How do entrepreneurs have an impact on a society’s culture and economy?
Entrepreneurs have an enormous impact on the cultural and economic landscape of the countries in which they live and work. They create most of the new jobs, drive innovation and significantly contribute to quality of life. Entrepreneurs spot problems in the world and find ways to fix them.
What is entrepreneurship?
Entrepreneurship is the creation of value. Value is created by solving problems, filling voids and by creating better ways of doing things.
Do you have to be born an entrepreneur to be successful?
“You have to be born an entrepreneur” is one of the most common myths of entrepreneurship. There is no set of traits or characteristics that sets entrepreneurs apart from non-entrepreneurs. Being a successful entrepreneur is more about having a mindset of determination and resilience, working hard and harnessing a willingness to learn.
Is entrepreneurship all about being lucky?
Another myth of entrepreneurship is that entrepreneurship is all about luck. While there is some truth to the idea of being in the right place at the right time, one has to recognize the opportunity and, importantly, has to take action in a way that serves the opportunity. Those who recognize the opportunity of solving a problem and take action to creating value can be called entrepreneurs.
Do you have to be a risk taker to be an entrepreneur?
Entrepreneurs aren’t gamblers. They assess opportunities, look at the upside and downside and then work to mitigate as much risk as possible. If the upside looks bigger than the downside, and the downside is sufferable, they may take the opportunity. Entrepreneurs are also risk distributors – that is, they find ways to engage others in their journey who may take on parts of the total risk.
Can entrepreneurship be taught?
While there is no magic formula that can give you success as an entrepreneur, you can be taught the process of entrepreneurship, how to frame issues in a more effective manner, how to avoid common pitfalls and mistakes and how to gain an expertise in the domain of starting and growing a business.
What are some of the ways entrepreneurs will approach starting a business?
There are two primary models to starting a business: The causal model and effectuation. With the causal model, entrepreneurs focus on a predefined goal and then aim to find the most efficient means to reach this goal. An effectuation approach is one where entrepreneurs will examine who they know, what they know and what resources they have access to, in order to solve a problem. They will enter in, without knowing exactly how they’ll solve it or what the right answer will be. In this approach, entrepreneurs have an idea of how much they are willing to lose to figure things out as they go along. Effectuation tends to be better suited to uncertain marketplaces and opportunities and Causal Models are better suited to stable marketplaces and predictable outcomes. Most entrepreneurs will utilize both models during their journey.
What is key to entrepreneurial opportunity?
The key to entrepreneurial opportunity is finding and defining a good problem to solve – a business that solves or tackles a clearly identifiable problem is more likely to succeed, grow and compete.
What is a “bug list”?
A bug list is one of the easiest ways to find a good problem and involves taking note of things you find annoying or needing attention within your market space. Every time you can think of something wrong or broken in your market, you write it down as a bullet or phrase in your bug list.
What are the characteristics of a good problem?
A good problem is one that is believable, compelling and with a clear root cause – that is, why this problem exists in the first place.
Why is it problematic to have a long list of root causes?
If your list of root causes is long, it may be that your problem statement is dealing with a higher-level issue – it may be worth narrowing your focus.
What is involved in writing a problem statement?
Writing your problem statement involves briefly describing your customer base, stating what they need, explaining why this is compelling and identifying the root cause or causes.
What is the difference between primary and secondary research?
Primary research is active and involves ‘getting out of the building’ and conducting your own customer investigation, such as through surveys, focus groups, observation and interviews. Secondary research means drawing on information collected and compiled by others, such as industry data, market reports, government statistics and research studies.
What is the total addressable market versus the serviceable market?
Your total addressable market will be the number of people or organizations that feel the problem you are trying to solve. The serviceable market, meanwhile, is the market you expect to reach long-term.
What is customer segmentation?
Customer segmentation is grouping together customers with similar characteristics and profiles. In the business-to-business space, you can segment by firm industry, age or size. In the business-to-consumer space, you can segment based on demographics, geographic information as well as psychographic and behavioural profiles.
Why is empathy important when assessing the needs of potential customers?
