Three secrets to becoming a successful entrepreneur

There are many secrets to becoming a successful entrepreneur. Three of the most significant are a demonstrated and infectious passion, a focused mission and vision, and relentless execution.

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1. A demonstrated and infectious passion 

If an entrepreneur does not demonstrate passion about their venture, it is unlikely that anybody else will. It is important that an entrepreneur demonstrates their passion in such a way that it rubs off on co-founders, employees, customers, suppliers, investors, and the community-at-large. In turn, these constituencies should become loyal to and promote the venture if the entrepreneur’s passion really is infectious. A good test of an entrepreneur’s passion is when competitors start to emerge. Where feasible, the entrepreneur must be using the product and/or service for their own purpose, and must never be seen with a competitor’s, except to demonstrate superiority of their own.

2. A focused mission and vision

It is important that an entrepreneur focus on well articulated mission and vision statements for their enterprise, and communicate them clearly. A mission is both an aspirational and an inspirational statement of purpose, supported by a set of high-level objectives, that address core competencies. A vision is an inspirational statement of a future state (reasonably achievable) within the context of a longer-term aspiration (dream). Vision statements may have two components: external and internal. An external vision is a statement of what a community (local-to-global) can become as a consequence of the enterprise’s activities, and the products and/or services that it offers. An internal vision is a statement of what the enterprise itself can become to its constituencies.

3. Relentless execution

Entrepreneurship is about causing change – causing customers to switch products and/or services, or use something that they have never used before. Causing change requires the art of persuasion, and the ability to relentless deliver quality products and/services (almost) flawlessly.

However, before new products and/or services can be delivered, an infrastructure has to be in place to produce and deliver them, which may require considerable financial and human capital to develop, enhance, and maintain.


Building infrastructure requires both project management and team building disciplines, as does the development of customer products and/or services. Thus, the entrepreneur is faced with building an enterprise that has both project-oriented and and process-oriented disciplines for ongoing product and/or service delivery. Building the enterprise requires being able to identify the appropriate talent for various tasks, and building a team because together everyone achieves more
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Characteristics of corporations, enterprises, companies, and businesses

The terms corporation, enterprise, company, and business are often used interchangeably; however, they have distinct meanings. In law, only individuals as natural persons and corporations are legal entities. A juristic person is a group of natural persons behaving as if they are a single group as a partnership, limited liability company, or corporation, and can exist for many reasons. An enterprise is either a sole proprietorship associated with a natural person, or a juristic person. A business can exist to earn revenue from customers in order to generate a profit for its owners regardless of legal form.

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A corporation is a legal entity that is separate and distinct from its owners. In the United States, corporations are organized under state law according to articles of incorporation. However, both the Federal and state governments may form corporations for commercial and governmental activities. Federally chartered banks are designated as national associations or national trust and savings associations. According to law, there must be some indication in the name of the corporation that it is incorporated. For example, “The Business Leadership Development Corporation” and “Javazona Cafes, Incorporated” (abbreviated to “Javazona Cafes, Inc.”) are two incorporated legal entities.

An enterprise is a group of activities intended to produce income for profit as a business, as a not-for-profit association, or as a government agency. An enterprise can consist of one or more legal entities.
In its simplest form, a company is a group of individuals who are associates or companions, as opposed to a group of individuals assembled with no distinct purpose. A team is a tightly coupled group working coherently with mutual accountability. In effect, a company is set of teams working together with common purpose.

The term “company” is used in the theatrical profession to describe a group of actors with their accompanying equipment. The term is also used to describe a group of individuals operating a business as employees and owners as juristic persons, regardless of legal form. In the United States, the term “company” can be associated with partnerships, limited liability companies, and corporations. A limited liability company that has a single owner is “disregarded” by the Internal Revenue Service if the owner elects that the entity be taxed as a sole proprietorship. However, in some states and countries, the term “company” is synonymous with “corporation” – meaning that it has a legal form separate from its owners. Hence, “American Express Company” and “Ford Motor Company” are corporations. In some countries, the term “associates (and company)” is synonymous with “partnership,” and “anonymous society” is synonymous with “corporation.”

The earliest forms of companies were unincorporated associations, followed later by partnerships. Individual corporations were initially established by governmental charter. However, the concept of a joint stock company was created over time, which had individual owners with unlimited liability. A joint stock company was similar to a partnership, but had certain rights distinct from the individual owners. A modern corporation is in effect a joint stock company with limited liability of the individual owners.

