The document discusses various principles of entrepreneurship, including defining entrepreneurship, evaluating new business opportunities, and identifying the key components necessary for starting a successful new business. It explains that the three crucial components for a successful new business are having an excellent opportunity, identifying customers, and ensuring the entrepreneur and management team have the necessary experience and skills. The document provides guidance on developing new business ideas and evaluating whether an idea presents a true market opportunity.

1. Entrepreneurship
Mr. Mazen S. H. Elsayed
Palestinian Community Assistance Program

2. Principles of Entrepreneurship

3. Contents
1 Introduction - What is Entrepreneurship?
2 What are Investors Looking For?
The Three crucial components for a
3 successful new business
Ingredients for a Successful New
4 Business

4. Introduction (1/2)
• After finishing your graduation you will be
at the crossroads of life:
– Career in your own business
[YOB] “Entrepreneurship”
– wage employment
[JOB]

5. Introduction (2/2)
Difference between Wage Employment and Entrepreneurship

6. What is Entrepreneurship??
• The Entrepreneurial Process includes all
the functions, activities, and actions that
are part of perceiving opportunities and
creating organizations to pursue them.
– An Entrepreneur is
someone who perceives
an opportunity and creates
an organization to pursue it.

9. Critical Factors for Starting a
New Enterprise
What about having a QUIZ??

10. A model of the entrepreneurial process

11. Critical Factors for Starting a
New Enterprise (1/3)
1. Personal Attributes
– A higher need for achievement.
– A higher internal locus of control.
– Independence
– Financial success
– Self-realization
– Recognition
– Innovation

12. Critical Factors for Starting a
New Enterprise (2/3)
1. Environmental Factors:
– Silicon Valley FEVER
– Entrepreneur genetics !!

13. Critical Factors for Starting a
New Enterprise (3/3)
1. Sociological Factors
– Family Responsibilities.
– Experience
VS.
Optimism and Energy

14. Evaluating Opportunities for
New Businesses
• How should you evaluate the prospects of
starting a new Business??
– USA: only 1 business in 10 will ever reach its
10th birthday.
• This is because they are
started as part-time pursuits
and are never intended to
become full-time businesses.

15. The Three crucial components for a
successful new business (1/8)

16. The Three crucial components for a
successful new business (2/8)
• The crucial ingredients for entrepreneurial
success are a superb-entrepreneur
with a first-rate management team
and an excellent market
opportunity.
• In entrepreneurship, as in
any other profession, Luck
is where preparation and
opportunity meet.

17. The Three crucial components for a
successful new business (3/8)
1. The Opportunity:
– The biggest misconception about an idea for
a new business is that it must be unique.
• If you have a unique idea, you become super-
secretive, reluctant to discuss it
with anyone who doesn’t sign a
nondisclosure agreement.
• That makes it almost impossible to
evaluate the idea.

18. The Three crucial components for a
successful new business (4/8)
1. The Opportunity (Cont.):
– The idea in itself is not
what is important.
– Developing the idea,
implementing it, and
building a successful
business are the
important things.

19. The Three crucial components for a
successful new business (5/8)
• The Customer:
– Would-be entrepreneurs who are unable to
name a customer are not ready to start a
business.
– They have found an idea but
have not yet identified a
market need.

20. The Three crucial components for a
successful new business (6/8)
• The Timing:
– In some emerging industries, there is a
definite window of opportunity that opens only
once.
– Most entrepreneurs should
avoid these kind of opportunities
• they will rush to open their
business, lead to costly mistakes.

21. The Three crucial components for a
successful new business (7/8)
1. The Entrepreneur and the Management
Team:
– Opportunity will not become
a successful business without
strong entrepreneurial and
management skills.
a. Experience in the same industry.
b. management experience.

22. The Three crucial components for a
successful new business (8/8)
1. Resources:
– Entrepreneurial frugality requires:
• Low overhead.
• High productivity.
• Minimal ownership of
capital assets.

23. Ingredients for a Successful
New Business
• Founders: Every startup company must have a
first-class entrepreneur.
• Focused: Entrepreneurial companies focus on
niche markets.
• Fast & Flexible: They make decisions quickly and
implement them swiftly. They keep an open mind.
• Forever-innovating: They are tireless innovators.
• Flat: Entrepreneurial organizations
have as few layers of management as
possible.
• Frugal: By keeping overhead low
and productivity high.

