Entrepreneurship: Successfully Launching New Ventures - Chapters 1-15

Comprehensive vocabulary flashcards covering the key terms, concepts, and definitions from Chapters 1 through 15 of 'Entrepreneurship: Successfully Launching New Ventures'.

Entrepreneurship

The process by which individuals pursue opportunities without regard to resources they currently control for the purpose of exploiting future goods and services.

Corporate Entrepreneurship

The use of entrepreneurial behavior within established firms, characterized by being proactive, innovative, and risk-taking.

Entrepreneurial Intensity

The position of a firm on a continuum that ranges from highly conservative to highly entrepreneurial based on its level of innovation and risk-taking.

Creative Destruction

A process whereby entrepreneurs develop new products and technologies that make current products and technologies obsolete, stimulating economic activity.

Triggering Event

An event that prompts an individual to become an entrepreneur, such as losing a job, inheriting money, or a lifestyle change.

Execution Intelligence

The ability to fashion a solid business idea into a viable business; one of the four key characteristics of successful entrepreneurs.

Salary-Substitute Firms

Small firms that provide their owner a level of income similar to what they would earn in a conventional job (e.g., dry cleaners, convenience stores).

Lifestyle Firms

Firms that provide their owner the opportunity to pursue a particular lifestyle and earn a living while doing so (e.g., ski instructors, tour guides).

Entrepreneurial Firms

Firms that bring new products and services to market by creating and seizing opportunities (e.g., Airbnb, Facebook).

Opportunity Gap

The recognition of a problem that has yet to be solved or a need that has yet to be met, which an entrepreneur can fill.

Window of Opportunity

A metaphor describing the time period in which a firm can realistically enter a new market.

Entrepreneurial Alertness

The ability to notice things without engaging in deliberate search, often referred to as a "sixth sense" for opportunities.

Strong-Tie vs. Weak-Tie Relationships

Strong-ties involve frequent interaction (friends/family), while weak-ties involve infrequent interaction (acquaintances); new ideas are more likely gained through weak-ties.

Brainstorming

A technique used to generate a large number of ideas quickly based on the rules of no criticism, freewheeling, speed, and leapfrogging.

Feasibility Analysis

The process of determining if a business idea is viable, occurring after opportunity recognition but before the business plan.

Primary vs. Secondary Research

Primary research is original data collected by the entrepreneur (surveys, interviews); secondary research uses existing data (census, trade journals).

Concept Statement

A preliminary description of a product or service idea used to solicit feedback from prospective customers and industry experts.

Gumshoe Research

A form of primary research where the entrepreneur acts as a detective to find clues about product demand through simple observation and investigation.

Business Model

A firm's plan or recipe for how it creates, delivers, and captures value for its stakeholders.

Disruptive Business Models

Rare models that change the way business is conducted in an industry, such as low-end market disruption or new market disruption.

Churn

The number of subscribers that a subscription-based business loses each month.

Standard Business Models

Existing plans firms use to define value creation, such as advertising, auction, or franchise models.

Industry Analysis

Business research focusing on the potential of an industry to help a firm decide if it should enter.

Porter's Five Forces

A model determining industry profitability based on: threat of substitutes, threat of new entrants, rivalry, bargaining power of suppliers, and bargaining power of buyers.

Barriers to Entry

Conditions that create a disincentive for a new firm to enter an industry, such as economies of scale, capital requirements, or product differentiation.

Fragmented Industry

An industry characterized by a large number of firms of approximately equal size.

Competitor Analysis

A detailed evaluation of a firm's direct, indirect, and future competitors.

Competitive Intelligence

Ethical information gathered by a firm to learn about its competitors.

Business Plan

A 25- to 35-page narrative describing what a new business intends to accomplish and how it intends to accomplish it.

Due Diligence

The process investors go through after they tentatively commit to an investment to verify the claims made in the business plan.

Executive Summary

A short (max 2 pages) overview of the entire business plan, arguably the most important section.

Operating Leverage

An analysis of a firm's fixed as opposed to variable costs; it is highest in firms with a high proportion of fixed costs.

Ethical Culture

An environment established by founders through leading by example, codes of conduct, and ethics training.

Founders' Agreement

A written document dealing with equity split, compensation, and vesting of shares among firm founders.

Buyback Clause

A clause in the founders' agreement legally obligating departing founders to sell their interest back to the remaining founders.

Sole Proprietorship

The simplest form of business entity involving one person; the person and business are legally the same.

Liquidity

A company's ability to meet its short-term financial obligations.

Profitability

A company's ability to make a profit.

Stability

The overall health of a firm's financial structure, particularly its debt-to-equity ratio.

Income Statement

Records all revenues and expenses for a given period to show if a firm is making a profit or a loss.

Balance Sheet

A snapshot of a company's assets, liabilities, and owners' equity at a specific point in time.

Statement of Cash Flows

Summarizes changes in a firm's cash position for a specified period across operating, investing, and financing activities.

Working Capital

A firm's current assets minus its current liabilities.

Burn Rate

The rate at which a company is spending its capital until it reaches profitability.

Liability of Newness

The high failure rate of new firms because people can't adjust quickly to roles and the firm lacks a track record.

New-Venture Team

The group of founders, key employees, and advisers that manage a new business in its startup years.

Heterogeneous vs. Homogeneous Teams

Heterogeneous teams have diverse abilities; homogeneous teams have similar abilities and experiences.

Board of Directors

A panel of individuals elected by shareholders to oversee management, with responsibilities like appointing officers and declaring dividends.

Advisory Board

A panel of experts asked to provide counsel and advice on an ongoing basis; they have no legal responsibility for the firm.

Bootstrapping

Using creativity and ingenuity to get a business running without the need for external funding (e.g., buying used equipment, hiring interns).

Equity Financing

Exchanging partial ownership in a firm (usually stock) for funding.

Venture Capital

Money invested by venture capital firms in startups with exceptional growth potential, usually managed by general partners.

Initial Public Offering (IPO)

The first sale of stock by a firm to the public.

Market Segmentation

The process of dividing a market into distinct subsets of customers who have similar needs or characteristics.

Brand Equity

The set of assets and liabilities linked to a brand that result in an increase in a firm's valuation.

Marketing Mix (4Ps)

The critical elements of marketing: Product, Price, Promotion, and Place.

Intellectual Property

Any product of human intellect that is intangible but has value in the marketplace (patents, trademarks, copyrights, trade secrets).

Utility Patent

The most common patent type, protecting new and useful processes, machines, or compositions of matter for 20 years.

Trademark

Any word, name, symbol, or device used to identify the source of products/services and distinguish them from others.

Copyright

A form of protection for "works of original authorship" in tangible form, protecting the owner's economic rights.

Trade Secret

Formulas, processes, or information that provides a competitive advantage and is kept confidential.

Sustained Growth

Growth in both revenues and profits over an extended period of time.

Economies of Scale

Occur when increasing production lowers the average cost of each unit produced.

Economies of Scope

Advantage gained by utilizing the same resources (like a sales force) to sell multiple different products.

Managerial Capacity Problem

A bottleneck occurring when a firm's managerial resources are insufficient to take advantage of new product/service opportunities.

Internal Growth Strategies

Strategies that rely on a firm's own efforts, such as new product development or international expansion (organic growth).

External Growth Strategies

Strategies relying on relationships with third parties, such as mergers, acquisitions, strategic alliances, and joint ventures.

Franchising

A form of business ownership where a firm licenses its trademark and business method to others for an initial fee and ongoing royalties.

Agency Theory

A theory suggesting it is more effective for units to be run by franchisees (owners) than managers because of increased commitment levels.