BGCSE BSSE Entrepreneurship (1441) cheat sheet

Mindset components: opportunity spotting, calculated risk-taking, initiative, persistence, adaptability, and responsibility for outcomes.

Opportunity cost: the value of the next-best alternative forgone; using own funds or time in a venture is rational only if expected return exceeds that alternative.

Calculated risk rule: proceed when expected gain multiplied by probability of success exceeds expected loss multiplied by probability of failure, and the worst-case loss is affordable.

Fixed versus growth mindset: a fixed mindset treats ability as static; a growth mindset treats ability as developable through effort and feedback, supporting resilience after failure.

Self-efficacy: belief in one's capability to organise and execute tasks; it raises persistence but must be tested against market evidence.

Effectuation principle: start with available means, namely who you are, what you know and whom you know, rather than a fixed goal and a predicted future.

Deliberate practice: repeated effort on specific weak skills with immediate feedback improves entrepreneurial competence more than general experience alone.

Resilience formula: recovery is supported by support networks, prior coping experience and reframing of the setback; higher support and reframing shorten recovery.

Decision rule: separate sunk costs from future costs; ignore sunk costs when deciding whether to continue a venture.

Self-employment: owning and operating a business, bearing profit or loss and risk; income is residual, meaning revenue minus all costs, not a fixed wage.

Entrepreneurial characteristics: need for achievement, internal locus of control, tolerance of ambiguity, initiative, self-confidence, and opportunity obsession.

Internal locus of control: belief that own actions determine outcomes; it supports proactive problem-solving but can cause overconfidence if external shocks are ignored.

Need for achievement: preference for moderately challenging tasks with clear feedback; high need for achievement suits growth ventures, while lower need suits stable small trades.

Self-employment versus paid employment decision: compare expected residual income and non-financial benefits against wage, benefits and income stability; self-employment is viable if expected utility is higher and the downside is survivable.

Time management rule: classify tasks by urgency and importance; owner-managers should spend most time on important-not-urgent tasks such as planning, supplier relations and skill building.

Role conflict: the owner-manager must balance production, finance, marketing and family roles; delegation reduces conflict but requires written procedures.

Characteristics are partly trainable: formal training, mentoring and prior venture experience raise the probability of business survival.

Risk tolerance: personal risk tolerance should not exceed the capital the owner can lose without affecting basic living needs.

Opportunity: a gap between customer needs and available supply that can be served profitably; an idea is only an opportunity if customers will pay more than the cost to serve.

Sources of opportunity: dissatisfaction with existing products, changing demographics, new technology, regulation changes, import gaps, and underused local resources.

Gap analysis: compare customer requirements with competitor performance; a large unmet requirement with high importance is a priority opportunity.

Screening criteria: market size, growth, competition, capital requirement, owner's skills, legal fit, and break-even time.

Idea generation methods: brainstorming, mind mapping, SCAMPER, customer observation, and reverse engineering.

SCAMPER: a structured creativity checklist that prompts substitute, combine, adapt, modify, put to other use, eliminate and reverse changes to an existing offer.

Feasibility test: an idea is feasible if demand exists, resources are obtainable, the owner has or can acquire competence, and the venture can comply with the law.

Value proposition: a clear statement of the benefit a product delivers, the customer segment it serves, and why it is better than alternatives.

Decision rule: reject ideas that depend on a single unconfirmed assumption; test the riskiest assumption first with the cheapest experiment.

Market research: systematic collection and analysis of data about customers, competitors and the market to reduce decision uncertainty.

Primary data: collected first-hand for the current problem through surveys, interviews, observation or experiments; secondary data: already published statistics, reports or records.

Sampling: a sample is valid when selected randomly or representatively; a biased sample produces unreliable estimates regardless of size.

Questionnaire rule: use closed questions for measurable data and open questions for insight; avoid leading and double-barrelled questions.

Market size formula: number of potential buyers multiplied by average purchase quantity multiplied by average price per unit per period.

Market share equals the firm's sales divided by total market sales, multiplied by 100.

Marketing mix: product, price, place and promotion; each element must fit the chosen target segment and positioning.

Pricing methods: cost-plus, competitive pricing, penetration pricing with a low initial price to gain share, and skimming with a high initial price for early adopters.

Break-even sales volume equals fixed costs divided by selling price per unit minus variable cost per unit.

Business plan: a written document that describes the venture, market, operations, management, finances and risks, and is used to guide action and raise finance.

Standard sections: executive summary, business description, market analysis, marketing plan, operations plan, management plan, financial plan, and risk assessment.

Executive summary: written last and summarises the whole plan; it states the opportunity, the business model, the finance required and the expected return.

SMART objectives: specific, measurable, achievable, relevant and time-bound; plans without measurable targets cannot be monitored.

