Description
This brief information around entrepreneurship successfully launching new ventures global edition third edition.
Successfully Launching
New Ventures '
Global Edition
Third Edition
Bruce R. Barringer
Oklahoma State University
R. Duane Ireland
Texas A&M University
Boston Columbus Indianapolis New York San Francisco Upper Saddle River
Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto
Delhi MjexicojCJty_SaQ_Baulo Sydney Har±gJ£ong__JSeoul Singap^ffi^
CONTENTS
Preface 15
PART 1 • Decision to Become an Entrepreneur 25 ~\
Chapter 1 Introduction to Entrepreneurship 27
Opening Profile—Klymit: The Classic Entrepreneurial Story 27
INTRODUCTION TO ENTREPRENEURSHIP 29
What Is Entrepreneurship? 30
Why Become an Entrepreneur? 31
Characteristics of Successful Entrepreneurs 33
• WHATWENTWRONG? Howa Lack of Passion Can Kill
a Business 35
• SAVVYENTREPRENEURIALFIRM: Guitar Hero and iRobot:
Why Tenacity Is One of the Most Important Entrepreneurial
Characteristics 38
Common Myths About Entrepreneurs 39
Types of Start-Up Firms 41
CHANGING DEMOGRAPHICS OF ENTREPRENEURS 42
ENTREPRENEURSHIP'S IMPORTANCE 45
Economic Impact of Entrepreneurial Firms 45
Entrepreneurial Firms' Impact on Society 45
Entrepreneurial Firms' Impact on Larger Firms 46
• PARTNERINGFOR SUCCESS:Topics Entertainment: Helping the
Makers of Children's DVDs Band Together to Take on Larger
Rivals 47
THE ENTREPRENEURIAL PROCESS 47
Decision to Become an Entrepreneur (Chapter 1) 48
Developing Successful Business Ideas (Chapters 2-6) 48
Moving from an Idea to an Entrepreneurial Firm (Chapters 7-10) 49
Managing and Growing an Entrepreneurial Firm (Chapters 11-15) 50
Chapter Summary 50 I Key Terms 51 I Review Questions 51
Application Questions 52 I You Be the VC 1.1 54 I You Be
the VC 1.2 54 I Case 1.1 55 I Case 1.2 58
ENDNOTES 60
PART 2 • Developing Successful Business Ideas 63
Chapter 2 Recognizing Opportunities and Generating Ideas 65
Opening Profile—Kathryn Kerrigan: Filling a Gap in the $24 Billion
Women's Shoe Industry 65
IDENTIFYING AND RECOGNIZING OPPORTUNITIES 66
Observing Trends 68
Solving a Problem 73
• SAVVYENTREPRENEURIALFIRM: iHearSafe, ZUCA, and
J.J. Creations: Companies Started by Or di nar y People Solving
Problems i n Thei r Everyday Lives 74
FINDING GAPS IN THE MARKETPLACE 76
Personal Characteristics of the Entrepreneur 77
• WHATWENTWRONG? Clearly Canadian: What Happens When
You Don't Deliver on Your Promises 78
• PARTNERINGFOR SUCCESS: Networking: The Importance
of Joining Industry Trade Associations 80
CONTENTS
TECHNIQUES FOR GENERATING IDEAS 82
Brainstorming 82
Focus Groups 83
Library and Internet Research 84
Other Techniques 85
ENCOU RAG ING AN D PROTECTING N EW IDEAS 85
Establishing a Focal Point for Ideas 85
Encouraging Creativity at the Firm Level 85
Protecting Ideas from Being Lost or Stolen 86
Chapter Summary 87 I Key Terms 88 I Review Questions 88
Application Questions 89 I You Be the VC 2.1 90 I You Be
the VC 2.2 91 I Case 2.1 91 I Case 2.2 94
ENDNOTES 97
Chapter 3 Feasibility Analysis 101
Opening Profile—Think Gum: The Value of Validating
a Business Idea 101
FEASIBILITY ANALYSIS 102
• WHATWENTWRONG?: eBay Drop-Off Stores: HowFeasible
Were They? 104
Product/Service Feasibility Analysis 105
IndustryATarget Market Feasibility Analysis 110
Organizational Feasibility Analysis 113
• PARTNERINGFOR SUCCESS: Finding the Right Business
Partner 115
Financial Feasibility'Analysis 115
• SAVVYENTREPRENEURIALFIRM: ABusiness's Location:
AResource that Varies in Importance Depending on the Type
of Business 116
First Screen 119
Chapter Summary 120 I Key Terms 121 I Review Questions 121
Application Questions 121 I You Be the VC 3.1 123 I You Be
the VC 3.2 124 I Case 3.1 124 I Case 3.2 127
ENDNOTES 129
Appendix 3.1 130
Appendix 3.2 132
Chapter 4 Writing a Business Plan 135
Opening Profile—Group Table: Proceeding on the Strength
of a Winning Business Plan 135
THE BUSINESS PLAN 137
Reasons for Writing a Business Plan 137
Who Reads the Business Plan—And What Are They Looking For? 139
Guidelines for Writing a Business Plan 140
• SAVVYENTREPRENEURIALFIRM: KnowWhen to Hold Them,
KnowWhen to Fold Them 143
OUTLINE OF THE BUSINESS PLAN 144
Exploring Each Section of the Plan 144
• PARTNERINGFOR SUCCESS: Types of Partnerships That are
Common in Business Plans 147