A tradename is often used to establish a brand separate from the legal name of a sole proprietorship, partnership, limited liability company, or corporation. For example, “BLD” is a tradename of The Business Leadership Development Corporation; “Achieve Plan B” and “Vitaprise” are tradenames of Nigel A.L. Brooks. Tradenames are common in franchise and licensee systems, where different legal entities are part of the same system, and thus share a common identity, such as Enterprise Rent-A-Truck, Holiday Inn, McDonald’s, and Subway. The tradename is owned by the franchisor or licensor, but can be used by the franchisees and licensees. However, whenever business is done in a name other than a legal name, it is fictitious and must be registered as a certified “doing business name” in whatever jurisdictions are required under state law. For example, if Nigel A.L. Brooks is doing business as “Vitaprise,” that name must be registered as fictitious in each jurisdiction where it is used.

A business is formed to earn a profit from revenues from commissions, dividends, fees, interest, rents, royalties, and sales less expenses from costs of revenue and operating items, and capital gains from investments. An entity such as a sole proprietorship, partnership, limited liability company, or corporation may be formed, organized, or incorporated for the purpose of conducting business before revenue is earned. As such the entity is separate from but related to the business enterprise. A venture is a start-up or early stage enterprise (as opposed to a hobby), which may be classified as a “development stage entity” because it has little or no income. Its future may be uncertain until the business concept has been proven.

The business becomes established when there is a commitment from the owners to earning revenue as an ongoing concern, and predictable patterns among the constituencies start to appear. Thus a business enterprise can be established much later than when the holding entity for it was formed. The entity can be changed as conditions dictate, without changing the nature of the business enterprise. For example, the initial business entity may be a limited liability company organized in Arizona, but later changed to a corporation incorporated in Delaware. Assets of the enterprise and associated revenue streams can be sold separately from the entity, or the entire entity itself can be sold. Similarly, assets and revenue streams, and entire entities can be acquired.

Regardless of the marketing efforts of the management of an enterprise and its legal form, its fate is ultimately determined by the frequency, recency, location, and value of the transactions of its customers based upon their needs and wants. Such transactions are in turn are influenced by the behaviors of employees, regulators, competitors, and market trends in general.

Operating enterprises is an enterpriship (entrepreneurship, leadership, and management) competency.

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Enterprises, entities, and all that

The word “enterprise” means “undertake for a prize or cause.” An enterprise is a group of activities organized as a business for profit, as a not-for-profit association, or as a government agency, and comprises one or more entities. An entity is formed, organized, and operated under Federal and/or state laws, which may permit or deny certain activities. Operators of enterprises have to be aware of those entities that are suitable to their situation.

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Enterprises…

Entrepreneurs transform ideas into products and/or services or causes through activities that may ultimately become enterprises. Under Federal and/or state laws, these activities must be conducted through appropriate legal vehicles. A legal vehicle is the type of entity for a specific situation based upon purpose, location of property (situs), and physical presence (nexus). The choice of legal vehicle and nexus determines the protections that are available for assets and the methods of taxation or exemption from taxes.

Associations, organizations, businesses, and not-for-profits…
An association represents a group of individuals who have voluntarily formed an organization to achieve a certain purpose. An organization is a generic term for an enterprise, entity, or a component thereof.

A business is an occupation, profession, or trade delivering products and/or services for an intended profit. “Not-for-profit” is a general term; “non-profit” entities include those that are exempt from certain taxes under the Internal Revenue Code and state laws. Non-profits are associations that are either unincorporated or incorporated, or trust funds and foundations. Their activities address agricultural, arts and entertainment, educational, health care, labor, religious, social, scientific, sports, or other charitable causes. Government agencies exist at Federal, state, county, and municipal levels.

An organizational unit is a component of an enterprise, such as a division, department, branch, plant, product line, business line, or business unit. Organizational units can exist within or across entities.

Entities…

A legal entity exists either as an individual or a corporation; a business entity has an accounting and tax reporting structure. A legal (juristic) person is either an individual natural person, or an entity as a group of natural persons behaving collectively as if they were a single individual. An entity is domiciled in the jurisdiction where it is organized or incorporated, or lives permanently if a natural person. If an entity has nexus in multiple jurisdictions, then it is subject to both domestic laws and foreign for local transactions, including taxation. All jurisdictions have licensing requirements for certain activities, and may have to grant authority to transact business before operations can begin locally.

