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Entrepreneurship:

Chapter 3: Entrepreneurial Mindset


A. Vision and Mission In Entrepreneurship
Vision – a fundamental element in becoming an entrepreneur.
- It is powerful motivating force that gives the entrepreneur a sense of perspective of what he hopes, expects and desires for
his intended business.
- It is through vision that an entrepreneur is able to picture in his mind the kind of new and better world he wishes to create.
With vision an entrepreneur develops a sense of direction of where he wants his business to proceed.
What Vision Provides to the Entrepreneur
1. A sense of direction by being the light at the end of the tunnel.
2. Helps the entrepreneur identify and define his goal or mission
3. Guides in formulating action plans
4. Serves as a communication tool
5. Provides a ‘sense of warmth’ and encouragement
6. Serves as a medium for attracting people for support and for motivating them
7. Provides moral content to the endeavor
Occasionally a vision emerges slowly in the entrepreneur’s mind, taking shape clearly later on it may just present itself to the
entrepreneur quite suddenly. When an entrepreneur begins to see that ‘things might be different to and better than they are
currently, this mental image reflects his vision.
Mission – a formal attribute expressed of what the entrepreneur hopes and wishes to achieve .
- It is also defines the scope and parameter of his vision.
- It takes its shape and form as a prescriptive tool to help him clarify his option and decisions, communicate his value
system and commit his resources, time and energy to goals and targets he has chosen.
Mission is the articulation of this vision through which the entrepreneur develops a comprehensive but clear and identifiable
perspective of what he wants to pursue.
B. Exploring Ideas and Opportunities
- In the entrepreneurial landscape, new ideas and opportunities are constantly in the conscious mind of the entrepreneur.
- Entrepreneurs are attuned to opportunities and are always on the lookout for them.
- Entrepreneurs generates ideas for innovation after exploring various opportunities which, in turn enables him to come
up with different and better ideas.
- Entrepreneurship is about creating value through the creation of something new that is different and better but not
necessarily original for the marketplace.
Opportunity and Innovation the opportunity provides the entrepreneur the chance to do something differently and better while
innovation is the means of doing something differently and better. Thus innovation is a means of exploiting a business opportunity.
Opportunity offers the possibility of creating new value but it is often the case that the value created may not be pure as when an
entrepreneur invents a new product to be introduced in the market.
Form of opportunity:
1. A new product – can be a physical device, something that will add value to an existing product.
2. A new service – refers to actions which will satisfy a particular need or solve a particular problem
3. New means of production – when the new means producing an existing product can deliver additional value, like producing
a product at a lower cost.
4. New distribution route – a new way of getting the product to the end-user, which the customer finds it easier, more
convenient and less time-consuming.
5. Improved service – offering additional service element to the product like offering training in the use of the product.
6. New networks and relationship – this can mean building relationship based on trust which creates value by reducing cost in
communication, monitoring and in strengthening networks against fierce competition.
A keen entrepreneur will always be alert to scan the environment and look for gaps and voids left out in the constantly progressing
and changeling marketplace.
According to Petter Drucker, gaps provide the opportunity conducive to innovation.
Gaps for Opportunity and Innovation:
1. Unexpected Success and Failures – happens when certain lines of product or service that you do not expect to be a copout
suddenly surges upward and generates more profit than the ones you intend to sell.
2. The Deviation from Conventional Wisdom – when deviation on the generally accepted belief, opinion, judgment, or
prediction about a particular matter.
3. The Need for a Process Creation or Process Revision – a particular process turned into an opportunity for innovation.
4. Change in Society Structure and Perception – influenced by the influx of development and change in consumer perception
brought about by the evolution of social, political, cultural and economic condition.
5. Location – an entrepreneur can use location as a means to cater to the various needs of people coming to the area in an
innovative way.
6. New Concepts – entrepreneurs have to continuously learn and develop new knowledge to be able to come up with better
product or service.
Rules for Successful Innovation
By: Beorge Ballas and David Hollas (Authors of the Book Making of an Entrepreneur)
1. Relative advantage over existing products
2. Must be compatible with existing attitudes and beliefs
3. It should not be complex
4. Benefits of innovation must easily be communicable
5. The innovation should be divisible - users can try the innovation without incurring a large risk
6. Buyer must believe that innovation satisfies one of his needs by giving some immediate benefits

