6.2 Entrepreneurial Strategies

An entrepreneur doesn’t typically start a business and instantly become an Apple or Meta.

Entrepreneurs first start with their distinctive competencies, things they are good at that few others are good at.  Perhaps it is software, cooking, or design.  They use their distinctive competencies as the basis for creating a business.

Entrepreneurs also don’t typically start out nationwide but rather pick a smaller target market.  These markets are called niche markets.  The idea is for an entrepreneur to be the first and only business in that market.  Consumers like competition, businesses don’t.

Being the first into a market gives what is called first mover advantage.  There are many advantages to being the first in a market, not the least of which is the ability to set prices.  A skimming strategy might be used, which sets prices relatively high.  This gets the customers with the highest willingness to pay.  As time goes on and competition enters, prices can be lowered.

A must for new businesses is to create a business plan.  That may sound rather formal and it is a document but it has very practical purposes.  First of all, it should help the entrepreneur assure him or herself that they will be successful.  A person may have what they consider to be a good business idea but when numbers are actually plugged in, the business may not look viable.  The second reason for a business plan is to convince others to lend you money or invest in your business.  How will your investors make money?

There are many outlines online for business plans.  Any business plan should include:

• Who are the target customers?  What need do they have that you will fill?
• What is your product or service?  What makes it different?
• How will you market your product or service?
• How will you price your product or service?
• How will your product be created and manufactured?
• How many people will you need to employ?
• What are your expected financials for the next three years?
  • Income statement
  • Balance sheet
  • Cash flow statement
• Biographies of the principal management team.