At the early stages of your startup, you need to get a better idea of who experiences the problem you’re trying to solve. You need to put yourself in their shoes, which requires empathy – that is, the better you understand the emotions, intentions, thoughts and needs of your potential customers, the better equipped you will be to develop solutions that solve their problem.
Once I’ve identified the problem and who experiences it, how do I determine what solutions exist today?
To find out how people currently deal with the problem you’ve identified, you need to analyze your competitive environment. This step involves identifying your key competitors, what they offer and what their weaknesses are. It’s important to analyze both current competitors and future competitors as certain firms may not be solving the problem now but may have capacity to do so in the future.
Why is it important to evaluate the broader ecosystem in which I plan to operate?
In addition to competitors, there are other factors and agents that can put pressure or hold power over your venture. Some of these agents, such as government regulators, hold formal power while other agents’ power is more informal, such as in the case of bloggers and other opinion leaders.
You can scan the environment using a PESTEL analysis – that is, assessing the political, economic, social, technological, environmental and legal factors that present opportunities or pose threats to your venture.
What is the difference between an analog and an antilog and why are they important?
Analogs are examples of ventures in the same industry as you, or are in a different industry but are worth mimicking in some way. Antilogs are ventures who are doing things in a way that don’t inspire you or appeal to your potential customers. Analogs and antilogs can serve as clear guides in decision making, helping you choose elements or features you do or don’t want to be part of your solution.
How close to a finished product should a prototype be?
A prototype can be very rudimentary and basic and doesn’t need to be perfect. It can be a sketch or a diagram, a model or a wireframe of a website or app. The idea is to use your prototype to develop, test and communicate your solution.
Is it natural to be afraid of taking the leap into entrepreneurship?
Yes, fear is natural when it comes to starting your own business, but it should not hold you back. You can manage fear by visualizing the business you want to create, planning for as many contingencies as you can imagine, learning what you need to know, acquiring the resources you will need, cultivating connections and studying your competitors. The best antidote to fear is preparation.
How do I decide if it’s best to take on a business task myself, hire someone else to do it or outsource it?
A good way to guide yourself on this decision is to give yourself a maximum monthly time budget. As soon as you exceed that time budget, it’s time to consider getting help. Also, if you determine your time is better spent on other tasks that return more value to the firm or provide you better mental health, it may be worth finding opportunities to outsource or hire someone to help.
How do I decide if it’s best to outsource a process or bring it in house?
The general rule on outsourcing is if the process will differentiate you from a competitor or provide you an advantage, you bring it in house. If you can do it better or cheaper or if the process involves proprietary information, you bring it in house. Otherwise, for a young company, it’s best to outsource everything you can afford, as your time and energy will be stretched to the max doing things that create value for your firm.
If I need to acquire resources for my business, what are my options?
If you need a resource, you have the choice of buying it, trading for it, borrowing it or renting it. Buying it will be the most expensive in the short-term. Renting tends to be cheap in the short-term but most expensive over time. Trading means giving up a resource in exchange – so it can be very cost-effective but may rob your company of something it needs. Borrowing is often the best option, but only useful when your need is infrequent.
How do I get my business off the ground and gain traction?
There are two philosophies on how to gain traction. One is the ‘shout it loud’ approach and the other is the ‘targeted’ approach. The ‘shout it loud’ approach is marketing-centric, such as a big blitz or grand opening. This works well for any business where the switching cost is low, and the value proposition is very clear and appealing. The ‘targeted’ approach is best used when your business is more niche, complex or the advantage is more nuanced. That’s because these businesses tend to have a high cost to acquire new customers. Two rules of thumb: 1) if you can compose a compelling sales message in 20 words or less, then consider ‘shout it loud’; 2) if you can clearly define your ideal customer, consider a more targeted approach.
What is the Pareto Distribution and how does it apply to starting a business?
The Pareto distribution describes the larger compared to the smaller. In the case of acquiring customers, it refers to 80% of sales coming from 20% of customers. The goal of any new business owner is to focus on that 20% of customers that will generate the most sales.
What should be included in a business plan?
A business plan summarizes the essence of the problem you want to solve, describes the scale of the problem and identifies who is affected by the problem as well as why they will choose your solution. A business plan is like a roadmap that describes how your business will function while outlining the associated projected costs and revenues.
