Business Concept - What is Entrepreneurship

Business Concept What is Entrepreneurship? Entrepreneurship is the activity of creating a business to meet a market need. The product or service provided by the business should fix a problem, fill a market gap, or provide enjoyment for which customers are willing to pay. For example, an affordable grocery store fixes a problem (lack of inexpensive food) and likely addresses a market gap (lack of grocery store options for lower-income residents). In Luis’s case, his home repair business improves the condition of his customers’ property and livelihood. Additionally, his customers receive meticulous, high-quality work. Customers usually are willing pay a premium price for this type of work. Becoming a small business owner There are countless ways to become a small business owner. Click through the following tabs to learn about some of the more common paths entrepreneurs take to starting their small business. STARTING A HOME BUSINESS STARTING AN ONLINE BUSINESS FREELANCING If you have a great business idea or a hobby that you enjoy, think about how you could start a business right from your home with the resources you already have. You will need to develop the product or service further, and in a way that attracts customers, but any business idea could have great potential. Considerations for a successful entrepreneur Persistence and research are key to starting a small business. First, you need to understand the market, your competitors, your target customers and their needs, and you need to plan carefully to increase your chance of success. Entrepreneurship is demanding. Companies that succeed frequently adjust their business model over time and it will benefit you to be similarly flexible in your business approach. Do you have what it takes to be an entrepreneur? Find out if you do! What skills, experience, and resources do you have that will help you start a business? For example, have you worked in the industry as an employee? If so, that gives you valuable knowledge, skills, and insight to apply to your own business. If not, do you have any connections to the industry in your network? These would be good relationships to start developing to learn more about the market and potentially secure partnerships for the future. Complete the next section to see where your entrepreneurial skills, experiences, and resources lie. Entrepreneurship Inventory As you begin to build your business, it will be helpful to take an inventory of your skills, life and professional experiences, contacts, and other resources. For each of the following statements about skills and capabilities, select the response that most applies to you. There are no right or wrong answers. You are only taking stock of, and thinking about, your current strengths and where you might have room to improve. Skills and Capabilities – What are your strengths? Self-starter: I am able to easily motivate myself to achieve a goal. Persistent: I do not give up easily and am not deterred by failure. Curiosity: I don’t assume I have all the answers. Flexibility: I am adaptable and can respond to changing challenges and opportunities. Strategic planning: I can approach problems with a long-term focus and set goals for the future. You don’t have to possess all of these qualities to be a successful entrepreneur. Taking stock and being honest with yourself about your strengths and weaknesses is key to making important decisions as you develop a business idea. For example, if you are a creative person with great ideas but lack organization and strategic planning skills, you may consider finding a business partner who has those strengths. Alternatively, if you are a diligent self-starter but lack networking skills, you may consider finding a mentor who can help you make connections. Experience + Social and Financial Capital + The Importance of Good Business Planning A business plan is an important strategic tool for entrepreneurs. By focusing on the steps and elements needed to make a business successful, a good business plan helps achieve short- and long-term goals. Why create a business plan? A business plan can serve multiple purposes. Click through the following tabs to learn more. CAPITAL DECISIONS RISKS STAKEHOLDERS Raise Capital Potential investors will want to see a business plan before they give you money. Ensure your plan has a thorough financial model that demonstrates the likelihood of success, lays out your capital requirements, and demonstrates the ability of the business to generate enough profit to make their investment worthwhile. Start with the basics Creating a business plan involves a lot of thought but does not need to be complicated. At its core, your plan should identify where you are now, where you want your business to go, and how you will get there. Writing a good business plan does not guarantee success but it can go a long way toward reducing the odds of failure. We will go through the elements of a business plan later on in the course and provide a downloadable template for you to get started. Here are the steps to start a business. We will discuss each step in more detail throughout the module. The steps in order are: develop a business idea, conduct market research, develop and test the business model, create a business plan, and acquire funding. Steps to starting a business 1. Develop a business idea There are several ways to come up with a business idea. You may have a great idea for a product or service that you can turn into a business. Or perhaps you see a customer problem that needs solving. But what if you don’t know enough to solve it? Take the HP LIFE Design Thinking course to learn more about how this can be done. You might also start observing problems or inconveniences you face daily. Talk with friends and family to see if they have any problems that they experience and would like to see solved. Carry a notebook with you and write down those daily items so that you can note possible solutions when they come to mind. 2. Conduct market research You have a great idea for a product or service. Now what? You need to do some market research to better understand your customers, competitors, industry, local market, and regulatory frameworks. By understanding these elements of the business opportunity, you can better evaluate the chances of creating a successful business. As you do your market research, ask yourself: Is there a gap in the market in which you can compete? Can you create a better or different product or service than your competitors? Are there enough potential customers to buy your product or service for you to be successful? Is the opportunity you envision growing or getting smaller? Understanding your customers: Industry research and some Google searching will likely provide you with some general information about your target audience. However, to gather more targeted and specific information, conduct interviews with friends, family, and potential customers. Establish a set list of questions