C. Making the Business Plan: A tool for the Entrepreneur


1. What is the Business Plan? – the written or codified text containing pertinent information about the venture. It is designed
to give the readers the clear picture of what the venture is. The proof of adequate research and analysis have been given to
the venture.
2. What is the Role of the Business Plan?
- It communicates to people – is a way of articulating or revealing to the proponents and the public the nature of the
venture. It provides information that gives emphasis to technology or type of innovation, target market and the financial
aspects.
- It permits constant change – must also evolve into one that is relevant to changing conditions. It serves as guide for the
entrepreneur to constantly re-check his ideas and concepts.
- It is a call to action – a written document, once properly presented, can convince more people as compared to a verbal
communication. A good business plan which is done presentation will attract potential people to be part of the business
endeavor.
3. What should the Business Plan Contain?
– it should contain key elements needed to produce results notably to influence investors to join the business and customers
to patronize it.
- It should be based on sufficient research and should present sound analyses from the data obtained.
- It’s like a map . it tells you what to expect and what alternative routes you can take to arrive at your intended
destination.
5 Areas entrepreneurs overlook:
1. Realism – it is easy to be excessively optimistic about a new idea.
2. Outside Advice – Planning enables you to recognize problems that call for outside sources of information and assistance.
3. Recognizing change – the nature of markets and consumer needs changes rapidly.
4. Balancing growth – Small business tends to either grow too fast for the capital base or too slow to maintain cash flow.
5. Result-orientation – a detailed business plan enables you to monitor results against an establishment set of goals and
performance standards.
Approaching a Business Plan
Personal Characteristics Business Opportunity Preliminary Evaluation Business Plan Knowledge and Experience
Drive & Energy Start-up Essential strategic factors Introductory Planning
Self-Confidence Purchase Uncontrollable factors Industry Purchasing
Long-term Involvement Franchise Controllable Factors Business Production
Persistent problem-solving Expansion Strengths Product or service Labor
Goal Setting Weaknesses Market Marketing
Moderate Risk Taking Opportunities Market Strategy Operations
Dealing with failure Risks Management Finance
Use of Feedback Labor Similar Business
Taking initiative Financial Forecasts
Use of Resources Supporting Exhibits
Tolerance to Uncertainty

4. Planning to Plan – Business plans are done differently and are unique. The figure above is an approach which you can modify
to suit your own circumstances.
 First step in planning process is the identification of a business opportunity
 Second step is to conduct a personal inventory to determine if there is a good fit between the type of business
opportunity that you have identified and your own personal characteristics, knowledge and experience.
 Preliminary Evaluation – an understanding of the advantages and limitations of a business opportunity is a prerequisite
for developing an elective business plan.
Types of Strategic Factors that you might examine include:
o The need for a certain size or type of target market segment
o Availability of a certain type or range of products
o Dependence on a highly reliable source of supply
o Required size, location or layout of physical facilities
o Availability of an essential service such as water, electricity, telecommunications, or transportation
o An assured line of finance on reasonable terms
o The need for highly skilled or experienced manpower
Uncontrollable Factors Controllable Factors
Competition Purchasing
Economic and financial conditions Production
Legal Regulations and Political Conditions Labor
Social and Cultural Trends Marketing
Technology Finance
D. Guidelines for the Preparation of the Business Plan
- The careful preparation of a business plan represents a unique opportunity to think through all aspects of operating a
business.
Guidelines to your Specific Business:
The Introduction – the introduction should state the objectives of the plan or proposal as simply as possible.
The Industry – you must indicate the present status and prospects for the industry in which the proposal business will operate.
The Business – you need to briefly describe what sort of business you are in or intend to enter.
The Product or Service – you must describe exactly what you are going to sell.
The Market – to demonstrate that your venture can achieve the sales indicated in your financial forecast.
Basic Steps in Determining your Market:
- Identify you customer profile – Who will be be your customers. You can classify your customers into groups having
common characteristics such as age, sex, or geographical location.
- Determine the size of the total market – How much should they be spending on your product or service? How many
potential customers exist within your trading area?
- Assess the competition – What have you learned of their operations? Who are you nearest competitors?
- Estimate you Sales – Based on the previous steps, estimate the sales that you expect to attain over the next three years.
Marketing Strategy – here you must explain your general marketing philosophy and strategy that develops from the assessment of
the market.
Management – you need to demonstrate the capabilities and capacity of your management team and its advisers.
Labor – you need to determine and document your manpower needs now and over the coming years.
Financial Forecast – Financial forecast represent you best estimate of future operations.
Supporting Exhibits – you should include copies of documentary evidence to substantiate you claims
Examples of Supporting Exhibits are:
 Detailed resumes of Principals
 Credit Information
 Quotations or Estimates
 Letters of intent from prospective customers
 Leases or buy/sell agreements
 Legal Documents
 Census or demographic data
 Design Pan or engineering specifications.

