ENTREPRENUERIAL POWER - MICROFINANCE

MICROFINANCE
- is a source of financial services for entrepreneurs and small businesses lacking access to
banking and other related services.
- For others microfinance is a movement whose object is "a world in which as many poor and
near poor households as possible have permanent access to an appropriate range of high
quality financial services, including not just credit but also savings, insurance, and fund
transfers

History of Microfinance
- the history of microfinance can be traced back as far as the 1800s, when the theorist
Lysander Spooner was writting about the benefits of small credits of entrepreneurs and
farmers as a way of getting the people out of poverty
- The modern use of the expression "microfinancing" has roots in 1970s when organizations
such as Grameen Bank of Bangladesh with the microfinance pioneer Muhammad Yunus

2 TYPES OF MICROFINANCE
Relationship - based banking for individual entrepreneurs and small businesses
Group-based models - several entrepreneurs come together to apply for loans and services as a
group
ENTREPRENEURIAL POWER POWER OF POSITIONING

Product positioning is the process marketers use to determine how to best communicate
their products' attributes to their target customers based on customer needs, competitive pressures,
available communication channels and carefully crafted key messages.

Customer Needs

- Effective product positioning requires a clear understanding of customer needs so that the right
communication channels are selected and key messages will resonate with customers. Product
positioning starts with identifying specific, niche market segments to target

Competitive Pressures

- Marketers must weigh competitive pressures when they are considering the positioning elements of
their marketing plans. Effective positioning conveys to consumers why this company's product or
service should be preferred over other competitive options based on what the company knows
about the target audience's needs. Effective marketing plans clearly identify how the company's
products or services are different from competitors' offerings and in what ways.

Factor in Current Trends

- Taking advantage of current trends for the use of your product positioning is an easy way to
keep up with the market and also attracting potential customers, this way you will gain
more competitive advantage among competitors
ENTREPRENEURIAL POWER - Entrepreneurial Tools and Environment

What is Entrepreneurial Environment?

Entrepreneurial Environment Refers to various facets within which and enterprise must operate.
It is also defined as combination of factors that play a role in entrepreneurial development.

Elements
Economic
Political
Social
Legal
Technological
Cultural
Characteristics of an Entrepreneurial Environment
Dynamic
Uncontrollable and external
Affects the business in varying degrees
Possess threats and offers opportunities

What is Entrepreneurial Tools?

It is the set of skills or abilities that an entrepreneur should possess.

An example of entrepreneurial tools are the:

Negotiation
Rapport and relationship
State management
Self-improvement
Networking and connection
Leadership
Risk taking
Persuasion and salesmanship
Listening skills
Life hacking
ENTREPRENUERIAL PROCESS OPPORTUNITIES OF A NEW BUSINESS

Entrepreneurial Process - Stage 1

Most authors agree that the initial stage in the entrepreneurial process is the identification and refining
of a viable economic opportunity that exists in the market Without the recognition of an opportunity the
entrepreneurial process is likely to result in failure
Opportunity recognition corresponds to the principal activities that take place before a business is formed
or structured. The opportunity identification stage can be divided into five main steps namely getting the
idea/scanning the environment, identifying the opportunity, developing the opportunity, evaluating
the opportunity and evaluating the team.

Getting the idea

There is a strong link between getting the initial idea and the starting of the new enterprise. An idea as
simply the conception of a possibility and a reflective method of evading, circumventing or surmounting
obstacles and challenges. The Oxford Dictionary defines an idea as 1. A thought or suggestion about a
possible course of action. Synonymous with idea are the terms thought, intention, scheme, suggestion,
proposal, initiative, spur, impulse, brainwave, insight, concept and connotation.
Since ideas are many, developing the idea into a market opportunity, implementing it and building a
successful business around it are the important aspects of entrepreneurship.
A market opportunity is a gap left in a market by those who currently serve it, giving a chance to others
to add unrealized value by performing differently from and better than competitors in order to create
new possibilities. The Oxford Dictionary defines opportunity as a favorable time or set of circumstances
for doing something. Synonymous with opportunity are chance, opening and prospect.
While business opportunities are detected from ideas, an idea is not synonymous with opportunity. The
difference between an idea and an opportunity is that an opportunity is the possibility of occupying the
market with a specific innovative product that will satisfy a real need and for which customers are willing
to pay. Successful venturing may well rest upon the ability to recognize or distinguish an opportunity from
an idea.
Opportunity identification
A theory of entrepreneurial alertness, describing it as the entrepreneurs ability to see, to discover and
exploit opportunities that others miss. This is a very difficult task, as most opportunities do not just appear
but rather result from an entrepreneurs alertness to possibilities.
Lists steps involved in opportunity identification to include scanning the informational environment, being
able to capture, recognize and make effective use of abstract, implicit and changing information from the
changing external environments. Opportunity identification is basically seeking out better ways of
competing.