• WHATWENTWRONG? What the Enthusiast Group Learned
About Assumptions, the Hard Way 153
PRESENTING THE BUSINESS PLAN TO INVESTORS 154
8
CONTENTS
The Oral Presentation of a Business Plan 155
Questions and Feedback to Expect from Investors 155
Chapter Summary 156 I Key Terms 157 I Review Questions 158
Application Questions 158 I You Be the VC 4.1 160 I You Be
the VC 4.2 161 I Case 4.1 162 I Case 4.2 164^
ENDNOTES 166
Chapter 5 Industry and Competitor Analysis 169
Opening Profile—BusinessesAtoZ: Occupying a Unique Position
in a Difficult Industry—and Thriving 169
INDUSTRY ANALYSIS 170
Studying Industry Trends 171
• WHAT WENT WRONG? Burberry: How a Traditional British
Brand Lost Its Favorable Position in the Fashion Industry 173
The Five Competitive Forces Model 174
• SAVVYENTREPRENEURIALFIRM: Howthe Bargaining Power of
Buyers Changed the Fate of Sony in Its Start-Up Years 180
The Value of the Five Forces Model 181
Industry Types and the Opportunities They Offer 183
COMPETITOR ANALYSIS 185
Identifying Competitors 185
• PARTNERINGFOR SUCCESS: Barista Exchange: Online Social
Network Aiding Independent Coffeehouse Owners 187
Sources of Competitive Intelligence 187
Completing a Competitive Analysis Grid 188
Chapter Summary 189 I Key Terms 190 I Review Questions 191
Application Questions 191 I You Be the VC 5.1 193 I You Be
the VC 5.2 193 I Case 5.1 194 I Case 5.2 196
ENDNOTES 199
Chapter 6 Developing an Effective Business Model 201
Opening Profile—Amie Street: Bridging the Gap in the Music
Industry 201
BUSINESS MODELS 203
• SAVVYENTREPRENEURIALFIRM: Three Industries, Three
Business Model Innovators 205
The Importance and Diversity of Business Models 206
How Business Models Emerge 208
Potential Fatal Flaws of Business Models 210
COMPONENTS OF AN EFFECTIVE BUSINESS MODEL 211
• WHAT WENT WRONG? What Happens When One of the Four
Components of a Start-Up's Business Model Doesn't Take
Shape? 212
Core Strategy 213
Strategic Resources 214
Partnership Network 215
• PARTNERINGFOR SUCCESS: Getwine, South Africa, and
WaveSecure, Singapore: Forging Valuable Relationships by
Elevating the Performance of Their Partners 217
Customer Interface 219
Chapter Summary 221 I Key Terms 222 I Review Questions 222
Application Questions 223 I You Be the VC 6.1 224 I You Be
the VC 6.2 225 I Case 6.1 225 I Case 6.2 228
ENDNOTES 231
CONTENTS
PART 3 • Moving from an Idea to an Entrepreneurial Firm 233
Chapter 7 Preparing the Proper Ethical andLegal Foundation 235
Opening Profile—RealKidz: Getting Off to a Good Start—Ethically
and Legally 235
INITIAL ETHICAL AND LEGAL ISSUES FACING A NEW FIRM 236
Establishing a Strong Ethical Culture for a Firm 237
Choosing an Attorney for a Firm 241
• SAVVYENTREPRENEURIALFIRM: Skype: Demonstrating a Strong
Moral Fortitude by Proactively Responding to a Crisis 242
Drafting a Founders' Agreement 243
Avoiding Legal Disputes 244
• WHATWENTWRONG? HowLegal Snafus Can Stop
a Business in Its Tracks 245
• PARTNERINGFOR SUCCESS: Patagonia and Build-A-Bear
Workshop: Picking Trustworthy Partners 248
OBTAINING BUSINESS LICENSES AND PERMITS 249
Business Licenses 249
Business Permits 250
CHOOSING A FORM OF BUSINESS ORGANIZATION 250
Sole Proprietorship 251
Partnerships 253
Corporations 254
Limited Liability Company 257
Chapter Summary 258 I Key Terms 259 I Review Questions 259
Application Questions 260 I You Be the VC 7.1 262 I You Be
the VC 7.2 263 I Case 7.1 264 | Case 7.2 266
ENDNOTES 268
Appendix 7.1 269
Chapter 8 Assessing a NewVenture's Financial Strength
andViability 273
Opening Profile—BLMA Models: Keeping a Sharp Eye on Cash Flow
from the Start 273
INTRODUCTION TO FINANCIAL MANAGEMENT 275
Financial Objectives of a Firm 275
The Process of Financial Management 276
• PARTNERINGFOR SUCCESS: Organizing Buying Groups to Cut
Costs and Maintain Competitiveness 277
FINANCIAL STATEMENTS AND FORECASTS 278
Historical Financial Statements 279
• SAVVYENTREPRENEURIALFIRM: Knowthe Facts Behind
the Numbers 282
Forecasts 287
PRO FORMA FINANCIAL STATEMENTS 291
• WHATWENTWRONG?: B2B Exchanges: AFalse Hope for Cost
Savings? 292
Pro Forma Income Statement 293
Pro Forma Balance Sheet 294
Pro Forma Statement of Cash Flows 295
Ratio Analysis 297
10 CONTENTS
Chapter Summary 298 I Key Terms 298 I Review Questions 298
