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THE
Strategic Leadership Lectures
Intercontinental Business SchoolSPRING-SUMMER SCHOOL
Southern African Association of Accountants
TOPIC:
VENUE: VICTORIA FALLS
Date: Saturday 20th OCTOBER 2018
Facilitator: Dr Sam Ruturi
LET ME INTRODUCE MYSELF…
PRESENTER: Dr. Sam RUTURIFETC, (Lon),AIBS,(SA);AIB,(SA); Dip. H.F (USA), Grad. Diploma IMM (SA); BBA.(SA) B. Com. (SA) B Phil. (SA);
MSc. (UK); MBA (NUST) ,MBA,(USA) PhD (USA), MCom, (SA). DBA (France) (Pending)
Director & Senior Lecturer: 1. Mortgage Banking School of Southern AfricaPart-Time Lecturer: 2. MBA-GSM; University of Zimbabwe Part-Time Lecturer: 3. MBA-GSB; Chinhoyi University of TechnologyPart-Time Lecturer 4. MBL-GBS; Bindura University of Science& Education Consultant & Facilitator: 5. Strategy, Quality, Change and Housing Finance
Email address: [email protected] Cell; 0734 371 341 / 0712221348/ Tel.
UZ - MBA 543 - MANAGING CHANGE AND COMPLEXITY © DR. RUTURI 2014
3
Job Challenge What I do for fun
Who I admire Happiest momentin my life
PRESENTER: Dr. Sam RUTURIFETC, (Lon),AIBS,(SA);AIB,(SA); Dip. H.F (USA), Grad. Diploma IMM (SA); BBA.(SA) B. Com. (SA) B Phil. (SA);
MSc. (UK); MBA (NUST) ,MBA,(USA) PhD (USA), MCom, (SA). DBA (France) (Pending)
Director & Senior Lecturer: 1. Mortgage Banking School of Southern AfricaPart-Time Lecturer: 2. MBA-GSM; University of Zimbabwe Part-Time Lecturer: 3. MBA-GSB; Chinhoyi University of TechnologyPart-Time Lecturer 4. MBL-GBS; Bindura University of Science& Education Consultant & Facilitator: 5. Strategy, Quality, Change and Housing Finance
Email address: [email protected] Cell; 0734 371 341 / 0712221348/ Tel.
Day I bought
my first houseTom PETERS
Teaching people to
learn to act on what
they have learnt
LET ME INTRODUCE MYSELF…Dr Sam Ruturi
Play Golf
for Fun
Entrepreneurship and SMEs
Management -How to Start and Sustain Your Business
5
THE STORY OF AN EAGLE
PLANNING YOUR LIFE IN 6 DAYSNo. of days Developmental
imperative
Threat Developmental
Image
Day 1:
0-12 Years
Bonding Fear Child
Day 2:
13- 24 Years
Learning - Ask
Questions
Juxtaposition Learning
Day 3
25-36 Years
Serve Your Country-
Working
Entitlement Soldier-
Day 4
37-48 Years
Create - Something
indispensible -you know
your capabilities
Avarice- desire for
money & material
things
Create Followership
Day 5
49 – 60
Giving; keep eyes on the
Ball to Avoid Distractions
Distractions Leader; Spreading the
word of prosperity through
mentorship
Day 6
61 -72 Years
Legacy Let Go -Disappear
into obscurity
Patriach / Matriach
DAY 7
73+ Years
Rest in Peace./Enjoy
bonus Years
Loss of Control Prepare for Eternity
• Destiny is not a matter of chance, it is matter of choice; it is not a thing to be waited for, it is thing to be achieved. –William Jennings Bryan (1860- 1925)
• We determine our own destiny- yet we think, act and spent our time, as if we have another live to lead.
• ‘‘Do not act as if you have a thousand years to live.’’- Marcus Aurelius (121-180)
• Death renders all our ideas, including our idea of reality and self, nonexistent.
• If death comes at a time when all passions are spent , it need not be terrifying.
• We have one life- so we must live our lives out loud.
LIFE VERSUS DEATHLet’s live our lives out loud
LIFE VERSUS DEATHIF YOU ARE YOU HAVE
SPENT
AND HAVE
20 YEARS OLD = 7 3OO DAYS = 18 250 DAYS LEFT
25 YEARS OLD = 9 125 DAYS = 16 425 DAYS LEFT
30 YEARS OLD = 10 950 DAYS = 14 600 DAYS LEFT
HALF WAY = 12 775 DAYS = 12 775 DAYS LEFT
40 YEARS OLD = 14 600 DAYS = 10 950 DAYS LEFT
45 YEARS OLD = 16 425 DAYS = 9 125 DAYS LEFT
50 YEARS OLD = 18 250 DAYS = 7 300 DAYS LEFT
55 YEARS OLD = 20 075 DAYS = 5 475 DAYS LEFT
60 YEARS OLD = 21 900 DAYS = 3 650 DAYS LEFT
65 YEARS OLD = 23 725 DAYS = 1 775 DAYS LEFT
70 YEARS OLD = 25 550 DAYS = ARE YOU SPENDING
THEM WISELY?
• It is not what you have accomplished that benefitsyou that is important, but what you haveaccomplished that benefits others.
• It is not what you have accomplished in relationto others that is important, but what you haveaccomplished in relation to your full potential.
• It is not what you do in your life that is important,but what you cause others to do.
LIFE VERSUS DEATH
• It is not what you have accomplished thatbenefits you that is important, but what youhave accomplished that benefits others.