Business Plan Outline


1. Cover Sheet

Business Names, address, phone number , web-sites, e-mail address

Date
2. Table of Contents
3. Executive Summary

Description of the Business Concept and the Business

The Opportunity Strategy

The Target Market and Projections

The Competitive Advantages

The Economics, Profitability and Harvest Potentials

The Team

The Offering
4. The Industry and the Company and its Products or Services

The Industry

The Company and the Concept

The product and Services

Entry and Growth Strategy
5. Market Research and Analysis

Customers

Market Size & trends

Competition and Competitive Edge

Estimated Market Shares and Sales

On-going Market Evaluation
6. Economics of the Business

Gross and Operating Margins

Profit Potentials and Durability

Fixed, Variables and Semi-variables Cost

Months to Breakeven

Months to Reach Positive Cash Flow
7. Marketing Plan

Overall marketing strategy

Pricing

Sales Tactics

Service and Warranty Policies

Advertising and Promotion

Distribution
8. Design and Development Plans

Development Status and Tasks

Difficulties and Risks

Product Improvement and new Products

Costs

Proprietary Issues
9. Manufacturing & Operations Plan

Operating Cycle

Geographical Location

Facilities and Improvements

Strategy and Plans

Regulatory and Legal Issues
10. Management Team

Organization

Key Management Personnel

Management Compensation and Ownership

Other Inventors

Employment and Other Agreements and Stock Option and Bonus Plans

Board of Directors

Other Shareholders, Rights and Restrictions

Supporting Professional Advisors and Services
11. Overall Schedule
12. Critical Risks, Problems and Assumptions
13. The Financial Plan

Actual Income Statements and Balance Sheets

Pro Forma Income Statements

Pro Forma Balance Sheets

Pro Forma Cash Flow Analysis

Break Even Charts and Calculations

Cost Control

Highlights
14. Proposed Company Offering

Desired Financing

Offering

Capitalization

Use of Funds

Investor's Return
15. Appendixes

Brochures Describing the Products

Letters of Recommendation or Endorsements

Future Activities

What are the Benefits of having the Business Plan?


