Lecture Entrepreneurship: Chapter 2 - Zacharakis, Bygrave, Corbett

THE 
ENTREPRENEURI AL 
PROCESS
Chapt e r   2
Bygrave & Zacharakis, Entrepreneurship, 3rd Edition. New York: Wiley,
2014 ©


The Entrepreneurial Process
PERSONAL
Achievement 
Locus of control
Ambiguity tolerance Risk 
taking
Personal values Education 
Experience
Opportunity recognition

PERSONAL
Risk taking
Job dissatisfaction 
Job loss 
Education
Age 
Gender
Commitment
Resources

SOCIOLOGICAL
Networks 
Teams 

Parents 
Family
Role models 
Advisors

PERSONAL
Entrepreneur 
Leader 
Manager 
Commitment 
Vision

INNOVATION    TRIGGERING EVENT     IMPLEMENTATION

ENVIRONMENTA
L
Opportunities 
Role models 
Creativity

ENVIRONMENTA
L
Economy 
Competition 
Resources 
Incubator 
Government policy

Bygrave & Zacharakis,
Entrepreneurship,

3rd Edition.
New
York:
Wiley,
Zacharakis,
Bygrave & Corbett,
Entrepreneurship,
New
York:
Wiley,
2014
©
2017©

ORGANIZATIONAL
Team 
Strategy 
Structure 
Culture 
Products

 GROWTH

ENVIRONMENTAL
Competitors 
Customers 
Suppliers 
Investors 
Bankers 
Lawyers 

Resources
Governmental Policy
Economy

2


Entrepreneurship Defined
Entrepreneur: someone who perceives an opportunity and
creates an organization to pursue that opportunity.
Entrepreneurship involves all the functions, activities, and
actions associated with perceiving opportunities and creating
organizations to pursue them.
These include:
• Market and customer research
• Service and product innovation
• Team building
• Finding & managing resources
• Leadership

Bygrave & Zacharakis,
Entrepreneurship,
3rd Edition.
New
York:
Wiley,
Zacharakis,
Bygrave & Corbett,
Entrepreneurship,
New

York:
Wiley,
2014
©
2017©

3


Factors Influencing an Entrepreneur
Personal
Attributes

Higher internal locus of control

•

Desire for financial success

•

Desire to achieve self-realization

•

Desire for recognition

•

Joy of innovation

•

Environmental
Factors

• Local, regional, or national attitudes
• Social and cultural pressures for or
against risk taking
• Access to entrepreneurial role models
• Responsibilities to family and
community

Risk tolerance

•

Remember: No single type of person is best suited for entrepreneurship.
Entrepreneurs come from all walks of life!
Bygrave & Zacharakis,
Entrepreneurship,
3rd Edition.
New
York:
Wiley,
Zacharakis,
Bygrave & Corbett,
Entrepreneurship,
New
York:

Wiley,
2014
©
2017©

4


Ten D’s of Entrepreneurship
1.

Dream

6.

Devotion

2.

Decisiveness

7.

Details

3.

Doers

8.

Destiny

4.

Determination

9.

Dollars

5.

Dedication

10.

Distribute

Bygrave & Zacharakis,
Entrepreneurship,
3rd Edition.
New
York:
Wiley,
Zacharakis,
Bygrave & Corbett,
Entrepreneurship,
New
York:

Wiley,
2014
©
2017©

5


Before Committing, Entrepreneurs
Must
1.

2.

Assess their own financial reality
•

Live with little or no salary?

•

What external financial commitments are there?

Identify key contacts in their networks
•

3.

Take an inventory of the resources in one’s network

Reach out to sources of free advice and feedback
•

Who can help or advise?

Bygrave & Zacharakis,
Entrepreneurship,
3rd Edition.
New
York:
Wiley,
Zacharakis,
Bygrave & Corbett,
Entrepreneurship,
New
York:
Wiley,
2014
©
2017©

6


3 Crucial Components of Success
Uncertainty
Entrepreneur

Opportunity

Uncertainty

Fits & Gaps 
Business planning

Uncertainty

Resources

The Timmons Model
Bygrave & Zacharakis,
Entrepreneurship,
3rd Edition.
New
York:
Wiley,
Zacharakis,
Bygrave & Corbett,
Entrepreneurship,
New
York:
Wiley,
2014
©
2017©

7


Tenets of the Timmons Model

The Opportunity

1.

•

Is there a clear customer need?

•

Is the timing right: team ready, market ready?

•

Combine these factors with the execution of the business plan to make
an idea an opportunity

The Lead Entrepreneur and Management Team

2.

•.

Experience within the proposed industry?

•.

Investors prefer to see a track record of driving growth and profits

•.

An ‘A’ team with a ‘B’ idea is almost always better than the opposite

The Resources

3.

•.

Capital, technology, equipment, and most importantly – people
Low overhead, high productivity, and controlling, but not owning

•. & Corbett,
Bygrave & Zacharakis,
Entrepreneurship,
3rd Edition.
New
York:
Wiley,
Zacharakis,
Bygrave
Entrepreneurship,
New
York:
Wiley,
2014
©
2017©

8

Key Forms of Start Up Capital
Debt

No transfer of company
ownership
Potentially higher risk for the
entrepreneur
Requires repayment, and
therefore careful cash flow
planning

Equity

• Investors gain an ownership
stake
• Investor takes most risk, which
explains the costs and expected
returns
• No repayment, but requires
careful capital planning and
investment

Remember: Most companies will never take on outside investors,
and many will never use debt financing for growth.
Bygrave & Zacharakis,
Entrepreneurship,
3rd Edition.
New

York:
Wiley,
Zacharakis,
Bygrave & Corbett,
Entrepreneurship,
New
York:
Wiley,
2014
©
2017©

9


A Sample Financing Path
Personal Savings
& Sweat Equity

Angel
Investment
Bank & SBA
Loans

Initial Public
Offering
Bygrave & Zacharakis,
Entrepreneurship,
3rd Edition.
New

York:
Wiley,
Zacharakis,
Bygrave & Corbett,
Entrepreneurship,
New
York:
Wiley,
2014
©
2017©

Venture
Capital
10


Happiness is a Positive Cash
Flow!
Understand the difference between profits and cash flow:
1.

2.

3.

•

Profitable companies can have negative cash flows and risk running out
of money

•

Unprofitable companies can have positive cash flows and be on healthy
trajectories

Profit is measured as a gain or loss on the income
statement, but…
•

Doesn’t accurately reflect the cash inflows and outflows of the company

•

Some cash dealings impact cash flow but not profits. Example: loan
repayments

Cash flow measures the flow of cash during a given
timeframe
•

It’s comprised of three elements: operations, investing and financing

Bygrave & Zacharakis,
Entrepreneurship,
3rd Edition.
New
York:
Wiley,
Zacharakis,

Bygrave & Corbett,
Entrepreneurship,
New
York:
Wiley,
2014
©
2017©

11


Nine F’s for Entrepreneurial Success
1.

Founders

5.

Forever-innovating

2.

Focused

6.

Flat

3.

Fast

7.

Frugal

4.

Flexible

8.

Friendly

9.

Fun

Bygrave & Zacharakis,
Entrepreneurship,
3rd Edition.
New
York:
Wiley,
Zacharakis,
Bygrave & Corbett,
Entrepreneurship,
New
York:

Wiley,
2014
©
2017©

12