Do potential investors want to see a detailed business plan right away?
Most potential investors don’t initially want to see detailed plans, so you will need to create an excellent overview document that outlines the sources and uses of initial capital that describes how much you need and how it will be spent. They will also want to see a three-to-five-year projection of profitability.
How is gross margin calculated?
Gross margin is projected revenues less the direct costs of labour and materials required to produce those revenues. It is a number most investors will focus on.
What is EBITDA
EBITDA stands for earnings before interest, tax, depreciation and amortization and is a deduction of marketing/ sales expenses, research and development expenses and general administrative expenses from your gross margin. It’s another key metric investors look at.
Is it a good idea to borrow or accept money from friends or family to fund a startup?
Most startups tend to include funding from friends and family members – they are necessary sources of funds in the startup world. It’s wise, however, to ensure you enter into written agreements with these funders to avoid potential conflicts. Clearly define on paper if the money provided is a loan, a gift or if there is expected equity in return for money.
What is the benefit of crowdfunding?
Crowdfunding enables you to secure buyers willing to pay for your product before you have spent the money to produce it, providing you with both a low cost of funding and proof of your concept.
What is an angel investor?
Angels are successful entrepreneurs who want to reinvest in the sectors they tend to know about. They have ‘been there, done that” and can be a calming presence during the stressful growing pains of your business. In addition to investing capital into your business, they offer their networks, knowledge and experience to help you succeed.
I don’t know any angel investors. How do I find one?
Angel groups are located all across the country and available to all – they’re not just for privileged insiders. You can search out your local angel network, get to know their process and criteria for investment.
What is the meaning behind the saying ‘Sales fixes everything’?
Guy Kawasaki said, ‘sales fixes everything’, which means as long as you have sales, cash will flow. And as long as cash flows, you’ll have the time to fix your team, your product or your marketing.
What is involved in a Go-To-Market plan?
A go-to-market plan consists of three elements:
- What: What you’re actually selling
- Who: Who are the specific customers you’re targeting in the short-term
- How: How you will get your product or service into the hands of your early customers
What is a value proposition?
A value proposition is the process of explaining to potential customers what problem you solve, how your solution is different from the solutions that already exist in the market and what key benefits the customers will get from purchasing your product or service.
What makes for a strong value proposition?
A great value proposition is so simple that a potential customer can immediately understand it, is specific and focused and differentiated. A great value proposition makes your awesome immediately obvious.
How do I reach my “ideal customer”?
First, it’s important to recognize that your business is not for everyone – you want to focus on a small market given your limited resources as a startup. To make sure you reach your ideal customers, put together a list of attributes for your ideal customer and develop a set of questions you can ask to be able to identify whether a potential customer is the right fit for your business.
What is product channel fit?
Product channel fit is when you find at least one scalable demand generation channel. Many entrepreneurs mistakenly think that their product or service will sell itself – the reality is you have to mold your product/ service to fit with a specific distribution channel to be where your customers shop.
In the entrepreneurship world, what is a unicorn?
A unicorn refers to a privately held startup company with a value of over one billion dollars.
What is a scaleup?
Scaleups are defined as companies having an average annualized sales growth of at least 20% in the past three years, with at least 10 employees in the beginning of the period.
Is it possible to grow a company too fast?
Yes. In fact, growth creates a lot of problems – like growing pains – which is especially problematic when a company is growing too fast. The reason is that in a high-growth environment, the management practices that create success are often the same ones that lead to failure as the company grows. To successfully grow a company, a different set of skills and attitudes are required of the founder.
How do I know if my business can be a high-growth company?
To start with, you need a problem that is significant enough that people are willing to pay money to have it addressed – and a problem that is shared by a lot of people. It needs to be the kind of problem that provides a foundation for a sizable market with tonnes of growth potential that will last a long time.
How does the Ansoff Matrix help an entrepreneur in their plans for growth?
