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Entrepreneur & business Planning
Entrepreneur & business Planning
Dr. Abdulfattah Abuhbail
Master of finance– Benghazi university
Spring 2012
Titles for the courseTitles for the courseInstitution Course name
BOCCONI, Benghazi 1-Entrepreneurship & Business Planning
Oregon State University 2- Venture Management
University of Florida (Warrington)
3- Entrepreneurial Opportunities
Other titles for the course Other titles for the course (cont.)(cont.)Ageno School of BusinessGOLDEN GATE UNIVERSITY
4-Entrepreneurship
Lester Center for Entrepreneurship, Haas Business School
5-New Venture Creation
Warrington College of Business Administration University of Florida
6-Entrepreneurship
NEW YORK UNIVERSITY,LEONARD N. STERN SCHOOL OF BUSINESS
7-FOUNDATIONS OF ENTREPRENEURSHIP
San José State University School: College of Business
8-Business Plans for New Ventures
THE UNIVERSITY OF HONG KONGFACULTY OF BUSINESS AND ECONOMICS
9-Entrepreneurship, Creativity and Innovation
Faculty of Applied Science - Sauder School of Business University of British Columbia
10-NEW VENTURE DESIGN
Other titles for the course Other titles for the course (cont.)(cont.)
Berkeley UNIVERSITY 11-ENTREPRENEURSHIP IN NEW VENTURE CREATION
University of Nevada Las Vegas, college of Business
12-NEW VENTURE CREATION
Greenmountain university 13-New Venture Creation and Entrepreneurship
MACQUARIE UNIVERSITYFACULTY OF BUSINESS AND ECONOMICS
14-ENTREPRENEURSHIP AND BUSINESS STRATEGY
Course objectiveCourse objective1. To examine the entrepreneurial
process: from the generation of ideas, to the exploration of their feasibility, through the creation of an organization, and finally, the implementation of the idea.
2. To provide training and education regarding the planning, strategy, and implementation of a new business venture within an innovative framework.
Course objective (cont.)Course objective (cont.)3. Examining the internal and external
environment to determine the impact on an entrepreneurial venture
4. Analyzing business opportunities and problems from the perspective of an entrepreneurial team
5. Sharpening your creative and critical thinking skills through case analyses, experiential exercises, and strategic planning.
Course objective (cont.)Course objective (cont.)6. To improve your managerial
and organizational skills through application of theories to real entrepreneurial problems and opportunities.
7. Examine the characteristics of an entrepreneur.
8. Understand the global implications of an entrepreneur mindset.
9. Analyze and prepare a complete Business Plan.
Course objective (cont.)Course objective (cont.)
10.Understand how to form and build a leadership team.
11.Gain an awareness of personal ethics and its role in their start-up.
12.Create simple cash flow, balance sheet, and income statements
Course’s RequirementsCourse’s Requirements
The main requirements for the course will be :
1. a business plan on a venture of the students’
choosing. Students will work together in teams of
three to develop an idea for a new venture, research
its potential, explain and defend a strategy for its
successful launch, and perform the analysis to assess
what resources its launch will require and when. This
work serves as the basis for two major deliverables:
a written business plan and an oral presentation .
The oral presentation is typically a “pitch” for
funding, delivered as would be required for venture
capital or angel financing.(30%)
Requirements (cont.)
2-Students will also be graded on in-class participation, with attendance at every class expected , as well as participating in solving the exercises .(20%) 3-Students are expected to be prepared to discuss all assigned readings and case studies .(20%)
4-A final written exam will end the course requirement (30%)
Business Plan
The business plan should be delivered no later than the end of Week 16 and should be no longer than 25 pages (excluding appendices). The report should use the following format:• Executive Summary• Description of Proposed Product or Service Offering• Market & Competitive Analysis• Marketing and Sales Plan• Operational and Technological Issues (including sourcing and distribution)• Human Resources Plan (including team, structure, culture, policies)• Finance• Bibliography• Appendices
.
Chapter 1 : Chapter 1 : The Global EntrepreneurialThe Global Entrepreneurial Revolution for a Flatter World Revolution for a Flatter World
Results Expected
1- discuss how Entrepreneurs , innovations &their growing companies are the engine of wealth & job creation & innovation and new industries , and how venture and risk capital fuels that engine2- Describe how Entrepreneurship is the principle source of philanthropy in the world.3- Share your views on the ImageCafe case study
Some questions this chapter tries to answer :
•Why is the field of entrepreneurship gaining attention , resources & community credibility ?•Where is this leading us ? •What is the next great opportunities & challenges for you to consider ?
