Guides aspiring entrepreneurs through the process of starting a new venture in today’s economy
Entrepreneurship is an essential resource for both undergraduate and MBA courses on new venture creation. With a focused “hands-on” learning approach, this leading textbook integrates contemporary cases, practical examples, and foundational theory in a single volume. Student-friendly chapters explain each step of the entrepreneurial process, including idea generation, prototyping, opportunity evaluation, business model development, team building, marketing, financial forecasting, legal and tax considerations, and much more.
Now in its sixth edition, Entrepreneurship is thoroughly updated to reflect today’s business environment. Entirely new material on Artificial Intelligence (AI) and digital marketing is accompanied by new examples and case studies of entrepreneurs facing issues in the real world. Throughout this edition, the authors provide timely insights on engaging with new ventures as investors, bankers, accountants, lawyers, vendors, customers, and employees.
Delving into the real-world trials and tribulations of entrepreneurs in the US and around the world, Entrepreneurship, Sixth Edition, remains the go-to textbook for upper-level undergraduate business, management, and entrepreneurship majors, MBA students, early-career business professionals, and general readers wanting to understand what it takes to create a new venture in the modern business landscape.
New to this Edition:
- Expanded reflecting current approaches and recent developments in the sphere of entrepreneurship
- New chapter on digital marketing, including real-world strategies and challenges
- New coverage of the role and impact of AI in starting a new venture, especially around prototyping
- Updated discussion of the entrepreneurial competitiveness of various nations
- Revised material on prototyping new ideas and business models
- New end-of-chapter cases, examples, and references
Wiley Advantage:
- Helps students develop an inclusive perspective on how businesses are born, grow, and succeed or fail
- Covers all stages of the entrepreneurial process from pre-startup through harvest, including financing, business planning, and creating realistic financial forecasts
- Presents an up-to-date and well-balanced exposition of all concepts and cases
- Contains actual cases of entrepreneurs facing the issues discussed in each chapter
- Provides an “Opportunity Journal” for students to reflect on the lessons and consider how to apply them to their future careers
- Includes sample syllabi, chapter outlines, case lecture notes, an image bank, discussion questions, a test bank, classroom activities, and other teaching resources
Table of Contents
Preface xvii
1 An Opportunity to Lift All: The Power of Entrepreneurship 1
Global Roots and an American Proliferation 3
An Evolution of Entrepreneurship and Small Business in the United States 5
An Entrepreneurial Evolution Becomes a Revolution 6
Three Revolutions Converge 10
Entrepreneurship Revolution Strikes Gold 11
Causes of the Entrepreneurial Revolution 12
Changes in the Entrepreneurial Framework Conditions 14
Global Entrepreneurship Monitor 17
Principal Findings from GEM 18
Activity 19
Gender 21
Age Distribution of Early-Stage Entrepreneurial Activity 21
Growth Expectations and Job Creation 22
Environmental and Social Entrepreneurship 24
Entrepreneurship and Today’s American Dream 25
Conclusion 26
Your Opportunity Journal 27
Web Exercise 27
Notes 27
Case: Zoey Koko: Choosing an Alternative 30
2 The Entrepreneurial Process 39
Critical Factors for Starting a New Enterprise 40
Evaluating Opportunities for New Businesses 45
Determining Resource Needs and Acquiring Resources 50
Profit Potential 54
Ingredients for a Successful New Business 55
Conclusion 57
Your Opportunity Journal 57
Web Exercise 57
Notes 57
Case: Vedavoo 60
3 Opportunity Recognition, Shaping, and Reshaping 69
From Glimmer to Action: How Do I Come Up with a Good Idea? 70
Is Your Idea an Opportunity? 76
The Opportunity Checklist 91
“I Don’t Have an Opportunity” 91
Conclusion 93
Your Opportunity Journal 93
Web Exercise 93
Notes 93
Case: ISlide, Inc. 95
4 Prototyping Your Ideas 102
What Is Prototyping? 103
Types of Prototyping 106
Using AI to Accelerate Entrepreneurial Prototyping 111
How Is AI Useful for Entrepreneurs? 111
Using AI to Help Identify Unmet Needs 112
Using AI for Idea Generation 114
AI for Rapid Prototyping 114
