ENTREPRENEURSHIP AND BUSINESS PLAN BASICS

WHAT IS ENTREPRENEURSHIP?

“The managerial function that combines land, labor, and capital in a cost effective way and uncovers new opportunities to earn a profit; includes the willingness to take the risks associated with a business venture.”


WHAT IS AN ENTREPRENEUR?
“Someone who creates a new opportunity in the world of business and assembles resources necessary to exploit that opportunity.”

“Entrepreneurs use personal initiative, and engage in calculated risk-taking, to create new business ventures by raising resources to apply innovative new ideas that solve problems, meet challenges, or satisfies the needs of a clearly defined market.”

THE TRUTH ABOUT ENTREPRENEURS
Entrepreneurs share some similar characteristics.
In general, entrepreneurs are:
 Self-confident and self-reliant.
 Goal oriented.
 Willing to take initiative.
 Hard-working and energetic.
 Persistent and committed.
 Positive-minded people.
 Innovative and creative.
 Driven by a desire for independence.
 More likely to know other entrepreneurs.
 More alert to the existence of new opportunities.
 Less afraid of failure.
 Moderate risk-takers.
 Passionate about achieving their goals.
 Adventurous.

WHY DO ENTREPRENEURS START BUSINESSES?
Motivation 1: Necessity entrepreneurs [Survival]
 Start a business because there is no other alternative.
 Self-employment.
 Mostly-micro enterprise.

Motivation 2: Opportunity entrepreneurs [Economic Growth]
 Start a business to exploit a perceived business opportunity.
 Create employment for others.
 If successful-build growth business.

TYPES OF ENTREPRENEURS
The Traditional Entrepreneur:
 Starts brick and mortar business.
 Builds it to a point where s/he can harvest the value.
The Home-Based Entrepreneur:
 Starts a business out of the home.
 Much more common since the advent of the internet.
The Virtual Entrepreneur:
 Starts a ‘cyberspace business’ (internet customers contact only).
 For example Amazon.com, EBay
The Serial Entrepreneur:
 Likes to start a new business but does not like to run them.
 Prefers to let other run their businesses or sell them, and move on to the next opportunity.

WHY DO YOU WANT TO BE AN ENTREPRENEUR?
If you want to be an entrepreneur because…
 Everyone is doing it
 You want to be rich
 You are looking for a secure job
 You don’t want to work for someone else
 You just came into some money
 If my friend can do it, so can I
 You want to give everyone in your family a job
 You’ve got a great idea
 You like to take risks
 You want to retire early
… You may need to re-asses your expectations.
Start a business if it is what you most want to do.

WHAT IS A BUSINESS PLAN?
 A written explanation of the company’s business model.
 A document that defines your business, identifies your goals, and serves as your firm’s resume/cv.
 A summary of how an entrepreneur, business owner, or manager intends to organize an entrepreneurial endeavor to implement the activities necessary for the venture to succeed.
 Inside your enterprise, a business plan provides the roadmap and a way to measure your progress. It helps to clarify your thinking and planning.

WHY DEVELOP A BUSINESS PLAN
 Forces you to look at the business concept in an objective manner and can be a strong reality check.
 Helps focus ideas and serves as a feasibility study of the business’s chances for success and growth.
 Assists you in managing the business and prepares you for success.
 It is a strong communication tool. It defines your purpose, your competition, your management and personnel.
 The finished business plan provides the basis for your financing proposal.
 Learning how to write a business plan will teach you more about your business than you could imagine.
 A business plan will help you cope with change because while you write the plan, you also become a ‘student of the business’.
 Regular review of the plan continues to educate you about past decisions and planning so you can move quickly to make changes.

WHY BANKERS NEED YOUR BIZ PLAN
 Saves them time because they can get a quick overview of your business, how you plan to run it, and how much money you will make.
 It is in a format they are familiar with and provides them with the information they need to make an investment decision.
 It serves as a ‘disclosure’ document and a reflection of your knowledge of the business.

WHAT INVESTORS LOOK FOR IN A PLAN
 A management team with a proven track record.
 A defensible product with a competitive advantage.
 Reasonable valuation.
 A clear statement of the investment offering.
 Thorough research on feasibility of business concept.

WHAT BANKERS LOOK FOR IN A BIZ PLAN
 The balance sheet.
 Profit or loss account and the cash flow.
 Solid evidence that the founders and managers know their business.
 Thorough research on feasibility of business concept.

7 STEPS TO A GREAT BUSINESS PLAN
 Develop a business concept and get it on paper.
 Conduct a feasibility study.
 Decide if your business concept is feasible.
 Refine your business concept based on the feasibility study.
 Detail the infrastructure required to execute the business concept successfully.
 Draft all the information into a compelling form and organize it into easy to read sections.
 Summarize your document: write the executive summary.

RESEARCH BEFORE YOU WRITE
Feasibility Study: Is a way to test your business concept to see if it has market potential.
 Requires forming the business concept and the founding team.
 Requires industry and market analysis of:
 Trends in your industry: changes, historical information
 Your target customers: needs, purchasing potential, etc
 Your competition: who they are, where they are
 Pricing and the competitive advantages of your products/services
 Requires planning the production of product/service.
 Requires financial analysis of the start-up costs