Venture Planning
Chapter Two
Dowling
BA 560
Fall Term 2005
The Entrepreneurial
Process
en· tre· pre· neur n.

A person who organizes, operates, and assumes
the risk for a business v...
The Entrepreneurial
Process
Entrepreneurship

Entrepreneurship is a way of thinking,
reasoning and acting that is
opportun...
The Entrepreneurial Process
It is opportunity driven
It is driven by a lead entrepreneur and an
entrepreneurial team
It is...
The Timmons Model of the
Entrepreneurial Process
Communication

Opportunity
(2)
Ambiguity
Creativity

Business Plan
Fits a...
The Entrepreneurial Leader
An entrepreneurial leader:
– Learns and teaches—faster, better
– Deals with adversity, is resil...
HIGH

The Entrepreneurial
Process
Inventor

Entrepreneur

Creativity
&
Innovation

Promoter

LOW

Manager,
Administrator

...
The Entrepreneurial
Process
Myths about Entrepreneurs
•Entrepreneurs are
born, not made
•Anyone can start a
business
•Entr...
The Opportunity
 Market demand is a key ingredient

to measuring an opportunity.
 Market Structure & Size
 Margin Analy...
The Entrepreneurial Team
Quality of the Team:
– Relevant experience and track record
– Motivation to excel
– Commitment, d...
The Entrepreneurial Team
Quality of the Team:
– Team focus of control
– Adaptability
– Opportunity obsession
– Leadership
...
Understand and Marshall
Resources
…………… .. Don’t

be driven by them.

 Minimize & Control , versus

Maximize & Own .
 Un...
The Entrepreneurial
Process
Paradox # 1
An opportunity with no or very low potential can be an
enormously big opportunity....
The Entrepreneurial
Process
Paradox # 5
Entrepreneurship requires considerable thought, preparation and
planning, yet is b...
The Entrepreneurial
Process
Paradox # 9
Adhering to management best practice, especially staying close to the
customer tha...
The Entrepreneurial
Process
Leading Practices
 Leading marketing practices of fast-growth firms
 Leading financial pract...
The Entrepreneurial
Process
Marketing Practices
 Deliver products and services that are perceived

as highest quality to ...
The Entrepreneurial
Process
Financial Practices
 Anticipate multiple rounds of financing (on

average, every 2.5 years)
...
The Entrepreneurial
Process
Management Practices
 Use a collaborative decision-making style with

the top management team...
The Entrepreneurial
Process
Planning Practices
 Prepare detailed plans for each of the next 12 to

24 months; annual plan...
The Entrepreneurial Process
Time to Fail
The following percentages of small businesses
Are dissolved within two, four and ...
The Entrepreneurial Process
Reasons for Failure
A breakdown of why businesses fail.
47.4%

Econom ic Factors
38.4%

Financ...
The Entrepreneurial Process
One-Year Survival Rates
77.8%
0 to 9
85.5%

10 to 19

95.3%
20-99
95.2%
100-249
100.0%
250+
0
...
The Entrepreneurial Process
Six-Year Survival Rates
Industry

All
(%)

Zero
Growth

Lo
Growth
1-4%

Med Grth
5-9%

Hi
Grow...
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Timmons chapter 02 fall 2005

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Timmons chapter 02 fall 2005