• It is not what you have accomplished in relationto others that is important, but what you haveaccomplished in relation to your full potential.
• It is not what you do in your life that isimportant, but what you cause others to do.
LIFE VERSUS DEATH
Re-emergence
Birth:Entrepreneurial Start-up
Death
Chaos Decline
Restructuring
Bureaucracy Bashing
Employee Involvement
Continuous Improvement
Cultural Change
Growth
Plateau
Ackerman’s (1997) CHANGE PERSPECTIVES11
Change Perspective 3: TRANSFORMATIONAL CHANGEEmergence of a new state, unknown until it takes shape, out of the
remains of the chaotic death of the old state; time period not easily
controlled
Relevance of Career Experience to
Entrepreneurship• 1981- Accountant and Part Time Teacher &
Lecturer
• 1981- Banker Personnel & Training Manager
• 1996 – Regional Mortgage Manager
• 1991 – Investments Manager
• 1993- Head Mortgage Manager
• 1996- CEO/Managing Director
• 2002- Group CEO: FNHL
• Consultant, CEO, and Lecturer
My Background• EXPERIENCE• 37 Years in Mortgage Banking
and-related business Ventures inall capacities– Founder / CEO, Publishing
Firm– Founder / CEO, Building
Society– Founder / CEO, Financial
Conglomerate and relatedbusiness Construction andproperty development
– Founder / CEO, Real Estateinvestor,
– Founder / CEO, Publishing– venture capital firm– Founder / CEO, Mortgage
Banking School– Corporate finance / M&A,
global investment bank• Authored and published 14 books
and articles
• EDUCATION– DBA - Pending– PhD in Finance Sector
Innovations and Creativity from1750 - 2000
– Master of Business Administrationin International Finance andBanking.
– Master of Science in StrategicManagement
– Master of Business Administration,– Master of Commerce– BBA– BPhil– BCom– Professional Member:– Institute of Bankers of South Africa– Institute Building Society of SA– Institute of housing finance USA– Dip Housing Finance USA– Diploma in Housing & Urban
development UZ
Entrepreneurial Leadership and
Innovation Linkages
Typeof
Venture
Typeof
Entrepreneur
Typeof
Leadership
Type
of
Innovation
Do the Results of the Assessments Make Sense Given:
Prior Experience
and Education
Early
CareerMid
Career
Late
Career
Stage of Entrepreneurial Career
FNBS
16 Years15 Years of experience
The Entrepreneurial Process
TEAM
COMMUNICATION TOOL
Business Plan
CREATIVITY
Ambiguities
Uncertainty
LEADERSHIP
Exogenous Forces
Capital Market Forces
FITS AND GAPS- RESOURCES AND TEAM TO CATCH UP?;- HOW LARGE AND PROFITABLE CAN WE BECOME?
FOUNDER
OPPORTUNITY RESOURCES
The Entrepreneurial Process
OPPORTUNITY
TEAM
RESOURCES
COMMUNICATION TOOL
Business Plan
CREATIVITY
Ambiguities
Uncertainty
LEADERSHIP
Exogenous Forces
Capital Market Forces
FOUNDER
FITS AND GAPS- RESOURCES AND TEAM
TO CATCH UP?;
- HOW LARGE AND
PROFITABLE CAN WE
BECOME?
17
Exercise1.1: identify a BUSINESS MODEL of you Choice
Key Partners
KeyActivities
ValueProposition
Relationship CustomerSegment
Key Resources
Channels
Cost Structure Revenue Streams
Source: Osterwalder, A. & Pigneur, Y., 2013. Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers (Google eBook), John Wiley & Sons.
CUSTOMERSEGMENTS
▪ Low Cost Housing
▪ Middle Income Earners
▪ First Time Home Buyers
▪ Investment syndicates
DISTRIBUTION
CHANNELS▪ Websites▪ Estate Agents▪ On Site Sales▪ Off Plan
CUSTOMERPROPOSITION
➢Functional Needs▪ Cozy in Winter▪ Warmth in
Winter▪ Investment➢Symbolic Needs▪ Wealth preserve▪ Homeowner➢Emotional Needs▪ Citizen
KEY RESOURCES• Computer
Equipment• Finance• Professional Staff
KEY PARTNERS NETWORKS
▪Local authority▪Professionals▪Financiers▪Developer▪Conveyancers▪Estate Agents▪Contractors ▪Architect
KEY ACTIVITIES▪Mobilise finance
▪ Land Acquisition
▪ Civil Works Drawings
▪ Infrastructure
Construction
▪ Superstructure
Construction
▪ Sales of Houses
▪ Property Transfer
CUSTOMERRELATIONSHIP❑Agent &
Principal Relationship
❑Purchase & Sale agreement
COST STRUCTURE❑ Interest cost❑ Wages & Salaries❑ Cost of Construction❑ Professional Fees
REVENUE STREAMS❑ Sales of Properties❑ Rentals❑ Interest Earned
18UZ - MBA 543 - MANAGING CHANGE AND COMPLEXITY © DR. RUTURI 2015
Who Should Prepare the Plan?
• If the Prospective Owner is the only oneinvolved in the business, he/she should preparethe plan, with the advice and counsel ofcompetent advisers.
• But if the business is to be organized and run bymore than one person, it should be A TeamEffort. You might encourage each manager toprepare a part of the plan.