For example, an entity incorporated in Arizona is considered to be foreign in California; an entity incorporated in the United Kingdom is considered to be foreign in both Arizona and California.

Sole proprietorship:

  • Simplest business structure
  • Unincorporated business owned by one individual proprietor
  • Proprietor liable for obligations
  • Files schedule C or F on the individual proprietor’s “1040” tax return

Partnership:

  • Formed by an agreement as a general partnership between two or more persons (active partners), or as a limited partnership (one or more passive partners and one or more active general partners) – includes joint ventures and syndicates
  • General partners are liable for obligations
  • Files “1065” tax return; tax liability is passed to individual partners via schedule K-1
  • If a husband and wife operate an unincorporated business, then it is treated a partnership – however, they may be able to elect for treatment as a qualified joint venture if there are no other partners and if they are both active – this election creates two sole proprietorships on an individual joint tax return

For profit corporation:

  • Formed by articles of incorporation
  • Owned by persons who are shareholders, who elect directors, who in turn appoint officers
  • Legal entity separate from its shareholders with its own bylaws
  • Liable for its obligations separate from the shareholders, directors, and officers
  • Files “1120” tax return and is either taxed on income in its own right with dividends taxed on the shareholders’ returns (C corporation), or as a pass-through where the entire income tax liability is passed to shareholders via schedule K-1 (S corporation)
  • As a “professional” corporation, activities may be restricted to licensed professions

Limited liability company:

  • Formed by articles of organization
  • Owned by one or multiple persons under an operating agreement, who are members and in turn may appoint managers if not member managed
  • Liable for its obligations separate from the members and managers
  • If it comprises multiple members, files a tax return and elects to be treated as either a partnership or a corporation; if it comprises a single member only, then it may file a tax return as a corporation, or be disregarded and treated as either a division of a corporation or a sole proprietorship

Limited liability partnership:

  • Formed as either a general limited liability partnership or limited liability limited partnership by two or more persons
  • Activities may be restricted to certain licensed professions
  • Qualifies for limited liability status with the approval of its partners
  • Liable for its obligations separate from the partners
  • Files “1065” tax return; tax liability is passed to individual partners via schedule K-1

Unincorporated association:

  • Formed by a group of individuals by a charter or agreement, whether organized for profit or not
  • May have to file its charter or agreement with a government agency in the local jurisdiction
  • May obtain tax exempt status if organized for not-for-profit activities

Non-profit corporation or limited liability company:

  • Formed by articles of incorporation or organization
  • Organized by persons who are members, who elect directors or trustees, who in turn appoint officers
  • Legal entity separate from its members with its own bylaws or operating agreement
  • Liable for its obligations separate from the members, directors or trustees, and officers
  • Has obtained tax exempt status from Federal and/or state jurisdictions
  • Files “990” tax return if exempt from Federal income tax, which is open to public inspection
  • May be eligible to receive public and private grants

Other types of entities include estates, trusts, employee benefit plans, and debtors in bankruptcy.

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Whether organized for profit or not, management has to be concerned about managing capital, net assets, or funds, and earning income, whether it be revenue sourced from sales, membership fees, or taxes.

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Understanding financial, managerial, and regulatory accounting and reporting concepts

Every enterprise has to file regulatory reports with both Federal and state agencies. Managerial reports are necessary for internal control and decision making, and financial reports are necessary for investors and creditors such as financial institutions. Financial, managerial, and regulatory reports should be reconciled to ensure that the differences between information reported externally and internally, and vice versa, are fully understood.

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The reporting burden on enterprises and their associated business and legal entities is significant.

An enterprise consists of one or more business entities for which management has to keep accounts and report financial condition and performance to regulators such as the Internal Revenue Service (IRS) and the equivalent state revenue agencies. Those enterprises that have employees must report payroll information to the IRS, the Social Security Administration, and state revenue and unemployment agencies. Those enterprises that sell securities must report financial condition and performance to the Securities and Exchange Commission (SEC). Reports may also have to be filed with the United States Immigration and Citizenship Services, the United States Department of Labor, the United States Bureau of Customs and Border Protection, and various other Federal and state agencies. Counties and municipalities may require reports too. Those enterprises doing business outside the United States may have to file reports to foreign governments. Taxes, duties, and fees are paid either with the report filings, or separately, depending on regulatory requirements. If paid separately, the payments have to be reconciled to the report filings. Legal entities may have to report financial condition and performance to regulators such as state corporation agencies.