Opportunity development
Having recognized the opportunity, timely adaptation of that opportunity to suit actual market need is
key to new venture success. Opportunity development as the process of combining resources to pursue
a market opportunity identified This involves systematic research to refine the idea to the most promising
high potential opportunity that can be transformed into marketable items.
 Opportunity evaluation
A critical element of the entrepreneurial process is the opportunity screening and evaluation. A
professional executed evaluation can tell whether the specific product or service has the returns needed
to justify the investment and the risk to be taken.
Evaluating the opportunity must answer the questions listed below.

Business factors and questions for opportunity evaluation

Business factor Questions for evaluation
Product or service Description of the product or service, its differentiator, purpose and the
need it fills
What competitive advantage / benefits does the product have?
What is the required customer care support for this product/service?
Is the company able to produce product and supply required aftercare
support?

Market opportunity Where is the market demand? What is the target market? Is it generic
or a niche?
Industry characteristics (growth rates, change, entry barriers).
What market share can the product reasonably expect today? In 2, 5 or
10 years?
Timing and length of the window of opportunity?
What competition exists in this market? Substitutes? How big is their
turnover?
How accessible are the desired distribution channels?

Costing and pricing How much will it cost to develop the product and commercialize it?
Where will the funds come from?
How do the pricing, costs and economies of scale compare with
competitors?
How easy is it to acquire equipment, skills and other inputs required?

Profitability Where is the money to be made in this activity? What are the gross
margins?
Would the return on investment be acceptable? What is the payback
period?
What are the cash flow patterns and the source of working capital?

Capital requirements How much capital (people, operating expense and assets) is required to
start?
What are the long-term capital needs?
 How much of the required capital is secured and where will the rest
come from?
What securities are available to guarantee the required funds?
Is there a list of potential funders? In case the funders withdraw their
capital?

Issues and risks What risks (real and perceived) are inherent with the product/service?
Industry based risks e.g. is the market on a decline?
Are there plans for surviving the death of the lead entrepreneur?
Unreliable forecasts? Inadequate cash flow?
Inability to grow with the demand or cope with shrinking sales?
Supplier and value chain management?

Assessment of the entrepreneurial team

Regardless of how right the opportunity may seem to be, it will not make a successful
business unless it is developed by a team with strong skills. Once the opportunity has been evaluated, the
next step is to ask pertinent questions about the people who would run the company. Such questions are
illustrated below:

Team factors and questions for opportunity evaluation

Business factor Questions for evaluation
Focus: Is the founder really an entrepreneur, bent on building a company?
Does the entrepreneur (or his team) have some experience (work or
industry)?
Do they really like this product/sector? Do they really want this?
Can the team create products to suit that market need?
How stressful is the opportunity for the team?

Selling: Does the team have the necessary selling and closing skills?

Management: Who will work full time? Do your managers represent competitive
advantage?
Does the team have the necessary management and technical skills?
If the required skills are not available, can they be acquired at
competitive rates?
How is their relationship with the entrepreneur, commitment and
motivation?

Ownership: Have the critical decisions about ownership and equity splits been
resolved?
Are the members committed to these?
 Does the owners have enough financial capital for required own
contributions?