- It provides a strong foundation of research and analysis that allows the entrepreneur to objectively+ look at the venture.
E. Tips in preparing a Good Business Plan
- A well- developed and conceived plan will surely muster the support of the people around the venture.
Tips in Making a Business Plan
1. Prepare an objectively short plan – Must be concise and direct to the point.
2. Explain thoroughly and honestly – The question that might arise during their reading should be answered by the document
itself.
3. Refer to a third person – should be grammatically denote the third person. Avoid personalizing the plan.
4. Always consider pitfalls – always have an alternative or back-up plan.
5. Stick to one business – do not confuse the readers by showing other opportunities the venture is reality-based.
6. Emphasize the target customers – investors are easily convinced if the venture shows clearly a target market.
7. Keep the plan neat and logically organized – an organized and neat business plan reflects the venture.
8. Capture the readers’ interest – make the Business Plan as interesting as possible by showing the distinct feature of the
venture.
Never or Avoid doing:
 Submit a “rough copy”, perhaps with coffee stains on the pages and crossed out words in the text, causing lenders to
question whether the entrepreneurs take their ideas seriously.
 Use outdated financial information or industry comparison, leaving doubts about the entrepreneurs’ planning ability.
 Use unsubstantiated assumptions by not explaining the why’s of every point in the plan.
 Fail to consider prospective pitfalls. Bankers can conclude that ideas are not realistic.
 Fail to understand the financial information. Even if outside source are used to prepare the projections, owners must
fully comprehend the information.
 Overlook the importance of outside influences. Owners need to discuss the potential impact of competitive factors as
well as the economic environment prevalent at the time of request.
 Give no indication that they have anything at stake in the venture Lenders expect entrepreneurs to have some equity
capital invested in the business.
 Be unwilling to personally guarantee any loans. If the business owners aren’t willing to stand behind their company, why
should the bank?
 Demand unrealistic loan terms lenders want to find about business viability before discussing loan terms.
 Focus too much on collateral, Even for cash-secured loans, bankers look toward projected profits for loan repayment.
The emphasis should be on cash flow.
F. Avoiding the Pitfalls in Planning
- Creating and developing a Business plan is an important accomplishment
- It is a great reference of the venture and the people around it.
Tips to Help you Avoid the Errors made by Entrepreneurs:
1. Set Realistic Goals – a common mistake committed is by not setting an attainable goal.
2. Involve Everyone in the Venture – there is a tendency for other managers not to appreciate and adhere to the plan if it is
made without them.
3. Make a workable document – some entrepreneurs make a mistake of conceptualizing a rather complex and huge business
plan.
4. Balance the attention you give to every aspect of the plan – Avoid disproportionate actions to be given to a few aspects like
finance and marketing.
5. Set the Target Market – Establish certain market segments that would see the benefits of what the venture has to offer.
6. Anticipate possible problems – an over enthusiastic entrepreneur has the tendency not to be objective.
7. Establish performance Standard – there should be ways for which you may be able to gauge performance.
8. Show maturity – in doing the business plan the entrepreneurs must show their maturity in handling the business.
9. Show communication and dedication – Use the business plan and do not just neglect it.
Common Mistakes in Developing the Business Plan:
1. Single-purpose use
- Entrepreneurs typically prepare a plan to raise money and seldom give thought of actually using it.
Remedy: Stress implementation.
2. One-person commitment
– if one person writes the entire plan, key managers are unlikely to be fully committed to it.
Remedy: Involve all members of the management team in preparing the plan. Have each member write a section of the plan
3. Benign neglect
– Once completed, the business plan sits on the shelf and collects dust. Out of sight, out of mind.
Remedy: Make following up the plan. Schedule regular meetings to discuss the plan and the progress made in accomplishing
the goals and objectives established.
4. Unworkable document
– Managers create a plan that is so huge and complex that it discourages everyone from actually using it.
Remedy: Give the plan life by developing one-page action summaries foe each department. Ask managers to update
progress on their responsibilities at periodic meetings.
5. Unbalanced application
- Sometimes managers give disproportionate amount of attention to one portion of the plan - marketing or finance.
Remedy: Get balanced participation from key managers and employees in all areas of the company.
6. Disillusionment
– Managers get disillusioned when the scenario laid out in the plan fails to develop
Remedy: Develop contingency plans – both positive and negative.
7. Too action-oriented
– action-oriented managers tend to forget the plan once it is completed. They want to get back to the real world of business
Remedy: Encourage these managers to use their action-orientation to develop plans for their areas of responsibility.
8. No performance standard
– too often, managers fail to establish measurable standards in the plan
Remedy: Encourage managers to establish specific. Measurable objectives in their respective areas
9. Poor progress control – implementing the plan is without control because progress reports are lost in the jumble of
everyday business
Remedy: Hold regular meetings to discuss progress of the plan and nothing else.
10. Early Consumption – the plan becomes outdated because no one bothers to update
Remedy: Update the plan every six months. That way you never run out of plan.