  1. 1. Venture Planning Chapter Two Dowling BA 560 Fall Term 2005
  2. 2. The Entrepreneurial Process en· tre· pre· neur n. A person who organizes, operates, and assumes the risk for a business venture. [French, from Old French, from entreprendre , ‘to undertake.’] American Heritage Dictionary, 4th Ed.
  3. 3. The Entrepreneurial Process Entrepreneurship Entrepreneurship is a way of thinking, reasoning and acting that is opportunity obsessed, holistic in approach, and leadership balanced.
  4. 4. The Entrepreneurial Process It is opportunity driven It is driven by a lead entrepreneur and an entrepreneurial team It is resource parsimonious and creative It depends on the fit and balance among these It is integrated and holistic 4 BA560 Venture Planning Prof. Dowling
  5. 5. The Timmons Model of the Entrepreneurial Process Communication Opportunity (2) Ambiguity Creativity Business Plan Fits and gaps Team (3) Uncertainty Resources (4) Exogenous forces Leadership Capital market context Founder (1) 5 BA560 Venture Planning Prof. Dowling
  6. 6. The Entrepreneurial Leader An entrepreneurial leader: – Learns and teaches—faster, better – Deals with adversity, is resilient – Exhibits integrity, dependability, honesty – Builds entrepreneurial culture and organization 6 BA560 Venture Planning Prof. Dowling
  7. 7. HIGH The Entrepreneurial Process Inventor Entrepreneur Creativity & Innovation Promoter LOW Manager, Administrator General management skills, business know-how, and networks HIGH
  8. 8. The Entrepreneurial Process Myths about Entrepreneurs •Entrepreneurs are born, not made •Anyone can start a business •Entrepreneurs are gamblers •Entrepreneurs want to run the show themselves •Entrepreneurs work longer hours than others •Entrepreneurs should be young and energetic •Entrepreneurs seek control over others •Any entrepreneur with a good idea can raise VC $
  9. 9. The Opportunity  Market demand is a key ingredient to measuring an opportunity.  Market Structure & Size  Margin Analysis helps differentiate an opportunity from an idea.
  10. 10. The Entrepreneurial Team Quality of the Team: – Relevant experience and track record – Motivation to excel – Commitment, determination, and persistence – Tolerance of risk, ambiguity, and uncertainty – Creativity 10 BA560 Venture Planning Prof. Dowling
  11. 11. The Entrepreneurial Team Quality of the Team: – Team focus of control – Adaptability – Opportunity obsession – Leadership – Communication 11 BA560 Venture Planning Prof. Dowling
  12. 12. Understand and Marshall Resources …………… .. Don’t be driven by them.  Minimize & Control , versus Maximize & Own .  Unleashing creativity: Financial Resources Assets People Your Business Plan Think Cash Last!
  13. 13. The Entrepreneurial Process Paradox # 1 An opportunity with no or very low potential can be an enormously big opportunity. Paradox # 2 In order to make money you have to first lose money. Paradox #3 In order to create and build wealth, one must relinquish wealth. Paradox #4 In order to succeed, one first has to experience failure.
  14. 14. The Entrepreneurial Process Paradox # 5 Entrepreneurship requires considerable thought, preparation and planning, yet is basically an unplannable event. Paradox # 6 In order for creativity and innovativeness to prosper, rigor and discipline must accompany the process. Paradox #7 Entrepreneurship requires a bias toward action and a sense of urgency, but also demands patience and perseverance. Paradox #8 The greater the organization, orderliness, discipline, and control, the less you will control your ultimate destiny.
  15. 15. The Entrepreneurial Process Paradox # 9 Adhering to management best practice, especially staying close to the customer that created industry leaders in the 1980’s, became a seed of self-destruction and loss of leadership to upstart competitors. Paradox # 10 To realize long-term equity value, you have to forgo the temptations of short-term profitability.
  16. 16. The Entrepreneurial Process Leading Practices  Leading marketing practices of fast-growth firms  Leading financial practices of fast-growth firms  Leading management practices of fast-growth firms  Leading planning practices of fast-growth firms
  17. 17. The Entrepreneurial Process Marketing Practices  Deliver products and services that are perceived as highest quality to expanding segments  Cultivate pace-setting new products and services that stand out in the market as the best.  Deliver product and service benefits that demand average market or higher pricing
  18. 18. The Entrepreneurial Process Financial Practices  Anticipate multiple rounds of financing (on average, every 2.5 years)  Secure funding sources capable of significantly expanding their participation amounts  Utilize financing vehicles that retain the entrepreneur’s voting control  Maintain control by selective granting of employee stock ownership
  19. 19. The Entrepreneurial Process Management Practices  Use a collaborative decision-making style with the top management team.  Assemble a balanced board of directors comprised of both internal & external directors  Calibrate strategies constantly w/board meetings  Involve the board of directors heavily at strategic inflection points
  20. 20. The Entrepreneurial Process Planning Practices  Prepare detailed plans for each of the next 12 to 24 months; annual plans for 3 or more years  Periodically share actual performance w/staff  Link job performance standards that have been jointly set by management and employees to the business plan  Prospectively model the firm based on benchmarks
  21. 21. The Entrepreneurial Process Time to Fail The following percentages of small businesses Are dissolved within two, four and six years. Within 2 Years 23.7% Within 4 Years 51.7% Within 6 Years 62.7% 0 20 40 60 80
  22. 22. The Entrepreneurial Process Reasons for Failure A breakdown of why businesses fail. 47.4% Econom ic Factors 38.4% Financial Troubles 7.1% Inexperience O w ner Neglect 3.4% O ther 3.7% 0 10 20 30 40 50
  23. 23. The Entrepreneurial Process One-Year Survival Rates 77.8% 0 to 9 85.5% 10 to 19 95.3% 20-99 95.2% 100-249 100.0% 250+ 0 20 40 60 80 100
  24. 24. The Entrepreneurial Process Six-Year Survival Rates Industry All (%) Zero Growth Lo Growth 1-4% Med Grth 5-9% Hi Growth 10%+ All Industries 39.8% 27.5% 66.3% 75.5% 78.4% Ag/Fishing 43.1 35.0 74.7 80.7 82.8 Mining 39.1 27.1 67.8 61.5 57.0 Construction 35.3 24.1 65 72.2 74.3 Manufacturing 46.9 27.0 66.9 73.5 76.0 Transport/Utils. 39.7 25.7 68.5 72.4 75.6 Wholesale Trade 44.3 28.3 66.5 74.9 77.2 Retail Trade 38.4 27.1 62.7 74.4 76.8 Finance, Insurance 38.6 28.7 68.7 76.4 78.5 Services 40.9 28.7 69.1 79.4 83.5
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