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TYPES OF LEGAL
STRUCTURE

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 Owned by one person and it is easy to form and offers complete

control to the owner. They also own all the assets of the business and
the profits generated by it.
 As a sole proprietor you can operate any kind of business as long as
you are the only owner. It can be full-time or part-time work. This
includes operating a:
• Shop or retail trade business
• Large company with employees
• Home-based business
• One-person consulting firm

ADVANTAGES:
 There are minimal costs and requirements in the formation.
 The owner can withdraw the assets and profits of the business anytime at his
or her own discretion.
 Decision making is solely in the hands of the owner.
 The duration of the life of business solely depends on its owner.

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DISADVANTAGES:
 Resources are limited as the capital is provided
only by the owner.
 The liability of the owner is unlimited as he or she
is accountable to all creditors of the business.
 Infusion of knowledge in the management of the
business is limited to one person only, which is
the owner.

WHERE TO REGISTER A SOLE PROPRIETOR BUSINESS?

1. Department of Trade and Industry

2. Local Government Units where your business is located:
• Barangay
• Mayor’s Office
3. Bureau of Internal Revenue
4. If you have employees, you need to register to the following:
• Social Security System
• Philippine Health Insurance Corporation
• Home Development Mutual Fund

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PARTNERSHIP

 Two or more people share ownership of a

single business. Each person contributes
money, property, labor or skill, and expects to
share in the profits and losses of the business.

 The partners should have a legal agreement

that sets forth how decisions will be made,
profits will be shared, disputes will be
resolved, how future partners will be admitted
to the partnership, how partners can be bought
out, or what steps will be taken to dissolve the
partnership when needed.

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GUIDELINES:
If you plan on going into business with a partner,
a written partnership agreement is a crucial
document to protect both of you. It's best practice
to have a partnership agreement in place. A
partnership agreement is a document that you
and your partner(s) create to clearly lay out each
partner's duties and liabilities, the percentage of
profits each is entitled to, and other aspects of
creating a business together. Without this
document, minor misunderstandings can erupt
into major disputes, which can be devastating to
your business.

TYPES OF PARTNERSHIP

1. GENERAL PARTNERSHIP
Partners divide responsibility for management and liability, as well as the
shares of profit or loss according to their internal agreement. Equal shares
are assumed unless there is a written agreement that states differently.

2. LIMITED PARTNERSHIP AND PARTNERSHIP WITH LIMITED LIABILITY

“Limited” means that most of the partners have limited liability (to the extent
of their investment) as well as limited input regarding management decision,
which generally encourages investors for short term projects, or for
investing in capital assets. This form of ownership is not often used for
operating retail or service businesses. Forming a limited partnership is
more complex and formal than that of a general partnership.

3. JOINT VENTURE
Acts like a general partnership, but is clearly for a limited period of time or a
single project. If the partners in a joint venture repeat the activity, they will
be recognized as an ongoing partnership and will have to file as such, and
distribute accumulated partnership assets upon dissolution of the entity.

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ADVANTAGES
 There are minimal costs and requirements in the formation.
 There are more funds contributed from the investment of the partners.
 There is infusion of more knowledge, experience, and skills, from two or more partners.
 There can be division of labor between or among partners.

DISADVANTAGES
 The partners are liable for actions of each partner as a result of mutual agency.
 A general partner has unlimited liability if the other partners are limited partners or are
insolvent.
 Disagreement between partners can lead to the withdrawal of one or more partners.
 The death, retirement, withdrawal, or incapacity of a partner results in the dissolution of the
partnership.
 Admission of a new partner depends upon the approval of the other partners.

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EXAMPLES
 Pottery Barn & Sherwin-Williams - the two brands created an exclusive product line of paints,
and then added a new section of Pottery Barn’s website that helped customers easily select
paint colors to complement their furniture choices.

EXAMPLES
 Bonne Belle & Dr. Pepper - Dr. Pepper-flavored lip balm. Bonne Belle forged their first flavor
partnership with the timeless Dr. Pepper brand.

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EXAMPLES
 Uber & Spotify - when riders are waiting for an Uber ride, they’re prompted to connect with
Spotify and become the DJ of their trip. Users can choose from their own playlists to
determine what they’ll listen to.

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Corporation is a business that has a life on its own

(business entity concept) which means that it can
represent itself to other personalities, can be taxed and
sued, and can enter to contractual agreements.

It is managed by a Board of Directors elected by the

shareholders among themselves which is why
corporations cannot be dissolved easily when
ownership changes.

ADVANTAGES
 The stockholders only have limited liability, as their liability extends only up to the amount of
their capital investment.
 A corporation has continuous existence as its life is indefinite.
 There is more infusion of funds from the stockholders or investors.
 Shares of stocks can be transferred without the consent of other shareholders.
 Management of the corporation is vested upon its board of directors.

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DISADVANTAGES
 A corporation entails many requirements and is more costly than a partnership.
 The government exercises strict control over corporations and imposes high taxes.
 Shareholders have little or no participation in the management of the corporation.
 Distribution of net income depends upon the declaration of dividends by the board of directors.
 In large corporations, there is formal or impersonal relationship between employees and
management due to the big number of employees. Hence, chances of creating a personal and
friendly atmosphere in the corporate setting are minimal.

EXAMPLES
 SM Investments Corporation - also known as SM Group, is a Philippine conglomerate with
interests in shopping mall development and management, retail, real estate development,
banking, and tourism.

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EXAMPLES
 San Miguel Corporation - It is the Philippines' largest corporation in terms of revenue, with
over 24,000 employees in over 100 major facilities throughout the Asia-Pacific region through
its highly integrated operations in food and beverages, packaging, fuel and oil, power, and
infrastructure.

EXAMPLES
 Ayala Corporation - is a holding company that is mainly in the businesses of real estate
development, banking and financial services, telecommunications, electronics and information
technology, water infrastructure development and management, and business process
outsourcing, and new investments in power, renewable energy, and transportation
infrastructure.

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HOW TO REGISTER CORPORATION?

 Reserve and register business name in SEC (Security and Exchange
Commission) - complete and sign all required documents: Articles of
Incorporation, By-Laws, Treasurer’s Affidavit, Joint Affidavit of Two
Incorporators. All documents need to be notarized.
 Acquire Barangay Clearance - Submit the following together with your
Barangay clearance: Certificate of Business Registration from SEC, Two Valid
IDs, Proof of Address
 Acquire Business Permit from Mayor’s Office – Submit the same
requirements in acquiring barangay clearance to the municipal office where
the business is located.
 Register with BIR (Bureau of Internal Revenue) - Request for a copy of BIR
Form 1903 (Application for Registration of Partnership or Corporation).
Submit the following together with your completed business permit,
barangay clearance, business permit from mayor’s office. Pay all applicable
fees and register your book of accounts and receipts. Claim your Certificate
of Registration.

COOPERATIVES

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According to the International Co-Operative

Alliance (ICA), cooperative or co-op is an
autonomous association united to reach their
common economic, social and cultural
necessities and aspirations through a jointly-
owned and democratically controlled
enterprise.

HOW IT WORKS:
 Members are the workers
 Members are the consumers
 Sometimes Services is only limited to its members
 Could also be open to all, however, members have special incentives
 Community focus & values:
1. Democracy 4. Self-help
2. Self-responsibility 5. Equity
3. Equality 6. Solidarity

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CO-OP
OWNESHIP &
CONTROL
 Those who benefit from products or services of a co-op business owns the
cooperative business.
 The member-owners of a co-op have a say in how it would run. Equity and
equality are among the founding principles of a co-operative, each member-
owner of a co-op gets one vote.
 Cooperatives often elect a board of directors. The responsibilities of this includes
ensuring that the co-op is working towards achieving its mission, setting up
operational policies and hiring any outside managers or employees.
 The members of the board are members of the co-op itself. They are elected by
member votes.

7 COOPERATIVE PRINCIPLES:
 International Co-Operative Alliance in 1995
 Based on Rochdale principles

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5 TYPES OF COOPERATIVE
 Worker co-ops: These are owned by the people who work for the company. They contribute by labor and working
for the organization.
 Producer co-ops: Owned by producers of goods who have joined together to sell their products more effectively
and to make the production process much efficient. Blue Diamond or Land O'Lakes are examples of this.
 Consumer co-ops: Owned by the customers who also purchase goods and services from the cooperative.
 Purchasing co-ops: Made up of small businesses that have merged to improve their purchase power, to get better
discounts and offers on products and services.
 Hybrid co-ops: Combination of any of the four stated types of co-op.

WHAT IS THE PURPOSE OF A CO-OP?

 The purpose of a cooperative is to realize the economic, cultural and social needs of the
organization’s members and its surrounding community.

CO-OPS ARE MOST LIKELY SEEN IN THE FOLLOWING AREAS:

Agriculture Education
Insurance Healthcare
Financial services Housing
Grocery Utilities

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IMPORTANCE
 The structure of a co-op means that its shares can be transferred from
one owner to another.
 From a social justice and democratic point-of-view, cooperatives matter
today because they help to rebalance power and dilute the concentration
of wealth.
 “one member, one vote”

 Access

 Business sustainability.

 Equality, diversity and inclusion.

 Financial security and advancement for workers.

 Democratic governance and empowerment.

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DISADVANTAGES
 Limited Capital
 Inefficient Management.
 Absence of Motivation
 Differences and Factionalism among Members
 Rigid Rules and Regulations

LIMITED LIABILITY
COMPANY

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Owners of an LLC are called members.

Taxation
 considered a "pass through entity" for tax purposes
 report their share of profits or losses on their individual income tax returns.

Liability
 limited liability

Formation
 filing fee worth $100-$800
 articles of the organization
 has operating agreements
• ownership interest for each member
• member rights and responsibilities
• member voting power

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Advantages
 limited liability

 loss of company will only be passed on to a member and taxed at individual level

 unlimited number or members

Disadvantages

 Often subject to additional taxes at the state level.

 Each member’s share of profit represents taxable income, even if
the profit wasn’t distributed.
 Limited life

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1. Business Structure 2. Trademark

It is an important decision to choose the right Selecting the business’ official name is important
business structure in starting up a business for this for this will be the identity of the business to the
will affect your level of personal liability, the industry which includes customers, investors,
amount of tax you pay, your control over the suppliers, and other businesses. Before finalizing
operations of the business, and your growth the business name, make sure that there is no other
potential. Bearing in mind there are advantages business existing that has the same name as what
and disadvantages to each structure, the most you have chosen. After finalizing your business
common legal structures for business are: name, consider registering your trading name and
logo as a trademark to prevent others from having
Sole Proprietorship, Partnership, Corporation
the same name as yours.

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3. Licenses
To completely start your business, it is a must that a business comply to the required several types of
licenses or permit. These required licenses and permits will depend on the kind of establishment you
want it to be. At the very least, you will need a business license, trading license, and sales tax permit. If
you plan to open a restaurant, pub, or catering company, you will have to register with the local
governing body for food standards and health and safety oversight.
4. Employees
As an employer, there is a lot of obligations to your employees such as paying them the right amount of
wages, ensuring their safety in the working environment, giving all the employees a fair treatment, not
acting in a way that may damage an employee’s reputation and mental distress or humiliation, not acting
in a way that damages the trust necessary for an employee relationship, ensure that the employees have
workers compensation insurance.

5. Zoning laws
If you are still looking for a good location for your shop, establishment or office, you have to make sure that
the area you are eyeing is properly zoned for the type of business you plan to operate. Again, do some
research or ask local government bodies to be certain that you can open your business in that area.

6. Confidentiality and Non-Disclosure Agreements

Lastly, if you will be working with a bank or other partners for business financing or entering into contracts
with suppliers, make sure you have the right confidentiality and non-disclosure agreements.

These parties will have access to business information that you may want to keep private and, as such, you
should consider preparing these contracts. Make sure your partners and suppliers sign them as well.