Application Questions 299 I You Be the VC 8.1 301 I You Be
the VC 8.2 301 I Case 8.1 302 I Case 8.2 304
ENDNOTES 306
Chapter 9 Building a New-Venture Team 309
Opening Pr of i l e—UNIGO: Hi t t i ng t he Ground Running 309
(
CREATING A NEW-VENTURE TEAM 311
• WHATWENTWRONG? Monitor 110: Howa Lack of Consensus
and a Clear Leader Can Damage a New-Venture Team 312
The Founder or Founders 313
• SAVVYENTREPRENEURIALFIRM: Overcoming a Lack
of Business Experience 315
Recruiting and Selecting Key Employees 316
The Roles of the Board of Directors 318
ROUNDING OUT THE TEAM: THE ROLE OF PROFESSIONAL
ADVISERS 320
Board of Advisers 321
• PARTNERINGFOR SUCCESS: Need Help with Product
Development? Consider Setting Up a Customer
Advisory Board 322
Lenders and Investors 323
Other Professionals 325
Chapter Summary 326 I Key Terms 327 I Review Questions 327
Application Questions 328 I You Be the VC 9.1 330 I You Be
the VC 9.2 331 I Case 9.1 331 I Case 9.2 334
ENDNOTES 336
Chapter 10 Getting Financingor Funding 339
Opening Profi l e—Bi zooki : Raising Money Through
a Variety of Sources 339
THE IMPORTANCE OF GETTING FINANCING OR FUNDING 340
Why Most New Ventures Need Funding 341
Sources of Personal Financing 342
• WHATWENTWRONG? Webvan: HowHaving Too Much Money
Can Be Just as Harmful as Having Too Little 343
Preparing to Raise Debt or Equity Financing 345
SOURCES OF EQUITY FUNDING 348
• PARTNERINGFOR SUCCESS: Want Help Navigating the Process
of Raising Money? Find a Mentor 349
Business Angels 349
Venture Capital 351
Initial Public Offering 353
SOURCES OF DEBT FINANCING 354
Commercial Banks 355
SBA Guaranteed Loans 355
Other Sources of Debt Financing 356
• SAVVYENTREPRENEURIALFIRM: John and Caprial Pence: How
the SBAGuaranteed Loan ProgramHelped Two Entrepreneurs
Get the Financing They Needed 357
CREATIVE SOURCES OF FINANCING AND FUNDING 358
Leasing 358
SBIR and STTR Grant Programs 358
CONTENTS 11
Other Grant Programs 360
Strategic Partners 360
Chapter Summary 361 I Key Terms 362 I Review Questions 362
Application Questions 363 I You Be the VC 10.1 365 I You Be
the VC 10.2 365 I Case 10.1 366 I Case 10.2 369
ENDNOTES 371
PART 4 • Managing and Growing an Entrepreneurial Firm 375
Chapter 11 Unique Marketing Issues 377
Opening Profi l e—Mi ss Mi sa: Creating a New Brand in t he
Jewelry Industry 377
SELECTING A MARKET AND ESTABLISHING A POSITION 378
Segmenting the Market 379
Selecting a Target Market 380
Establishing a Unique Position 381
KEY MARKETING ISSUES FOR NEW VENTURES 382
Selling Benefits Rather Than Features 383
Establishing a Brand 384
THE 4Ps OF MARKETING FOR NEW VENTURES 386
• WHATWENTWRONG? Quaker Oats' Botched Acquisition of
Snapple:The Price of Failing to Understand the Real Meaning
of a Company's Brand 387
Product 388
Price 389
Promotion 391
• PARTNERINGFOR SUCCESS: Sofia's Diary: Building Awareness
of Major Brands Among a Key Segment of Young Consumers
Through a Multichannel Campaign 392
Place (or Distribution) 396
• SAVVYENTREPRENEURIALFIRM: Utilizing Guerrilla Marketing
Techniques to Create Product Awareness in Entertaining,
Clever, and Effective Ways 397
Chapter Summary 399 I Key Terms 400 I Review Questions 400
Application Questions 401 I You Be the VC 11.1 402 I You Be
the VC 11.2 403 I Case 11.1 404 I Case 11.2 406
ENDNOTES 408
Chapter 12 The Importance of Intellectual Property 411
Opening Profile—Ecovative Design: The Key Role of Intel l ectual
Property in Its Early Success 411
THE IMPORTANCE OF INTELLECTUAL PROPERTY 413
Determining What Intellectual Property to Legally Protect 415
The Four Key Forms of Intellectual Property 415
• WHATWENTWRONG? Dippin' Dots: Why the USPTOInvalidated
Its Patent and It NowHas Two NewCompetitors 416
PATENTS 417
Types of Patents 418
Who Can Apply for a Patent? 419
The Process of Obtaining a Patent 420
• PARTNERINGFOR SUCCESS: Entrepreneurs and Large Firms:
Partnering to Bring Patented Products to Market 422
Patent Infringement 422
12 CONTENTS
TRADEMARKS 423
The Four Types of Trademarks 424
What Is Protected Under Trademark Law? 425
Exclusions from Trademark Protection 426
The Process of Obtaining a Trademark 426 *
COPYRIGHTS 428
What Is Protected by a Copyright? 428
t
Exclusions from Copyright Protection 429
How to Obtain a Copyright 429
Copyright Infringement 430
Copyrights and the Internet 431