24. Opportunity Recognition

25. Contents
1 How Do I Come Up with a Good Idea?
2 Is Your Idea an Opportunity?

26. How Do I Come Up with a Good
Idea? (1/2)
• Finding your passion:
– Launching an entrepreneurial venture takes a
tremendous amount of time and energy, and
you will have difficulty sustaining that level of
energy if you aren’t passionate about
the business.
• about all the things that give you
joy.
• Ask your Friends (they know you
better!!)

27. How Do I Come Up with a Good
Idea? (2/2)
• Idea Multiplication
– Moving from seed idea to something that is
robust, exciting, and powerful.
• cocktail-party entrepreneur is all talk and no action.
1.Gather Stimuli.
2.Multiply Stimuli: Brain-Writing.
3.Create Customer Concepts: build a simple mock-
up of what the product will look like.
4.Optimize Practicality: identify those
features that are unnecessary,
impractical, or simply too expensive

28. Is Your Idea an Opportunity?
(1/5)
• five major areas you need to fully
understand prior to your launch:

29. Is Your Idea an Opportunity?
(2/5)
• The Customer:
– Who is your core customer?
1. Primary target audience (PTA):
most likely to buy at a price that
preserves your margins and with a
frequency that reaches your target
revenues.
2. Secondary target audience (STA):
part of your growth strategy.
3. Tertiary target audience (TTA).
– Trends: spot trends that are
currently influencing customer
buying behavior and that might
influence it in the future.

30. S-curve and Product Acceptance

31. Is Your Idea an Opportunity?
(3/5)
• The Customer (Cont.):
– Frequency and Price: how often our average
customer buys our product or service and
how much he or she is willing to pay.
• Don’t use a penetration-pricing strategy.
• Use cost-plus pricing.

32. Cost-Pluss Pricing (1/2)
• Converting markup to gross margin
– Markup = 100% = 1
– Markup = 66.7% = 0.667

33. Cost-Pluss Pricing (2/2)
• Converting gross margin to markup
– Gross margin = 50% = 0.5
– Gross margin = 40% = 0.4

34. Is Your Idea an Opportunity?
(4/5)
• The Competition:
– How is the customer currently fulfilling the need
or want you intend to fill?
• Direct competitors.
• Indirect competitors.
• Substitutes.
– The good news is that many times
strong competitors won’t bother with new
startups.
– How to know your competitors:
• Ask suppliers.
• Professional investors.

35. Is Your Idea an Opportunity?
(5/5)
• Suppliers and vendors:
– suppliers can have tremendous power, and
that will directly affect your margins.
• The Government:
– Tax
– Time for registering a new business.
• The Global Environment.

36. Introduction to business models
• A business model describes the
rationale of how an organization
creates, delivers, and captures
value.
• Consists of two components:
– The Revenue Model: breaks down all the
sources of revenue that your business will
generate.
– The Cost Model: identifies how you are
spending your resources to make money

37. The Revenue Model
• Breaking down the revenue sources
into categories.
• Different revenue categories often
require variations on the firm’s central
strategy to achieve the highest possible
outcomes
– influenced by ‘‘drivers’’ that are directly correlated
with the level of revenues the company earns.
– If you don’t fully understand your revenue drivers,
you won’t achieve the greatest success.

38. The Cost Model
• A firm needs to spend money to influence the
revenue drivers.
• Includes two primary categories:
– Cost of goods sold (COGS):
represents costs directly associated
with the revenue source.
– Operating costs: like
advertisements, Rapid delivery.
• Until having a full understanding
of the business model required,
it is difficult to move on to tactics
to implement that strategy.

39. The First-Mover Myth
• To capture a first-mover advantage:
1. You have to be first (or very early) into the
market.
2. You need to capture a large percentage of
the market quickly (fast growth).
3. You need to create switching costs so the
customer will stick with you.

40. Formulating a Winning
Strategy
  Exercise  

41. Business Model Canvas

42. Contents
1 Definition of Business Model
2 The 9 Building Blocks

43. Business Model Definition
A Business Model describes the rationale

of how an organization creates, delivers,
and captures Value.