• It is also recommended having other KeyEmployees help in the planning stage which willimprove communication and motivation.
Sources of Business Capital
Idea Plan Prototype Beta Sales Profitability
$0
$100K
$1M
$10M
$50M
$100M
Founders, Friends,
Family & Fools
Angel Investors
SBIR/SBTT Grants
Angel Groups
Equity Investors /
Strategic Partners
Venture Capitalists
Banks
Initial Public
Offering
(IPO)
Decreasing Risk
Decre
asin
g R
etu
rns
BOARD OF DIRECTORS
MANAGEMENT TEAM
Key Introductory ConceptThe diffusion of innovations theory argues there is a chasm
between the early adopters of the product (the technology
enthusiasts and visionaries) and the early majority (the
pragmatists).
Early-Stage Funding Gap for Zimbabwe’s Recovery
Basic Research, Idea
Generation and
Opportunity
Identification Create
New Business Ideas Applied Research& Innovation
Valley of No Capital to Develop Ideas
To Innovation
No Capital
Research & Invention
Innovation: new business
The Struggle of Inventions to Become Innovations
Research & Invention
Innovation & New Business
“Struggle for Life” in a Sea of Technical and Entrepreneurship Risks
BRANSCOMB’S DARWINIAN SEABusiness Risks
SMALL ECONOMIES LIKE SMALL FIRMS ACTUALLY FACE MANY HURDLES
Crossing the Valley of Death and the Darwinian Sea only to Arrive in the Jungle of Prosperity
“Valley of
Death” The Darwinian Sea
Basic ResearchInvention
Research &
InventionInnovation: new
businessViableViable
Business Business
Innovation &New Businesses Must Swim Past:•Management Failure•Technology Obsolescence•Alternative Business Models•Debilitating Legal Proceedings•Hostile Acquisitions
in the
Jungle ofProsperity
REMAIN THE SAME:
(STABILITY STRATEGY)
GET SLIM:
(RETRENCHMENTSTRATEGY)
GROW(GROWTH STRATEGY)
➢Internal ➢External Growth
CORPORATES ARE LIVING ORGANISMS THEY ALSO BEHAVE LIKE HUMAN BEINGS THEY CAN CHOOSE TO:
Strategic Leadership Provides Corporate Level Directional Strategies
CORPORATE GROWTH STRATEGIES
INTERNAL GROWTH STRATEGIES▪PLOUGHING-BACK PROFITS▪ RETAINED EARNINGS
EXTERNAL GROWTH STRATEGIES▪Mergers and Acquisitions▪Franchises▪Strategic Alliances, - Opportunistic, andservice alliance
INCREMENTAL CHANGE TRANSITIONAL CHANGE
STABILITY STRATEGIES
PAUSE/PROCEED-WITH-CAUTION STRATEGYA timeout-opportunity to rest before proceedingwith a growth/retrenchment strategy
NO-CHANGE STRATEGYA do nothing newBefore proceeding with current policies
PROFIT STRATEGYA do-nothingTop management’s passive short-term self-serving response to a difficult situation
STABILITYONE OF CORPORATE LEVEL STRATEGIES USED IN ZIMBABWE:-
RETRENCHMENT STRATEGYMOST COMMON CORPORATE STRATEGY ADOPTED IN ZIMBABWE: RETRENCHMENT
TURNAROUND STRATEGY
CAPTIVE COMPANY STRATEGY
SELL-OUT/ DIVEST STRATEGY
BANKRUPTCY/LIQUIDATION STRATEGY
TO REVERSE THE ASSET STRPPING CULTURETRANSFORMATIONAL CHANGE IS NEEDED
R & D
Cash GeneratedCash Use
Net
Star
Cash GeneratedCash Use
Net
Cash Cow
Cash GeneratedCash Use
Net
Problem Child
Cash GeneratedCash Use
Net
Dog
Cash GeneratedCash Use
Net
High
High
Low
Low0%
10%
10x 1.0x 1xMarket Dominance
Market-Growth
Rate
0
++ +
-- - -
-
+++
--
++
+
--
0
The BCG Growth-Share Matrix
0
+
ANALYSING PRODUCTS FOR PLOTTING ON THE BCG MATRIX
PRODUCT LINE
SALES in $ Change
in
Sales ($)
Market
Growth
Rate (%)
Market Share (%)
Relative Market
ShareLast
Month
This
Month
A 200 250 50 25.00 7.72 0.28
B 420 560 140 33.33 17.28 0.62
C 120 300 180 150.00 9.26 0.33
D 750 900 150 20.00 27.78 1
E 350 400 50 14.29 12.35 0.44
F 410 830 420 102.44 25.62 0.92
Total 2 250 3 240 990 Ave: 44.00 100.00
PLOTTING PRODUCTS INTO THE BCG MATRIX
160%
0%
120%
40%
100%
20%
140%
60%
Problem ChildrenStars
DogsCash Cows
Mar
ket
Gro
wth
Rat
e
LOW
HIGH
1.1x 0.55x -0.1x0.80x 0.30x1.0x 0.50x0.70x 0.2x0.90x 0.40x0.60x 0.1x 0.0x
HIGH LOW
Relative Market Share
B A
C
E
F
D
F
Discussion Questions• Using the BCG Matrix
– Where would you likely categorize the market leader in the typewriter market?
• 10 years ago, where would you have likely categorized a small player in the cell phone business?
• Where would you categorize the market leader in cell phones today?