TRADE SECRETS 431
• SAVVYENTREPRENEURIALFIRM: Protecting Intellectual
Property: Elvis's Memory, and Intellectual Property,
Live On 432
What Qualifies for Trade Secret Protection? 433
Trade Secret Disputes 433
Trade Secret Protection Methods 434
CONDUCTING AN INTELLECTUAL PROPERTY AUDIT 435
Why Conduct an Intellectual Property Audit? 436
The Process of Conducting an Intellectual Property Audit 436
Chapter Summary 437 I Key Terms 438 I Review Questions 438
Application Questions 439 I You Be the VC 12.1 441 I You Be
the VC 12.2 441 I Case 12.1 442 I Case 12.2 444
ENDNOTES 446
Chapter 13 Preparing for and Evaluatingthe Challenges of Growth 449
Opening Profile—JGoods: Preparing for Growth Cautiously 449
PREPARING FOR GROWTH 451
Appreciating the Nature of Business Growth 451
Staying Committed to a Core Strategy 453
• WHAT WENT WRONG? Meetro: Sometimes Businesses Just Don't
Scale 454
Planning for Growth 455
REASONS FOR GROWTH 456
MANAGING GROWTH 458
• SAVVYENTREPRENEURIALFIRM: Timbuk2: Bagging the Right
Customers Rather Than the Biggest Ones 459
Knowing and Managing the Stages of Growth 459
CHALLENGES OF GROWTH 462
Managerial Capacity 462
Day-to-Day Challenges of Growing a Firm 464
• PARTNERINGFOR SUCCESS: Zazzle: Addressing the Managerial
Capacity Problemby Leveraging the Resources of MySpace 465
Chapter Summary 466 I Key Terms 467 I Review Questions 467
Application Questions 468 I You Be the VC 13.1 470 I You Be
the VC 13.2 471 I Case 13.1 471 I Case 13.2 474
ENDNOTES 476
Chapter 14 Strategies for FirmGrowth 479
Opening Profile—University Parent Media: Gradually Pursuing
Additional Strategies for Growth 479
INTERNAL GROWTH STRATEGIES 480
CONTENTS 13
New Product Development 481
Other Product-Related Strategies 483
• WHATWENTWRONG? Sock Shop: HowFocusing More on Growth
Than Profitability and Creating Value Sank a Popular Retail
Chain 484
International Expansion 486
EXTERNAL GROWTH STRATEGIES 489
Mergers and Acquisitions 491
Licensing 493
• SAVVYENTREPRENEURIALFIRM: Honest Tea: Accelerating
Its Growth and Mission Through Being Acquired by Coca-
Cola 494
Strategic Alliances and Joint Ventures 496
• PARTNERINGFOR SUCCESS: Zlio.com: 250,000 Partners and
Growing 498
Chapter Summary 499 I Key Terms 500 I Review Questions 500
Application Questions 501 I You Be the VC 14.1 503 I You Be
the VC 14.2 503 I Case 14.1 504 I Case 14.2 506
ENDNOTES 508
Chapter 15 Franchising 511
Opening Profile—College Nannies &Tutors: Franchising as a Form
of Business Ownership and Growth 511
WHAT IS FRANCHISING AND HOW DOES IT WORK? 513
What Is Franchising? 513
How Does Franchising Work? 514
ESTABLISHING A FRANCHISE SYSTEM 516
• PARTNERINGFOR SUCCESS: Boosting Sales and Reducing
Expenses Through Co-branding 517
When to Franchise 518
Steps to Franchising a Business 518
Selecting and Developing Effective Franchisees 520
Advantages and Disadvantages of Establishing
a Franchise System 520
BUYING A FRANCHISE 523
• SAVVYENTREPRENEURIALFIRM: Franchise Systems That
Operate Strictly Online 524
Is Franchising Right for You? 525
The Cost of a Franchise 525
Finding a Franchise 527
Advantages and Disadvantages of Buying a Franchise 528
Steps in Purchasing a Franchise 529
Watch Out! Common Misconceptions About Franchising 531
LEGAL U.S. ASPECTS OF THE FRANCHISE RELATIONSHIP 532
U.S. Rules and Regulations 532
State Rules and Regulations 533
MORE ABOUT FRANCHISING 535
Franchise Ethics 535
International Franchising 536
• WHATWENTWRONG? Watch Out: Plenty Can Go Wrong in
Opening Franchise Outlets Overseas 538
The Future of Franchising 539
14 CONTENTS
Chapter Summary 539 I Key Terms 541 I Review Questions 541
Application Questions 542 I You Be the VC 15.1 544 I You Be
the VC 15.2 544 I Case 15.1 545 I Case 15.2 547
ENDNOTES 550
Case Appendix 553 \
Case 1 San Francisco Coffee House: An American-Style Franchise in Croatia 553
Case 2 E+CO: A Tipping Point for Clean Energy Entrepreneurship (A) 560
Case 3 Cineplex Entertainment: The Loyalty Program 574
Case 4 Williams Coffee Pub: The Franchising Opportunity 584
Case 5 The Career Choi ce of Ms. Linlin Chen 58 6
Glossary 591
Name Index 601
Subject Index 603
Company Index 607
doc_619740199.pdf
This brief information around entrepreneurship successfully launching new ventures global edition third edition.
