Entrepreneur & business Planning

Master of finance Benghazi university

Dr. Abdulfattah Abuhbail

Spring 2012

Titles for the course

Institution
BOCCONI, Benghazi

Course name
1-Entrepreneurship & Business Planning

Oregon State University

2- Venture Management

University of Florida (Warrington)

3- Entrepreneurial Opportunities

Other titles for the course (cont.)

Ageno School of Business GOLDEN GATE UNIVERSITY Lester Center for Entrepreneurship, Haas Business School Warrington College of Business Administration University of Florida NEW YORK UNIVERSITY,LEONARD N. STERN SCHOOL OF BUSINESS San Jos State University School: College of Business THE UNIVERSITY OF HONG KONG FACULTY OF BUSINESS AND ECONOMICS Faculty of Applied Science - Sauder School of Business University of British Columbia 4-Entrepreneurship 5-New Venture Creation

6-Entrepreneurship
7-FOUNDATIONS OF ENTREPRENEURSHIP 8-Business Plans for New Ventures 9-Entrepreneurship, Creativity and Innovation 10-NEW VENTURE DESIGN

Other titles for the course (cont.)

Berkeley UNIVERSITY 11-ENTREPRENEURSHIP IN NEW VENTURE CREATION

University of Nevada Las 12-NEW VENTURE CREATION Vegas, college of Business

Greenmountain university MACQUARIE UNIVERSITY FACULTY OF BUSINESS AND ECONOMICS 13-New Venture Creation and Entrepreneurship 14-ENTREPRENEURSHIP AND BUSINESS STRATEGY

Course objective
1.

2.

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. To provide training and education regarding the planning, strategy, and implementation of a new business venture within an innovative framework.

Course objective (cont.)

3.

4.

5.

Examining the internal and external environment to determine the impact on an entrepreneurial venture Analyzing business opportunities and problems from the perspective of an entrepreneurial team Sharpening your creative and critical thinking skills through case analyses, experiential exercises, and strategic planning.

Course objective (cont.)

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.
6.

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

Courses 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 : The Global Entrepreneurial 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 engine 2- 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 Defined
Entrepreneurshipa

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

(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 Characteristics
Timmons: 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.

Bianchi

1. 2. 3. 4.

5.
6.

being an offspring of self-employed parents; being fired from more than one job; being an immigrant or a child of immigrants; previous employment in a firm with more than 100 people; being the oldest child in the family; and being a college graduate.

Pros

&

Cons
You are alone All decisions are yours All losses are yours Work may not be satisfying You will need to put in long hours Lack of success will effect self esteem Exiting the business is difficult Pressures will affect social and family life

You are the boss All profits are yours There will be great variety in roles and tasks Increases self confidence Work can be very satisfying Success will give you immense satisfaction

Entrepreneurial Motivation
Environment
IDEA

Personal Goals Entrepreneuri al Motivation

Personal Characteristics

Entrepreneuri al Activity

Expectations

Match

Outcomes

rectangular

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 Approach

Psychological 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 Approach
1. 2.

Cantillon Knight Schumpeter Kirzner Gartner Stevenson Phelan

1. 2.

3.

3.

4.

4. 5. 6.

5.
6.

7.

7.

One who works for uncertain wages One who buys factors at certain prices and sells them in the future at uncertain prices (1921) One who creates new products, processes, inputs, markets, or organizations (1911) One who is alert to profit opportunities One who creates a new venture One who pursues opportunities regardless of resources currently controlled One who seeks to earn entrepreneurial profits

Characteristics of Entrepreneurs
Look at page 44 in the book

Entrepreneurship Flattens the World

page 3

Significant impact on the American society Model for business, education, and policymakers around the globe Exploding in India, China, and the former Soviet bloc Adoption of the entrepreneurial mindset is growing exponentially larger and faster

p4

Entrepreneurship Around the Globe

A 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 = Prosperity and Philanthropy

page 13

Entrepreneurship is an important political phenomenon. The linkage between entrepreneurship and public policy is increasingly important.

Job Creation

page 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 Administrations 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

page 14

Creates economic and social mobility opportunity-centered and rewards talent and performance Entrepreneurship 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 Young at Start! p14

Entrepreneurship is more appealing than ever to: High school seniors Their parents 47% of women and 38 % of men in a 2004 national sample by USA Today Laid-off corporate managers

The Self-Employed Report:

The highest level of personal satisfaction Challenge Pride Remuneration ($) Love of work - it is:

Invigorating Energizing Meaningful

Page 17

Innovation

page 17

Small entrepreneurial firms (since WWII) are: Responsible for half of all innovation Credited with 95 percent of all radical innovation Led to the creation of major new inventions and technologies

P 18

Venture and Growth Capital

page 19

Classic venture capitalists: Work as coaches and partners with entrepreneurs and innovators At very early stages of development To 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 Leadership

page 21

Successful entrepreneurs give back to the community Colleges 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 Revolution

page 22

Entrepreneurship 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.

Americas Self-Made Millionaires

page 24

The Millionaire Next Door by Thomas J. Stanley and William D. Danko Millionaire a person with a net worth of $1 million or more Traits of these millionaires
Two-thirds are self-employed Over 80 percent accumulated their wealth in one generation

The New Age of Equity Creation

Long-term perspective Venture capital industry has followed overall economics Over 95 percent of the nations wealth has been created since 1980 a direct result of the entrepreneurial revolution

Page 24

Page 25

Building an Entrepreneurial Society

The poor get richer Equal opportunities (not equal incomes) are created Economic mobility increases Social mobility increases

Page 26

Leadership and Human Behavior

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)

Page 59

Exhibit 1.9 (Part 2)

Page 60

Myth #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 dont 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 #2

Venture 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. Thats worse than the odds that you will die from a fall in the shower.

Myth #3

Most 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 dont 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 #4

Start-ups cant be financed with debt.

Actually, debt is more common than equity. According to the Federal Reserves Survey of Small Business Finances, fiftythree percent of the financing of companies that are two years old or younger comes from debt and only fortyseven percent comes from equity. So a lot of entrepreneurs out there are using debt rather than equity to fund their companies.

Myth #5

Banks dont 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 #6

Most 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 #7

The growth of a start-up depends more on an entrepreneurs 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 #8

Most 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 #9

Starting a business is easy.

Actually it isnt, 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 Exercises Case study : ImageCafe

page 28 29-32 33

The end of 1st session