44. The 9 Building Blocks
We believe a business model can best be
described through nine basic building blocks
that show the logic of how a company intends
to make money.
They cover the four main areas of a business:
(1) Customers
(2) Offer
(3) Infrastructure
(4) Financial Viability.

45. The 9 Building Blocks

46. 1- Customer Segments (1/3)
It defines the different groups of

people or organizations an
enterprise aims to reach and
serve.
 For whom are we creating
value?
 Who are our most important
customers?

47. 1- Customer Segments (2/3)
Customer groups represent separate segments if:

 Their needs require and justify a distinct
offer.
 They are reached through different
Distribution Channels.
 They require different types of relationships.
 They have substantially different
profitabilities.
 They are willing to pay for different aspects
of the offer.

48. 1- Customer Segments (3/3)
There are different types of Customer Segments:

 Mass market
 Niche market
 Segmented
 Diversified
 Multi-sided platforms
(or multi-sided markets)

49. 2- Value Propositions (1/2)
It describes the bundle of products and services

that create value for a specific Customer
Segment
 What value do we deliver to the customer?
 Which one of our customer’s problems are
we helping to solve?
 Which customer needs are we satisfying?
 What bundles of products and services are
we offering to each Customer Segment?

50. 2- Value Propositions (2/2)
Elements from the following non-exhaustive list

can contribute to customer value creation:
* Newness * Performance
* Customization * Accessibility
* Design * Brand/status
* Price * Cost reduction
* Risk reduction * “Getting the job done”
* Convenience/usability

51. 3- Channels
It describes how a company communicates with

and reaches its Customer Segments to deliver a
Value Proposition.

52. 4- Customer Relationships (1/2)
It describes the types of relationships a company
establishes with specific Customer Segments.
Customer relationships may be driven by the
following motivations:
 Customer acquisition
 Customer retention
 Boosting sales (upselling)

53. 4- Customer Relationships (2/2)
We can distinguish between several categories

of Customer Relationships:
 Personal assistance
 Dedicated personal assistance
 Self-service
 Automated services
 Communities
 Co-creation

54. 5- Revenue Streams (1/3)
It represents the cash a company generates
from each Customer Segment (costs must be
subtracted from revenues to create earnings).
A business model can involve two different types
of Revenue Streams:
1.Transaction revenues resulting from one-time customer
payments
2. Recurring revenues resulting from ongoing payments to
either deliver a Value Proposition to customers or
provide post-purchase customer support.

55. 5- Revenue Streams (2/3)
There are several ways to generate Revenue

Streams:
 Asset sale
 Usage fee
 Subscription fees
 Lending/Renting/Leasing
 Licensing
 Brokerage fees
 Advertising

56. 5- Revenue Streams (3/3)

57. 6- Key Resources
It describes the most important assets required
to make a business model work.
Key Resources can be categorized as follows:
 Physical
 Intellectual
 Human
 Financial

58. 7- Key Activities
It describes the most important things a
company must do to make its business model
work.
Key Activities can be categorized as follows:
 Production
 Problem
solving
 Platform/
network

59. 8- Key Partnerships (1/2)
It describes the network of suppliers
and partners that make the business
model work.
It can be useful to distinguish between
three motivations for creating
partnerships:
 Optimization and economy of scale
 Reduction of risk and uncertainty
 Acquisition of particular resources and activities

60. 8- Key Partnerships (2/2)
We can distinguish between four different types

of partnerships:
1. Strategic alliances between
non-competitors
2. Strategic partnerships
between competitors
3. Joint ventures to
develop new businesses
4. Buyer-supplier relationships

61. 9- Cost Structure (1/2)
It describes all costs incurred to operate a
business model.
It can be useful to distinguish between two broad
classes of business model Cost Structures:
 Cost-driven
 Value-driven

62. 9- Cost Structure (2/2)
Cost Structures can have the following

characteristics:
 Fixed costs
 Variable costs
 Economies of scale
 Economies of scope

63. The 9 Building Blocks

64. Apple iPod/iTunes Business Model

65. QUESTIONS