Successfully Launching
New Ventures '
Global Edition
Third Edition
Bruce R. Barringer
Oklahoma State University
R. Duane Ireland
Texas A&M University
Boston Columbus Indianapolis New York San Francisco Upper Saddle River
Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto
Delhi MjexicojCJty_SaQ_Baulo Sydney Har±gJ£ong__JSeoul Singap^ffi^
CONTENTS
Preface 15
PART 1 • Decision to Become an Entrepreneur 25 ~\
Chapter 1 Introduction to Entrepreneurship 27
Opening Profile—Klymit: The Classic Entrepreneurial Story 27
INTRODUCTION TO ENTREPRENEURSHIP 29
What Is Entrepreneurship? 30
Why Become an Entrepreneur? 31
Characteristics of Successful Entrepreneurs 33
• WHATWENTWRONG? Howa Lack of Passion Can Kill
a Business 35
• SAVVYENTREPRENEURIALFIRM: Guitar Hero and iRobot:
Why Tenacity Is One of the Most Important Entrepreneurial
Characteristics 38
Common Myths About Entrepreneurs 39
Types of Start-Up Firms 41
CHANGING DEMOGRAPHICS OF ENTREPRENEURS 42
ENTREPRENEURSHIP'S IMPORTANCE 45
Economic Impact of Entrepreneurial Firms 45
Entrepreneurial Firms' Impact on Society 45
Entrepreneurial Firms' Impact on Larger Firms 46
• PARTNERINGFOR SUCCESS:Topics Entertainment: Helping the
Makers of Children's DVDs Band Together to Take on Larger
Rivals 47
THE ENTREPRENEURIAL PROCESS 47
Decision to Become an Entrepreneur (Chapter 1) 48
Developing Successful Business Ideas (Chapters 2-6) 48
Moving from an Idea to an Entrepreneurial Firm (Chapters 7-10) 49
Managing and Growing an Entrepreneurial Firm (Chapters 11-15) 50
Chapter Summary 50 I Key Terms 51 I Review Questions 51
Application Questions 52 I You Be the VC 1.1 54 I You Be
the VC 1.2 54 I Case 1.1 55 I Case 1.2 58
ENDNOTES 60
PART 2 • Developing Successful Business Ideas 63
Chapter 2 Recognizing Opportunities and Generating Ideas 65
Opening Profile—Kathryn Kerrigan: Filling a Gap in the $24 Billion
Women's Shoe Industry 65
IDENTIFYING AND RECOGNIZING OPPORTUNITIES 66
Observing Trends 68
Solving a Problem 73
• SAVVYENTREPRENEURIALFIRM: iHearSafe, ZUCA, and
J.J. Creations: Companies Started by Or di nar y People Solving
Problems i n Thei r Everyday Lives 74
FINDING GAPS IN THE MARKETPLACE 76
Personal Characteristics of the Entrepreneur 77
• WHATWENTWRONG? Clearly Canadian: What Happens When
You Don't Deliver on Your Promises 78
• PARTNERINGFOR SUCCESS: Networking: The Importance
of Joining Industry Trade Associations 80
CONTENTS
TECHNIQUES FOR GENERATING IDEAS 82
Brainstorming 82
Focus Groups 83
Library and Internet Research 84
Other Techniques 85
ENCOU RAG ING AN D PROTECTING N EW IDEAS 85
Establishing a Focal Point for Ideas 85
Encouraging Creativity at the Firm Level 85
Protecting Ideas from Being Lost or Stolen 86
Chapter Summary 87 I Key Terms 88 I Review Questions 88
Application Questions 89 I You Be the VC 2.1 90 I You Be
the VC 2.2 91 I Case 2.1 91 I Case 2.2 94
ENDNOTES 97
Chapter 3 Feasibility Analysis 101
Opening Profile—Think Gum: The Value of Validating
a Business Idea 101
FEASIBILITY ANALYSIS 102
• WHATWENTWRONG?: eBay Drop-Off Stores: HowFeasible
Were They? 104
Product/Service Feasibility Analysis 105
IndustryATarget Market Feasibility Analysis 110
Organizational Feasibility Analysis 113
• PARTNERINGFOR SUCCESS: Finding the Right Business
Partner 115
Financial Feasibility'Analysis 115
• SAVVYENTREPRENEURIALFIRM: ABusiness's Location:
AResource that Varies in Importance Depending on the Type
of Business 116
First Screen 119
Chapter Summary 120 I Key Terms 121 I Review Questions 121
Application Questions 121 I You Be the VC 3.1 123 I You Be
the VC 3.2 124 I Case 3.1 124 I Case 3.2 127
ENDNOTES 129
Appendix 3.1 130
Appendix 3.2 132
Chapter 4 Writing a Business Plan 135
Opening Profile—Group Table: Proceeding on the Strength
of a Winning Business Plan 135
THE BUSINESS PLAN 137
Reasons for Writing a Business Plan 137
Who Reads the Business Plan—And What Are They Looking For? 139
Guidelines for Writing a Business Plan 140
• SAVVYENTREPRENEURIALFIRM: KnowWhen to Hold Them,
KnowWhen to Fold Them 143
OUTLINE OF THE BUSINESS PLAN 144
Exploring Each Section of the Plan 144
• PARTNERINGFOR SUCCESS: Types of Partnerships That are
Common in Business Plans 147
• WHATWENTWRONG? What the Enthusiast Group Learned