Concerntrated
Market
Penetration
Market
Development
Product
Development
Diversification
Existing
New
Existing New
Market
Penetration
Market Development
PRODUCT DEVELOPMENT
Diversification
Existing
New
Existing New
BCG AND ANSOFF MATRICESExisting PRODUCTS New
MARKET PENETRATION (Grow market Increase Market Share)
PRODUCT DEVELOPMENT(New / Improved Products)
MARKET DEVELOPMENT
(New Customers For Existing Products) DIVERSIFICATION (New Products into New Markets)
For CASH COW use
For STAR use
For DOGS use
For PROBLEM CHILD use
E
D
C
B
A
New Products/ Markets
Market Penetration
Productivity
Forecast
$900
$400
$1000
$300
$500
$800
$700
$600
$200
$100
$0
$1400
$1500
$1300
$1200
$1100
Sale
s R
evenue (
$)
Budget $ t + 2013 t + 2014 t + 2015
ANSOFF MATRIX
Change Asset Base
Market Development
Market Penetration
Product Development
New Segment
Existing markets
Convert non
users
Take Competitor customer
Increase price / reduce
discounts
Improve asset
Utilisation
Improve product / sales mix / Margins
Cost reduction
(PAF Model)
Cash & Margin Focus
New markets
Increase Usage
Growth Focus
Productivity Growth
Existing Assets
Profit Improvement
Investment-Innovation-Diversification
Divestment-Redeployment of Capital Resources
Sales Revenue Growth
Growth Focus
WHY HAVE A BUSINESS PLAN?
• What?– Roadmap and a Powerful Communication
Tool– Forces an entrepreneur to be disciplined to think
through every facet of the plan– Serves as a benchmark for control or Self-checking
tool– Serves as a Resources Mobilisation Tool; funding or
financing proposal or prospectus– Serves as a Strategic, Administrative and Operating
guide;
• Why?– 1,000,001 questions– Infinite number of possibilities– Distractions galore
Preliminaries of Business Plan
•Title Page
•Confidentiality and
Copyright
•Disclaimers
EXECUTIVE SUMMARY
• Description of the Business Concept and the Business
• Opportunity and Strategy
• Target Market and Projections
• Competitive Advantages
• Costs
• Sustainability
• The Team and Advisors
• The Offering
THE INDUSTRY, THE COMPANY AND ITS PRODUCTS OR SERVICES
• THE INDUSTRY THE COMPANY AND ITS PRODUCTS OR SERVICES
• The Industry
• The Company and the Concept
• The Products or Services
• Entry and Growth Strategy
MARKET RESEARCH AND ANALYSIS
• Customers
• Market Size and Trends
• Competition and competitive
Advantages
• Estimated Market Share and Sales
• Ongoing Market Evaluation
OPPORTUNITY AND STRATEGY
❖ HEART OF THE PROCESS– 100 IDEAS REVIEWED; <10% MERIT DUE DILIGENCE
❖ CHARACTERISTICS OF GOOD OPPORTUNITIES
– MARKET DEMAND❖ BASIS OF VALUE
– NEW FUNCTIONAL NEEDS OR EXISTING NEED AT SUBSTANTIALLY LOWER COST
❖ MAGNITUDE OF VALUE– ECONOMIC OR EMOTIONAL VALUE
– WHAT SIZE AND FUTURE SUPPLY-DEMAND PATTERNS
– MARKET STRUCTURE AND SIZE❖ DEMAND DRIVERS AND GROWTH POTENTIAL
❖ BARRIERS OF ENTRY AND COMPETITIVE ADVANTAGES
– MARGIN AND OPERATING STRUCTURE❖ HIGH OPERATING LEVERAGE
❖ CAPITAL REQUIREMENTS– TECHNICAL, MANUFACTURING, MARKETING AND DISTRIBUTION RESOURCES TO
CAPTURE VALUE
Competitive advantages
• 1. Market share
• 2. Cost structure/cost advantages
• 3. Product/service quality
• 4. Technological know-how
• 5. Marketing know-how
• 6. Management
• 7. Location/distribution advantages
• 8. Financial resources
• 9. Own brands, patents, etc.
• 10. Spare capacity
HOUSING DEMAND
BOTTOM OF THE PYRAMID (BOP) PYRAMID
3% High Income
7% High IncomeMore than $20,000 p.a. [≈$55+ per day)
25% Middle Income$1,500 - $20,000 p.a.
[≈$4 - $55 per day)
65% Low IncomeLess than $1,500 p.a. Less than $4 per day
INCOME PER CAPITAZimbabwean Population
Tier 4
Tier 3
Tier 2
Tier1
Customer Segments
• Low Income 65% 950 500 950 500
Competition and competitive AdvantagesCompetitive advantages/ success criteria <<Competitor is Stronger
We are stronger>>
1 2 3 4 5 6 7 8 9
1. Market share
2. Cost structure/cost advantages
3. Product/service quality
4. Technological know-how
5. Marketing know-how
6. Management
7. Location/distribution advantages
8. Financial resources
9. Own brands, patents, etc.
10. Spare capacity
Overall Evaluation/ Summary
Analysis of Market AttractivenessCompetitive advantages/ success criteria <<Very Negative
Very Positive>>
1 2 3 4 5 6 7 8 9
1. Market Size
2. Market Growth
3. Branch profitability
4. Innovation potential of the industry
5. Competition intensity
6. Recession susceptibility
7. Substitution danger
8. Client loyalty
9. Security of supply (materials/spare parts)
10. Regulatory/public opinion risks
Overall Evaluation/ Summary
Position in the MarketEv
alu
atio
n o
f m
arke
t at
trac
tive
ne
ss9
8
7
6
5
4
3
2
1
1 2 3 4 5 6 7 8 9
Evaluation of competitive advantages
Position in the MarketM
arke
t at
trac
tive
ne
ss
Hig
h ConcentrateConcentrate your activitieson niches. Specialize in thefew products/services thatyou can do best.