Risks of Using AI 116
Conclusion 117
Your Opportunity Journal 117
Web Exercise 117
Notes 117
Case: Design a Better Cable Trainer 118
5 The Importance of Business Models 126
Introduction 126
The Core (Steps 1, 2, and 3) 129
The Market (Steps 4, 5, 6, and 7) 131
Customer Segments (Step 4) 132
Marketing Channels (Step 5) 132
Distribution Channels (Step 6) 133
Revenue Streams (Step 7) 134
Product and Operations (Steps 8, 9, 10, and 11) 135
Resources (Step 8) 135
Partners (Step 9) 135
Key Metrics (Step 10) 136
Cost Drivers (Step 11) 136
The External Environment and Financial Strategy (Steps 12, 13, and 14) 138
Competitive Environment (Step 12) 138
Industry Attractiveness (Step 13) 138
Financial Strategy (Step 14) 138
Conclusion 139
Your Opportunity Journal 139
Web Exercise 139
Notes 139
Case: Zumba Fitness 140
6 Entrepreneurial Marketing 147
Why Marketing Is Critical for Entrepreneurs 148
Entrepreneurs Face Unique Marketing Challenges 148
Acquiring Market Information 149
Marketing Strategy for Entrepreneurs 151
Segmentation, Targeting, and Positioning 151
The Marketing Mix 152
Value Proposition: Articulating the Entrepreneurial Strategy 164
Social Media 167
Guerrilla Marketing 168
Marketing Skills for Managing Growth 169
Understanding and Listening to the Customer 169
Building the Brand 170
Conclusion 171
Your Opportunity Journal 171
Web Exercise 171
Appendix: Customer Interview 171
General Outline: It Needs To Be Tailored To Meet Your Research Needs 172
Notes 172
Case: Raised Right 174
7 Digital Marketing for Entrepreneurs 183
Introduction 183
Poem Model 184
Generating Awareness and Leads Using Paid Media 185
Metrics of Digital Advertising 185
Paid Search Marketing 186
Programmatic Advertising 188
Native Advertising 188
Sponsorships and Affiliate Marketing 189
Connecting With Your Customers in Owned Media 189
Owned Media: Websites and Landing Pages 189
Internal Web pages versus direct landing pages 190
Webpage Goals 192
Conversion Centered Design Goals 193
Making Your Website More Findable: Search Engine Optimization (seo) 193
On-Site: Keywords 193
Other Aspects of On-site SEO 194
Off Site SEO: Backlinks 194
Off Site SEO: Creating Useful Content 194
Owned Media: Social Media 195
Content Strategy for Organic Posts 196
Types of Organic Social Posts 197
Owned Media: Email 198
Owned Media: Other Content 199
Earned Media 199
Sentiment and Marketing Research 199
Influencers, Public Relations and Publicity 200
Leveraging User generated Content (UGC) 200
The Buyer’s Journey - Planning and Assessing Your Digital Marketing Content 201
Conclusion 204
Your Opportunity Journal 204
Exercises 204
Notes 205
Case: PetPax Co. 206
8 Building the Founding Team 213
Power of the Team 214
Where Do You Fit? 216
How to Build a Powerful Team 219
Bootstrapping: Building the Team Based on Stage-of-Venture Life 221
Compensation 223
Equity 223
Salary 227
Other Compensation Considerations 228
External Team Members 228
Outside Investors 229
Lawyers 229
Accountants 230
Board of Advisors 230
Board of Directors 231
Keeping the Team Together 232
Burnout 233
Family Pressure 233
Interpersonal Conflicts 234
Conclusion 234
Your Opportunity Journal 234
Web Exercise 235
Notes 235
Case: Bin, Inc. 236
9 The Business Planning Process 245
The Planning Process 247
The Story Model 248
The Business Plan 249
The Cover 249
Executive Summary 249
Table of Contents 250
Industry, Customer, and Competitor Analysis 250
Company and Product Description 254
Marketing Plan 255
Development Plan 260
Team 261
Critical Risks 263
Offering 265
Financial Plan 265
Appendices 265
Types of Plans 265
Style Pointers for the Written Plan and Oral Presentation 266
Conclusion 267
Your Opportunity Journal 268
Web Exercise 268
Notes 268
Case: ONSUNDAYS: Business Brief 269
10 Building Your Pro Forma 282
Financial Statements 283
Common Mistakes 283
Financial Statement Overview 284
Building Your Pro Forma Financial Statements 285
Build-Up Method 286
Revenue Projections 287
Cost of Goods Sold 288
Operating Expenses 289
Preliminary Income Statement 290
Comparable Method 291
Building Integrated Financial Statements 293
Income Statement 295
Balance Sheet 297
Cash-Flow Statement 298
Putting It All Together 299
Conclusion 299
Your Opportunity Journal 300
Web Exercise 300
Notes 300
Case: ONSUNDAYS: Understanding Your Market and Building Realistic Proformas 301
11 Raising Money for Starting and Growing a Business 314
Bootstrapping New Ventures 315
Informal Investors 316