Management must measure both financial and non-financial performance within and across the various entities that make up an enterprise on whatever schedule is necessary to conduct business. The reports that are prepared for internal use should be available on a “need to know” basis. Indicators for financial performance measurement include revenues, costs and expenses, profits, cash flows, and returns on investment. Financial measurements are based upon rates, quantities of input, volumes of output, and aging. Financial performance must be evaluated in terms of non-financial measures, such as market share and penetration, product usage, employee and customer satisfaction, quality, time-to-market, cycle time, and asset utilization. As information systems become more real-time oriented, some reports may be available on demand.

Management must also report financial condition and performance to external investors and certain creditors such as financial institutions, and to the SEC and other regulators when applicable, that are in conformity with Generally Accepted Accounting Principles (GAAP). These reports are prepared according to standards for which the financial condition and performance of the enterprise can be measured against others on a consistent basis. These reports include financial statements of cash flow, income, and condition (balance sheet). The accompanying notes are an integral part of the financial statements, and contain items such as commitments and contingencies that may have a significant impact on the future financial condition of the enterprise. Management must be cautious about the use of non-GAAP measures in external financial statements. However, there may be rare circumstances where it is necessary to depart from GAAP if a material misstatement would otherwise occur. In such cases, the causes and effects must be disclosed. Estimates and judgments must be used on a consistent basis.

In the United States, GAAP is influenced by the SEC, the Government Accounting Standards Board, the Financial Accounting Standards Board, and the American Institute of Certified Public Accountants. Other countries have their own equivalent of GAAP. The International Accounting Standards Board develops international financial reporting standards.

In the ideal world, financial, managerial, and regulatory reports would be prepared from a set of accounts in a single database. In reality, this may not be practical because of limitations in accounting processes and systems. However, whenever reports are prepared, regardless of source, they must be reconcilable, and the differences must be understood.

Whatever the reporting needs of management, attention must be paid internally to what is being reported externally, because if the information is necessary for external parties, it must be relevant internally. Management should also be aware of internal financial information that is non-GAAP based from differing treatment of period and product expenses.

Severe penalties can result from erroneous information reported externally, especially to regulators, investors, and financial institutions.

Financial Accounting and Reporting Concepts:

  • Business entity assumption – the entity for which accounts are kept and reports are prepared
  • Going concern assumption – the entity will operate indefinitely
  • Monetary unit principle – accounting and reporting is in a stable currency, unadjusted for inflation
  • Periodicity principle – reports are prepared in consistent time periods
  • Revenue recognition principle – accrual basis (revenue is recognized when realizable and earned) or cost basis (revenue is recognized when cash is collected)
  • Cost principle – acquisition cost is recognized except for certain assets and and almost all liabilities that are recognized at fair value
  • Matching principle – expenses (expired costs) incurred to generate revenue must be matched with earned revenue in the same period – until revenue is earned, expenses incurred to generate revenue are capitalized as product costs (fully absorbed or inventoriable)
  • Conservatism principle – when alternatives are available, methods are based on recording the higher expense or lower revenue, or the lower asset or higher liability
  • Consistency principle – same principles and methods are used from period to period
  • Disclosure principle – relevant information must be reported in financial statements and notes
  • Materiality principle – significance of items must be considered when reported
  • Objectivity principle – financial statements are prepared from reliable and traceable sources

Managerial Accounting and Reporting Concepts:

  • Plans and budgets
  • Sales funnel for submitted, presented, and closed proposals (booking of unearned and earned revenue)
  • Cost allocation and transfer pricing
  • Standard costing
  • Variable (direct) costing
  • arginal costing
  • Activity-based costing
  • Functional, process, product and/or service, and market costing
  • Project costing
  • Branch and departmental reporting
  • Cost, profit, and responsibility center reporting

Regulatory Accounting and Reporting Concepts:

  • Taxes (employment, excise, franchise, income, property, sales, use, and withholding)
  • Customs duties
  • Fees
  • Licenses and permits
  • Employment
  • Environmental
  • Insurance
  • Real estate
  • Securities
  • Zoning

When reconciling regulatory reports to financial reports, attention must be paid to uniform capitalization rules (UNICAP) as adopted by the IRS, which differ from GAAP.

When reconciling managerial reports to financial reports, attention must be paid to differences in revenue and expenses by time period resulting from those non-GAAP managerial accounting techniques that do not employ the matching principle. Techniques such as variable (direct) costing and marginal costing do not because they expense fixed costs within periods instead of against products.

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