About Assumptions, the Hard Way 153
PRESENTING THE BUSINESS PLAN TO INVESTORS 154
8
CONTENTS
The Oral Presentation of a Business Plan 155
Questions and Feedback to Expect from Investors 155
Chapter Summary 156 I Key Terms 157 I Review Questions 158
Application Questions 158 I You Be the VC 4.1 160 I You Be
the VC 4.2 161 I Case 4.1 162 I Case 4.2 164^
ENDNOTES 166
Chapter 5 Industry and Competitor Analysis 169
Opening Profile—BusinessesAtoZ: Occupying a Unique Position
in a Difficult Industry—and Thriving 169
INDUSTRY ANALYSIS 170
Studying Industry Trends 171
• WHAT WENT WRONG? Burberry: How a Traditional British
Brand Lost Its Favorable Position in the Fashion Industry 173
The Five Competitive Forces Model 174
• SAVVYENTREPRENEURIALFIRM: Howthe Bargaining Power of
Buyers Changed the Fate of Sony in Its Start-Up Years 180
The Value of the Five Forces Model 181
Industry Types and the Opportunities They Offer 183
COMPETITOR ANALYSIS 185
Identifying Competitors 185
• PARTNERINGFOR SUCCESS: Barista Exchange: Online Social
Network Aiding Independent Coffeehouse Owners 187
Sources of Competitive Intelligence 187
Completing a Competitive Analysis Grid 188
Chapter Summary 189 I Key Terms 190 I Review Questions 191
Application Questions 191 I You Be the VC 5.1 193 I You Be
the VC 5.2 193 I Case 5.1 194 I Case 5.2 196
ENDNOTES 199
Chapter 6 Developing an Effective Business Model 201
Opening Profile—Amie Street: Bridging the Gap in the Music
Industry 201
BUSINESS MODELS 203
• SAVVYENTREPRENEURIALFIRM: Three Industries, Three
Business Model Innovators 205
The Importance and Diversity of Business Models 206
How Business Models Emerge 208
Potential Fatal Flaws of Business Models 210
COMPONENTS OF AN EFFECTIVE BUSINESS MODEL 211
• WHAT WENT WRONG? What Happens When One of the Four
Components of a Start-Up's Business Model Doesn't Take
Shape? 212
Core Strategy 213
Strategic Resources 214
Partnership Network 215
• PARTNERINGFOR SUCCESS: Getwine, South Africa, and
WaveSecure, Singapore: Forging Valuable Relationships by
Elevating the Performance of Their Partners 217
Customer Interface 219
Chapter Summary 221 I Key Terms 222 I Review Questions 222
Application Questions 223 I You Be the VC 6.1 224 I You Be
the VC 6.2 225 I Case 6.1 225 I Case 6.2 228
ENDNOTES 231
CONTENTS
PART 3 • Moving from an Idea to an Entrepreneurial Firm 233
Chapter 7 Preparing the Proper Ethical andLegal Foundation 235
Opening Profile—RealKidz: Getting Off to a Good Start—Ethically
and Legally 235
INITIAL ETHICAL AND LEGAL ISSUES FACING A NEW FIRM 236
Establishing a Strong Ethical Culture for a Firm 237
Choosing an Attorney for a Firm 241
• SAVVYENTREPRENEURIALFIRM: Skype: Demonstrating a Strong
Moral Fortitude by Proactively Responding to a Crisis 242
Drafting a Founders' Agreement 243
Avoiding Legal Disputes 244
• WHATWENTWRONG? HowLegal Snafus Can Stop
a Business in Its Tracks 245
• PARTNERINGFOR SUCCESS: Patagonia and Build-A-Bear
Workshop: Picking Trustworthy Partners 248
OBTAINING BUSINESS LICENSES AND PERMITS 249
Business Licenses 249
Business Permits 250
CHOOSING A FORM OF BUSINESS ORGANIZATION 250
Sole Proprietorship 251
Partnerships 253
Corporations 254
Limited Liability Company 257
Chapter Summary 258 I Key Terms 259 I Review Questions 259
Application Questions 260 I You Be the VC 7.1 262 I You Be
the VC 7.2 263 I Case 7.1 264 | Case 7.2 266
ENDNOTES 268
Appendix 7.1 269
Chapter 8 Assessing a NewVenture's Financial Strength
andViability 273
Opening Profile—BLMA Models: Keeping a Sharp Eye on Cash Flow
from the Start 273
INTRODUCTION TO FINANCIAL MANAGEMENT 275
Financial Objectives of a Firm 275
The Process of Financial Management 276
• PARTNERINGFOR SUCCESS: Organizing Buying Groups to Cut
Costs and Maintain Competitiveness 277
FINANCIAL STATEMENTS AND FORECASTS 278
Historical Financial Statements 279
• SAVVYENTREPRENEURIALFIRM: Knowthe Facts Behind
the Numbers 282
Forecasts 287
PRO FORMA FINANCIAL STATEMENTS 291
• WHATWENTWRONG?: B2B Exchanges: AFalse Hope for Cost
Savings? 292
Pro Forma Income Statement 293
Pro Forma Balance Sheet 294
Pro Forma Statement of Cash Flows 295
Ratio Analysis 297
10 CONTENTS
Chapter Summary 298 I Key Terms 298 I Review Questions 298
Application Questions 299 I You Be the VC 8.1 301 I You Be