Entrepreneurship DefinedEntrepreneurship Defined
Entrepreneurship—a way of thinking, reasoning, and acting that is opportunity obsessed, holistic in approach, and leadership balanced(This definition of entrepreneurship has evolved over the past two decades from research at Babson College and the Harvard Business School and has recently been enhanced by Stephen Spinelli, Jr., and John H. Muller, Jr., Term Chair at Babson College.)
Entrepreneur’ definition
• an entrepreneur is a person of very high aptitude who pioneers change, possessing characteristics found in only a very small fraction of the population. • Anyone who wants to work for himself or herself is considered to be an entrepreneur.
•The word entrepreneur originates from the French word, entreprendre, which means "to undertake." In a business context, it means to start a business.
• The Merriam-Webster Dictionary presents the definition of an entrepreneur as one who organizes, manages, and assumes the risks of a business or enterprise.
The Entrepreneur’ Definition The Entrepreneur’ Definition ((cont)cont)Richard Cantillion – an entrepreneur is
someone who takes the risk of running an enterprise by paying a certain price for securing and using resources to make a product and reselling the product for an uncertain price.
Entrepreneurship vs. Small Business
Many people use the terms "entrepreneur" and "small business owner" synonymously. While they may have much in common, there are significant differences between the entrepreneurial venture and the small business.
Entrepreneurial ventures differ from small businesses in these ways:
1.Amount of wealth creation - rather than simply generating an income stream that replaces traditional employment, a successful entrepreneurial venture creates substantial wealth, typically in excess of several million dollars of profit .
Entrepreneurship vs. Small Business (CONT)
2. Speed of wealth creation - while a successful small business can generate several million dollars of profit over a lifetime, entrepreneurial wealth creation often is rapid; for example, within 5 years
3. Risk - the risk of an entrepreneurial venture must be high; otherwise, with the incentive of sure profits many entrepreneurs would be pursuing the idea and the opportunity no longer would exist.
Entrepreneurship vs. Small Business (CONT)
4.Innovation - entrepreneurship often involves
substantial innovation beyond what a small
business might exhibit. This innovation gives the
venture the competitive advantage that results in
wealth creation. The innovation may be in the
product or service itself, or in the business
processes used to deliver it.
Entrepreneurial Entrepreneurial CharacteristicsCharacteristicsTimmons:1. commitment and determination; 2. leadership; 3. opportunity obsession; 4. tolerance of risk, ambiguity and
uncertainty; 5. creativity, self-reliance and ability to
adapt; and
6. motivation to excel.
BianchiBianchi
1. being an offspring of self-employed parents;
2. being fired from more than one job;
3. being an immigrant or a child of immigrants;
4. previous employment in a firm with more than 100 people;
5. being the oldest child in the family; and
6. being a college graduate.
Pros Pros & & ConsConsYou are the bossAll profits are
yoursThere will be
great variety in roles and tasks
Increases self confidence
Work can be very satisfying
Success will give you immense satisfaction
You are aloneAll decisions are yoursAll losses are yoursWork may not be
satisfyingYou will need to put in
long hoursLack of success will
effect self esteemExiting the business is
difficultPressures will affect
social and family life
Entrepreneurial MotivationEntrepreneurial Motivation
Entrepreneurial
MotivationPersonal
Characteristics
Personal Goals
IDEA
Environment
Entrepreneurial Activity
Expectations Outcomes
Match
rectangular
What is an entrepreneur?What is an entrepreneur?Two broad schools of thought
◦Attributes An entrepreneur is someone who
possesses attribute X
◦Behavioral/functional An entrepreneur is someone who does
Y
◦So what are X and Y?