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1. Not Registering Your Name

Whether you intend to be a sole proprietor or a corporation, you should make sure that
no one else is using the name you have selected for your company. If you register a
limited liability company (LLC) or a corporation, a name check is required, but be
certain the name is available before you design a website, have a logo made, or print
business cards.

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2. Not Choosing a Business Structure

While you're dreaming up the concept for your startup business, you're probably not focused
on how you should structure your business. Setting your business up as an LLC or a
corporation from the start can save you money on taxes and also help to clarify your
ownership structure.

Take some time to consider your options, which include sole proprietorship, partnership, LLC,
and corporations (both S and C corporations) and choose the option that makes the most
sense for your business startup. Keep in mind that you are planning for your startup to grow,
so you will want to put a structure in place that can accommodate your big plans. When
starting an LLC or partnership, be sure to have member or partner agreements in place as
well, so everyone's role and share is clearly designated.

3. Not Having a Standard Contract

When you start a business you likely don't have a lot of customers, but since you
intend to see a lot of growth, you should develop a standard contract to use with
all of your customers. This will streamline things and ensure that you protect
yourself. Take a look at contracts your competitors are using. Draft a contract that
is easy to understand and not overly long. Talk with an attorney to ensure you
create a contract that is favorable for your business and fair to your customers.

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4. Not Having a Nondisclosure Agreement

When you are exploring how to start a startup, you will likely be talking to a lot
of people and sharing a lot of information about your business idea as you try
to get advice, hire people, get estimates, and retain professionals. A
nondisclosure agreement, or NDA, will help ensure that the information you
share with others remains private.

REFERENCES:
 Grit PH (2020). How to Register and Form a Corporation in the Philippines. Retrieved from [Link]
 Tomacruz, S. (2017). 8 Philippine companies among world's largest listed firms. Retrieved from
[Link]
 Cruz-Manuel, Z,V., Financial Accounting & Reporting for Services & Merchandisers, 26th ed., San Andres Manila: Cruz Manuel,
2020, 6-7 pp.
 Ong, F. L. (2016). Fundamentals of Accountancy, Business, and Management 1. Quezon City, Philippines: C & E Publishing Inc.,
13-15 pp.
 Sember, B. (2019). Top 8 Legal Mistakes Made by Startups. Retrieve from [Link]
mistakes-made-by-startups

24
If you read the definition closely, you see that there are four activities, or components, of
marketing:

1. Creating. The process of collaborating with suppliers and customers to create

offerings that have value.
2. Communicating. Broadly, describing those offerings, as well as learning from
customers.
3. Delivering. Getting those offerings to the consumer in a way that optimizes value.
4. Exchanging. Trading value for those offerings.
Introduced in the early 1950s, the four Ps were called the marketing mix, meaning that a
marketing plan is a mix of these four components.

If the four Ps are the same as creating, communicating, delivering, and exchanging, you
might be wondering why there was a change. The answer is that they are not exactly the
same. Product, price, place, and promotion are nouns. As such, these words fail to capture
all the activities of marketing. For example, exchanging requires mechanisms for a
transaction, which consist of more than simply a price or place. Exchanging requires,
among other things, the transfer of ownership. For example, when you buy a car, you sign
documents that transfer the car’s title from the seller to you. That’s part of the exchange
process.

Even the term product, which seems pretty obvious, is limited. Does the product include
services that come with your new car purchase (such as free maintenance for a certain
period of time on some models)? Or does the product mean only the car itself?

Finally, none of the four Ps describes particularly well what marketing people do.
Marketing is composed of four activities centered on customer value: creating,
communicating, delivering, and exchanging value.

What does value mean? Value is at the center of everything marketing does.

When we use the term value, we mean the benefits buyers receive that meet their needs. In
other words, value is what the customer gets by purchasing and consuming a company’s
offering. So, although the offering is created by the company, the value is determined by the
customer.

Furthermore, our goal as marketers is to create a profitable exchange for consumers. By

profitable, we mean that the consumer’s personal value equation is positive. The personal
value equation is

value = benefits received – [price + hassle]

Hassle is the time and effort the consumer puts into the shopping process. The equation is a
personal one because how each consumer judges the benefits of a product will vary, as will
the time and effort he or she puts into shopping. Value, then, varies for each consumer.

One way to think of value is to think of a meal in a restaurant. If you and three friends go to
a restaurant and order the same dish, each of you will like it more or less depending on your
own personal tastes. Yet the dish was exactly the same, priced the same, and served exactly
the same way. Because your tastes varied, the benefits you received varied. Therefore the
value varied for each of you. That’s why we call it a personal value equation.

Value varies from customer to customer based on each customer’s needs. The marketing
concept, a philosophy underlying all that marketers do, requires that marketers seek to
satisfy customer wants and needs. Firms operating with that philosophy are said to
be market oriented. At the same time, market-oriented firms recognize that exchange must
be profitable for the company to be successful. A marketing orientation is not an excuse to
fail to make profit.

Firms don’t always embrace the marketing concept and a market orientation. Beginning
with the Industrial Revolution in the late 1800s, companies were production orientation.
They believed that the best way to compete was by reducing production costs. In other
words, companies thought that good products would sell themselves. Perhaps the best
example of such a product was Henry Ford’s Model A automobile, the first product of his
production line innovation. Ford’s production line made the automobile cheap and
affordable for just about everyone. The production era lasted until the 1920s, when
production-capacity growth began to outpace demand growth and new strategies were
called for. There are, however, companies that still focus on production as the way to
compete.

From the 1920s until after World War II, companies tended to be selling orientation,
meaning they believed it was necessary to push their products by heavily emphasizing
advertising and selling. Consumers during the Great Depression and World War II did not
have as much money, so the competition for their available dollars was stiff. The result was
this push approach during the selling era. Companies like the Fuller Brush Company and
Hoover Vacuum began selling door-to-door and the vacuum-cleaner salesman (they were
always men) was created. Just as with production, some companies still operate with a push
focus.

In the post–World War II environment, demand for goods increased as the economy soared.
Some products, limited in supply during World War II, were now plentiful to the point of
surplus. Companies believed that a way to compete was to create products different from
the competition, so many focused on product innovation. This focus on product innovation
is called the product orientation. Companies like Procter & Gamble created many
products that served the same basic function but with a slight twist or difference in order to
appeal to a different consumer, and as a result products proliferated. But as consumers had
many choices available to them, companies had to find new ways to compete. Which
products were best to create? Why create them? The answer was to create what customers
wanted, leading to the development of the marketing concept. During this time, the
marketing concept was developed, and from about 1950 to 1990, businesses operated in
the marketing era.

So what era would you say we’re in now? Some call it the value era: a time when
companies emphasize creating value for customers. Is that really different from the
marketing era, in which the emphasis was on fulfilling the marketing concept? Maybe not.
Others call today’s business environment the one-to-one era, meaning that the way to
compete is to build relationships with customers one at a time and seek to serve each
customer’s needs individually. For example, the longer you are customer of Amazon, the
more detail they gain in your purchasing habits and the better they can target you with
offers of new products. With the advent of social media and the empowerment of
consumers through ubiquitous information that includes consumer reviews, there is clearly
greater emphasis on meeting customer needs. Yet is that substantially different from the
marketing concept?

Still others argue that this is the time of service-dominant logic and that we are in
the service-dominant logic era. Service-dominant logic is an approach to business that
recognizes that consumers want value no matter how it is delivered, whether it’s via a
product, a service, or a combination of the two. Although there is merit in this belief, there
is also merit to the value approach and the one-to-one approach.

Whatever era we’re in now, most historians would agree that defining and labeling it is
difficult. Value and one-to-one are both natural extensions of the marketing concept, so we
may still be in the marketing era. To make matters more confusing, not all companies adopt
the philosophy of the era. For example, in the 1800s Singer and National Cash Register
adopted strategies rooted in sales, so they operated in the selling era forty years before it
existed. Some companies are still in the selling era. Recently, many considered automobile
manufacturers to be in the trouble they were in because they work too hard to sell or push
product and not hard enough on delivering value.

Creating Offerings That Have Value

● Marketing creates those goods and services that the company offers at a price to its
customers or clients. That entire bundle consisting of the tangible good, the intangible
service, and the price is the company’s offering. When you compare one car to
another, for example, you can evaluate each of these dimensions—the tangible, the
intangible, and the price—separately. However, you can’t buy one manufacturer’s car,
another manufacturer’s service, and a third manufacturer’s price when you actually
make a choice. Together, the three make up a single firm’s offer.

● Marketing people do not create the offering alone. For example, when the iPad was
created, Apple’s engineers were also involved in its design. Apple’s financial
personnel had to review the costs of producing the offering and provide input on how
it should be priced. Apple’s operations group needed to evaluate the manufacturing
requirements the iPad would need. The company’s logistics managers had to evaluate
the cost and timing of getting the offering to retailers and consumers. Apple’s dealers
also likely provided input regarding the iPad’s service policies and warranty structure.
Marketing, however, has the biggest responsibility because it is marketing’s
responsibility to ensure that the new product delivers value.
Communicating Offerings

● Communicating is a broad term in marketing that means describing the offering and
its value to your potential and current customers, as well as learning from customers
what it is they want and like. Sometimes communicating means educating potential
customers about the value of an offering, and sometimes it means simply making
customers aware of where they can find a product. Communicating also means that
customers get a chance to tell the company what they think. Today companies are
finding that to be successful, they need a more interactive dialogue with their
customers. For example, Comcast customer service representatives monitor Twitter.
When they observe consumers tweeting problems with Comcast, the customer service
reps will post resolutions to their problems. Similarly, JCPenney has created consumer
groups that talk among themselves on JCPenney-monitored Web sites. The company
might post questions, send samples, or engage in other activities designed to solicit
feedback from customers.

● Mobile devices, like iPads and Droid smartphones, make mobile marketing possible
too. For example, if consumers check-in at a shopping mall on Foursquare or
Facebook, stores in the mall can send coupons and other offers directly to their phones
and pad computers.

Delivering Offerings

● Marketing can’t just promise value, it also has to deliver value. Delivering an offering
that has value is much more than simply getting the product into the hands of the user;
it is also making sure that the user understands how to get the most out of the product
and is taken care of if he or she requires service later. Value is delivered in part
through a company’s supply chain. The supply chain includes a number of
organizations and functions that mine, make, assemble, or deliver materials and
products from a manufacturer to consumers. The actual group of organizations can
vary greatly from industry to industry, and include wholesalers, transportation
companies, and retailers. Logistics, or the actual transportation and storage of
materials and products, is the primary component of supply chain management, but
there are other aspects of supply chain management.

Exchanging Offerings

● In addition to creating an offering, communicating its benefits to consumers, and

delivering the offering, there is the actual transaction, or exchange, that has to occur.
In most instances, we consider the exchange to be cash for products and services.
However, if you were to fly to Louisville, Kentucky, for the Kentucky Derby, you
could “pay” for your airline tickets using frequent-flier miles. You could also use
Hilton Honors points to “pay” for your hotel, and cash back points on your Discover
card to pay for meals. None of these transactions would actually require cash. Other
exchanges, such as information about your preferences gathered through surveys,
 might not involve cash.

● When consumers acquire, consume (use), and dispose of products and services,
exchange occurs, including during the consumption phase. For example, via Apple’s
“One-to-One” program, you can pay a yearly fee in exchange for additional periodic
product training sessions with an Apple professional. So each time a training session
occurs, another transaction takes place. A transaction also occurs when you are
finished with a product. For example, you might sell your old iPhone to a friend, trade
in a car, or ask the Salvation Army to pick up your old refrigerator.

● Disposing of products has become an important ecological issue. Batteries and other
components of cell phones, computers, and high-tech appliances can be very harmful
to the environment, and many consumers don’t know how to dispose of these products
properly. Some companies, such as Office Depot, have created recycling centers to
which customers can take their old electronics.