Business Angels 317
Searching for Business Angels 318
Types of Business Angels 318
Putting Together a Round of Angel Investment 319
Amount of Capital Needed to Start a Business 321
Financial Returns on Informal Investment 321
Crowdfunding 322
Venture Capital 323
Classic Venture Capital 323
Mechanism of Venture Capital Investing 324
Financial Returns on Venture Capital 325
Dealing with Venture Capitalists 326
Negotiating the Deal 328
Valuation 328
Scorecard Valuation 329
Earnings Capitalization Valuation 330
Present Value of Future Cash Flows 330
Market-Comparable Valuation (Multiple of Earnings) 330
Asset-Based Valuation 331
Example of Market-Comparable Valuation 331
Asset-Based Valuation Example 333
Harvesting Investments 334
Initial Public Offering 335
Pros and Cons of an IPO 335
The Process of Going Public 337
BFAI Goes Public 338
Selling the Company 338
Why Be Acquired? 339
Conclusion 340
Your Opportunity Journal 340
Web Exercise 340
Notes 341
Case: Auction Mobility 343
12 Debt and Other Forms of Financing 349
Getting Access to Funds - Start with Internal Sources 350
Start with Credit Cards and Home Equity Lines 351
Cash Conversion Cycle 352
Working Capital: Getting Cash from Receivables and Inventories 352
Using Accounts Receivable as Working Capital 353
The Sales Pattern 354
Cash versus Credit Sales 354
Credit Policies 354
Setting Credit Terms 355
Collection Policies 356
Setting Credit Limits for Individual Accounts 357
Inventory 358
Sources of Short-Term Cash: More Payables, Less Receivables 359
Cash from Short-Term Bank Loans 359
Cash from Trade Credit 359
Cash Obtained by Negotiating with Suppliers 360
Cash Available Because of Seasonal Business Credit Terms 360
Advantages of Trade Credit 361
Cash Obtained by Tightening Up Accounts Receivable Collections 361
Obtaining Bank Loans Through Accounts Receivable Financing 362
Pledging 362
Pledging with Notification 362
Factoring 362
Recourse 362
Obtaining Loans against Inventory 363
Obtaining “Financing” from Customer Prepayments 363
Choosing the Right Mix of Short-Term Financing 363
Traditional Bank Lending: Short-Term Bank Loans 364
Maturity of Loans 365
Interest Rates 365
Collateral 366
Applying for a Bank Loan 366
Restrictive Covenants 367
General Provisions 367
Routine Provisions 368
Specific Provisions 368
Equipment Financing 369
Obtaining Early Financing from External Sources 369
SBA-Guaranteed Loans 369
Applying for an SBA Loan 370
Conclusion 371
Your Opportunity Journal 371
Web Exercise 372
Notes 372
Case: FEED Resource Recovery 373
13 Legal and Tax Issues, Including Intellectual Property 384
Why, When, and How to Choose an Attorney 385
Leaving Your Present Position 385
Corporate Opportunity 385
Recruitment of Fellow Employees 386
Noncompetition 386
Intellectual Property 387
The Basics: What Is Protectable and How Should It Be Protected? 388
Patents 388
Trade Secrets 393
Trademarks 395
Copyright 397
International Protection for Intellectual Property 399
Choice of Legal Form 400
Control 401
Personal Liability 402
Taxation 402
Initial Investment of the Founders 404
Choosing a Name 405
Negotiating Employment Terms 405
Disposition of Equity Interests 405
Legal and Tax Issues in Hiring Employees 408
Employees as Agents of the Company 408
Employment Discrimination 409
Employment Agreements 409
Raising Money 409
Conclusion 410
Your Opportunity Journal 411
Web Exercise 411
Notes 411
Case: Wefunder: Leading the Growth of a New Industry 412
Appendix A: A Sample Wefunder Offerings 418
14 Entrepreneurial Growth 420
Making the Transition from Start-up to Growth 421
Looking Forward: The Choice to Grow, or Not, or Sell 421
A Model of Driving Forces of Growth 423
The Growth Process 424
Execution 425
Instituting Controls 426
Tracking Performance 427
Managing the Cash Cycle 429
Leveraging the Value Chain 431
Maintaining the Entrepreneurial Organization 432
Opportunity Domain 432
Organizational Resources and Capabilities 435
Obtaining Financial Resources for the Growing Company 435
Intangible Resources and Capabilities 436
Leadership 438
Starting the Delegation Process 438
First-Level Management 440
From Delegation to Decentralization 440
Professional Management and Boards 440
Coordinating the Driving Forces 441
Leading People; Developing Entrepreneurs 441
Conclusion 442
Your Opportunity Journal 443
Web Exercise 443
Notes 443
Case: Connecting Students with Therapists Immediately 445
Appendix: Competitors 451
Glossary G- 1
Index I- 1
