MBAX 6100 Entrepreneurship & Small Business Management Marshalling Resources

1. 0 MBAX 6100Entrepreneurship & Small Business ManagementMarshalling Resources Frank MoyesLeeds College of Business University of ColoradoBoulder, Colorado Marshalling Resources

2. 0 Today’s Agenda • Live case study: • Confident Living • Terry Tierney, CEO of Confident Living • Strategic alliances • Marshalling resources • Bootstrapping Marshalling Resources

3. Next Week • Legal Issues • Intellectual property • Employee agreements • Stock options • Read BZ-9 & 10 • Case: Mason and Sheppard • Jim Linfield, Cooley Godward Marshalling Resources

4. Strategic Alliances Marshalling Resources

5. Strategic Alliances • Over 75% of technology businesses are active in strategic alliances. 63% said critical or very important. (PricewaterhouseCoopers, Trendsetter Barometer 2001). • Most are informal • Joint venture – jointly owned entity • Speed to market • Access to markets, technology or knowledge • Access to capital • Spin-ins & spin-outs Marshalling Resources

6. Strategic Alliances Forms • Marketing – access to distribution e.g. Nestle in Europe • Technological – joint research, e.g. Celebrex for Pfizer • Manufacturing – subcontract operations, e.g. Jurismonitor • Investment – Intel had 220 active investments in 2004 Marshalling Resources

7. Advantages to Strategic Alliances • Gain access to a resource, e.g. production, skills, capital • Economies of scale • Risk & cost sharing • Gain access to international market • Learning • Speed to market • Neutralizing or blocking competitors Barringer & Ireland, Entrepreneurship Marshalling Resources

8. Disadvantages of Strategic Alliances • Loss of proprietary information • Management complexities • High risk of failure • Become dependent on partner • Risk of opportunism • Non performance • Loss of decision autonomy • Clash of cultures • Precludes partnership with another firm or exit Barringer & Ireland, Entrepreneurship Marshalling Resources

9. Marshalling Resources Marshalling Resources

10. 0 What Resources Do New Ventures Have? Marshalling Resources

11. 0 People Resources? Marshalling Resources

12. 0 Physical Assets? Marshalling Resources

13. 0 Financial Resources? Marshalling Resources

14. 0 Social Resources? Marshalling Resources

15. 0 Own or Control Resources? “Key is not to own resources, but to have use of & be able to control or influence deployment”, Timmons Ask yourself where is the value added of my venture? R & D? Sales & Marketing? Manufacturing? Customer Service? Marshalling Resources

16. 0 What is Bootstrapping? • “Launching ventures with modest personal funds”, Bhide • Using Other People’s Resources (OPR), Timmons • Scrooge mode Marshalling Resources

17. 0 Bootstrapping Examples • Make vs. buy • Volume purchasing • Hiring employees vs. temps or subcontract • Employee benefits • Office and location • Used equipment • PR vs. advertising & promotion • Strategic alliances - Jurismonitor • Grants Marshalling Resources

18. 0 Benefits of Bootstrapping - Enhances Funding • Need less capital • Reduces financial exposure • Reduces amount of money need to raise - less dilution • Reduces risk • Obsolescence • Lower sunk costs • Investor's love it • Proves concept and management team • Reduces risk Marshalling Resources

19. 0 Benefits of Bootstrapping - Provides Flexibility • Fluctuating conditions and uncertainty • Difficulty in predicting what resources are needed • Make changes quickly • Permits strategic experiments • Cost of making a mistake is minimized • Mistakes less likely to be fatal • Inexperienced entrepreneurs can screw-up • Don’t have the pressure of high growth Marshalling Resources

20. 0 Benefits of Bootstrapping - Improves Problem Solving • Like zero inventory in JIT • Reveals hidden problems • Forces management to solve them • Focus is on profits • Forces management to solve problems • Price for profitability • Reduces costs • Lower fixed costs • Higher variable costs, but high Gross Profit Margin solves • Lower break-even point Marshalling Resources

21. 0 Benefits of Bootstrapping - Sets the Right Culture • Employees • Suppliers Marshalling Resources

22. 0 Bootstrapping Summary • Requires less capital • Lowers risk • Improves decision making • Enhances flexibility • Focus on profitability • Investors love it • Establishes culture Marshalling Resources A Bhide, Bootstrap Finance, HBR

23. 0 What Is the Greatest Source of Cash? Marshalling Resources

24. 0 Marshaling Resources Conclusion • Control rather than own - OPR • Money is not the solution. May be the problem. • Bootstrapping is an attitude • What is a downside of focusing on resources? Marshalling Resources