● Apple has a Web page where consumers can fill out a form, print it, and ship it along
with their old cell phones and MP3 players to Apple. Apple then pulls out the
materials that are recyclable and properly disposes of those that aren’t. By lessening
the hassle associated with disposing of products, Office Depot and Apple add value to
their product offerings.
The key to always being successful in business is to understand very well the
market and those customers inside.
Do you know that some of your customers pick your competitors over you because your
competitors seemed more relevant and satisfied your customers’ needs better?

But why do your customers feel unsatisfied and that your services are irrelevant? The
most prominent answer is that you are handling different types of customers in the same
way.

If you’re not strategically segmenting your customers and handling them accordingly,
things are going wrong. And if you continue to do so, you are bound to lose tons of loyal
customers and a big chunk of your sales. Each of your customers’ types massively differs
from other customers in many ways. And that is why dealing with all your customers the
same way could be the biggest mistake you’re making in your retail business.

What are the types of customers? Why you should handle them differently?

Your customers have different personalities and are spread across the various stages of
your sales funnel. Customers show different personalities and behavior when they are
potential customers or even when you need to support them in the customer service and
customer success stages.

So in such cases, having the same approach to handle all your customers leads to bad
customer experiences. And studies show that 33% of customers leave a brand they leave
just after one bad experience!!
Instead of handling all your customers the same way, if you segment your customers into
different stages and personalities, and handle them accordingly, you can make a huge
difference in your revenue and brand authority.

You also need to understand the stages of a customer journey to better serve them and
provide value at each step of the way.

So let’s find out how you can approach different types of customers.
These are the customers that are in the awareness stage of your sales funnel.

So your focus for such customers should primarily be to make them aware of your
services, win their trust, and lead them towards their first purchase with you.

Let’s find out about the different types of customers before the purchase stage and how
to deal with them. Note that any customer can fall into more than one type as well
The next category of customers you need to look for is the customers who are already on
board and are new acquaintances to your brand.

They have already made the purchase, so now you have to focus on retaining them by
adding the utmost value to them.
There are some other kinds of customer personalities that you might have to segment and
handle differently.
Every entrepreneur should be intensely focused on his or her prospective customers. The
ability to find a customer, sell your product or service to that customer, and satisfy the
customer so that he buys from you again should be the central focus of all entrepreneurial
activity. The greater clarity you have with regard to your ideal customer, the more focused
and effective your marketing efforts will be.

Everyone is in the business of customer satisfaction in some way. The most important
activity of any entrepreneur is to clearly identify the very best customers for your product
or service, and then focus all marketing, advertising and sales efforts on this particular
type of customer.

Here are some tips to help you find your business's ideal customers:
1. Define your product or service from the customer's point of view. What does your
product do for your ideal customer? What problems does your product solve for your
customer? What needs of your customer does your product satisfy? How does your
product improve your customer's life or work?
2. Define the ideal customer for what you sell. What is his or her age, education,
occupation or business? What is his or her income or financial situation? What is his or her
situation today in life or work?
3. Determine the specific benefits your customer is seeking in buying your product. Of all
the benefits you offer, which are the most important to your ideal customer? What are
the most pressing needs that your product or service satisfies? Why should your customer
buy from you rather than from someone else?
4. Determine the location of your exact customer. Where is your customer located
geographically? Where does your customer live or work? Where is your customer when he
or she buys your product or service?
5. Determine exactly when your ideal customer buys your product or service. What has
to happen in the life or work of your customer for him to buy your product? What time of
year, season, month or week does your customer buy?
6. Determine your customer's buying strategy. How does your customer buy your
product or service? How has your customer bought similar products or services in the
past? What is your customer's buying strategy? How does your customer go about making
a buying decision for your product?

Imagine placing an ad in the newspaper for your perfect customer. How would you
describe your perfect customer? What prospective customers are the most likely to buy
your product or service immediately? What are the most important qualities that your
ideal customer would have?

Your ability to clearly define and determine the very best customer for your product or
service will determine your success in business. How could you find more perfect
customers for your product? How could you create new customers for your product?
Define your unique selling proposition and communicate this key benefit in every
customer contact.

Most entrepreneurs aren't clear about their ideal customer. For this reason, they waste a
lot of time and money trying to sell their product to people who aren't good potential
customers.

Your ability to clearly define and focus in on the customers who can most rapidly buy your
product or service will be essential to your business success.
Brands often use segmentation to help understand and target an
audience. This means taking into consideration general details about the
average customer, such as their demographic, gender, socio-economic
status and so on. What is less common is the practice of creating
customer personas.

Let’s start with the difference between customer segments and

personas.

First, segmentation allows a brand to understand different sets or groups

of customers. This might tell us where a particular group lives, their age
range, and maybe even some of their typical buying behaviour. A
customer persona, on the other hand, allows brands to better
understand these homogenous groups, and to recognise key traits
within them.

In order to create a representative sample of an audience, personas are

based on the analysis and research of real customers. This helps to build
a much more detailed picture of the (hypothetical) customer, including
far more emotive information such as personal motivations, what they
value in a brand, what kind of communication they prefer, etc.

Brands are then able to take this insight and use it to deliver a much
more relevant and less one-dimensional experience.
Customer personas representing your prospects and consumers are widely-used in
advertising, sales, web and software design, and in communicating with
shareholders. It is a substantial competitive advantage when you know how to
satisfy your target audience’s needs and interests, as you’ll be better placed to
deliver the solutions they need. Therefore, a persona-based marketing approach
helps improve customer experience, enhance targeting accuracy, and leverage
behavioral analytics to meet your business objectives. But what is a customer
persona?

What is a Customer Persona?

● A customer persona is a semi-fictional depiction of your ideal buyer based on

market research and actual data about your present consumers. It
encompasses consumer demographics, behavior patterns, motivations, and
objectives.

● With customer personas, you can understand different sets or groups of

consumers. You get to know where a particular group lives, their age bracket,
and maybe some of their usual purchasing behavior. All this information can
help you develop a better understanding of these homogenous groups, so you
can better serve their interests.

3 Types of Personas in Marketing

A lot of marketers make the mistake of creating a single customer persona.
However, there are usually several different customer types within the same
audience, with slightly varied interests. Therefore, you have to develop at least
three main kinds of personas for your visitors that consider the different types of
people engaging with your business.

1. Buyer Personas
A buyer persona represents your target customer, who is involved in buying your
product or service. Your target customer has the most obvious relation to your
revenue. So, they play a highly significant role in navigating your marketing
strategies and communications.

2. Website Personas
Your website persona depicts all the people who your website is intended to serve.
They help guide your website design and include critical audiences that buyer
personas don’t cover (such as present consumers, consumers’ clients, investors,
prospective workers, the media, etc.).

3. User Personas
User personas represent the people who will be using your product or service,
irrespective of whether they have any impact over the buying decision. You might
use these personas to guide product design, as well as communications about
product advantages.

Quantitative vs. Qualitative Research: What’s Best to Create Customer Personas?

The first step to understanding your customers is to research them either

qualitatively or quantitatively.

● Qualitative research allows you to discover new insights using a small sample
size. Common examples include user interviews and usability testing. While it
is easier to perform, qualitative research is not much beneficial because it
involves a limited number of people.

● Quantitative Research allows you to test or prove a hypothesis that you

uncover with qualitative research. However, it uses a large sample size, such
as surveys and site traffic analysis. You can observe statistically significant
trends and have more assurance that your findings precisely reflect reality for
all users.
But where exactly does this information come from?

Keyword research is one effective tool for generating data, allowing

brands to discover exactly what customers are searching for in relation to
their product or website. For example, if a retailer discovers that a
popular search term is its brand-name alongside the word ‘discount’ or
‘offer’, it could be the case that customers value price over other factors
like entertaining content or fast delivery – informing the ‘motivations’
part of a persona.

Social media is another important tool for establishing personas, with

most platforms already having in-built analytics that can offer key data
sets.

Facebook Insights, for example, allows brands to tap into how users are
responding to ads, as well as what kind of content is generating the most
engagement. By comparing this to specific user data, such as gender,
relationship status and so on, brands are able to flesh out personas even
more.

Finally, alongside data-driven tools, customer personas can also be

largely influenced by surveys, feedback, and one-to-one interviews.
What about negative personas?

Once the ideal customer persona has been established, it can also be
worthwhile to build a negative one.

This means identifying the kind of person that brands don’t want as a
customer. Not to be all ‘Mean Girls’ about it, that is, but by identifying
who is not a good fit – companies can avoid wasted resources and
misspent budget.

Characteristics of a negative persona could involve someone who is

overly negative or unrealistic in their expectations, someone who
typically abandons purchases, or who has a high acquisition cost.
Recognising these types of customers early on can allow marketers to
hone their communication and marketing messages accordingly, and
instead target the most worthwhile.

Turning insight into action

So, while it’s all well and good creating customer personas, how do you
turn insight into strategic actions? Here are just a few key takeaways.

● Focus on where customers spend their time. Are a larger

percentage of people using Facebook or Instagram? Do they read
the Guardian or watch YouTube videos? Information on where
customers live can help brands to plan advertising and marketing
spend accordingly, informing where and how they use ads to target
users.
● Speak their language. Does a customer use slang and emojis? Are
they a lover of hashtags? Taking this kind of information into
consideration can help brands to hone and refine their
communication style to mirror how customers speak.
● Creating persona-specific content. Instead of creating content and
marketing it to a specific segment, customer personas can help to
inform what kind of content is created in the first place. Insight into
whether the customer cares about topics like charity, technology or
the environment can also provide an indication of what else they
might want to hear about.
● Partner with people your personas love. Finally, by working with a
company or influencer that will definitely appeal to the customer,
brands can be sure that they are spending both time and budget
wisely – and also helping to prevent miss-judged and potentially
damaging brand-associations.
You want to create memorable first impressions and deliver differentiated
buying experiences to your customer? You want to find out how your
customers shop in today's digital world? What are the most influential channels
and touch points in their customer journey and how can you impact these?
How does this work for the new product category you wish to enter?

Customer Journey Map is a powerful technique for understanding what

motivates your customers - what their needs are, their hesitations, and
concerns. Although most organizations are reasonably good at gathering data
about their customers, data alone fails to communicate the frustrations and
experiences the customer experienced. A story can do that, and one of the
best storytelling tools in business is the customer journey map.

Customer journey map uses storytelling and visuals to illustrate the

relationship a customer has with a business over a period of time. The story is
being told from the perspective of customer, which provides insight into the
total experience of the customer. It helps your team better understand and
address customer needs and pain points as they experience your product or
service. In other words, mapping out the customer journey offers your
business the chance to see how your brand first engages a potential customer,
and then moves through the touchpoints of the entire sales process.

Of all the problems that plague growing businesses, the most frustrating is trying to
understand user behavior. But then, when you think you've figured it all out, loyal
customers begin to leave without warning. Or, new visitors spend hours on your
pricing page only to leave without buying.

Every team — from support to sales to marketing — wishes they could get inside the
head of your customers. But while you can't read minds, you can get close to it with
customer journey maps.

Customer journeys visualize the touchpoints and steps toward reaching a goal. It
outlines customer sentiment along the way to find where they're satisfied, stuck, or
frustrated.

But as these paths become more complex, even the simplest ones promote a better
understanding of customer needs. With a well-thought plan, today's business tools
make the customer journey mapping a breeze.
What is a customer journey map?

Before we talk about customer journey maps, let's briefly define what we mean by
a customer journey.

Customers go through multiple stages as they interact with your brand–from

discovery to becoming a long-term customer. Each stage is full of different
touchpoints. For example, finding your product on social media or reaching out to
support with a technical issue.

Each touchpoint is an opportunity for either confusion or delight. The more you can
deeply understand your customer's experience and how they feel at each step, the
better suited you are to serve their needs.
Why Customer Journey Map?