Attribute ApproachAttribute ApproachPsychological Traits
◦Intelligence, extraversion, locus of control, need for achievement, social competence, creativity, risk-taking
Demographics◦Social networks, age, marital status,
parental influences, work experience, education, income level, social status
Are these attributes necessary?◦Founding vs. Success
Behavioral/Functional Behavioral/Functional ApproachApproach1. Cantillon2. Knight
3. Schumpeter
4. Kirzner5. Gartner6. Stevenson
7. Phelan
1. One who works for uncertain wages
2. One who buys factors at certain prices and sells them in the future at uncertain prices (1921)
3. One who creates new products, processes, inputs, markets, or organizations (1911)
4. One who is alert to profit opportunities
5. One who creates a new venture6. One who pursues opportunities
regardless of resources currently controlled
7. One who seeks to earn entrepreneurial profits
Characteristics of Characteristics of Entrepreneurs Entrepreneurs
Look at page 44 in the book
Entrepreneurship Flattens the Entrepreneurship Flattens the WorldWorld page 3page 3Significant impact on the American
society Model for business, education, and
policymakers around the globeExploding in India, China, and the
former Soviet blocAdoption of the entrepreneurial
mindset is growing exponentially larger and faster
p4
Entrepreneurship Around the Entrepreneurship Around the GlobeGlobeA 2000 EU Economic Action Plan
calls for:◦Fueling entrepreneurial mind-sets◦Encouraging more people to become
entrepreneurs◦Gearing entrepreneurs for growth and
competitiveness◦Improving the flow of finance◦Creating a more entrepreneurial-
friendly regulatory and administrative framework
Entrepreneurial Transformations that are changing the world page 7
There are at least four entrepreneurial revolutions that profoundly impact how the world lives , works , learns , enjoy leisure :1.Entrepreneurship is the new management paradigm for thinking and reasoning.2.Entrepreneurship has spawned a new education paradigm for learning and teaching.3.Entrepreneurship is becoming a dominant management model for running nonprofit businesses and social ventures.4.Entrepreneurship is transcending business schools.
Innovation + Entrepreneurship = Innovation + Entrepreneurship = ProsperityProsperity and and PhilanthropyPhilanthropypage 13page 13
Entrepreneurship is an important political phenomenon.
The linkage between entrepreneurship and public policy is increasingly important.
Job Creation Job Creation page 13page 13
Landmark Research findings by David Birch of MIT
New firms created 81.5 percent of the net new jobs from 1969 to 1976.
According to the U.S. Small Business Administration’s Office of Advocacy, in 2004 small firm with fewer than 500 employees represented 99.9 percent of the 26.8 million businesses in the United States.
New Venture Formation New Venture Formation page 14page 14
Creates economic and social mobilityopportunity-centered and rewards
talent and performanceEntrepreneurship is not about
religion, gender, skin color, social class, or national origin
Women and a number of ethnic and racial groups are excelling at entrepreneurship
Page 15
American Dream: For the American Dream: For the Young at Start! Young at Start! p14p14
Entrepreneurship is more appealing than ever to:
High school seniorsTheir parents47% of women and 38 % of men
in a 2004 national sample by USA Today
Laid-off corporate managers
The Self-Employed Report:The Self-Employed Report:
The highest level of personal satisfaction
Challenge PrideRemuneration ($)Love of work - it is:
◦Invigorating◦Energizing◦Meaningful
Page 17
Innovation Innovation page 17page 17
Small entrepreneurial firms (since WWII) are:
Responsible for half of all innovationCredited with 95 percent of all radical
innovationLed to the creation of major new
inventions and technologies
P 18
Venture and Growth Venture and Growth CapitalCapital page 19 page 19
Classic venture capitalists: Work as coaches and partners
with entrepreneurs and innovators At very early stages of
developmentTo shape and accelerate the
development of the company
Angels Investors Page 20-21
An individual who provides capital to one or
more startup companies. The individual is
usually affluent ( rich) or has a personal
stake (The amount of a security either owned
or owed by an investor ) in the success of
the venture. Such investments are
characterized by high levels of risk and a
potentially large return on investment.
Startup companies means :
1.the beginning of a new company or new product.
2.a new, usually small business that is just
beginning its operations, especially a new business
supported by venture capital and in a sector where
new technologies are used
Page 19
Philanthropy and Philanthropy and LeadershipLeadership
page 21page 21Successful entrepreneurs give back to
the communityColleges and universities
◦New buildings, classrooms, athletic facilities, and endowed professorships
◦The largest gifts and the greatest proportion of donors to college capital campaigns
Local churches, hospitals, museums, orchestras, and schools
The Entrepreneurial The Entrepreneurial RevolutionRevolution page 22page 22Entrepreneurship is:Taught at over 2,000 colleges, universities,
and community colleges.The focus of a number of educational
grants.Creates most of the net new jobs
nationwide.Self-employment eliminates “glass ceilings”
and “glass walls” for women and minorities.Gaining and growing in elementary through
high schools.
America’s Self-Made America’s Self-Made MillionairesMillionaires page 24page 24The Millionaire Next Door by Thomas J.