Selective investmentand growthConsider in particular buildingup strengths (managementimprovements, cost reduction,quality upgrading, newtechnologies, etc.).
Maximize investment and
grow M
ed
ium
Partnership Consider joining forces witha partner, perhaps with astrong company interestedin entering your type ofbusiness/market or youtype of clients.
Gradual
development Strengthenyour competitiveness throughincremental improvements (asyou earn) and shift emphasisto the most attractive marketsegments of the business.
Selective investment
& growth Identify themost attractive growthsegments of your market andinvest in them (intensifymarketing / promotion,expand geographically etc.).
Low
Divest
Partnership Consider
joining forces with a partner,perhaps with a companyinterested in some of the strongfeatures of your company(infrastructure, networks,location, human resources, etc.).
Harvest/diversify Maintain your position and get as much as you can from the market. Consider diversifying and entering new markets, possibly through the development of new products.
Low Medium High
Relative Competitive advantages
THE ECONOMICS OF THE BUSINESS
• Gross Operating Margins
• Profit Potential and Durability
• Fixed Variable,
• Semi-variable Costs
• Months to Break-even
• Months to Reach Positive Cash Flows
MARKETING PLAN• Overall Marketing Plan
• Pricing
• Sales Tactics
• Service and Warranty Policy
• Advertising and Promotion
• Distribution
Integrated Marketing Communication PlanPromotion Channels
Product Lines Mix Prom.
Budget
Cost $Low Cost- Semi Detached
Low Cost Detached
MiddleIncome
Clusters Housing
Advertising -Below the Line
Resume, Business
card.
Brochures, Leaflets
Resume,
Business card.
Brochures,
Leaflets
Resume,
Business card,
Brochures,
Leaflets
Resume,
Business card,
Brochures,
Leaflets
AdvertisingAbove the Line
Social Media
LinkedIn,
Social Media
LinkedIn,
Social Media
LinkedIn,
Social Media
LinkedIn,
Radio, TVs, Bills
boards, Signage
Radio, TVs, Bills
boards, Signage
Radio, TVs, B/
boards,
Radio, TVs, Bills
boards, Signage
Public Relations
Sundowners,
Cocktails
Sundowners,
Cocktails
Sundowners,
Cocktails
Sundowners,
Cocktails
Personal Selling
Road Shows, Show
Days
Road Shows,
Show Days
Road Shows,
Show Days
Road Shows,
Show Days
Sales Promotion
Show Days, Golf
Day, Estate Agents
Show Days, Golf
day, Estate
Agents
Show Days,
Golf day,Estate
Agents
Show Days, Golf
day, Estate
Agents
Direct Marketing
Employer Assisted,
Pension Fund
Assisted,
Cooperatives,
Municipalities,
Employer
Assisted,
Pension Fund
Assisted,
Cooperatives
Employer
Assisted,
Pension Fund
Assisted,
Cooperatives
Employer
Assisted,
Pension Fund
Assisted,
Cooperatives
DESIGN AND DEVELOPMENT PLAN
• Development status and tasks
• Difficulties and risks
• Product improvement and new
Product
• Costs
• Proprietary Issues
MANUFACTURING AND OPERATIONS PLAN
• Operating Cycle
• Geographical Location
• Facilities Improvements
• Strategy and Plans
• Regulatory and Legal Issues
Determine the feasibility and strategiesnecessary to establish new business lines.
1. Staffing – current, repurpose and new
2. Space – current, repurpose and new
3. Distribution Channels and networks
4. Scope of services to be provided
5. Information Technology Plan needs
6. Marketing Strategies
7. Business Partnerships and Strategic Alliances Opportunities
8. Financial and Human Resources Management
Manufacturing and Operational
Plan
Operations Strategy and Plans
Develop a structure or partnership that supports the provision of the business line.
1. Current Corporate Structure with expanded programming
2. Subsidiary Corporations- Strategic Business Units (SBUs)
3. Joint Ventures
4. Franchises
Assure compliance with state laws, industry, local authority and professional regulations. Examples may include:1. Company Registration; Certificate of Incorporation ❖ Clinic Licensure,❖ Pharmacy Licensure❖ Bank Licence❖ Estate Agent licence
2. Local Authority Licensures3. Pensions and Medicaid & Medicare requirements4. Contract negotiations and credentialing
Legal & Regulatory Issues Analysis
• The meaning of the term
• Four forms of legal defense
– Patent
– Copyright
– Trademark-
– Trade Secret
• Confidentiality Agreements
Legal & Regulatory Issues Analysis
Legal & Regulatory Issues Analysis
• Construction permits;
• Environment-related permits;
• Health- and sanitary-related approvals;
• Work permits for foreign employees;
• Foreign currency exchange andinternational procurement permissions;
• Import of machinery and equipment;
• Import of raw materials and components;
• Land and water use rights.
