Chapter 5€¦ · Objectives 1. To describe the major pathways that may lead to entrepreneurial ventures 2. To examine bootstrapping and minipreneurship as fast lanes

Chapter 5

Pathways to

entrepreneurial ventures

Objectives

1. To describe the major pathways that may lead to entrepreneurial ventures

2. To examine bootstrapping and minipreneurship as fast lanes to gaining entrepreneurial experience

3. To identify and discuss what is involved in acquiring an established venture that already has some entrepreneurial momentum

4. To outline key questions to ask when buying an ongoing venture that is already generating value

5. To define a franchise and outline its structure

6. To examine the benefits and drawbacks of franchising

7. To look at the route social entrepreneurs take to creating new ventures

But first

• Assuming you have the desire and

enough money to make either choice,

which of the following would you prefer?

• Are you more likely to establish your

own business ‘from scratch’ ?

• Or are you more likely to take over the

running of an established business?

• Why?

?

Entrepreneurial pathways

• Which way for you?

• Different pathways to

experiencing

entrepreneurship.

• Each has its own

disadvantages and

difficulties.

• Don’t rush your decision.

Six common

business-creation

pathways

1. Bootstrapping

2. Minipreneurship

3. A new business start-up

4. Acquiring an existing venture

5. Buying a franchise

6. Establishing a social venture

Pathway 1:

Bootstrapping• ‘Highly creative acquisition’.

• Using other people’s resources.

• Relies on:

– networks, trust and cooperation

– wise use of existing resources.

• No debt / don’t give away equity.

• Look for ‘low-hanging fruit’.

• Use a copycat idea.

• Find quick, break-even, cash-

generating products.

• Keep growth in check.

• Focus on cash for healthy,

immediate returns.

• Avoid loss-making strategies.

See the dozens of bootstrapping ideas in Chapter 5.

Chris Potter, licensed under CC Attribution 2.0 creativecommons.org/licenses/by/2.0/

Pathway 2: Business assistance funding• Access to funds to support

start-ups and development of

small businesses

• Often from government

• Not just about funding, also:

– business information

– training programs, workshops

and seminars

– business referrals and networks

– mentoring support.

See URL list in Table 5.1: ‘Business development assistance in the Asia-Pacific’.


Pathway 3:

Minipreneurship

• Do you create rather than consume

goods or services?

• eBay for product placement and

marketing/

• PayPal for accepting secure

payments.

• Niche is the new mass.

• Consumerism is now about

standing out rather than conforming

to trends.


Selling to the long tail

Chocolate

Dark chocolate

How to make chocolate

Fairtrade and organic beans

Where to buy cocoa beans

How to get cocoa beans from Samoa

Niche is the new

mass. You only need a

few thousand people

in the entire world to

be interested in what

you offer.

Ivan Chew, licencedunder CC Attribution 2.0 creativecommons.org/licenses/by/2.0/

Can you give your own examples

of long tail products? ?

Ivan Chew, licensed under CC Attribution 2.0 creativecommons.org/licenses/by/2.0/

What are the main drivers

behind trend towards

minipreneurship?

• Entrepreneurs now have access

to resources and technologies

previously only available to large

companies.

• 24/7 access to the marketplace.

• Access to marketplaces.

• Access to manufacturing.

• Partnering with top talent.

• Self-sufficiency, with a huge

support network.

Australian Murray River Pink Flake Salt is available for sale 24/7.

Foodista, licensed under CC Attribution 2.0 creativecommons.org/licenses/by/2.0/

Pathway 4: Classic start-up

• Entrepreneurs launch a

business when they can:

– drive less-innovative products

out of the market

– advance the product frontier

– lower prices

– satisfy untapped demand

– broaden market penetration.

• Two ways to do this:

– create a unique product or

service

– adapt or extend something that

is currently on the market


The new-new approach

• Identify trends that could become

products.

• Try making a list of annoying

products you deal with over a week

(PITA products).

• Common sources of ideas are prior

jobs, hobbies/interests and

personally identified problems.

• Most business ideas tend to come

from people’s experiences.

The new-new approach

1. Think about the last few days.

Identify a product you have used

which left you annoyed.

What could be done to fix it?

2. Identify a current social or

educational trend. If people

were caught up in the trend, what

products or services would they

want?

?

The new-old approach

• Rather than a totally new idea,

piggyback.

• Bring an existing idea to a new

place.

• Choose a product or service

which is difficult to copy (to

minimise or delay competition). Giuseppe Milo www.pixael.com, licenced under CC Attribution 2.0 creativecommons.org/licenses/by/2.0/

Opportunity trends

• Food: gourmet chocolate, powdered alcohol drinks,

special needs food, culinary tourism

• Green products: fibres and textiles, solar and wind,

miniature power

• Business and analytics: group buying,

crowdsourcing, location-based marketing

• Personal and health care: niche gyms, wearable

technology, medical marijuana

• Mobile: bump exchange, translators, locators, ultra-

private technologies.Palcahol

The cost of start-up

• How much will it cost to stay in business for the first year?