Financial plan components: projected cash flow, profit and loss, balance sheet, break-even analysis, and funding requirement.

Assumption register: list every forecast assumption, such as price, volume, cost and payment terms, with the evidence for it; unsupported assumptions are a main cause of plan failure.

Contingency planning: identify trigger points and pre-agreed responses; a plan states what will be cut or changed if sales fall below forecast.

Planning fallacy: people underestimate the time and cost of projects; correct it by using historical data and adding a buffer based on past overruns.

Decision rule: a plan is bankable when projected cash flow shows loan repayments can be met in every month, including the worst case.

Accounting equation: assets equal liabilities plus owner's equity; it must hold after every transaction.

Revenue equals selling price multiplied by quantity sold; profit equals total revenue minus total costs; total costs equal fixed costs plus variable costs.

Fixed costs do not change with output in the short run, such as rent and insurance; variable costs change directly with output, such as materials and piece-rate labour.

Contribution per unit equals selling price minus variable cost per unit; total contribution equals contribution per unit multiplied by units sold.

Break-even units equal fixed costs divided by contribution per unit; break-even revenue equals break-even units multiplied by selling price.

Cash flow versus profit: profit is revenue minus expenses over a period; cash flow is money in and out; a profitable firm can fail if cash is tied up in stock or debtors.

Working capital equals current assets minus current liabilities; it funds day-to-day operations and must cover short-term obligations as they fall due.

Record-keeping rule: record transactions when they occur, keep source documents such as receipts and invoices, and reconcile bank records regularly.

Budget variance equals actual minus budget; a revenue variance is favourable when actual revenue is above budget, and a cost variance is favourable when actual cost is below budget.

Operations: the processes that transform inputs such as materials, labour, energy and information into outputs of value to customers.

Productivity equals output divided by input; a rise means more output from the same resources or the same output from fewer resources.

Capacity utilisation equals actual output divided by maximum possible output, multiplied by 100; low utilisation raises unit fixed cost.

Inventory levels: too high ties up cash and risks obsolescence; too low risks stock-outs and lost sales.

Economic order quantity balances ordering cost and holding cost; larger orders lower ordering cost but raise holding cost.

Quality control: inspection-based detection of defects; quality assurance: process-based prevention of defects.

Supply chain: the network of suppliers, producers, distributors and customers; single-sourcing reduces transaction cost but raises dependency risk.

Just-in-time: materials arrive as needed, reducing stock holding; it requires reliable suppliers and accurate demand forecasts.

Bottleneck: the operation with the lowest capacity in a process; throughput is limited by the bottleneck, so improvement should target it first.

Legal forms: sole proprietorship, partnership, private company, public company and cooperative; each differs in liability, taxation, continuity and registration.

Limited liability: owners' losses are limited to their invested capital; unlimited liability means personal assets can be used to pay business debts.

Registration in Botswana: business names and companies are registered with the Companies and Intellectual Property Authority, and tax registration is with the Botswana Unified Revenue Service.

Contract essentials: offer, acceptance, consideration, intention to create legal relations, capacity of the parties, and legality of purpose.

Consumer protection: goods must be of merchantable quality, fit for purpose and match their description; misleading advertising is prohibited.

Intellectual property: trademarks protect brand signs, patents protect inventions, and copyright protects original expression; registration gives stronger enforceable rights.

Business ethics: principles of honesty, fairness, transparency and respect for stakeholders; ethical behaviour can reduce legal risk and build trust.

Conflict of interest: a situation where personal interest could improperly influence business decisions; it must be disclosed and managed.

Tax compliance: record revenue and expenses accurately, submit returns by deadlines, and pay taxes due; non-compliance attracts penalties and interest.

Risk score equals likelihood multiplied by consequence; higher scores indicate risks that need earlier or stronger treatment.

Risk treatment options: avoid, reduce, transfer through insurance, or accept; choose by comparing the cost of treatment with the expected loss.

Risk register: a log of identified risks, their likelihood, impact, owner and mitigation action; it is reviewed at set intervals.

Insurance transfers specified risks to an insurer for a premium; it does not remove the risk of business failure from poor management.

Business continuity: plans for keeping critical operations running during disruption, including backup suppliers, data backups and emergency funds.

Resilience: the capacity to absorb shock, adapt and recover; it is built through cash buffers, diversified customers and suppliers, and documented procedures.

Growth methods: market penetration, market development, product development and diversification, as shown in the Ansoff matrix.

Diseconomies of scale: rising average cost as a firm grows, caused by coordination problems, bureaucracy and communication breakdown.

Sustainable growth rule: growth should be financed by retained profit or matched long-term finance; funding long-term assets with a short-term overdraft creates liquidity risk.