MANAGEMENT TEAM• Shareholders, Rights, and Restrictions
• Governance
– Board of Directors and
– Board Committees;
• Management Team
– Executive management;
– Middle management;
• External support services:
– Advisory Board, and Industry Experts
– Professional Advisors; Consultants
– Lawyers, and Auditors
– Banks, and Corporate Risk Advisors
– Finance and Insurance Services
Investors Invest in People and
not in Business
Particular features on which an investor will be placing emphasis are:
• Technical skills and competences of managers;
• Attitudes and human characteristics of managers;
• Team spirit;
• Values and norms of the firm;
• Compatibility of business type and people’s culture.
KEY EXECUTIVE MANAGEMENT
• Key Management Personnel– Highlight collective industry experience
– Past successes of:
• General management (Chief Executive Officer-CEO);
• Financial management (Chief Financial Officer-CFO) and
• Operations and Administration;
• Marketing and Sales Management;
• Production Management.
MANAGEMENT TEAM• Organisation Structure/Chart/Organogram
• Human Resource Policies and Strategies– Management compensation and ownership
– Employment and Other Agreements
– Employee and Executive Share Option and BonusPlans
– Employee Housing Policies
– Medical Aid and Group Life and Accident Cover
– Company Motor Vehicle Policy
– Employee Pension Fund Benefits
– Job Descriptions and Job Evaluation Systems
OVERALL SCHEDULEThis provides a Gantt Chart of activities to be undertaken;
▪Business plan development and private placement documents
• Incorporation of the venture
• Road shows for fund raising and Closing dates
• Completion and design development
• Recruitment of Key Personnel
• Launch of the company and its products etc; etc;.
CRITICAL RISKS, PROBLEMS, AND ASSUMPTIONS
•Risks
•Problems
•Assumptions–Economic and market conditions
Idea of Some POSSIBLE RISKS You Run And Have To Cope With:
❖ Key employees leave the business.
❖ Your competitors cut their prices.
❖ Changes in the rates of exchange affect your exports unfavourably.
❖ A key customer cancels a major contract.
❖ New unforeseen regulatory requirements have a negative impact on sales.
❖ The industry's growth rate drops.
❖ An economic crisis decreases the purchasing power of your customers.
❖ Design or manufacturing costs exceed your projections.
❖ Your sales projections are not achieved.
❖ An important advertising campaign fails.
❖ Important subcontractors fail to make deliveries.
❖ Your competitors introduce a new, better product or service at a lower price.
Consider some common mistakes as potential risks. Some of the most important ones are:
• Paying employees too much or too little;• Hiring friends rather than the most qualified
candidates;• Underestimating costs;• Overestimating the growth of sales;• Underestimating the length of the sales cycle;• Underestimating competition;• Fast growth which cannot be properly dealt with
by the organization;• Trying to do everything for everybody.
THE FINANCIAL PLAN• Actual Income Statements and Balance Sheet
• Pro Forma Comprehensive Income Statement
• Pro Forma Comprehensive Statement of Financial Position (Balance Sheet)
• Pro Forma Cash Flow Statement ()
• Break-even Chart and Calculations
• Investment Ratios
• Cost Control
• Highlights
PROPOSED COMPANY OFFERING
• Desired Financing
• Offering:
– Type
– Amount,
– Time and
– Terms
• Capitalisation
• Use of Funds: CAPEX, OPEX
• Investor’s Return
APPENDICESAll Pieces of Evidence such as:
❖ Curriculum Vitae (CVs) of Key Management Personnel;
❖ Company Registration Legal Documents (e.g., Photocopies of Certificate of Incorporation, CR 14 Forms, CR 6, CR2, and CR11
❖ Memorandum and Articles of Association
❖ Local Authority Office or Factory Licences and Trade Licences
❖ Product Literature and Brochures
❖ Testimonials and News Articles
❖ Statement of Current Net Worth of Directors
❖ Asset Valuations Report;
❖ Historical Financial Statements and Auditor’s Reports;
❖ Proposed or Actual Lease Agreements and Contracts
❖ Letters of Intent or Commitment from Potential Investors
❖ Price List and Quotations from Suppliers
❖ Market Research Report and Data
❖ Plans and Design Specifications
Prof RAO Dubai Entrepreneurship
Financing Your Venture
• Not all startups require external funding
• Cash flow comes ultimately and most importantly from customers, NOT from investors
• Benefits of external funding– Cash
• Faster growth
• Staying power
• Competitive positioning
• Credibility
– Value-add investors
• Credibility
• Customer/partner introductions (“Keiretsu” effect)
• Management expertise
Financing Options
• Non-Equity– Personal funds
– Personal debt
– Grants and awards
– Customer pre-sales
– Venture leasing
– Receivables financing
– Business loans
– In-kind contributions
– Joint ventures
• Equity
– Venture capital
– Angels
– The “3Fs” – Friends,
Family and Fools
– Corporate direct
investment
Equity is the most
expensive form of capital!
Major Financing Questions
• How much?
• When?
• From where / whom?
• What terms?