• How much revenue will the organisation generate during this time period?

• If outflow of cash is greater than inflow, how long will it take to ‘turn the corner’?

• Is the return adequate in terms of risk?

Start-up expense calculator on p. 166.

Salaries and wagesRentAdvertisingDelivery expensesSuppliesTelephoneInsuranceTaxes, superannuation and other employee on-costs

InterestMaintenanceLegal and professionalStart-up costsFixtures and equipmentStarting inventoryLegal and professional feesAdvertising and promotion

Adapted from US Small Business Administration, ‘Management aids’, MA 2.025, Washington DC: US Government Printing Office

Go or no-go decisions

• What is the ‘upside gain’ and

‘downside loss’?

• What is the risk versus the reward?

• Analytic tools covered in this book:

– opportunity analysis (Chapter 9)

– feasibility analysis (Chapter 12)

– sensitivity analysis (Chapter 15)

– business planning (Chapter 16)

Advantages

• Future success is likely

• Reduced time and effort

• Possibly, a good price

Key questions to ask

• Why is it being sold?

• Current physical condition of the

business?

• Condition of inventory?

• How many of the employees will

remain?

• What type of competition does the

business face?

• What does the company’s financial

picture look like?

Pathway 5: Acquiring an existing ventureChris Potter, licensed under CC Attribution 2.0 creativecommons.org/licenses/by/2.0/

Diana Parkhouse, licensed under CC Attribution 2.0 creativecommons.org/licenses/by/2.0/, cropped from original

Pathway 5:

Buying a franchise

• Combining independence with

the larger umbrella of a

corporation.

• One-third of all retail sales

generated by franchises.

• The franchisee is generally

legally independent but

economically dependent.

Jim's Group, started in Perth in 1982, is now the world’s largest

home franchise business.


Ninian Reid, licenced under CC Attribution 2.0 creativecommons.org/licenses/by/2.0/, cropped from original

Franchisee

• A financial investment

• Obtains standardised inventory

• Maintains quality of

performance

• Pays franchise fee and a

percentage of revenues

Franchisor

• Allows use of the

company name

• Provides management

training

• Sells merchandise at

wholesale

• Continued supportAdvantages

• Training and guidance

• Brand-name appeal

• A proven track record

• Financial assistance

Disadvantages

• Franchise fees

• Franchisor control

• Unfulfilled promises

Examples of green franchises

• Sustainable home energy

• Carbon-neutral dry cleaning

• Ecological car cleaning and

detailing services

• Pizza makers that use hybrid

cars for delivery

• Rubbish removal companies

that completely recycle the

waste

• Eco-friendly auto tune-ups

• Organic lawn care

• Chemical-free carpet

cleaning

• Energy doctors to reduce

heating and cooling costs

• Printer cartridge recycling

Geoffrey A. Landis, licensed under CC Attribution 3.0 Unported creativecommons.org/licenses/by/3.0/deed.en

Social venturing

How would establishing a social

venture be different to the preceding

pathways??

Pathway 6:

Social venturing

• For the entrepreneur driven by a desire

to find solutions to social injustice or

environmental problems.

• Double challenge:

– A strategy for accomplishing lasting social

change

– A viable profit-making business model.

• Apply business skills to solve real-world

challenges and capture opportunities in

new market niches.

Global social venture competition


Ken Banks, licensed under CC Attribution 2.0 creativecommons.org/licenses/by/2.0/, cropped from original

http://gsvc.org/

Models of

social venturing• Social-purpose business to

support or create economic

opportunities for a particular

target population, while

referencing a financial bottom

line.

Non-profit enterprise

Social-purpose

Business-develop-

mentservice

Micro-finance

institution

Cooperat-ive

Adapted from Managing the double bottom line: A business planning reference guide for social enterprises, by Sutia Kim Alter. Copyright © 2000 Sutia Kim Alter. Published by Virtue Ventures LLC.


Key concepts

(Close your books.)

1. Name the six pathways.

2. Which pathway(s) would appeal

to you and why??

Key concepts

• Six common pathways:

1. Bootstrapping

2. Minipreneurship

3. A new business start-up

4. Acquiring an existing venture

5. Buying a franchise

6. Establishing a social venture

• Don’t forget, we’ll be covering

two more pathways:

– Taking over the family business

(Chapter 7)

– Starting a business for your

employer (Chapter 8)

Documents

Chapter 5€¦ · Objectives 1. To describe the major pathways that may lead to entrepreneurial ventures 2. To examine bootstrapping and minipreneurship as fast lanes