The purpose of customer journey mapping is to understand what customers

go through and improve the quality of your customer experience, ensuring
consistency and a seamless experience at all touchpoints and across all
channels. There is no substitution for listening to your customers about how
the steps in the journey are working out for them. Having built an
understanding of the customer journeys with your business you are now in a
position to improve the customer experience enables:

• Provides a bird's eye view of the entire customer journey

• Bring teams together to resolve specific customer hurdles for
understanding core customer journey paths, where additional
development will provide biggest impact.
• Build faster and higher customer conversion rates by minimizing negative
customer experiences, through identification of key steps and decision
points.
• Improved customer retention, through understanding how they transit
through, say, each stage of a procurement cycle to ensure the correct
information is available and accessible to all stakeholders.
• Allows a business to zoom-in a single customer journey in a specific
channel.
• Understanding of required metrics to identify customer's progress and fall
 out points, providing opportunities to bring customers back on board.
• Allows businesses to prioritize actions in their customer experience
strategy
• Reveals the gaps between various channels and departments
Here's an example from a customer's perspective.

Let's say you're looking for a new business phone system. Your customer journey
could entail the following touchpoints:

1. Problem or need: You realize your current phone setup isn't working or that
your customers can't contact you quickly enough.
2. Research solutions: Then, you start looking for options through search, social
media, referrals, ads, and all other resources.
3. Evaluate vendors: Next, you'll start to narrow down your options and make a
choice of which solution to use. You might hop on demos and chat with a
salesperson.
4. Onboarding: After you buy, you'll start setting up your phone service
integrating it with your workflow, and training the rest of your team. Likely,
you'll also port your phone numbers over.
5. Product usage: You'll begin to use the tool and hopefully have an outstanding
experience with it.
6. Support: When you have an issue or want a second opinion, you reach out to
customer support.
7. Renewal: If all goes well, you'll keep having a great experience, renew your
plan, and even add more lines as you scale.
8. Advocacy: The final stage is when you move from a user to an advocate and
recommend the product to others.
However, a journey alone doesn't define your customer experience (CX). This
outline summarizes distinct stages along the customer lifecycle.

A customer journey map represents this flow of touchpoints as they move towards
their goal. It also includes straightforward interpretation and action items to move
the customer onward. As an internal document, a customer journey map guides
team members and partners on how to serve customers the right way — your way.

Of course, not every customer follows a linear journey like this.

A number of them will opt for a different solution and never interact with you. At
the same time, many others will hit a roadblock during onboarding or have a poor
support experience that will make them leave.

However, by knowing how your customers act and feel along their journey, you can
forecast ways to create a better overall experience and offer proactive customer
service.
The benefits of customer journey mapping

Customer journey mapping is a visual representation of the intricate path a

customer takes when interacting with your brand. But more than just another
planning tool, customer journey maps bring numerous benefits:

• Builds a customer-centric organization. Too many teams get stuck in a myopic

view of the customer. For example, sales only care about the customer from a
sales perspective. But with customer journey maps, all your teams share a
holistic and unified point of view. Read on to see how to make this a reality.
• Exposes (and solves) pain points. Customers don't often give second
chances. One-third of consumers say they would switch companies after just
one poor experience. Customer journey maps identify situations where
customers get lost, confused, or frustrated. It anticipates negative moments
and prescribes solutions so customers don't get stuck.
• Highlights gaps in the user experience. A customer journey map can also point
out gaps as customers move between devices (mobile to desktop), channels
(social media to live chat), or departments (sales to service team). These
handoffs influence the user experience, such as offering self-service materials
or 24/7 support.
• Benchmarks for each customer touchpoint. Every purchase requires
customers to go through a long chain of decisions and actions. But every
decision point is also an opportunity for them to fall off your ideal path.
 Journey mapping plots metrics for each touchpoint, so you know where to
focus your efforts.
• Gives support agents context from the start.72% of customers expect support
agents to know personal information about them and their previous
interactions as soon as they answer. Data-driven customer journey mapping
software places this information at their fingertips. Examples include past
website visits, support tickets, and survey responses.
• Anticipates user needs based on Your decisions are only as good as the data
that informs them. A personalized customer journey map combines qualitative
data like surveys and Customer Effort Score (CES) and quantitative data like
product usage to uncover your customer's true motivations and needs (before
they know them)!
• Increases customer retention. Customer satisfaction drives sales, not just
support. Current research shows that 85% of customers pay higher prices
for better experiences. The secret to business growth isn't more advertising;
it's increasing product adoption from existing customers.
You want to create memorable first impressions and deliver differentiated
buying experiences to your customer? You want to find out how your
customers shop in today's digital world? What are the most influential channels
and touch points in their customer journey and how can you impact these?
How does this work for the new product category you wish to enter?

Customer Journey Map is a powerful technique for understanding what

motivates your customers - what their needs are, their hesitations, and
concerns. Although most organizations are reasonably good at gathering data
about their customers, data alone fails to communicate the frustrations and
experiences the customer experienced. A story can do that, and one of the
best storytelling tools in business is the customer journey map.

Customer journey map uses storytelling and visuals to illustrate the

relationship a customer has with a business over a period of time. The story is
being told from the perspective of customer, which provides insight into the
total experience of the customer. It helps your team better understand and
address customer needs and pain points as they experience your product or
service. In other words, mapping out the customer journey offers your
business the chance to see how your brand first engages a potential customer,
and then moves through the touchpoints of the entire sales process.

Of all the problems that plague growing businesses, the most frustrating is trying to
understand user behavior. But then, when you think you've figured it all out, loyal
customers begin to leave without warning. Or, new visitors spend hours on your
pricing page only to leave without buying.

Every team — from support to sales to marketing — wishes they could get inside the
head of your customers. But while you can't read minds, you can get close to it with
customer journey maps.

Customer journeys visualize the touchpoints and steps toward reaching a goal. It
outlines customer sentiment along the way to find where they're satisfied, stuck, or
frustrated.

But as these paths become more complex, even the simplest ones promote a better
understanding of customer needs. With a well-thought plan, today's business tools
make the customer journey mapping a breeze.
Market sizing is the estimation of the potential of a market. Incorporating market
research, market sizing is useful for businesses looking to introduce a
new product or service to evaluate the business opportunity. Market sizing also
helps investors to understand the value of the potential opportunity within the target
company’s business plan.

Understanding market sizing

For businesses wishing to enter a new market, the research that goes into
market analysis is daunting in its complexity.

Market sizing seeks to remove that complexity by breaking the analysis into smaller
sets of assumptions. These assumptions can then be extrapolated to form an
overall market size estimate.

Once a business has successfully undertaken market sizing, it can determine the
level of investment required and also potential growth strategies. It can also gauge
the value of a market and its profitability – factors that ultimately determine whether
the business enters said market.

To be effective, market sizing should be a bottom-up approach. Although time-

consuming, this approach to market research gives more realistic and accurate
market potential. Using the bottom-up approach, market size can be calculated by
multiplying the number of units sold by the price of each unit.

In other words, businesses using this approach start with the smallest known
pieces of data and then use these data to build up a realistic representation of their
market.

This approach differs from the top-down approach, which is based on generalized
and trend-inflated market valuation whose data accuracy is often questionable.

Here is how the bottom-up approach works.

1. Define the target market

● The first step is perhaps the most important, and it involves understanding a
target audience. In other words, who is the type of person a product or service
is best suited to? A buyer persona can help because it allows businesses to
be ultra-specific on the type of people they want to attract.
● Then, the business must determine the size of their target market. This can be
done in several ways and may involve contacting business organizations or
governmental and commerce agencies. For example, a high-end baby food
company may contact its local commerce board to determine that there are
550 high-end supermarkets in their state.

2. Assess product interest

● Then, the business should determine the number of consumers who may be
interested in buying their product. This can be done by looking at competitors
and their annual sales data.
● However, sometimes this information is hard to obtain. If competitor data
cannot be found, then focus groups and surveys can be used to gauge the
likely level of interest in a new product. While the baby-food company may
have identified 550 stores, they find that only 250 are interested in stocking
the product on their shelves.

3. Calculate the potential sales

● Calculating potential sales can be tricky, but an accurate approximation can
be obtained by competitor analysis or by referring to cash flow forecasting or
other finance based models.
● In the case of the baby-food company, it estimates a roll-out cost of $20 million
across 250 stores compared to potential annual revenue of $60 million.
Although the investment is 33% of forecasted annual revenue, profits in the
second year sans roll-out costs are significantly higher. Therefore, the
company decides to enter the market.

Key takeaways:
• Market sizing is the estimate of the size of a market using insights gleaned from a
target audience and existing or potential sales volume.
• Market sizing is a bottom-up approach that utilizes known data to give a
representative view of the larger market. It is more accurate than the top-down
approach that relies on generalized or assumption based market data from
competitors.
• At its core, market sizing is an iterative process that is based on an accurate and
detailed view of the target audience a business hopes to serve.
Although the research on and interest in entrepreneurship has increased
significantly over the last two decades, several questions still remain: Who is an
entrepreneur and why is he or she different from other businesspeople? What
is entrepreneurship? What is corporate entrepreneurship? What is social
entrepreneurship? What is the entrepreneurial process? These frequently
asked questions reflect the increased national and international interest by
individuals, groups, academics, students, and government officials in
entrepreneurs and entrepreneurship. This increased interest is to be expected
considering that entrepreneurs’ creative ideas, the ability to bring innovations
to the market, and the ability to take risks are changing people’s lives
(Ramadani and Schneider, 2013). Today, numerous young and older
entrepreneurs around the world launch new ventures. These new ventures
create a life for them and their families, create new jobs, and contribute to the
overall economic development of the countries involved.

Entrepreneurship as a word derived from the French entreprendre (to

undertake), which, literally translated, means “between-taker” or “go-between.”
Richard Cantillon, the sixteenth/seventeenth-century Irish-French economist,
used this word for the first time in his book Essaie sur la Nature du Commerce en
Général, which was published in 1755, 20 years after his death. He described
the entrepreneur as a risk-taker, comparing them with the farmer who pays
the workers and the landowners a certain price, to produce and sell products
at an uncertain price in the future, therefore operating at a risk (Hisrich, Peters
and Shepherd, 2017). An early example of an entrepreneur as a go-between is
Marco Polo, who established trade routes to the Far East. As a go-between,
Marco Polo would sign a contract with a money person (the forerunner of
today’s private investor or venture capitalist) to sell the goods. A common
contract during this time provided a loan to the merchant-adventurer with
about 22 percent interest including insurance. The capitalist was a passive risk-
bearer and the merchant-adventurer took the active role in trading, bearing all
the physical and emotional risks. When the merchant-adventurer successfully
sold the goods and completed the trip, the profits were divided, with the
capital provider taking the most – up to 75 percent – while the merchant-
adventurer settled for the remaining 25 percent.

In the Middle Ages, the term “entrepreneur” was used to describe both an
actor and a person who managed large production projects, where this person
did not take any risks but merely managed the project using the resources
provided, usually by the government of the country. The cleric was considered
a typical entrepreneur in the Middle Ages, who oversaw great architectural
works, such as castles and fortifications, public buildings, abbeys, and
cathedrals.

In the eighteenth century, as Cantillon introduced the theory of

entrepreneurship into the literature, the people who provided capital (money
providers) were differentiated from those who needed capital (entrepreneurs).
This reflected the industrialization occurring throughout the world. Many of the
inventions developed during this time were reactions to the changing world,
such as the inventions of Eli Whitney and Thomas Edison, who were developing
new technologies and were unable to finance their inventions themselves.
Whereas Whitney financed his cotton gin with expropriated British Crown
property, Edison raised capital from private sources to develop and
experiment in the fields of electricity and chemistry. Both Edison and Whitney
were capital users (entrepreneurs), not providers (venture capitalists).