Stanley and William D. DankoMillionaire —a person with a net worth of
$1 million or moreTraits of these millionaires
◦ Two-thirds are self-employed◦ Over 80 percent accumulated their wealth in
one generation
The New Age of Equity The New Age of Equity CreationCreationLong-term perspectiveVenture capital industry has
followed overall economicsOver 95 percent of the nation’s
wealth has been created since 1980 – a direct result of the entrepreneurial revolution
Page 24
Page 25
Building an Entrepreneurial Building an Entrepreneurial SocietySocietyThe poor get richerEqual opportunities (not equal
incomes) are createdEconomic mobility increasesSocial mobility increases
Page 26
Leadership and Human Leadership and Human BehaviorBehavior
No single psychological model of entrepreneurship has been supported by research◦But, behavioral scientists, venture
capitalists, investors, and entrepreneurs agree the venture will depend a great deal upon the talent and behavior of the lead entrepreneur and his or her team
Myths still exist about entrepreneurs and entrepreneurship
Exhibit 1.9 (Part 1)Exhibit 1.9 (Part 1)Page 59
Exhibit 1.9 (Part 2)Exhibit 1.9 (Part 2) Page 60
Myth #1Myth #1 It takes a lot of money to finance a new
business.
◦Not true. The typical start-up only requires about $25,000 to get going. The successful entrepreneurs who don’t believe the myth design their businesses to work with little cash. They borrow instead of paying for things. They rent instead of buy. And they turn fixed costs into variable costs by, say, paying people commissions instead of salaries. From Scott Shane “The Illusions of
Entrepreneurship” 2008
Myth #2Myth #2Venture capitalists are a good place to go for start-up money. ◦ Not unless you start a computer or biotech
company. Computer hardware and software, semiconductors, communication, and biotechnology account for 81 percent of all venture capital dollars, and seventy-two percent of the companies that got VC money over the past fifteen or so years.
◦ VCs only fund about 3,000 companies per year and only about one quarter of those companies are in the seed or start-up stage. In fact, the odds that a start-up company will get VC money are about one in 4,000. That’s worse than the odds that you will die from a fall in the shower.
Myth #3Myth #3Most business angels are rich.
◦ If rich means being an accredited investor –a person with a net worth of more than $1 million or an annual income of $200,000 per year if single and $300,000 if married – then the answer is “no.”
◦ Almost three quarters of the people who provide capital to fund the start-ups of other people who are not friends, neighbors, co-workers, or family don’t meet accreditation requirements.
◦ In fact, thirty-two percent have a household income of $40,000 per year or less and seventeen percent have a negative net worth.
Myth #4Myth #4Start-ups can’t be financed with debt. ◦Actually, debt is more common than
equity. According to the Federal Reserve’s Survey of Small Business Finances, fifty-three percent of the financing of companies that are two years old or younger comes from debt and only forty-seven percent comes from equity. So a lot of entrepreneurs out there are using debt rather than equity to fund their companies.
Myth #5Myth #5Banks don’t lend money to start-ups.
◦ This is another myth. Again, the Federal Reserve data shows that banks account for sixteen percent of all the financing provided to companies that are two years old or younger.
◦ While sixteen percent might not seem that high, it is three percent higher than the amount of money provided by the next highest source – trade creditors – and is higher than a bunch of other sources that everyone talks about going to: friends and family, business angels, venture capitalists, strategic investors, and government agencies.
Myth #6Myth #6Most entrepreneurs start businesses in attractive industries. ◦ Sadly, the opposite is true. Most
entrepreneurs head right for the worst industries for start-ups. The correlation between the number of entrepreneurs starting businesses in an industry and the number of companies failing in the industry is 0.77. That means that most entrepreneurs are picking industries in which they are most likely to fail.
Myth #7Myth #7The growth of a start-up depends
more on an entrepreneur’s talent than on the business he chooses. ◦ Sorry to deflate some egos here, but the
industry you choose to start your company has a huge effect on the odds that it will grow.
Myth #8Myth #8Most entrepreneurs are successful
financially. ◦ Sorry, this is another myth.
Entrepreneurship creates a lot of wealth, but it is very unevenly distributed.
◦ The typical profit of an owner-managed business is $39,000 per year.
◦ Only the top ten percent of entrepreneurs earn more money than employees.
◦ And the typical entrepreneur earns less money than he otherwise would have earned working for someone else.
Myth #9Myth #9Starting a business is easy.
◦Actually it isn’t, and most people who begin the process of starting a company fail to get one up and running. Seven years after beginning the process of starting a business, only one-third of people have a new company with positive cash flow greater than the salary and expenses of the owner for more than three consecutive months.
Study questions page 28Exercises 29-32 Case study : ImageCafe 33
The end of 1st session