Skills required for success in stage 1

From the 100 authors reviewed these skills below were identified as critical for this stage:
T/S = Technical skills
technical skills are a prerequisite as they provide entrepreneurs with the ability to identify opportunities
based on existing competence.
PC = Communication
the ability to interact with individuals from many different backgrounds, plus interpersonal skills such as
listening and persuasive communication as linked with success in the opportunity identification stage
PP = Problem solving
the abilities that are required for successful identification of a business opportunity include the capacity
to solve everyday problems.
PM = Motivation (need for achievement)
personal motivation as one of the key success actors for systematically scanning and spotting the market
opportunity.
PA = Adaptability to change
entrepreneurs who have adaptability to change have a higher probability of identifying opportunities.
PT = Time management skills
timing as crucial for identifying market opportunities.
BF = Financial management
opportunity identification is dependent on skills that
enable the nascent entrepreneur to accurately forecast financial estimates.
BH = Human resources
the entrepreneur must be able to evaluate the opportunity and how it fits with the skills of the team.
BM = Marketing
successful entrepreneurs have the abilities to identify niche markets, to identify the paying customers and
to analyze competitors.
BN = Networking
networking can facilitate successful opportunity identification as networks are pathways through which
the firm can access opportunities.
BP = Planning
Most successful entrepreneurs have skills that allow them to formulate strategic plans for
setting up the business
BR = Research and development
opportunity adaptability is linked to the firms intelligence-gathering efforts, which include gathering,
disseminating, sharing and acting on intelligence.
BI = ICT skills
ICT skills allow the entrepreneur to access critical knowledge about markets, opportunities and
businesses.
 EC = Creativity
creativity to be key for seeking business opportunities.
EI = Innovation
Innovation is considered key to the identification of opportunities.
EO = Opportunity recognition
the ability to detect, identify, select, evaluate and develop the right business opportunities is key for
success in this first stage. Successful entrepreneurs perceive
opportunities hidden to others.
EG = Ability to gather and control resources
the ability to identify resources needed to pursue the identified opportunity and to conceptualize how
the entrepreneur will secure these resources as
important
ER = Calculated risk taking
risk taking as a factor that influences the process of opportunity recognition and development. Identifying,
quantifying plus analyzing potential uncertainties and envisioned risks linked with each opportunity
identified is important for this stage.
Entrepreneurial Process Human, Finacial and Social Capital

Human capital is a term popularized by Gary Becker, an economist from the University of Chicago, and
Jacob Mincer that refers to the stock of knowledge, habits, social and personality attributes, including
creativity, embodied in the ability to perform labor to produce economic value.

Financial capital most commonly refers to assets needed by a company to provide goods or services, as
measured in terms of money value. Money raised from debt and equity issues is normally referred to
as capital. Economic capital is the estimated amount of money needed to cover possible losses from
unexpected risk
Sources
Debt - This is where someone gives you cash now in return for a fixed return later. Many
entrepreneurs use loans from family members or their credit cards to get started. Others may
prefer to get bank loans and Federal government assistance from the Small Business
Administration. They only need to pay back the interest, and eventually the principal. They don't
have to share the profits (or losses). As these businesses continue to grow, they become large
enough to issue individual bonds to investors.
Equity - This is cash that is given now for a share of the profits later. Most entrepreneurs
owners use their own cash to get started. They put their own equity into the business in hopes
of receiving 100 percent of the return later. If the company is profitable, they forgo spending
some of the cash flow now, and instead invest it in the business.
Specialty Capital - This is extra cash flow that comes from managing the company's operations
better. Vendor financing is when the company's suppliers are willing to accept delayed payment
for their goods or services. Supply chain financing is like a pay-day loan for businesses. Banks
lend the company the amount of an invoice (minus a fee), and accept payment when the invoice
is paid. Company finance managers can also create extra capital through investing wisely.

Social capital is a form of economic and cultural capital in which social networks are central,
transactions are marked by reciprocity, trust, and cooperation, and market agents produce goods and
services not mainly for themselves, but for a common good.
Two Forms of Social Capital
Bonding social capital is social capital that arises from the connections formed by homogeneous
groups, such as employees within a single company or enthusiasts of a specific hobby.

Bridging social capital, by contrast, results when members of different groups forge connections
to share ideas and informant.

Entrepreneurial Process - Process of Starting a New Venture

Phase I: Discovery -- identifying opportunities and shaping them into business concepts;

Phase II: Feasibility analysis and assessment;

Phase III: Creating your business plan;

Phase IV: Launching your business;

Phase V: Growing your business;

Phase VI: Exiting your business -- from succession planning to IPOs.