In the late nineteenth and early twentieth centuries, in most cases,

entrepreneurs were not distinguished from managers (Ely and Hess, 1937,
p.488):

● Briefly stated, the entrepreneur organizes and operates an enterprise for

personal gain. He pays current prices for the materials consumed in the
business, for the use of the land, for the personal services he employs and
for the capital he requires. He contributes his own initiative, skill and
ingenuity in planning, organizing and administering the enterprise. He also
assumes the chance of loss and gain consequent to unforeseen and
uncontrollable circumstances. The net residue of the annual receipts of
the enterprise after all costs have been paid, he retains for himself.
Andrew Carnegie is a good example of this period and this definition. He
adapted and developed new technology in the creation of products for
economic vitality. From a poor Scottish family, Carnegie made the American
steel industry one of the wonders of the industrial world, primarily through his
unremitting competitiveness rather than his inventiveness or creativity.

In the middle of the twentieth century, entrepreneurs were seen as innovators.

Astonishing contributions to this idea were made by Joseph Alois Schumpeter,
who viewed the entrepreneur as a person who provides a new product/service
in the market, a new, usually practically untested production method, a new
source of raw materials, or as a person who opens up new markets. In this
regard, Schumpeter said (1952, p.72):

● The function of the entrepreneur is to reform or revolutionize the pattern

of production by exploiting an invention or, more generally, an untried
technological method of producing a new commodity or producing an old
one in a new way, opening a new source of supply of materials or a new
outlet for products, by organizing a new industry.

The concept of innovation and newness is an integral part of entrepreneurship

and the act of introducing something new is one of the most difficult tasks for
the entrepreneur. It takes the ability not only to create and conceptualize but
also to understand all the forces at work in the environment. Edward
Harriman, who reorganized the Lake Ontario Southern Railroad through the
Northern Pacific Trust, and John Pierpont Morgan, who developed a large
banking house by reorganizing and financing the nation’s industries, are
examples of entrepreneurs fitting this definition. These organizational
innovations are frequently as difficult to develop successfully as the more
traditional technological innovations (transistors, computers, lasers) that are
usually associated with being an entrepreneur.

The concept of an entrepreneur varies depending on the perspective from

which it is observed. To an economist, an entrepreneur is one who combines
resources, labor, vision, materials, and other assets to increase product/service
value and introduce and implement change, innovation, and a new order. To a
psychologist, such a person is typically driven by certain forces – the need to
attain something, to experiment, to accomplish, or perhaps to escape
authority. To one businessperson, an entrepreneur may appear as a threat, an
aggressive competitor; to another, the same entrepreneur may be an ally, a
supplier, a customer, or a creator of wealth. The effective entrepreneurial
manager finds better ways to utilize resources, reduce waste, and produce jobs
for willing candidates (Hisrich and Ramadani, 2017).

Even though each of these descriptions views entrepreneurs from a different

perspective, they contain similar notions such as newness, organizing, creating,
wealth, and risk-taking. Generally, entrepreneurship is the process of “creating
something new with value by devoting the necessary time and effort, assuming
the accompanying financial, psychic and social risks, and receiving the resulting
rewards of monetary, personal satisfaction and independence” (Hisrich and
Ramadani, 2017, p.5). This definition stresses four basic aspects of
entrepreneurship. First, entrepreneurship involves creating – creating
something new of value. The creation must have value to the entrepreneur
and to the customer. Second, entrepreneurship requires time and effort. Only
those going through the entrepreneurial process truly appreciate the
significant amount of time and effort it takes to create something new and
make it operational. Assuming the necessary risks is the third aspect of
entrepreneurship. These risks take a variety of specific forms but are in
financial, psychological, and social areas. The final part of the definition
involves the rewards of being an entrepreneur. The most important of these
rewards is independence, followed by personal satisfaction and profit in for-
profit organizations.
IMPORTANCE OF THE ENTREPRENEURSHIP AND MARKETING INTERFACE

The entrepreneurship and marketing interface is an important issue for several

reasons (Hisrich, 1992). First, many studies on entrepreneurs and
entrepreneurship around the world reveal that the greatest problem areas are
marketing and finance. Finance problems are related to obtaining capital to
start a new business, financing growth, cash flow management and financial
control, where obtaining the initial capital needed to build a prototype or start
initial production seems to be the most difficult. Marketing problems often
reflect the lack of a marketing plan, inaccurate determination of market size,
and unreliable sales forecasts. Sound marketing is a necessary component for
developing a new product/service for the market, as well as successfully selling,
nurturing, and growing the company.

Second, many entrepreneurs have a limited knowledge about marketing and

believe that all they need is an innovative product/service and that all
consumers will buy this product/service. This misguided belief is often caused
by the so-called “bag mentality” of entrepreneurs, where entrepreneurs are so
afraid that someone will steal their idea, they put it in a “bag” and do not
obtain any market feedback. Without market feedback, entrepreneurs may
provide unsuccessful products and still expect unrealistic sales. To be
successful, entrepreneurs need to have information to determine the
appropriate market segment, price, distribution, and communication.
Third, many entrepreneurs can be bad marketing managers. Very often,
entrepreneurs underestimate the time and effort needed to accomplish a
certain marketing task and overestimate the sales that will result. This results
in poor marketing plans. A poor marketing plan may even cause the loss of the
business when the entrepreneur is tied to a specific sales objective and
performance by the funding source.

Entrepreneurship and marketing also have many similarities. First, the

consumer is a focal point of both concepts, which means that the two should
be based on consumer orientation. Second, both entrepreneurship and
marketing have a “deal” mentality – the deal is a central factor in conceiving
and developing a new business for the entrepreneur and closing a sale for the
marketer. Finally, both concepts involve the development of distinctive
competence; both are affected by environmental turbulence; and both are all-
encompassing – entrepreneurship in terms of developing an entirely new
business and marketing in terms of its models.

ENTREPRENEURIAL MARKETING CONCEPTS

Interest in entrepreneurial marketing as a new field of study began in 1982,

when the International Council for Small Business and the American Marketing
Association jointly organized a conference. In 1985, Gerald Hills published the
first empirical study of the marketing and entrepreneurship interface
in Frontiers of Entrepreneurship Research. In 1987, Michael Morris and Gordon
Paul published “The relationship between entrepreneurship and marketing in
established firms” in the Journal of Business Venturing and moved
entrepreneurial marketing research into higher academic standing. In 1992,
Robert Hisrich published “The need for marketing in entrepreneurship” in
the Journal of Consumer Marketing. In 1999, the Journal of Research in Marketing
and Entrepreneurship was launched as the first scientific journal that handled
issues of entrepreneurial marketing. By the end of 2018, there will be 18
volumes and 36 issues of this journal. Entrepreneurial marketing’s importance
further increased in 2010 when researchers at the Charleston Summit
redefined the entrepreneurship and marketing interface and offered a
conceptual framework for future research (Hills, Hultman and Miles, 2008;
Ioniţă, 2012).

One significant unanswered question remains: how does entrepreneurial

marketing differ from traditional marketing? Some of the differences between
traditional and entrepreneurial marketing are summarized along four
dimensions: business orientation, collecting information, tactical perspective,
and strategic perspective (Stokes, 2000).

The table above presents some of the main differences between entrepreneurial
and traditional marketing. In terms of business orientation, entrepreneurial
marketing is oriented towards entrepreneurs and innovations, while traditional
marketing is more customer oriented. According to traditional marketing, the
entrepreneur should initially identify and assess market needs and then
develop a new product/service; according to entrepreneurial marketing, the
entrepreneur should generate initially an (unique) idea, convert that idea to a
new product/service, and then find a market. From the second
dimension, collecting information from the market, entrepreneurial marketers
usually use informal methods such as personal observation or personal
networks/contacts. They usually do not use formal research methods due to
their higher costs. From the tactical perspective, entrepreneurial marketers use
an interactive marketing approach, which is based on personal and direct
contacts with consumers. For entrepreneurial marketers, word-of-mouth and
references from consumers are very important. From a strategic perspective,
entrepreneurial marketing uses a bottom-up approach, while traditional
marketing uses a top-down approach. The top-down approach requires a
clearly defined order of activities, such as segmentation, targeting, and then
positioning. The entrepreneurial bottom-up approach initially requires
identification of an opportunity, which needs to be tested. The company
satisfies the needs and desires of a limited number of consumers in the
beginning and then expands these sales through direct contact with
consumers.
Some of the several definitions of entrepreneurial marketing are presented in
the above.

One of the most widely used definitions is provided by Morris et al. (2002, p.5),
who defined entrepreneurial marketing as: “proactive identification and
exploitation of opportunities for acquiring and retaining profitable customers
through innovative approaches to risk management, resource leveraging and
value creation.” This definition incorporates elements of both concepts:
entrepreneurship (proactiveness, risk-taking, opportunity, and innovation) and
marketing (customer focus, resource leveraging, and value creation).

The concept of entrepreneurial marketing consists of six elements (Morris et

al., 2002):

● Customer intensity. This aspect focuses on the enthusiasm, passion, zeal, and belief in
marketing that help to make the company successful. It is believed that a customer-
intensity element strengthens the core values of the company and the passion for the
customer.
● Continuous innovation. An entrepreneurial company should continuously generate
creative ideas and convert them into new or adapted products/services or processes.
● Strategic flexibility. An entrepreneurial company should show a willingness to
continuously review and adjust its strategies, action plans, methods of resource
allocation, structure, culture, and management systems.
● Calculated risk-taking. Risk-taking means pursuing new opportunities. Entrepreneurs
take calculated risks, but some can be fatal for the future of the company.
● Proactiveness. Entrepreneurs are aware of the importance of the external marketing
environment, but they do not take it as a given. They perceive it as a horizon of
possibilities. In other words, entrepreneurs try to redefine the elements of the external
environment to reduce its uncertainty, reduce dependence and vulnerability of the
company, and/or modify the environment in which the company operates.
● Resource leverage. Since entrepreneurs’ ambitions usually exceed their resources,
they are forced to use their resources in the best possible way. They leverage their
resources: they use resources for much longer than others have used them in the past;
they use resources that others do not view as resources; they use other
people’s/companies’ resources to fulfill their own goals; and they blend one resource
with another to create a greater combined value.
When you’re creating a business, it can feel like the image you’re creating for the
brand represents you as well. But while you might reflect in the company brand, it
isn’t the same as a personal brand.

A personal brand is your image – and only your image. You might share some
characteristics with your company brand, but they should be two independent
things.

Why is a personal brand so important?

Your personal brand boosts your credibility.

When you’re an entrepreneur, a lot of your business growth depends on you getting
out there and marketing it. This means going to conventions and conferences,
talking with other business owners or customers and just spreading the word.

However, this also means you’re not only selling the business – you’re also selling
you. If you don’t have a personal brand to sell, you can’t expect prospects to be
interested in what you’re offering.

Think of your personal brand like a gateway to your business. When you connect
with a potential customer or member of your industry, you can connect on a more
personal level rather than jumping straight into marketing your company brand.
This improves your relationships and helps you seem more credible. When you
have that initial connection, you can then introduce your business without seeming
pushy.

Your personal brand improves your work opportunities.

Think about some of today’s biggest brands: Apple, Facebook, Amazon. When these
brands pop into your head, the entrepreneurs that founded them probably pop up
as well.

This isn’t a coincidence. Those leaders had strong personal brands. They were
confident in who they were as business owners and created brands around those
images. As their businesses grew, so did their status.

By developing a personal brand, your image can grow alongside the company’s. As
more people start to hear about what you offer and the products or services you are
providing, you can meet them with thought leadership, ideas and expertise that is
just as impressive.

When you start to become an in-demand industry thought leader, you can work
with bigger clients and charge more money.

Your personal brand distinguishes you from the competition.

With the growing number of entrepreneurs out there, it’s hard to distinguish
yourself – especially if you’re only trying to do it through branding your business.

