Typical Entrepreneur

1. Briefly outline the key characteristics of a typical entrepreneur. Which of these

characteristics do you think are most important? Why? (5 points)

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Bill Hudson was a real craftsman when it came to being a machinist. Bill had learned almost everything he knew from Hugo Huffman, his first and only employer. Bill Hudson was married and had three young children. He was 33 years old and had worked for Hugo ever since he finished his tour in the Army. In 12 years, Bill had polished his skills under the watchful and critical eye of Hugo Huffman. Hugo was quick to recognize Bill’s talent for the trade. Bill had a positive learning attitude and displayed a drive for perfection that Hugo admired.

Hugo’s Machine Shop was a successful small business. Its success was primarily based on the reputation for quality that had been established over its 42 years in operation. Hugo had come to this country with his new wife, Hilda, in his late twenties. Now the business was a success, but Hugo remembered the early years when he and Hilda had to struggle. Hugo wanted the company to continue to produce the highest quality craftsman products possible. On a Friday evening, he called Bill into his office at closing time, poured him a cup of half-day-old coffee, and began to talk with him about the future.

“Bill, Hilda and I are getting old, and I want to retire. It has been 42 years of fun, but these old hands need a rest. In short, Hilda and I would like you to buy the business. We both feel that your heart is in this craft and that you would always retain the quality that we have stood for.” Bill was taken back by the offer. He, of course, knew Hugo was getting older, but had no idea Hugo would retire. Bill and his wife, Anna, had only $4,200 in the bank. Most of Bill’s salary went for the typical costs of rearing three children. Hugo knew Bill did not have the money to buy the business in cash, but he was willing to take a portion of the profits for the next 15 years and a modest initial investment from Bill.

For the past four years, Bill had made most of the technical decisions in the shop. Bill knew the customers and was well respected by the employees. He had never been involved in the business side of the operation. He was a high school graduate but had never taken business courses. Hugo told Bill that even after deducting the percentage of the profits he would owe under the sales agreement, he would be able almost to double his annual earnings. Bill would have to take on all the business functions himself because Anna had no business training either.

2a. Which entrepreneurial characteristics does Bill have that may be important to his

 

 

success? Which characteristic could lead to his failure? (5 points)

2b. What steps should Bill take to avoid the pitfalls common to a small business? (5 points)

Andrew Sycamore has spent more than ten years in the human resources department of a large management consulting company. During his tenure, he was often put in charge of training new recruits, where he arranged for various company managers to address the recruits and teach them skills important in the workplace. What Andy had noticed was the one skill that was often the hardest to teach involved problem identification and problem-solving. Even the best recruits from well-known universities found it hard to assess a situation to determine the problem and how to develop solutions. In his heart, Andy was an entrepreneur, and he was dying to quit his corporate job and be his own boss. He was convinced there was a business opportunity in developing an interactive, online problem identification and problem-solving tool.

Andy’s idea, which he titled “Nested Learning,” involved software that included a screen where a scenario was presented to the user, and the user was asked first to identify the problem and then develop solutions for it. What was unique about “Nested Learning” was that the initial scenario was specifically written so as not to be sufficient enough to generate a problem. In other words, the user (or the trainee) had to ask the software questions that would be responded with additional facts about the situation. Andy argued that problem solvers don’t get all the facts handed to them initially and that they had to “tease” more out of the situation to identify the problem.

Andy’s idea was to develop a software prototype with a small number of generic scenarios. He then hoped to meet with training managers of different companies and “sell” them the idea of using “Nested Learning” as a better training tool. Once a client agreed to use it, Andy would then work with the client to develop client-specific scenarios.

3a. What is the value proposition of “Nested Learning?” Is it compelling? (5 points)

3b. How important is a prototype for Andy Sycamore to succeed with his “Nested Learning?” (5 points)

Copreneurs Ed and Yolanda recently opened a vintage used car lot called Cherry Lane. They sell antique and collectible cars on consignment for the owners at a fee of 30 percent of the selling price. The price is further reduced by 10 percent if a particular vehicle is not sold within the first 30 days. One of the first customers convinced Yolanda that this was the only fair thing to do and provided something for “the cost-conscious buyer,” she offered what she thought was excellent customer service and implemented the idea. Ed and Yolanda feel Cherry Lane has an ideal location. It is located adjacent to the city’s baseball stadium, alongside the freeway in the center of all the other car dealerships. Although Cherry Lane has significant foot traffic, most people never make offers to buy. To increase sales, Ed and Yolanda are working on a new marketing strategy that they believe should be quite different from the “shotgun” approach they have been using over the last few

 

 

months. 4a. What is a competitive advantage? Does Cherry Lane have one? If so, what is it? (5

points)

4b. How would you characterize Cherry Lane’s strategy? Is this strategy appropriate? (5 points)

Entrepreneurs create minimal viable products to test a product with real customers as quickly as possible. Testing a product this way helps determine whether consumers really want the product, provides feedback from these customers to help improve the product and gathers hard data that demonstrates the proof of concept many investors want before they fund an emerging business.

Judson Aikens wanted to start a business but had a good-paying job and was concerned about taking on too much risk. While brainstorming about possible businesses he could launch, Aikens came up with an idea for a new dating app. He had observed that it is easy to meet new people at places like dog parks.

Aikens’s idea was to develop an app called RendezWoof (www.rendezwoof.com) that created a virtual dog park. “The app would not only connect dog owners with each other, but it would also connect them with dog-friendly resources around them,” says Aikens. “Using GPS, the app’s map would populate restaurants with patios and parks convenient to users interested in meeting up to grab a beer or throw a Frisbee.”

Aikens reached out to an entrepreneur, Ben Dolgoff, who had spoken to one of the entrepreneurship classes he had taken in graduate school. Ben was an experienced app developer who had developed and launched several successful apps. After asking Ben to sign a nondisclosure agreement, Aikens shared his idea. Ben said he thought the app had promise as a commercially viable product. He suggested that Aikens develop some designs for his idea and then get back with him. Ben said he might be willing to develop the app in exchange for some equity in the new business if the idea had promise.

Aikens shared his app idea with a friend who was a graphic designer. She was eager to help him with the designs and was willing to provide ongoing graphic design services in exchange for equity.

The next step was for Aikens to work with the graphic designer to develop a wireframe of the app. A wireframe is a drawing of the various screens that make up an app; it includes the kinds of information displayed, the functions of the app, and the basic flow from screen to screen.

Aikens took the wireframe designs to Ben, who was eager to move forward.

“This arrangement was very acceptable to me,” says Aikens. “It simultaneously removed the financial burden of development and provided an experienced go-to consultant I could work with through the life of the app.”

Aikens formed an LLC and secured the RendezWoof name on all social platforms and for the Web domain. He opened an Apple developer account and applied for copyrights and

 

 

trademarks. Because he is still working his day job, Aikens spends many late nights working with the developers to improve the app’s user interface and user experience.

Because the goal of the initial version of the app is to gain users and prove the concept, RendezWoof initially offered the app for free through the Apple Store. Future versions of the app will have more features, and the company will charge a small fee for the app.

5a. Why would you recommend that an entrepreneur develop a minimal viable product or a prototype? (5 points)

5b. Can you think of additional market research that Aikens could have done before developing his product? (5 points)

5c. What are the advantages and disadvantages of offering equity in exchange for work done on a new product? (5 points)

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