the VC 8.2 301 I Case 8.1 302 I Case 8.2 304
ENDNOTES 306
Chapter 9 Building a New-Venture Team 309
Opening Pr of i l e—UNIGO: Hi t t i ng t he Ground Running 309
(
CREATING A NEW-VENTURE TEAM 311
• WHATWENTWRONG? Monitor 110: Howa Lack of Consensus
and a Clear Leader Can Damage a New-Venture Team 312
The Founder or Founders 313
• SAVVYENTREPRENEURIALFIRM: Overcoming a Lack
of Business Experience 315
Recruiting and Selecting Key Employees 316
The Roles of the Board of Directors 318
ROUNDING OUT THE TEAM: THE ROLE OF PROFESSIONAL
ADVISERS 320
Board of Advisers 321
• PARTNERINGFOR SUCCESS: Need Help with Product
Development? Consider Setting Up a Customer
Advisory Board 322
Lenders and Investors 323
Other Professionals 325
Chapter Summary 326 I Key Terms 327 I Review Questions 327
Application Questions 328 I You Be the VC 9.1 330 I You Be
the VC 9.2 331 I Case 9.1 331 I Case 9.2 334
ENDNOTES 336
Chapter 10 Getting Financingor Funding 339
Opening Profi l e—Bi zooki : Raising Money Through
a Variety of Sources 339
THE IMPORTANCE OF GETTING FINANCING OR FUNDING 340
Why Most New Ventures Need Funding 341
Sources of Personal Financing 342
• WHATWENTWRONG? Webvan: HowHaving Too Much Money
Can Be Just as Harmful as Having Too Little 343
Preparing to Raise Debt or Equity Financing 345
SOURCES OF EQUITY FUNDING 348
• PARTNERINGFOR SUCCESS: Want Help Navigating the Process
of Raising Money? Find a Mentor 349
Business Angels 349
Venture Capital 351
Initial Public Offering 353
SOURCES OF DEBT FINANCING 354
Commercial Banks 355
SBA Guaranteed Loans 355
Other Sources of Debt Financing 356
• SAVVYENTREPRENEURIALFIRM: John and Caprial Pence: How
the SBAGuaranteed Loan ProgramHelped Two Entrepreneurs
Get the Financing They Needed 357
CREATIVE SOURCES OF FINANCING AND FUNDING 358
Leasing 358
SBIR and STTR Grant Programs 358
CONTENTS 11
Other Grant Programs 360
Strategic Partners 360
Chapter Summary 361 I Key Terms 362 I Review Questions 362
Application Questions 363 I You Be the VC 10.1 365 I You Be
the VC 10.2 365 I Case 10.1 366 I Case 10.2 369
ENDNOTES 371
PART 4 • Managing and Growing an Entrepreneurial Firm 375
Chapter 11 Unique Marketing Issues 377
Opening Profi l e—Mi ss Mi sa: Creating a New Brand in t he
Jewelry Industry 377
SELECTING A MARKET AND ESTABLISHING A POSITION 378
Segmenting the Market 379
Selecting a Target Market 380
Establishing a Unique Position 381
KEY MARKETING ISSUES FOR NEW VENTURES 382
Selling Benefits Rather Than Features 383
Establishing a Brand 384
THE 4Ps OF MARKETING FOR NEW VENTURES 386
• WHATWENTWRONG? Quaker Oats' Botched Acquisition of
Snapple:The Price of Failing to Understand the Real Meaning
of a Company's Brand 387
Product 388
Price 389
Promotion 391
• PARTNERINGFOR SUCCESS: Sofia's Diary: Building Awareness
of Major Brands Among a Key Segment of Young Consumers
Through a Multichannel Campaign 392
Place (or Distribution) 396
• SAVVYENTREPRENEURIALFIRM: Utilizing Guerrilla Marketing
Techniques to Create Product Awareness in Entertaining,
Clever, and Effective Ways 397
Chapter Summary 399 I Key Terms 400 I Review Questions 400
Application Questions 401 I You Be the VC 11.1 402 I You Be
the VC 11.2 403 I Case 11.1 404 I Case 11.2 406
ENDNOTES 408
Chapter 12 The Importance of Intellectual Property 411
Opening Profile—Ecovative Design: The Key Role of Intel l ectual
Property in Its Early Success 411
THE IMPORTANCE OF INTELLECTUAL PROPERTY 413
Determining What Intellectual Property to Legally Protect 415
The Four Key Forms of Intellectual Property 415
• WHATWENTWRONG? Dippin' Dots: Why the USPTOInvalidated
Its Patent and It NowHas Two NewCompetitors 416
PATENTS 417
Types of Patents 418
Who Can Apply for a Patent? 419
The Process of Obtaining a Patent 420
• PARTNERINGFOR SUCCESS: Entrepreneurs and Large Firms:
Partnering to Bring Patented Products to Market 422
Patent Infringement 422
12 CONTENTS
TRADEMARKS 423
The Four Types of Trademarks 424
What Is Protected Under Trademark Law? 425
Exclusions from Trademark Protection 426
The Process of Obtaining a Trademark 426 *
COPYRIGHTS 428
What Is Protected by a Copyright? 428
t
Exclusions from Copyright Protection 429
How to Obtain a Copyright 429
Copyright Infringement 430