While your business might be getting attention, it doesn’t always translate. Without
a face to put to the name, it can be easy for your customers to get you confused with
competitors. However, if you’re building a personal brand, your face can be
recognizable. When they are able to pick out your face, they can pick out your
brand.

Additionally, the thought leadership you provide with a strong personal brand can
improve your company’s overall expertise. If it seems like you’re more
knowledgeable than the entrepreneurs behind your competitor’s businesses,
customers might be inclined to work with you.

A strong brand can also create feelings within customers that can be difficult for
just a company to evoke. For example, warmth or friendliness can be challenging
for a company to show. But if those characteristics are part of your personal brand,
customers may attribute those feelings to your brand as well. This can improve
perceptions of your company, as well as you individually.
Create a personal brand image.

As an entrepreneur, you need to craft a brand image that accurately portrays you as
an individual just as much as you need one for your company. When you’re the face
behind a growing business, it’s your job to step out from behind the curtain and get
familiar with your customers and industry.

Your brand image should be your own, but it should be clear that you work for the
company that you’ve created. Think of your personal brand as an extension of your
business brand. While they shouldn’t be exactly the same – your personal brand
should be more individual-focused, for example – they should share some of the
same ideas and characteristics.

Start to think about who you want to be in your industry: the expert, the
philanthropist, etc. As you start to put the pieces of your personal brand together,
you might be surprised at how seamlessly it all comes together.
Many people find the professional world and even their own career fields
difficult to navigate. One way to increase your professional capital is by
networking with other people in your field.

Though it can be tricky getting your foot in the door, there are plenty of ways
nowadays you can network without being pushy or awkward. Some of these
include platforms like LinkedIn or special networking groups.
Networking is the exchange of information and ideas among people with a
common profession or special interest, usually in an informal social
setting. Networking often begins with a single point of common ground.

The term “networking” in entrepreneurship refers to creating and maintaining social

contacts that can help businesses meet their needs. Nowadays, one of the most
important things that entrepreneurs have to think about a lot is to strengthen
their networks. Furthermore, it’s been said that business is all about who you know.

Networking is the No. 1 unwritten rule of success in business.

Business networking involves making connections not only with likely customers or
clients, but also with other individuals who might refer business to you, or mention
your name in some positive way to people they know. It also involves making
contacts with people who provide information or training and can be an excellent
way of locating reputable vendors to hire for your own business.

Although many people associate networking with asking for favors, successful
networkers know that networking is not all about them. Networking in business is
about creating trusting relationships and friendships with other businesspeople. A
key part of effective networking is helping other business people with their needs.
That’s why you’ll find that the best networkers are often connectors who help
others by referring customers, providing testimonials, or helping to promote events
and other businesses in some way.

Clearly, if you aren’t taking the time to meet and interact with others in your field,
you’re likely missing out on valuable opportunities to find new partnerships,
generate referrals, and even land clients and positions.

Of course, networking isn’t just about building relationships. Meeting and

interacting with other industry professionals also enables you to continue your
education. While you might not have time to attend a seminar or certification
course, grabbing coffee with a business connection helps you stay abreast of new
developments and practices in your field. You can bring these trends back to your
current company or use what you learned to better your chances of landing a new
position.
Firstly, we will underline the importance of networking in entrepreneurship.
Undoubtedly, networking is one of the most valuable skills that you could learn in
order to make your company a success story. It takes a lot of time and effort to
create a successful company, so it is reasonable to have a network of business
partners and associates to draw energy from and keep you motivated. Besides,
you are more likely to step forward and achieve success by connecting yourself
with others who share a common enthusiasm and way of achieving goals. In
addition, business networking is a very valuable way to extend your skills, learn
from others’ success, get new customers, and tell others about your business.

Hence, the 5 biggest benefits of business networking:

1. Opportunities
2. Advice
3. New business
4. Growing your personal profile
5. Friendship

In other words, through networking in entrepreneurship you can help your business
grow and become more successful (Pretorius, 2017).
The power of networking can go a long way if you do it correctly. If you’re still
on the fence about how networking might be beneficial for you, here are a few
reasons why you should be networking in your professional community.

Build Your Confidence and Self-Esteem

The main goal of networking is to build upon your career, but that isn’t all you
should be focusing on. By talking to various new people, whether you’re already
an extrovert or not, you can build your confidence and increase your self-
esteem.

The more people you talk to, the more comfortable you’ll get selling
yourself. Even if they’re basic introductions, first impressions can go a long
way. By connecting with more people, you see the value others have for you
and the value you present to others.

You’ll see your confidence and self-esteem grow as you welcome new people
into your network, and others reach out to you!

New Insight

While the term “networking” sounds like it should be about schmoozing and
clinking glasses with important people, you can actually gain a lot of helpful
insight from your colleagues and others in your industry.

Say you have a difficult project you’re working on, and you need an outside
opinion. The people you network with can offer you fresh ideas and solutions
that you and the people in your department may be blind to. You can
brainstorm or bounce ideas off of one another.

Networking with people in different departments or even completely different

fields can also help open you up to what else is out there! People discover new
career fields, companies, and departments by networking too! You may even
find that networking energizes you and pushes you to innovate in your own
work.

Advice and Support

We all need people to talk to who understand what we’re struggling with or
excited about at work. While your husband or girlfriend may be good listeners,
they probably don’t know how to offer the career-specific advice or support
you need.

Creating a close group of people you can ask for advice and support from is
important for creating a healthy work environment. It can also help you enjoy
your work more when you have people you can relate to!

Networking enables you to create a list of people that, should you ever need
help or advice, you can reach out to! To start networking with people in your
area, try searching for “networking groups near me,” where you can get to
know professionals in your area who are looking for the same thing as you!

Business Connections and Contacts

Networking is great for creating a system of people that all have their own
specific skills and needs. Professionally, we rely on an interconnected web of
people throughout our companies, especially in other disciplines and fields.

Without reliable contacts, the transdisciplinary approach many businesses take

would not be possible. They help hire new people, assist with projects, and let
you know about potential opportunities. By having a reputable base of
contacts, you’re setting yourself up for future success. Many opportunities can
arise when you have people looking out for you across the company, state, or
country!

Networking can also help you find partners and teammates that you can add to
your own team! It can help you find qualified people looking for jobs and help
you find a better job. Or, it gives you the chance to get to know people who can
introduce you to the people who can help with either of those things.

You’re then opened up to a lot of opportunities, including new business

connections. Whether you’re trying to get promoted or want to meet important
people in your company, creating business connections is always helpful for
getting a leg up.

Ultimately, the goal of networking is to improve upon your own career, so keep
that in mind as you make connections, but don’t forget to actively engage in
mindful communication. Mindful connections and good first impressions are
what will make people remember you in the long run.

Personal Connections

Though certain people may start as professional contacts, you may get to know
them personally, too! It would be best if you were specific about which people
you get to know out of a professional capacity. Still, some great friendships and
relationships can develop because of networking.

Just remember, if you work together, it’s usually best to create friends out of
people at the same level as you. Friendships and relationships can complicate
work dynamics, so make sure to keep it professional when required. You should
always respect the working and professional boundaries.

When you put many people with similar interests and bright ideas in the same
room, you’re bound to get along with some personality!

Using the Power of Networking

The power of networking can create limitless opportunities for you throughout
your professional life. You create long-lasting bonds and connections that,
when kept up, can benefit both you and the other individual.
Business professionals who don't have a lot of spare time often ask us
which networking groups provide the biggest bang for their buck. There are five main types,
and what works best depends on the business they're in and the prospects they want to
meet.

1. Casual contact networks

These are general business groups that allow many people from various overlapping
professions. These groups usually meet monthly and often hold mixers where everyone
mingles informally. They may also hold meetings where guest speakers present on
important business topics or to discuss issues concerning legislation, community affairs or
local business programs.

The best examples of these groups are the thousands of chambers of commerce active
across North America and elsewhere in the world. They offer participants an opportunity
to make valuable contacts with many other business people in the community. By
attending chamber events, you can make initial contacts that will be valuable in other
aspects of developing your referral business.

But, because casual-contact organizations aren't tailored primarily to help you get
referrals, you have to exert effort to make them work. For example, you can volunteer to
be a chamber ambassador, a position that that requires little time commitment but
provides much exposure. Sitting on committees helps you get to know members better.
Most of all, you need to attend events regularly so you can take advantage of every
opportunity to strengthen the relationships you form.

2. Strong contact networks

Organizations whose purpose is principally to help members exchange business referrals
are known as strong contact referral groups. Some of these groups meet weekly, typically
over lunch or breakfast. Most of them limit membership to one member per profession or
specialty.

Strong contact networks provide highly focused opportunities for you and your associates
to begin developing your referral marketing campaigns. You won't meet hundreds of
businesspeople in this type of group, but all the members will be carrying your business
cards around with them everywhere they go. The net result is like having up to 50
salespeople working for you! With a program like this, you'll be establishing powerful long-
term relationships that will prove invaluable.

If you're considering a strong-contact group, you'll want to keep a few things in mind:
• You need to have a schedule that lets you attend all or almost all of the meetings.
Regular attendance is vital to developing a rapport with the other members of the
group and getting to know their businesses.
• You need to feel comfortable going to a networking event and being on the lookout
for prospects who can help other members of your group. A good strong-contact
networking group typically tracks the amount of business that's conducted. If you're
not "pulling your weight," you'll be asked to leave or referrals will stop coming your
way.

3. Community service clubs

Unlike more business-oriented groups, service groups aren't set up primarily for referral
networking; their activities are focused on service to the community. However, in the
course of giving time and effort to civic causes, you form lasting relationships that broaden
and deepen your personal and business networks. If you go in not to benefit but to
contribute, the social capital you accrue will eventually reward you in other ways and from
other directions -- business among them.

4. Professional associations
Professional association members tend to be from one specific type of industry, such as
banking, architecture, personnel, accounting or health. The primary purpose of a
professional association is to exchange information and ideas.

Your goal in tapping into such networks is to join groups that contain your potential clients
or target markets. A simple procedure for targeting key groups is to ask your best clients
or customers which groups they belong to.

Many groups limit their membership to those who have specific industry credentials, and
vendors aren't welcome. However, to generate more income or to give their full members
a well-rounded slate of potential vendors, a growing number of associations have created
an associate member category, whose members aren't active in the business or profession
for whom the group was formed.

In these type of networks, we recommend you stand out by finding ways to help without
selling to members. As an example, if you were a social media consultant and joined an
association of professional business coaches, rather than trying to "sell" them on your
services, how about volunteering to run the association's social platforms? Taking charge
of their Facebook and LinkedIn pages would be a great start toward building relationships
and showing them your value.

5. Online/social media networks

From a business perspective, the ideal use for social media is to build your brand and your
credibility with the people you're connected to by providing value for your connections
and followers. Whether you're talking about face-to-face networking or online networking
-- credibility and relationship building is still critical to the process.

With social media, the key to success is outlining a strategy that considers the amount of
time you can realistically dedicate to your online marketing efforts and being consistent.
Map out a weekly schedule that outlines specific days and times you'll spend developing
your social media strategy. Figure out what's realistic and what makes sense for your
company, and go from there.

Once your strategy's in place, you'll no doubt be anxious to start seeing a return on your
social media investment. It's vital to remember that networking is more about farming
than it is about hunting, whether online or face to face. It's about cultivating relationships
with people. It's about building the credibility of your brand and that doesn't happen
overnight.
To sum up, we must mention that undoubtedly, the advantages of networking are
many. For this reason, entrepreneurship networks are a strategy for the survival
and success of small businesses. Thus, to be a successful entrepreneur, it’s critical
to obtain a variety set of networks for yourself as well as to set up a successful new
business, you must make relations with those who you believe can help you gain
better results. So by finishing, we should mention that the bigger network is, much
better results.

So start networking now!

Don’t wait until your marketing funnel is empty to start networking. If you want to
build a robust business, you should get out there and make connections today.
Check out these 11 networking tips sure to expand the number of opportunities
that come your way.

