THE ENTREPRENEURIAL PROCESS

THE ENTREPRENEURIAL PROCESS
Step 1 Deciding to become an entrepreneur
Step 2 Developing successful business ideas
Step 3 Moving from an idea to an entrepreneurial firm
Step 4 Managing and growing the entrepreneurial firm
Figure 1.3 models the entrepreneurial process you will study while reading this text. This process is the guide or framework around which we develop this book’s contents. The double-headed arrow between the decision to become an entrepreneur and the development of successful business ideas indicates that sometimes the opportunity to develop an idea prompts a person to become an entrepreneur. Each section of Figure 1.3 is explained in the following sections.
Decision to Become an Entrepreneur
As discussed earlier, people become entrepreneurs to be their own bosses, to pursue their own ideas, and to realize financial rewards. Usually, a triggering event prompts an individual to become an entrepreneur.61 For
example, an individual may lose her job and decide that the time is right to start her own business. Or a person might receive an inheritance and for the first time in his life have the money to start his own company. Lifestyle issues may also trigger entrepreneurial careers. For example, a woman may wait until her youngest child is in school before she decides to launch her own entrepreneurial venture.
Developing Successful Business Ideas
Many new businesses fail not because the entrepreneur didn’t work hard but because there was no real opportunity to begin with. Developing a successful business idea includes opportunity recognition, feasibility analysis, writing a business plan, industry analysis, and the development of an effective business model. Chapter 2 takes a scientific look at how entrepreneurs recognize opportunities and describes how the opportunity recognition process typically unfolds. Chapter 3 focuses on feasibility analysis: the way to determine whether an idea represents a viable business opportunity. Chapter 4 describes how to write a business plan. A business plan is a written document that describes all the aspects of a business venture in a concise manner. It is usually necessary to have a written business plan to raise money and attract high-quality business partners. Some entrepreneurs are impatient and don’t want to spend the time it takes to write a business plan.62 This approach is usually a mistake. Writing a business plan forces an entrepreneur to think carefully through all the aspects of a business venture. It also helps a new venture establish a set of milestones that can be used to guide the early phases of the business rollout. Industry and competitor analysis is our concern in Chapter 5. Knowing the industry in which a firm will choose to compete is crucial to an entrepreneur’s success. Chapter 6 focuses on the important topic of developing an effective business model. A firm’s business model is its plan for how it competes, uses its resources, structures its relationships, interfaces with customers, and creates value to sustain itself on the basis of the profits it generates.
Moving from an Idea to an Entrepreneurial Firm
The first step in turning an idea into reality is to prepare a proper ethical and legal foundation for a firm, including selecting an appropriate form of business ownership. These issues are discussed in Chapter 7. Chapter 8 deals with the important topic of assessing a new venture’s financial strength and viability. Important information is contained in this chapter about completing and analyzing both historical and pro forma financial statements. Chapter 9 focuses on building a new-venture team. Chapter 10 highlights the important task of getting financing or funding and identifies the options that a firm has for raising money.
Managing and Growing an Entrepreneurial Firm
Given today’s competitive environment, all firms must be managed and grown properly to ensure their ongoing success. This is the final stage of the entrepreneurial process. Chapter 11 focuses on the unique marketing issues facing entrepreneurial firms, including selecting an appropriate target market, building a brand, and the four Ps—product, price, promotion, and place (or distribution)—for new firms. Chapter 12 examines the important role of intellectual property in the growth of entrepreneurial firms. More and more, the value of “know-how” exceeds the value of a company’s physical assets. In addition, we will talk about protecting business ideas through intellectual property statutes, such as patents, trademarks, copyrights, and trade secrets. Preparing for and evaluating the challenges of growth is the topic of Chapter 13. We’ll look at the characteristics and behaviors of successful growth firms. In Chapter 14, we’ll study strategies for growth, ranging from new product development to mergers and acquisitions. We conclude with Chapter 15, which focuses on franchising. Not all franchise organizations are entrepreneurial firms, but franchising is a growing component of the entrepreneurial landscape. When you finish studying these 15 chapters, you will have been exposed to all components of the entrepreneurial process—a process that is vital to entrepreneurial success.