and be sure to record each interview and take notes. Your questions will want to explore: Who might buy your product or service? How often do they buy it? Why will they buy it? Who do they currently buy from? What are their primary needs? How much will they pay? What are their buying habits? How do they learn about or become aware of new businesses offering this type of product or service? How big is the target market? Where are the demographics? As you conduct interviews, note any common or surprising findings and consider if and how you might reframe the business opportunity. For example, Luis might learn that while his potential customers may be in need of home repair, many of them don’t know how to properly diagnose the issue in the first place. He may consider including a learning component into his business model to teach his customers about what to look out for. As you research your target audience, you can use this template to document your findings: Target Market Template.pdf 83.7 KB Understanding your competitors: Conducting a competitor analysis can help you learn from other businesses competing for your potential customers. This is the key to defining your Unique Value Proposition, or your competitive edge, and making key decisions around product design, pricing, and marketing. You can use this template to document your findings: Competitive Analysis Template.pdf 119.5 KB Understanding your industry: It’s important to understand the overarching trends within your industry and any regulatory or compliance barriers you will need to address. You will want to understand: What are the industry trends? Is it growing or declining? How big is it? How is the local market tracking with the industry trends? How big is it? Are there new innovations in the industry? How are the new innovations changing the industry? Are there government regulations that your product or service must comply with? Are there market or legal requirements for your business (legal business structure, registration, licensing, government rules or regulations, insurance, environmental requirements, or other)? Did You Know? Click to flip Findings from studies published by the US Bureau of Labor Statistics suggest health care and social assistance businesses have the highest survival rates, whereas the construction, transportation, manufacturing, and food service industries have the lowest. Click to flip 3. Develop and test your business model Use the findings from your market research to refine your idea and develop your business model. Simply put, a business model is an outline of how a business plans to make a profit. It includes identifying revenue sources, customer base, products, marketing, operations, and details of financing. If you cannot make a profit, you will need to refine your plan or reconsider your business idea. Not managing cash flow is the most common reason small businesses fail, so it is important to develop thorough cash flow and financial models. Take the HP LIFE Cash Flow course to understand the importance of monitoring cash flow, developing cash flow projections, and making business decisions based on cash flow. Also, take the HP LIFE Basics of Finance course to complete a break-even analysis on your product or service and explore the key concepts below even further: Break-even point + Variable costs + Fixed costs + Identify Luis’s potential fixed and variable costs by selecting the most appropriate responses below: 1. Select examples of fixed costs from the items listed below. Advertising costs Credit card fees Permits and licenses Insurance Lease payment for truck used in the business SUBMIT TAKE AGAIN 2. Select examples of variable costs from the items listed below. Credit card fees Insurance Home repair parts and other inventory Permits and licenses Staff wages (electricians, plumbers, carpenters, etc.) SUBMIT TAKE AGAIN This graphic demonstrates the difference between low-capital and high-capital businesses. There are many businesses you can start with little money. Some businesses can be run from your home which eliminates space rental or lease fees. Or you might work part time while running your business. Other businesses require more money to start. Some examples of low-capital businesses include housecleaning, babysitting, maintenance, tailoring, consulting, and artisanship. Examples of high-capital businesses include restaurants, manufacturing, and real estate. Examples of sources of funding include savings, family and friends, crowdfunding, and bank loans. Think about how much money might be required to start these businesses. What are the capital or funding requirements for your business idea? Additional Resources: As you develop your business model, here are some key questions to ask yourself and the HP LIFE courses you can take to help you answer these questions. Prototype and test your idea: Next, test your product or service and marketing message with potential customers, mentors, friends, and family. Get their feedback to improve your plan, product, or service idea and start building your customer base. There are several other free and low-cost ways to test your idea: Use a free website builder like Wix or Wordpress to develop a landing page and showcase your idea. Learn more by taking HP LIFE’s Effective Business Websites course. Prototype your mobile idea with the Marvel App or InVision. Use Marvel’s Prototyping on Paper function to turn sketches into an interactive iPhone or Android beta app. Pilot your business idea on a small scale with a test group of trusted friends, mentors, and family. Use everyday items to develop a simple, low-tech mock-up of your product. Test your marketing message Is the marketing message compelling? Is it clear and customer oriented? What questions do they have? Do they want to buy? If not, what objections do they have and how can you overcome them? Test your product or service Are people ready to buy? What do they like about the product or service? What don’t they like? What will they pay? Would they be a repeat customer and how often? Do they prefer your product or service over the competition? Why or why not? Note: If few people are willing to buy, you may want to rethink your product, service, price or message. 4. Create a business plan Once you have developed your business idea, conducted market research, and created and tested your business model, you are ready to create your business plan. Your business plan will be the roadmap for your business. Product or service + Marketing + Sales + Operations + Finance + Success metrics + Business Plan template + Business Plan Template.pdf 73.6 KB 5. Acquire funding The last step in starting a business is acquiring your funding. Does your business need additional financing to get started? If so, you will need to find funders and that requires a well-thought-out business plan to convince the funder your business is a safe risk. As discussed earlier in this course, funders can be: Your own savings Family and friends Crowdfunding Bank loans