1. Attend Business Networking Events

The first step in successful networking is knowing where you should go to make
connections. While almost any activity or event can serve as a networking
opportunity, small business owners and professionals with local businesses should
attend local business events. For example, your city’s chamber of commerce might
host gatherings for people in your industry. Additionally, it’s worth hitting up
meetings for professional associations and societies related to your field.

2. Choose a Goal
It’s hard to get what you want out of your networking endeavors if you don’t start
with a clear agenda. Before attending meetings or events, take the time to
determine what your goals are for the experience. For example, you might want to
make new connections, donate your time to the community, or simply learn about
the latest developments in your business or industry.

3. Get Social in Your Off Hours

Just because you’re off the clock doesn’t mean it’s time to stop networking. If you
want to expand your reach, make an effort to chat with attendees at your health
club or pilates class. You can even make business connections at your child’s school
activities and sports events. After all, parents are typically looking for something to
chat about besides what’s happening on the soccer field!

4. Know Your Worth

It’s not enough to provide your clients with a great product or service. If you can’t
articulate what it is you do, then you can’t hope to convey that information at
networking events. Whether your goal is to generate referrals or simply build your
virtual rolodex for the future, you should take time to generate an elevator pitch
that conveys what you do, for whom you do it, and why customers should choose
you over your competition.

5. Identify Conversational Icebreakers

If you want to overcome initial awkwardness and make a good first impression,
consider opening with a compliment. For example, you might tell the person sitting
next to you at a seminar that you like their shoes or tie. Similarly, asking a question
gives contacts the chance to talk about themselves. Ask how they got into the field
or what they think of a recent development affecting your industry.

6. Bring a Buddy
Sometimes starting conversations with strangers is easier if you have a familiar face
by your side. If you have a friend or coworker who’s also looking to expand their
network, consider attending professional events as a twosome. Just be sure you
make an effort to connect with other attendees rather than sitting in the corner
chatting the whole time.

7. Overcome Introversion
If you’re naturally shy, having success in networking can be a challenge.
Fortunately, there are some strategies for overcoming introversion and making
connections. First, consider brainstorming icebreakers before a networking event,
so you don’t have to come up with ideas on the spot. Second, feel free to take a
breather if you get overwhelmed. Go to the restroom, take a walk, or grab a coffee.
You can return to the room refreshed and ready to meet new people.

8. Find a Reason to Follow Up

Making connections is only half the battle; you also have to take steps to keep the
relationship going. Even if you aren’t currently job hunting, strive to reach out to
your contacts a few times a year to follow up. You could forward a relevant article,
invite them to a seminar or conference, or even just send a friendly note during the
holidays. Of course, being successful in networking is about more than what you
do. It’s also about what not to do. Here are some tactics to avoid if you want to
boost your business connections.

9. Don’t Be Negative
When searching for conversation starters, avoid speaking negatively about former
companies or coworkers. After all, you don’t want potential contacts thinking you’d
say bad things about them given the opportunity.

10. Don’t Be Selfish

Whether you’re chatting at a chamber of commerce event or attending an
informational meeting, it’s important to remember that networking is about give
and take. If you’re always the person asking for favors, the relationship is unlikely to
last. For best results, look for opportunities to help your networking contacts
prosper in their own careers.

11. Don’t Be Afraid to Ask for What You Want

We all need help now and again. If you want your networking efforts to be a
success, you have to be bold enough to ask for assistance. Before attending that
next meetup or seminar, make sure you can articulate what it is that you’re seeking.
Then, when someone asks how they can help you, tell them the truth.
For early stage startups, accelerators and incubators offer great ways to grow their
businesses.

Startup founders looking to start off on the right foot often turn to a startup
accelerator or startup incubator for help.

The terms "accelerator" and "incubator" are often assumed to represent the same
concept. However, there are a few key distinctions that first-time founders should
be aware of if they are planning on signing up.

Accelerators and incubators both offer entrepreneurs good opportunities early on.
Founders get help to quickly grow their business and they often better their
chances of attracting a top venture capital (VC) firm to invest in their startup at a
later point. Still, the programs are different frameworks for startup success.
Let's start by breaking down the goals of each of these types of programs.
Accelerators "accelerate" growth of an existing company, while incubators
"incubate" disruptive ideas with the hope of building out a business model and
company. So, accelerators focus on scaling a business while incubators are often
more focused on innovation.

While both types of programs were popularized in startup hubs like Silicon Valley,
nowadays they can be found all over the world. Although most people associate
these programs with tech startups, most of them accept companies from a wide
variety of verticals.

Accelerators

One of the big differences between accelerators and incubators is in how the
individual programs are structured. Accelerator programs usually have a set
timeframe in which individual companies spend anywhere from a few weeks to a
few months working with a group of mentors to build out their business and avoid
problems along the way. Y Combinator, Techstars, and the Brandery are some of
the most well-known accelerators.

Accelerators start with an application process, but the top programs are typically
very selective. Y Combinator accepts about 2% of the applications it receives and
Techstars usually has to fill its 10 spots from around 1,000 applications.
Early stage companies are typically given a small seed investment, and access to a
large mentorship network, in exchange for a small amount of equity. The mentor
network--typically composed of startup executives, venture capitalists, industry
experts, and other outside investors--is often the biggest value for prospective
companies.

The mentor networks aren't small, either. TechStars, for example, has hundreds of
mentors in its program.

Aaron Harris, a partner at Y Combinator, said he's not sure that accelerators
necessarily work as a whole, but Y Combinator's success is due to the way it
approached incentives.

At the end of an accelerator program, you're likely to see all the startups from a
particular cohort pitch at some sort of demonstration day (often shortened and
referred to as a demo day) attended by investors and media. At this point, the
business has hopefully been further developed and vetted.

Accelerators focus on scaling a business, it accelerates the growth of an

existing company.

Things to consider when Joining an Accelerator:

•Is it the right time?
•How fast or slow are you growing?
•Will you relocate?

Incubators

Startup incubators begin with companies (or even single entrepreneurs) that may
be earlier in the process and they do not operate on a set schedule. If an
accelerator is a greenhouse for young plants to get the optimal conditions to grow,
an incubator matches quality seeds with the best soil for sprouting and growth.

While there are some independent incubators, they can also be sponsored or run
by VC firms, angel investors, government entities, and major corporations, among
others. Some incubators have an application process, but others only work with
companies and ideas that they come in contact with through trusted partners. A
good example of an incubator is Idealab

Depending on the sponsoring party, an incubator can be focused on a specific

market or vertical. For example, an incubator sponsored by a hospital may only be
looking for health technology startups.
In most cases, startups accepted into incubator programs relocate to a specific
geographic area to work with other companies in the incubator. Within the
incubator, a company will refine its idea, build out its business plan, work on
product-market fit, identify intellectual property issues, and network in the startup
ecosystem.

A typical incubator has shared space in a co-working environment, a month-to-

month lease program, additional mentoring, and some connection to the local
community.

Co-working is a big part of the incubator experience and has been split off as its
own separate business offering around country, with co-working spaces charging
rent for access to utilities. Some accelerators offer a co-working space, but most
provide companies with private office space or let them find it on their own.

Incubators are often more focused on innovation, it incubates disruptive

ideas with the hope of building out a business model and company.

Things to Consider when joining an Incubator:

•Do they have the right mentors?
•Do you need Funding now?

Both incubators and accelerators offer a great opportunity to help young

companies and ideas for startups get headed in the right direction, but it's up to
you where you need to start.
A key step in developing your revenue model is determining the types and sources
of revenue your business will generate. Revenue types include product sales,
service fees, advertising sales, data access fees, license fees, and/or commissions.

Each type of revenue generated can come from a multitude of sources. For
example, sources of revenue from service sales can vary depending on customer
type and category, including online, mobile, consumer, corporate, institutional,
and/or government. Additionally, each category can expand into multiple sources.
For example, the corporate sales category can include major accounts, named
accounts, vertical markets, geographic territories, partnerships, and one-off sales.

Entrepreneurs spend months designing and planning how their business model will
work and create value in the market.

This business model is made up of components – the value created; the operating
model, which specifies how the business works and operates; and the revenue
model, which specifies how the business makes money and how much does it
spends in doing so.

While the operational blueprint is important for the business, a blueprint of the
revenue model is equally important as it decides the feasibility and long-term
projections of the business by stating its money-making process.
But what is revenue model and why is it important?

Let’s find out.

A revenue model is a component of a company’s business planning that describes
the way it intends to make money. The revenue model is an important element
of an organization’s business model and business plan.

Basically, the revenue model details on what the business will offer and how it will
charge customers: What product or service it will offer, what it will charge for the
product or service, and the method it will use to generate revenue.

A revenue model is a conceptual structure that states and explains the revenue
earning strategy of the business. It includes the offerings of value, the revenue
generation techniques, the revenue sources, and the target consumer of the
product offered.

Revenue can be generated from a myriad of sources, can be in the form of

commission, markup, arbitrage, rent, bids, etc. and can include recurring payments
or just a one-time payment. A revenue model is that part of the business
model that includes every aspect of the revenue generation strategy of the
business.

A revenue model is how a business makes money.

A revenue model is important for the company’s long-term business projections as

it gives an overview of the company’s current and future potential to earn profits.
A revenue model gives a business a framework for generating income, and a yardstick by
which they can measure their long-term profitability. Understanding the mechanics of a
revenue model can help determine a company’s success.

A revenue model is a blueprint that shows how a startup business will earn revenue
or gross income from its standard business operations, and how it will pay for operating
costs and expenses. This model is one of the key performance indicators (KPIs) for a
company to measure the profitability of its pricing strategy and product sales.

Revenue model is sometimes used as another term for a business model, which is a
structure for generating value for customers. However, these terms are not
interchangeable but there is a connection between them. A revenue model is part of a
business model, serving to explain how a company’s goods or services are made,
distributed, and sold for profit.
The purpose of a revenue model is to manage a company’s revenue streams, which are its
sources of income from target customers in different demographics and locations.

With a revenue model, a business can determine crucial factors that can help it thrive and
grow. Companies use the information from a revenue model to determine how much
money they will have to focus their sales and marketing on a target audience, develop
new goods and services for customers, and ultimately determine their place and future in
their particular market. Without a revenue model, companies, and especially startups, can
generate costs that can make their business unsustainable.

The revenue model is just like a fuel system to a car. While the engine or the
operating model is a necessity, a car cannot move for long if its fuel system is
damaged.

Hence, a well-defined revenue model is important for any business to –

• Operate and expand

• Remain in the market for long
• Make profits
With the advent of the internet, the revenue models of many companies now
include countless income sources from the digital world. Nevertheless, all of the
income sources, whether online or offline, can be confined to 10 types of revenue
models on the basis of revenue source

● Markup
Markup is the most common and oldest revenue model seen among the
businesses. It involves setting up the selling price of the good by adding profits
and overhead charges to its cost price. This revenue model is common
among retailers, wholesalers, etc. who act as middlemen and buy the products
from manufacturers/other parties before selling it to others.

However, manufacturers also use markup model to earn money by selling the good
at a price which includes profits over and above the cost involved in manufacturing
it.

● Arbitrage
Arbitrage revenue model makes use of the price difference in two different
markets of the same good. It involves buying security, currency, and/or commodity
in one market and simultaneously selling the same in another market at a higher
price and making profits from the temporary price difference.

● Licensing
Licencing revenue model is common among inventors, creators, and intellectual
property owners which grant a license to use their name, products or services at a
predetermined or recurring cost. The revenue model is common among many
software companies and legally protected intellectual property (patents,
trademarks, copyrights) owners which grant a license limited by time, territory,
distribution, volume, etc. to anyone who fulfils their requirements and pays for it.