– Security
– Valuation
– Control
– Timing
Raise Money from a Position of
Strength
• Have cash in the bank
• Prepare to build your company without any
outside investment (bootstrap)
• Seek to secure multiple competing offers
• Raise money when you can, not when you
have to (Sun Tzu – “In times of war,
prepare for peace”)
• Have a call to action
Seek True Value-Added Investors
• Understand your business
• Operating experience
• Domain and/or geographic experience
• Rolodex / network
• Relevant portfolio
• Relevant limited partners (in your space)
• Deep pockets / courage to stay the course
Fundraising Process
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Business Plan
Submissions
Investor
Presentations
Term Sheet
Negotiations
Final
Documentation
Funding
Budget 4-5 months, or more
Peace and Prosperity Through Science and Collaboration www.crdf.org
Lifecycle of a Startup
• Conception /
Invention
• Seed Stage– Formation / incorporation
– Market research
– Product research
• Early Stage– Product development
– Team formation
– Infrastructure build-out
• Launch
• Growth Stage
• Expansion Phase
• Exit
• Post-Exit
Peace and Prosperity Through Science and Collaboration www.crdf.org
Lifecycle of a Startup
• Conception /
Invention
• Seed Stage– Formation /
incorporation
– Market research
– Product research
• Early Stage– Product development
– Team formation
– Infrastructure build-out
• Launch
• Growth Stage
• Expansion Phase
• Exit
• Post-Exit
Startup Fundamentals
Solid foundation =
best chance of
funding your venture
Pour a Solid Foundation
• Market-driven concept– Talk to prospective customers– Assess market and competition
• Resolve legal issues upfront– Satisfy prior employment obligations– Incorporate properly– Check intellectual property rights– Spin-out cleanly
• Form a solid team– Management, board, advisors, professionals – Teamwork begets success
• If possible, kick-start the business– Spin-out / acquisition– Key customer
Be Market-Driven!
• Purchase decisions are based on relationships –
understand your customers
• Understand and model your customers’
economic benefit:– How are they currently solving the problem?
– How will their work processes change by using your product?
– What is their economic benefit / ROI?
• Your product / service must be better, faster and
cheaper
Protect Your Assets!
Cash Flow is Your Life Blood!
• CFIMITYM
• Cash flow comes ultimately and most
importantly from customers, not from
investors
• Profit is not cash flow
• Capitalize properly
Business Planning
• “The plan is useless; it’s the planning
that’s important.”– General Dwight D. Eisenhower,
on the success of his D-Day invasion plan
• The process of uncovering and identifying
what creates and drives value in your
business, and the risks involved
• A business plan is an output of the
business planning process
Output of the Business Planning
Process
• Business plan (narrative)
• Pro forma financial statements
• PowerPoint pitch (12-13 pages)
• Elevator pitch (1-2 minutes)
A Business Plan…
• Describes all the critical internal and external elements and strategies for guiding the direction of your company
• Communicates how you will create sustainable value
• Identifies risks and uncertainties and communicates how you will manage them
• Describes the company’s structure, objectives and future plans
Uses of a Business Plan (Internal)
• Refining your product /
service strategy
• Identifying key
customers
• Identifying milestones
and timelines
• Helping set objectives
& performance metrics
• Managing risk and
uncertainty
• Motivating and focusing employees
• Analyzing capital budgeting decisions
• Facilitating new product development
• Integrating new acquisitions
• Facilitating restarts, restructuring and turnarounds
Uses of a Business Plan (External)
• Attracting key employees
• Educating potential investors
• Arranging strategic alliances
• Obtaining large contracts with strategic
customers
• Facilitating mergers and acquisitions
The 12-13 Page PowerPoint Pitch
1. Summary (1)– Mission statement
– What is the idea?
– How will it create value?
– Timeline / milestones
– Expected results
– Specific request (e.g., $)
The Mission Statement
To create [value/EVA]
by [product/service] for/to [customer(s)] by…
Strategic
Objective 1
Strategic
Objective 2
Strategic
Objective 3
The Mission Statement
Mission Statement Example
To be Ukraine’s leading producer of “A-
class” widgets to the _______ sector by:
– Securing exclusive purchase contracts with 3
of the top 10 customers of A-class widgets in
Ukraine;
– Creating proprietary manufacturing methods
for the highest yield of A-class widgets; and
– Building a world-class team of research &
development scientists and engineers.
The 12-13 Page PowerPoint Pitch
1. Summary (1)– Mission statement
– What is the idea?
– How will it create value?
– Timeline / milestones
– Expected results
– Specific request (e.g., $)
2. Market Overview (2)– Substantiation of need
– The opportunity (size, trends, etc.)
– Markey validation
– Identification of prospective customers
Major Pain Points
• What is the major pain your customers face currently and/or in the future?– Cost
– Convenience
– Growth
– Focus
– Time-to-market
– Regulatory compliance
• Why are alternative products/services not addressing the pain (fully)?
• Why won’t this change?
Favorable Market Dynamics
• The market is large for our product/service:– Size stat 1
– Size stat 2
– Size stat 3
• The market is growing for our product / service:– Growth stat 1
– Growth stat 2
– Growth stat 3
• Market trends favor us:– Trend 1
– Trend 2
– Trend 3
The 12-13 Page PowerPoint Pitch
1. Summary (1)– Mission statement
– What is the idea?
– How will it create value?
– Timeline / milestones
– Expected results
– Specific request (e.g., $)
2. Market Overview (2)– Substantiation of need
– The opportunity (size, trends, etc.)