Copyrights and the Internet 431
TRADE SECRETS 431
• SAVVYENTREPRENEURIALFIRM: Protecting Intellectual
Property: Elvis's Memory, and Intellectual Property,
Live On 432
What Qualifies for Trade Secret Protection? 433
Trade Secret Disputes 433
Trade Secret Protection Methods 434
CONDUCTING AN INTELLECTUAL PROPERTY AUDIT 435
Why Conduct an Intellectual Property Audit? 436
The Process of Conducting an Intellectual Property Audit 436
Chapter Summary 437 I Key Terms 438 I Review Questions 438
Application Questions 439 I You Be the VC 12.1 441 I You Be
the VC 12.2 441 I Case 12.1 442 I Case 12.2 444
ENDNOTES 446
Chapter 13 Preparing for and Evaluatingthe Challenges of Growth 449
Opening Profile—JGoods: Preparing for Growth Cautiously 449
PREPARING FOR GROWTH 451
Appreciating the Nature of Business Growth 451
Staying Committed to a Core Strategy 453
• WHAT WENT WRONG? Meetro: Sometimes Businesses Just Don't
Scale 454
Planning for Growth 455
REASONS FOR GROWTH 456
MANAGING GROWTH 458
• SAVVYENTREPRENEURIALFIRM: Timbuk2: Bagging the Right
Customers Rather Than the Biggest Ones 459
Knowing and Managing the Stages of Growth 459
CHALLENGES OF GROWTH 462
Managerial Capacity 462
Day-to-Day Challenges of Growing a Firm 464
• PARTNERINGFOR SUCCESS: Zazzle: Addressing the Managerial
Capacity Problemby Leveraging the Resources of MySpace 465
Chapter Summary 466 I Key Terms 467 I Review Questions 467
Application Questions 468 I You Be the VC 13.1 470 I You Be
the VC 13.2 471 I Case 13.1 471 I Case 13.2 474
ENDNOTES 476
Chapter 14 Strategies for FirmGrowth 479
Opening Profile—University Parent Media: Gradually Pursuing
Additional Strategies for Growth 479
INTERNAL GROWTH STRATEGIES 480
CONTENTS 13
New Product Development 481
Other Product-Related Strategies 483
• WHATWENTWRONG? Sock Shop: HowFocusing More on Growth
Than Profitability and Creating Value Sank a Popular Retail
Chain 484
International Expansion 486
EXTERNAL GROWTH STRATEGIES 489
Mergers and Acquisitions 491
Licensing 493
• SAVVYENTREPRENEURIALFIRM: Honest Tea: Accelerating
Its Growth and Mission Through Being Acquired by Coca-
Cola 494
Strategic Alliances and Joint Ventures 496
• PARTNERINGFOR SUCCESS: Zlio.com: 250,000 Partners and
Growing 498
Chapter Summary 499 I Key Terms 500 I Review Questions 500
Application Questions 501 I You Be the VC 14.1 503 I You Be
the VC 14.2 503 I Case 14.1 504 I Case 14.2 506
ENDNOTES 508
Chapter 15 Franchising 511
Opening Profile—College Nannies &Tutors: Franchising as a Form
of Business Ownership and Growth 511
WHAT IS FRANCHISING AND HOW DOES IT WORK? 513
What Is Franchising? 513
How Does Franchising Work? 514
ESTABLISHING A FRANCHISE SYSTEM 516
• PARTNERINGFOR SUCCESS: Boosting Sales and Reducing
Expenses Through Co-branding 517
When to Franchise 518
Steps to Franchising a Business 518
Selecting and Developing Effective Franchisees 520
Advantages and Disadvantages of Establishing
a Franchise System 520
BUYING A FRANCHISE 523
• SAVVYENTREPRENEURIALFIRM: Franchise Systems That
Operate Strictly Online 524
Is Franchising Right for You? 525
The Cost of a Franchise 525
Finding a Franchise 527
Advantages and Disadvantages of Buying a Franchise 528
Steps in Purchasing a Franchise 529
Watch Out! Common Misconceptions About Franchising 531
LEGAL U.S. ASPECTS OF THE FRANCHISE RELATIONSHIP 532
U.S. Rules and Regulations 532
State Rules and Regulations 533
MORE ABOUT FRANCHISING 535
Franchise Ethics 535
International Franchising 536
• WHATWENTWRONG? Watch Out: Plenty Can Go Wrong in
Opening Franchise Outlets Overseas 538
The Future of Franchising 539
14 CONTENTS
Chapter Summary 539 I Key Terms 541 I Review Questions 541
Application Questions 542 I You Be the VC 15.1 544 I You Be
the VC 15.2 544 I Case 15.1 545 I Case 15.2 547
ENDNOTES 550
Case Appendix 553 \
Case 1 San Francisco Coffee House: An American-Style Franchise in Croatia 553
Case 2 E+CO: A Tipping Point for Clean Energy Entrepreneurship (A) 560
Case 3 Cineplex Entertainment: The Loyalty Program 574
Case 4 Williams Coffee Pub: The Franchising Opportunity 584
Case 5 The Career Choi ce of Ms. Linlin Chen 58 6
Glossary 591
Name Index 601
Subject Index 603
Company Index 607
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