● Commission
A commission revenue earning model is a type of transactional revenue model
where a party charges commission for every transaction/action it mediates
between two parties or any lead it provides to the other party. It is one of the most
common revenue earning strategy among the online marketplaces
and aggregators where they provide a platform for selling items digitally and
charge a commission as a percentage or fixed price on every item sold.

Affiliates, brokers, and auctioneers are also seen working on a commission-based

revenue model.

● Rent/Lease
Rent/Lease revenue model is common where a physical asset is involved. This
revenue earning strategy involves recurring (rent) or one time (lease) payment for
temporary use of the asset.

● Subscription
A subscription model is a great example of recurring revenue strategy. This is a
common strategy among SAAS, entertainment services, and online hosting
companies like Netflix, Youtube etc. where they provide the specified service for a
pre-determined periodic cost.

● Advertising
An advertising revenue model is usually adopted by media houses and information
providers which usually earn money by including advertisements in the content
provided. This revenue model is widespread in both offline and online businesses
and the company makes money by charging the advertiser: per size of the space
offered, thousand impressions or per click on the advertisement.

● Fee-for-service
Unlike other service-based models, a fee-for-service model charges the customers
for the type of and times the service is provided. This is pay-as-you-go or pay-per-
usage revenue model where the customer pays only for the services he actually
used. This revenue model is common in telecom and cloud-based services
industries.

● Interest
An interest-based revenue strategy or an investment based revenue strategy is
common among banks. Banks usually generate revenue in the form of interest on
their offerings (loans).

● Donation
Many companies provide their products and services free of cost and rely totally
on donations paid to them by their customers. These companies hardly make any
profits as donations usually cover only their operating costs. Wikipedia is one such
company which relies on donations.
Here are tips to help you pick the best revenue model for your business:

1. Product value. The revenue model you choose should connect to your value
proposition, which is a statement that clearly expresses your product or service's
distinct selling points to potential customers. Is your product something that is sold
or licensed? Does it involve a tier structure for payments? Does it generate income
from a per-user arrangement? The value that your product delivers to the consumer
should be reflected in your revenue model.

2. Customers. An understanding of the customer segments that use your business will
also help you determine your revenue model. Single customers may benefit from a
subscription model, but larger companies may require a different approach, such as
licensing.

3. Competition. How does your competition in the financial market generate revenue?
Studying their strategies will help you determine if your current model is more
successful than that of other companies in the marketplace, or if you should consider
adopting a different approach.
First, what is a business model (BM)? According to literature, there are several ways
to describe it. For instance, Alex Osterwalder defines a business model as “the
rationale of how an organization creates, delivers, and captures value“. In general,
BM is a description of (1) how the company creates value for its customers, (2) the
key processes and resources needed to deliver this value and (3) the ways in which
the company wants to make a profit.

Now it’s time to tackle “revenue model“, which is a subset component of a BM. As a
matter of fact, the revenue model describes how the company earns money in order
to capture value for itself. A revenue model basically answers to the following
questions: “Through which mechanisms does the company bill its customers and
generate revenues? How does it generate income?“. Depending on the industry and
the customer segments, revenue models can radically change from time to time.

Although they might sound similar, business models and revenue models do not
mean the same thing. On one hand, a business model describes indeed how an
organization creates value (for both audience and itself). On the other hand, a
revenue model describes instead how the money flows from the customer to the firm.
This distinction applies to social enterprises too.

Coming up with solid revenue models is often a struggle, especially for social
businesses. As a matter of fact, such entities primarily exist to serve unprivileged
communities or vulnerable individuals. Because of that, oftentimes they cannot rely
on revenue streams coming directly from beneficiaries. Instead, they must get
creative in order to find viable alternatives.

● Take Aravind Eye Care Hospital, for instance. This company performs eye
surgeries to cure preventable eye diseases and eradicate needless blindness
in India. That’s the value proposition provided. But what about its revenue
model? Well, the firm decided to charge paying customers the price of each
surgery performed, whereas beneficiaries receive treatments for free.

● Another interesting case study is StartSomeGood, an Australian social

enterprise connecting donors and social entrepreneurs. Thanks to its
crowdfunding platform, the company helps changemakers get their
projects/initiatives funded from the crowd. To remain financially sustainable,
StartSomeGood keeps a 5% fee each time a crowdfunding campaign reaches
its goal.

● Direct payments and intermediary fees as such are just couple examples of
revenue models social enterprises may choose from. But the list goes on and
on. The point we want to make here is that the revenue model is no
standalone entity. Quite the opposite: it‘s just a part of the business model,
thus it must be coherent with the value proposition provided and the overall
structure of a BM.

A business model is a method for capturing value. On the other hand, a revenue
model is a structure for billing customers.

A business model describes how a business generates value. A revenue model is a

small part of a business model that describes how customers are charged.

Example:

Manufacturing is a business model. Manufacturing firms take components, parts and

materials and create a product of greater value.

Markup is a revenue model whereby firms charge a price that is higher than their
costs. Most manufacturing firms have a markup revenue model.
 • Bootstrapping is founding and running a company using only personal finances or
operating revenue.
• This form of financing allows the entrepreneur to maintain more control, but it also
can increase financial strain.
• The term also refers to a method of building the yield curve for certain bonds.
• GoPro was a bootstrapped company that eventually went public with a $3 billion
valuation.

Bootstrapping a company occurs when a business owner starts a company with little to no
assets. This is in contrast to starting a company by first raising capital through angel investors
or venture capital firms. Instead, bootstrapped founders rely on personal savings, sweat
equity, lean operations, quick inventory turnover, and a cash runway to become successful.
For example, a bootstrapped company may take preorders for its product, thereby using the
funds generated from the orders actually to build and deliver the product itself.

Compared to using venture capital, bootstrapping can be beneficial because the

entrepreneur is able to maintain control over all decisions. On the downside, this form of
financing may place unnecessary financial risk on the entrepreneur. Furthermore,
bootstrapping may not provide enough investment for the company to become successful at
a reasonable rate.

In investment finance, bootstrapping is a method that builds a spot rate curve for a zero-
coupon bond. This methodology is essentially used to fill in the gaps between yields for
Treasury securities or Treasury coupon strips. For example, since the T-bills offered by the
government are not available for every time period, the bootstrapping method is used to fill
in the missing figures to derive the yield curve. The bootstrap method uses interpolation to
determine the yields for Treasury zero-coupon securities with various maturities.

There are a number of successful companies that started as a bootstrapped operation. For
example, the home search platform Estately was bootstrapped by its two founders, Galen
Ward, and Douglas Cole. Ward quit his job in 2007 to start the company and convinced his
partner to drop out of graduate school to join him.

With enough personal finances to live on for a year, the two co-founders invested $4,000
total in purchasing a cheap server, paying for incorporation fees, and maintaining a runway
that could cover miscellaneous expenses. The company grew from the $4,000 personal
investment to a reported $1 million in revenue in 2014. It was also reported to have 17
employees.

Additionally, bootstrapped companies, even if they become successful, can still decide to
take on future investments. In fact, this is often the case when a successful company hits a
growth plateau and uses outside investments to accelerate its business. This was the case for
GoPro, which was initially bootstrapped by Nick Woodman, who used his personal savings
and a $35,000 loan from his mom. Woodman took a $200 million investment from Foxconn
10 years after starting the company. GoPro completed its initial public offering (IPO) with a
near $3 billion valuation.
 • Crowdsourcing is the collection of information, opinions, or work from a group of
people, usually sourced via the Internet.
• Crowdsourcing work allows companies to save time and money while tapping into
people with different skills or thoughts from all over the world.
• While crowdsourcing seeks information or work product, crowdfunding seeks money
to support individuals, charities, or startup companies.
• The advantages of crowdsourcing include cost savings, speed, and the ability to work
with people who have skills that an in-house team may not have.

Crowdsourcing allows companies to farm out work to people anywhere in the country or
around the world; as a result, crowdsourcing lets businesses tap into a vast array of skills and
expertise without incurring the normal overhead costs of in-house employees.

Crowdsourcing is becoming a popular method to raise capital for special projects. As an

alternative to traditional financing options, crowdsourcing taps into the shared interest of a
group, bypassing the conventional gatekeepers and intermediaries required to raise capital.

Crowdsourcing usually involves taking a large job and breaking it into many smaller jobs that
a crowd of people can work on separately.

Crowdsourcing vs. Crowdfunding

While crowdsourcing seeks information or work product, crowdfunding seeks money to

support individuals, charities, or startup companies. People can contribute to crowdfunding
requests with no expectation of repayment, or companies can offer shares of the business to
contributors.

For example, popular crowdfunding platforms include Indiegogo and Kickstarter, both online
platforms in which individuals can contribute a small amount of money and collectively bring
a new business idea or product to fruition. Platforms like Kickstarter make money by charging
a small platform fee, whereas some of the best crowdfunding platforms specialize in helping
creatives (Patreon), investing (StartEngine), the real estate industry, nonprofits
(Mightycause), or even startups trying to raise capital (SeedInvest Technology).

Especially as recent years have seen grassroots activism ramp up, communities have used
platforms like GoFundMe to support families affected by police brutality or other violent
attacks. If crowdfunding sounds like an intriguing option, read more on the best alternatives
to Kickstarter for your cause.
The advantages of crowdsourcing include cost savings, speed, and the ability to work with
people who have skills that an in-house team may not have. If a task typically takes one
employee a week to perform, a business can cut the turnaround time to a matter of hours
by breaking the job up into many smaller parts and giving those segments to a crowd of
workers.

Many types of jobs can be crowdsourced, including website creation and transcription.
Companies that want to design new products often turn to the crowd for opinions. Rather
than rely on small focus groups, companies can reach millions of consumers through social
media, ensuring that the business obtains opinions from a variety of cultural and
socioeconomic backgrounds. Oftentimes, consumer-oriented companies also benefit from
getting a better gauge of their audience and creating more engagement or loyalty.

But that being said, crowdsourcing isn't a magic bullet for companies that hope to lighten
their workload while pursuing the next shining star of an idea. Many times, someone will
have to sift through all the ideas being pitched, fundraising goals can fall short in all-or-
nothing type funding platforms, and the right crowd can be difficult to find or engage.
Two (2) Types of Financing:

1. Equity Financing

is the process of raising capital through the sale of shares. Companies raise
money because they might have a short-term need to pay bills or they might
have a long-term goal and require funds to invest in their growth. By selling
shares, they sell
ownership in their company in return for cash, like stock financing.

2. Debt Financing

occurs when a firm raises money for working capital or capital expenditures by
selling debt instruments to individuals and/or institutional investors.

Two (2) Ways of Financing:

1. Direct Finance
the borrower-spenders, borrow and deal directly with lenders through selling
financial instruments (or securities). Financial Instruments
represent claims on the future income or assets of the borrower. Borrowers
recognize financial instruments as liabilities while lenders recognize these as
an asset. buying stock directly from a company is also considered as direct
 financing.

1. Indirect Finance
The borrowing activity between both parties still happens though indirectly
through the intervention of a financial intermediary.
Financial statements are a collection of summary-level reports about an
organization’s financial results, financial position and cash flows.

The purposes of the financial statements are, as follows:

• TO DETERMINE THE ABILITY OF A BUSINESS TO G ENERATE CASH, AND

THE SOURCES AND USES OF THAT CASH.

• TO DETERMINE WHETHER A BUSINESS HAS THE CAPABILITY TO PAY

DEBTS.

• TO TRACK FINANCIAL RESULTS ON A TREND LINE TO SPOT ANY LOOMING

PROFITABILITY ISSUES.

• TO DERIVE FINANCIAL RATIOS FROM THE STATEMENTS THAT CAN

INDICATE THE CONDITION OF THE BUSINESS.

• TO INVESTIGATE THE DETAILS OF CERTAIN BUSINESS TRANSACTIONS, AS

OUTLINED IN THE DISCLOSURE THAT ACCOMPANIES THE STATEMENTS.