Seminar in Business Plan Development

1. Seminar in Business Plan Development The Entrepreneurial Process Instructor: Dr. William J. Tsai, Ph.D.

2. Definition of an Entrepreneur An Entrepreneur is someone who relentlessly pursues and opportunity without regard to resources currently under his/her control.

3. Perspectives on the Nature of Entrepreneurship • Creation of Wealth: Assuming of the risks associated with the facilitation of production in exchange for profit. • Creation of Enterprise: Founding a new business venture where none existed before. • Creation of Innovation: Combining unique resources that make existing methods or products obsolete. • Creation of Change: Adapting one’s personal repertoire, approaches, and skills to meet different opportunity sets. • Creation of Employment: Employing, managing and developing the factors of production, including the labor force. • Creation of Value: Creating value for customers by exploiting untapped opportunities. • Creation of Growth: Having a strong and positive orientation towards growth sales, income, assets, and employment.

4. The Entrepreneurial Process • Identify an Opportunity • Develop and Refine the Concept • Assess and Acquire the Necessary Resources • Implementation • Manage and Harvest the Venture

5. Entrepreneurship 〝The reasonable man (woman) adapts himself/herself to the world; the unreasonable one persists in trying to adapt the world to himself (herself). Therefore all progress depends on unreasonable men (and women)〞 George Bernard Shaw Men and Supermen 〝The role of the entrepreneur is to stand up to all, to stand up to ridicule〞 - Tom Peters Thriving on Chaos

6. Inputs to the Entrepreneurial Process • Environmental Opportunities • Entrepreneurial individual (s) • An organizational context • Unique business concepts • Resources

7. Outputs of the Entrepreneurial Process • A going venture • Value creation • New products, services and processes • Profit and/or personal benefits • Employment, asset and revenue growth • Failure/Loss

8. Lifestyle Ventures • Business built around lifestyle of founders • Generating income to support desired lifestyle • Controlled growth to maintain desired lifestyle • Harvest concerns focus on retirement issues • Usually self-funded; or family and friends • Not conducive to angel or VC financing

9. Entrepreneurial Ventures • Business designed to yield capital gains • Short-term income is of a lesser concern • Focus is on value creation • Harvest concerns focus on ROI • Self-funding; followed by equity-funding • Attractive to angel or VC financing

10. Seminar in Business Plan Development Opportunities and Concepts Instructor: Dr. William J. Tsai

11. Opportunity • Favorable circumstances pointing to a need • Ability to improve something at a profit • Better, faster, cheaper / Brave new world • Existence of〝pain〞that can be removed • Fixing an unsatisfactory situation • Timing is critical

12. Types of Opportunities

13. Finding Opportunity • Deliberate or active search, or • A〝discovery〞process as one pursues everyday life or a business idea

14. Examples of sources of Opportunity • Rule change • Demographic change • Underserved markets • Poorly served markets • Social trends • New customers to a market • Increasing usage rates • Shortages • New technologies to address unmet needs or change ways needs are met

15. Why would something not be a good opportunity? • No market need • Customers not dissatisfied • Customer loyalty very strong • Customer〝switching costs〞 • Customers hard to reach • Intense competition • Easy for people to enter after you • Customers too demanding relative to what they’ll pay • Window not open

16. Business Concept or Idea • Specific value-creating method for capitalizing on the opportunity • New product, new service or new process • The〝unique combination〞that defines how much value a customer is getting---can include price, distribution, packaging, etc.

17. Concept statement should be: • Concise and to the point CNN’s concept might be stated a〝instant information, anytime, from anywhere〞

18. Where do business concepts/ ideas come from? • Aha experience • Obtaining rights • Daydreams • Customer requests • Invitation • Deliberate search • Necessity (mother of invention) • Geographic transfer • Prior employment • Teaming with inventors • Hobbies • Social encounters • Everyday observation

19. What is a good concept? • Many criteria exist (e.g., profit potential, leads to stream of products, barriers to entry, comprehensive, internally consistent) • But let’s focus on three core criteria • Overt benefit • New and different • Reason to believe

20. Opportunity versus Concept/Idea • Opportunity • Labor shortage in fast food industry (unskilled services in general) • High employee turnover in fast food restaurants • Lousy/inconsistent service • Business Concept: • Hire and train high school students; act as outsourced labor supply to local Burger King franchisees

21. Opportunity versus Concept/Idea • Opportunity • Salespeople need to build relationships that are one to one: need ways to do so at a reasonable cost • Business Concept: • On-line business that does customized greeting cards for all of your customers

22. The opportunity Matrix REVENUE POTENTIAL BIG SMALL Known Concept Novel Concept

23. Qualities of an Opportunity • Durable • Timely • Creative or adds value • Offers sustainable competitive advantage • Economics are rewarding and forgiving

24. Criteria for Evaluating Venture Opportunities • Industry and market • Economics • Harvest issues • Competitive advantage issues • Management team • Fatal Flaw issues • Strategic Differentiation

25. Seminar in Business Plan Development Business Model and Revenue Streams

26. The Core Components of a Business Model • How do we create value? • Who do we create value for? • What is our source of competence / advantage • How do we differentiate ourselves? • How we make money? • What are our time, scope and size ambitions?

27. How do we create value?(Factors related to the offering) • Primarily products/primarily services/heavy mix • Standardized/some customization/high customization • Broad line/medium breadth/narrow line • Access to product/product itself/product bundled with other firm’s products / services • Internal manufacturing or service delivery/outsourcing / licensing reselling / value added reselling • Direct distribution / indirect distribution (single or multiple channel)

28. Who do we create value for?(market factors) • Type of organization • Local/regional/national/international • Where in value chain; upstream supplier/downstream supplier/ wholesale/retail/ serve • Broad or general market niche

29. What is our source of competence advantage? (Internal capability factors) • Production / operating systems • Selling / marketing • Information management / mining / info. Packaging • Technology / R&D / creative or innovative capability/ intellectual • Financial transactions • Supply chain management • Networking / resource leveraging

30. How do we differentiate ourselves? (Competitive strategy factors) • Image of operational excellence / consistency / dependability • Product or service quality / selection / features / availability • Innovation leadership • Low cost / efficiency • Intimate customer relationship/ experience

31. How we make money (economic factors) • Pricing & revenue sources: fixed / mixed / flexible • Operating leverage: high / medium / low • Volumes: high / medium / low • Margins: high / medium / low

32. What are our time, scope and size ambitions? (Personal / investor factors) • Subsistence model • Income model • Growth model • Speculative model