Entrepreneurship - Key Terms

Question	Answer
Entrepreneurs	A person who assumes the risks of organizing and managing a business for the sake of potential rewards.
Product	Something that exists in nature or is made by human beings. It is tangible, meaning that it can be physically touched.
Service	Labor or expertise exchanged for money. It is intangible. You cannot actually touch it.
Free Enterprise System	Economic system in which businesses are privately owned and operate relatively free of government interference.
Capitalism	The free-market system; characterized by individuals and companies competing for economic gains, private property ownership and wealth; free-market forces determine prices.
Capital	Money or property owned or used in business.
Voluntary Exchange	A transaction between two parties who agree to trade money for a product or service.
Salary	Fixed amount of money paid to an employee at regular intervals.
Wage	Fixed payment per hour for work performed.
Dividend	Each stockholder's portion of the profit-per-share paid out by a corporation. Must be paid to all shareholders.
Commission	A percentage of a sale paid to a salesperson or employee.
Cost/Benefit Analysis	A decision making process in which the costs of taking an action are compared to the benefits.
Opportunity Cost	The value of what must be given up in order to obtain something else.
Social Entrepreneurship	A for-profit enterprise that has the dual goals of achieving profitability and attaining social returns. 1. Adopting a mission to create and sustain social value (not just private) 2. Recognizing and relentlessly pursuing new opportunities to serve that mission. 3. Engaging in a process of continuous innovation, adaptation, and learning. 4. Acting bolding without being limited by resources currently in hand. 5. Exhibiting heightened accountability to the constituencies served and for the outcomes created.
Venture Philanthropy	A subset or segment of social entrepreneurship wherein financial and human capital are invested in not-for-profits by individuals and for-profit enterprises with the intention of generating social rather than financial returns on their investments.
Green Entrepreneurship	Enterprise activities that avoid harm to the environment or help to protect it in some way.
5 Basic Ways that Entrepreneurs find opportunities to create new businesses	1. Use a new technology to produce a new product. 2. Use an existing technology to produce a new product. 3. Use an existing technology to produce an old product in a new way. 4. Find a new source of resources (that might enable the entrepreneur to produce a product more cheaply). 5. Develop a new market for an existing product.
How do entrepreneurs create business ideas?	1. Listen: Entrepreneurs can get ideas about improving a business or starting a new one. Create a business idea by listening. Describe how you got the idea. 2. Observe: By constantly keeping their eyes open, entrepreneurs get ideas about how to help society, about businesses they could start, and about what consumers need. Create a business idea by observing. Describe how you got the idea. 3. Think: When entrepreneurs analyze a problem, they think about solutions. What product or service could solve that problem? Create a business idea by thinking about a problem. Describe how you got the idea.
SWOT Analysis	1. Strength All the capabilities and positive points that the entrepreneur has, from experience to contacts. These are internal to the organization. 2. Weaknesses All of the negatives that the entrepreneur faces, such as lack of capital or training, or inability to set up a workable accounting system. These are internal to the organization. 3. Opportunities Any positive external event or circumstance (including lucky breaks) that can help the entrepreneur get ahead of the competition. 4. Threats Any external factor, event, or circumstance that can harm the business, such a competitors, legal issues, or a declining economy.
Four Characteristics of a Business Opportunity	1. It is attractive to customers. 2. It will work in your business environment. 3. It can be executed in the window of opportunity that exists. 4. You have the resources and skills to create the business, or you know someone who does and who might want to form the business with you.
The Five Roots of Opportunity in the Marketplace	1. Problems that your business can solve. 2. Changes in laws, situations, trends. 3. Inventions of totally new products or services 4. Competition If you can find a way to beat the competition on price, location, quality, reputation, reliability, or speed, you can create a very successful business with an existing product or service. 5. Technological Advances Scientists may invent new technology, but entrepreneurs figure out how to use and sell it.
Franchise	A business that markets a product or service developed by a franchisor, typically in the manner specified by the franchisor.
Acquisiton	The purchase of a business
Due Diligence	The exercise of reasonable care in the evaluation of a business opportunity. • The process used to learn about the business's true financial condition. • The challenge is to complete an in-depth analysis of the opportunity
Gazelle	A company that achieves an annual growth rate of 20 percent or greater, typically measured by increase of sales revenue. • Gazelles are financed by a combination of found resources plus significant outside assistance. • They rely heavily upon external financial support and counsel.
Mircoenterprises	A firm with five or fewer employees, initial capitalization requirements of under $35,000, and the consistent operational involvement of the owner.
Lifestyle Business	A microenterprise that permits its owners to follow a desired pattern of living, such as supporting college costs or taking vacations.
Profit	Amount of money remaining from the revenue of a business after all costs are deducted.
Trade-off	The act of giving up one thing or another

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