to make the business have sustainable competitive advantage compared to other firms in the industry.
- The candidate should be able to make the business have a strategic business model that is more efficient. 17. To qualify for assistance from the Small Business Administration, the proceeds of an SBA-guaranteed loan must be used for what purpose? In order to qualify for a SBA guaranteed loan, some of the basis uses for the proceeds can be used for the purpose of some of the following:
Michael Smith Must hold annual meetings and record meeting minutes. Limited Liability Companies (LLCs) Independent legal structures separate from their owners. Help separate your personal assets from your business debts. Taxed similarly to a sole proprietorship (if one owner) or a partnership (if multiple owners). No limit to the number of owners. Not required to hold annual meetings or record minutes. Governed by operating agreements. S Corporations Independent legal and tax structures separate from their owners. Help separate your personal assets from your business debts. Owners report their share of profit and loss in the company on their personal tax returns. Limits on number of shareholders, who must be U.S. citizens or residents. Must hold annual meetings and record meeting minutes. Partnerships Partners remain personally liable for lawsuits filed against the business. Usually no state filing required to form a partnership. Easy to form and operate. Owners report their share of profit and loss in the company on their personal tax returns. Sole Proprietorships Owner remains personally liable for lawsuits filed against the business. No state filing required to form a sole proprietorship. Easy to form and operate. Owner reports business profit and loss on their personal tax return.
Michael Smith
