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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

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

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

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

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

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

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)

Exhibit 1.9 (Part 2)Exhibit 1.9 (Part 2)

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

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