The Ansoff Matrix suggest that your growth can focus on one or more of the following quadrants: Market penetration, which is to try to gain a bigger market share in your current market using the same product or service; Product development, which is to try to offer new products or services to your existing customers; Market development, which is to try to expand to new markets with your existing product or service; Diversification, which is the simultaneous pursuit of market development and product development.
What are some of the downsides of financing growth through equity-based funding?
While many entrepreneurs rely on equity-based funding to finance high growth (angels, venture capital or private equity), there could be some trade-offs to receiving funding this way. Giving up the company’s equity often means you can lose full control of the company’s direction, depending on the arrangements between you and investors – such as through board seats and rules for decision making. Investors often have a set of timelines for exit or harvest as well.
What is the Founder’s Dilemma?
The Founder’s Dilemma identifies that entrepreneurs can belong to one of four categories depending on how they prioritize financial gains versus control over the company. These are failure, exception, king and rich. Founders either want to be “rich” or they want to be “king”. Those who want to be king want to control everything – they do not want to sell a portion of their business. But the consequence of retaining power is likely low growth. To be rich, you typically have to give up some of what you own to have new money come in that will help you grow to the next stage.
How does the role of the entrepreneur change as the company grows?
The role of the entrepreneur is very different when starting a 10-person company versus leading a 30-person company versus being the CEO of a 200-person company. In the early days you need to be a jack-of-all-trades but need to evolve to become a leader and manager. This involves making changes in terms of your focus and leadership style as your company grows.
What are some of the considerations when starting a business with someone else?
When startups are co-founded by people with previous relationships, they often have great potential for success – but many of them fail because of team issues. Typical issues include figuring out how roles, responsibilities and rewards will be shared or divided and how important decisions will be made. It is best to discuss these issues thoroughly in advance and have everything written on paper – this is called a founder’s agreement.
What differentiates a social enterprise form a regular for-profit company?
Unlike regular for-profit enterprises, social enterprises seek to create social and/or environmental value, as well as financial returns. They have what is called a double- or triple-bottom line. Social enterprises will use different business models to generate revenues – often their commitment to social impact is a differentiator from their competition and driver of sales growth. Also, social enterprises that are first-to-market can achieve a first-mover advantage – unlike with a for-profit business, the very act of entering first into a new market can result in a sustainable, competitive advantage as later entrants can be perceived as inauthentic.
Are social enterprises the same as non-profit businesses?
Social enterprises are different than non-profit businesses. Most non-profits are charities that receive favourable tax breaks and rely on grants and volunteer labour. Legally, non-profits cannot distribute dividends to their owners, but social enterprises can make profits.
Why would an entrepreneur start a social enterprise?
Social entrepreneurs are motivated to tackle social or environmental problems through entrepreneurship, such as helping disadvantaged people, tackling environmental problems or lifting people out of poverty.
Are consumers more likely to shop at social enterprises versus for-profit businesses?
There is a growing consumer awareness of, and demand for new products and services in which social and environmental impact is a core part of their offering. Millennials in particular love starting and supporting these types of ventures.
What is greenwashing?
Greenwashing is a form of marketing spin used to deceive the public into wrongly believing that an organization’s products, aims and policies are environmentally friendly.
How can companies prove they are genuine and not greenwashers?
Companies can become certified Benefit corporations, or “B corps”, which are social enterprises that have been audited and certified by an independent third-party body called B LAB. B LAB certification is a great way for social entrepreneurs to credibly signal genuine social mission to consumers, employees and other stakeholders.
How do social entrepreneurs balance their goals of making a profit and creating social impact?
Social enterprises have the difficult task of balancing their financial and social missions. For example, if they direct all their work to the social task, they risk financial underperformance and possibly even failure, removing its capacity to make any social impact at all. This outcome is sometimes referred to as “revenue drift.”
At the same time, they don’t want to direct all their efforts to generating profits, because they then risk deviating from their social mission, which was their initial purpose. This outcome is sometimes called “mission drift.” Every decision a social entrepreneur makes involves navigating this trade-off between creating social and financial value.
Is it hard for social enterprises to grow?
Growth can be harder to achieve in a social enterprise because many social entrepreneurs essentially are the venture – and with only so many hours in the day, they face challenges scaling their social enterprise to other locations.
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