Chapter 11 Entrepreneurship Quiz Duel Enrollement

Customer-centric approach

From the start, entrepreneurs infuse their insights into the planning process through a process called “customer discovery.”

Direct businesses

Most common business type and involves one-sided actors—that is, users—becoming your customers.

Multisided models

Users and customers—multi-actors—are usually different people.

Ad-based models

Big data, and enterprise are common examples where the products are free to users, and their value is monetized by a different customer base.

Marketplace models

More complex variant of multisided models made up of two different customer segments of buyers and sellers.

Solopreneurs

Hard-working entrepreneurs who are comfortable working alone on all the requisite tasks of starting a venture.

Innovation

A new addition to the market or a novel change to an existing product or service; products or processes.

Disruptive innovation

The creative destruction of old markets with inferior technology and the creation of new markets.

Jobs-to-be-done theory

Aids companies in determining how to create products and services that customers want to buy by getting at the causal driver behind a purchase.

Sustaining technologies

Improve the performance of established products through characteristics that mainstream customers adopt.

Business model innovation

A disruptive business model can fundamentally reshape profits within an industry because managers are faced with a technological disruption/innovation that alters their businesses, specifically their business models; occurs when an existing business fundamentally changes their business model.

Radical innovations

New-to-the-world products that are disruptive to both consumers and producers.

Value proposition

A summary describing the benefits (value) customers can expect from a particular product or service.

Business model

A plan for how venture will be funded; how the venture creates value for its stakeholders, including customers; how the venture’s offerings are made and distributed to the end users; and the how income will be generated through this process. They address the desirability, feasibility, and viability of a company, product, or service.

Business plan

A planning document used for operations.

Canvas

A display that would-be entrepreneurs commonly use to map out and plan different components of their business models.

Business Model Canvas

Includes key partners, key activities, key resources, value propositions, customer relationships, channels, customer segments, cost structure, and revenue streams.

Value proposition

A product that helps customers do a job they’ve been trying to do more effectively, conveniently, and affordably.

Formula for creating an initial value proposition in the canvas

End results customer wants + Specific period of time + Address objections = Initial value proposition.

Lean Business Model

Problems, solutions, metrics, value propositions, customer relationships, channels, customer segments, cost structure, and revenue streams.

Customer empathy map

A portrayal of a target customer—the most promising candidate from a business’s customer segments—that explores the understanding of that person’s problems and needs.

Components of an Empathy Map

See, Say, Do, Hear, Think.

Value Proposition Canvas

A new tool that pulls out the customer segment and value proposition blocks of the business model canvas, and encourages more in-depth exploration of those blocks to achieve a good fit between the two.

Desirability-feasibility-viability

Forces the entrepreneur to address broad questions about the startup concept.

Adaptability

The assumption that you chose the right business model within the context of external factors such as technology change, competition, and regulation.

Lean model canvas

Adds an “Unfair Advantage” block, similar to the block for competitive advantages or barriers to entry found in a business plan, and gone are the customer relationships, key activities, key partners, and key resources blocks. Instead, a problem block is added.

Social business model canvas

New areas added include measures of what kind of social impact you are creating or developing, measures of surplus to address what happens with profits and where you intend to reinvest them, and measures of beneficiary segments, and social and customer value propositions.

Feasibility analysis

Designed to assess whether your entrepreneurial endeavor is, in fact, feasible or possible. By evaluating your management team, assessing the market for your concept, estimating financial viability, and identifying potential pitfalls, you can make an informed choice about the achievability of your entrepreneurial endeavor.

Feasibility study

Allows a business to address where and how it will operate, its competition, possible hurdles, and the funding needed to begin.

Resource sufficiency

Nonfinancial resources that the venture will need to move forward successfully and aims to assess whether an entrepreneur has a sufficient amount of such resources.

Organizational Feasibility Analysis

Aims to assess the prowess of management and sufficiency of resources to bring a product or idea to market; The company should evaluate the ability of its management team on areas of interest and execution. Typical measures of management prowess include assessing the founders’ passion for the business idea along with industry expertise, educational background, and professional experience.

Financial analysis

Seeks to project revenue and expenses (forecasts come later in the full business plan); project a financial narrative; and estimate project costs, valuations, and cash flow projections; should estimate the sales or revenue that you expect the business to generate.

T x A = S (Target(ed) Customers / Users x Average Revenue per Customer = Sales Projection)

One commonly used equation for a sales model multiplies the number of target customers by the average revenue per customer to establish a sales projection.

Breakeven point

The level of operations that results in exactly enough revenue to cover costs.

Fixed costs

Expenses that do not vary based on the amount of sales.

Variable costs

Fluctuate with the level of sales revenue and include items such as raw materials, purchases to be sold, and direct labor.

Projected cash flow

Outlines preliminary expenses, operating expenses, and reserves—in essence, how much you need before starting your company. You want to determine when you expect to receive cash and when you have to write a check for expenses.

Balance sheet

Shows assets and liabilities, necessary for reporting and financial management.

Owners’ equity

When liabilities are subtracted from assets.

Market analysis

Enables you to define competitors and quantify target customers and/or users in the market within your chosen industry by analyzing the overall interest in the product or service within the industry by its target market.

Total available market (TAM)

The number of potential users within your business’s sphere of influence. This market can be segmented by geography, customer attributes, or product-oriented segments.

Serviceable available market (SAM)

The portion of that target market that will be attracted to your business.

Go-or-no-go decision

Allows a team to decide if criteria have been met to move forward on a project.

Business plan

A formal document used for the long-range planning of a company’s operation. It typically includes background information, financial information, and a summary of the business.

A business plan includes:

An executive summary, business description, market strategies, marketing plan, competitive analysis, operations and management plan, financial analysis, and design and development plan.

Brief business plan

Similar to an extended executive summary from the full business plan. This concise document provides a broad overview of your entrepreneurial concept, your team members, how and why you will execute on your plans, and why you are the ones to do so.

Executive Summary

Also known as brief business plan, summarizes key elements of the entire business plan, such as the business concept, financial features, and current business position. This version of the business plan is your opportunity to broadly articulate the overall concept and vision of the company for yourself, for prospective investors, and for current and future employees.

Suggested Executive Summary Components for Rice University Business Plan Competition

Company summary, customer analysis, market analysis, product or service, intellectual property, competitive differentiation, company founders, management team, and/or advisor, financials, and amount of investment.

Business Description

This section describes the industry, your product, and the business and success factors. It should provide a current outlook as well as future trends and developments. You also should address your company’s mission, vision, goals, and objectives. Summarize your overall strategic direction, your reasons for starting the business, a description of your products and services, your business model, and your company’s value proposition.

Competitive matrix

Shows clearly how and why the startup has a clear (if not currently measurable) competitive advantage.

Competitive analysis

Helps you create a marketing strategy that will identify assets or skills that your competitors are lacking so you can plan to fill those gaps, giving you a distinct competitive advantage.

Financial plan

Seeks to forecast revenue and expenses; project a financial narrative; and estimate project costs, valuations, and cash flow projections.

SWOT analysis

Strategic analytical tool used to help a potential venture or existing company identify its strengths, weaknesses, opportunities, and threats related to business competition.