– Markey validation
– Identification of prospective customers
3. Description of Product / Service (2)
– Overview of product / service, including high-level technology description
– Specific value proposition (including qualitative & quantitative customer benefits)
– Correlate product / service features & benefits with market needs
– Value chain dynamics
The 12-13 Page PowerPoint Pitch
4. Operating Plan (2)– Production /
manufacturing
– Marketing / distribution
– Sales & marketing plan
5. Competitive Environment (2)
– Sustainable competitive advantages
– Alternatives
– Competition (existing and potential
What’s Proprietary About Your
Idea?• Competitive Advantages
– Proprietary IPR
– Exclusive distribution
– Exclusive content / sources
– Proprietary manufacturing
– Proprietary integration
– Installed base / customer contracts
– Unparalleled capital structure
– Unparalleled scale, scope and/or focus
– Team with unique expertise and/or access
– First mover advantage
• Distinguish between momentary and sustainable
• Must correlate to strategic objectives
Peace and Prosperity
Through Science and
Collaboration www.crdf.org
The 12-13 Page PowerPoint Pitch
4. Operating Plan (2)– Production /
manufacturing
– Marketing / distribution
– Sales & marketing plan
5. Competitive Environment (2)
– Sustainable competitive advantages
– Alternatives
– Competition (existing and potential
6. The Team (1)– Management expertise
& relevance
– Board, advisors, professionals & others
– Identify key hiring needs
7. Financials (1-2)– Pro forma snapshot
– Key metrics / drivers
– Funding requirements (optional)
Financial Projections(in thousands) 2007 2008 2009 2010
Revenue driver 1 (1)
Revenue driver 2 (2)
Cost driver 1 (3)
Net Revenue
– Cost of Sales (4)
= Gross Profit
– SG&A (5)
= Pre-tax Income (Loss)
Notes
(1) Assumption 1
(2) Assumption 2
(3) Assumption 3
(4) Assumption 4
(5) Assumption 5
Numbers will
prove wrong!
Key is to
understand
drivers and
assumptions
since…
Funding Requirements• Does your venture need external financing?
– How much & when?
– Venture capital, debt, etc.
• Capital structure considerations– Options plans, etc.
– Position vis-à-vis in-kind contributions
• Use of proceeds; e.g.:
Staff $200,000
Technology & IPR development 150,000
Equipment & facilities 200,000
Other legal, operations, SG&A and misc. 100,000
Reserve (net of cash on hand) 100,000
Total $750,000
The 12-13 Page PowerPoint Pitch
4. Operating Plan (2)– Production /
manufacturing
– Marketing / distribution
– Sales & marketing plan
5. Competitive Environment (2)
– Sustainable competitive advantages
– Alternatives
– Competition (existing and potential
6. The Team (1)– Management expertise
& relevance
– Board, advisors, professionals & others
– Identify key hiring needs
7. Financials (1-2)– Pro forma snapshot
– Key metrics / drivers
– Funding requirements (optional)
8. Road Map (1)– Major accomplishments
– 90-day plan
– Horizon
The 12-13 Page PowerPoint Pitch
9. Appendix (as long as you want)
– Market details (e.g., surveys)
– Product details
– Operating & financial details
– Résumés (CVs)
– Articles / research reports
– Patents & IPRs
– Key contracts
– Brochures
The Elevator Pitch
• One of the most important “outputs” of business planning
• Convinces the “target person” to schedule a longer meeting with you
• Empowers and enables the “target person” to convince other appropriate people to become interested in your idea
• Resonates, demonstrates sincerity
• Communicates a sense of value, empathy and urgency
• No more than 1-2 minutes!
Part I Summary
• Pour a solid foundation
• Protect your strategic assets (like IPRs)
• Value is in the business planning, not the
business plan
• Be concise and to the point with pitch
materials
• Be top-down customer-driven, not bottom-
up product-driven
Fundraising Lessons
• Network to gain access to VCs
• Don’t get hung-up on confidentiality
• Be persistent
• Be humble yet confident, and always
courteous and professional
• Embrace and learn from rejection
• Be greedy in the long-run (any % of
something > 100% of nothing!)
Believe In Your Idea!
“The wireless music box has no imaginable commercial value.”
David Sarnoff Associates, in rejecting a proposal for investment in the radio in the 1920s
“We don't like their sound, and guitar music is on the way out.”
Decca Recording Co., rejecting the Beatles in 1962
“There’s never going to be a market for the telephone, and therefore we
have declined the offer to take a license.”
Chairman of Western Union, in its annual report from the late 1800s
“Who the hell wants to copy a document on plain paper?”
National Inventors Council, as told in 1940 to Chester Carlson, founder of XEROX
Attributes of a Successful
Entrepreneur
• Problem solver
• Decisive
• Leader & motivator
• Humble
• Passionate
• Persistent
• Optimistic
• Professional
• High integrity
• Critical path doer
• Impatient / bias
toward action (with
analysis)
• Rejoices in others’
victories
• Focused on the long-
term goal
and … Just Do It!
Peace and Prosperity Through Science and Collaboration www.crdf.org
Closing thoughts…• Focus on the long-run
– What goes around comes around
– Friendships last longer than jobs
– Don’t let greed blind the objective
• Make the most of the experience
– Listen & learn
– Failure or rejection is what you make of it
• Entrepreneurship is a lifestyle choice
– Balance your risk & return
– Seize opportunities
– Life’s short, have fun!
Dr Sam RuturiMBSSA Training and Advisory Services
A division of
Mortgage Banking School of Southern Africa (Private) Limited
80 Folyjon Crescent, Folyjon Estate, Glen Lorne, HarareEmail: [email protected]; [email protected]
[email protected]@mbssa.net ; [email protected]
Telephone:263 773610 590, 263 712 610 590Cell; 263 - 0734 371 341 or 263 - 0712 221 348
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