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#1 BESTSELLER. Why Some Start-ups Go Down the Tubes … and Others Don't. BAD TO WORSE. GREG FISHER. Top 10 Mistakes of Entrepreneurs. 1. NO REAL PASSION FOR THE BUSINESS. “I don’t care about the product, I just want to make loads of money”.

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bad to worse

#1 BESTSELLER

Why Some Start-ups Go Down the Tubes … and Others Don't

BAD TOWORSE

GREG FISHER

i don t care about the product i just want to make loads of money

1

NO REAL PASSION FOR THE BUSINESS

“I don’t care about the product, I just want to make loads of money”

linking market demand with passion skills and resources to create an entrepreneurial opportunity
Linking Market Demand with passion, skills and resources to create an entrepreneurial opportunity

Skills

Market Demand

Passion

Resources

the key elements in creating an entrepreneurial opportunity
The Key Elements in Creating an Entrepreneurial Opportunity

Entrepreneur

Opportunity

Market Demand

Passion

Skills

Resources

key questions to sourcing the right opportunity
Key questions to sourcing the right opportunity
  • What do people need? Whowill buy it? Why do they want it? How can I reach them?
  • What am I (are we) deeply passionate about?
  • How can I leverage my (our) unique skills?
  • Where can I (we) get the resources to make it happen?
we want one so everyone will want one

2

NO UNDERSTANDING OF THE MARKET

“We want one so everyone will want one”

assessing an opportunity
Assessing an Opportunity

High

Market Size

Market Growth

Differentiation

Customer Need

[VENTURE]

Concept Attractiveness

Low

Skills

Resources

Passion / Energy

Network

High

Low

Competitive Advantage

[ENTREPRENERIAL TEAM]

response
Response

High

Build / hire / develop the required capabilities

Invest and pursue the opportunity

[VENTURE]

Concept Attractiveness

Identify / exploit a specific under served niche

Revise product or business model

Avoid / Wait & Reassess in Future

Low

High

Low

Competitive Advantage

[ENTREPRENERIAL TEAM]

key questions for building a business model
Key questions for building a business model
  • What are the sources of revenue for the business?
    • Single or multiple revenue streams?
    • Payment terms – upfront, over a period of time or post delivery?
  • What are the cost drivers for the new business?
    • Major costs incurred to generate revenue?
    • Nature of costs – fixed, variable or semi-variable?
    • Payment terms – upfront, over a period of time or post delivery?
  • What size capital investment is required to launch and sustain the business?
    • To sustain a positive cash balance?
    • To make profit?
  • What are the critical success factors for this business?
    • Identify the issues that will determine the success or failure of the business?
business model diagram
Business Model Diagram

Inputs Required

(Cost Drivers)

People

Product

Premises

Marketing

etc.

Input

Investment

$

Up Front Investment

Equipment

Premises

Branding

Training

Working Capital

Etc

$

Critical Success Factors

What are the factors that are required to ensure that this model works?

Costs

New Business

Input

$

Output

Revenue

Buyers

What they buying

Range of products or services

Volumes; Frequency

How they pay

Timing of payment

slide23

Types of Entrepreneurs

Extremist Revolutionary

Rands

Growth Entrepreneur

Revenue

Lifestyle Entrepreneur

Survivalist

Breadline

0

Time

Investment

the entrepreneurial team
The Entrepreneurial Team

High

Creativity and Innovation

Low

High

General management skills, business know-how and networks

Source: Timmons & Spinelli. New Venture Creation.2004. McGraw Hill.

quality of the team
Quality of the team

Entrepreneurial Attributes

Commitment and Determination

Opportunity Obsession

Tolerance for Risk, Ambiguity and Uncertainty

Creativity, Self-Reliance and Ability to Adapt

Motivation to Excel

Leadership

Management Attributes

Marketing

Operations / Production

Finance

Administration

Interpersonal / Team

Law

Source: Timmons & Spinelli. New Venture Creation.2004. McGraw Hill.

financial plan
Financial Plan
  • Sales forecast
  • Startup expenses
  • 12 Month profit and loss statement (monthly)
  • 12 Month cash flow statement (monthly)
  • 3 – 5 Year profit & loss (high level – quarterly)
  • 3 – 5 Year cash flow (high level – quarterly)
  • Opening balance sheet
  • Projected balance sheet
  • Breakeven analysis
financial plan1
Financial Plan
  • Sales forecast
  • Startup expenses
  • 12 Month profit and loss statement (monthly)
  • 12 Month cash flow statement (monthly)
  • 3 – 5 Year profit & loss (high level – quarterly)
  • 3 – 5 Year cash flow (high level – quarterly)
  • Opening balance sheet
  • Projected balance sheet
  • Breakeven analysis
sales forecast
Sales Forecast

* State the assumptions on which these numbers are based

p l forecast1
P & L Forecast

EXAMPLES

Direct cost of goods sold

EXAMPLES

Salaries & wages

Other operating expenses

Interest payments

Depreciation

cash flow forecast
Cash Flow Forecast

EXAMPLES

Cash sales of goods or services

Collection of accounts receivable

Interest earned

Sales of fixed assets or investments

Capital from investor

Loan received

EXAMPLES

Payment of cash expenses

Payment to creditors

Payment of salaries and wages

Purchase of inventory for cash

Purchase of fixed assets or investments

Payback loans

Payout dividends

balance sheets1
Balance Sheets

Goods or resources owned by the business to be transformed utilized / realized in 1 year

Goods or resources owned by the business that have a life span exceeding 1 year

Total amount OWNED by the business

Amounts owed by the business to be paid back within 12 months

Amounts owed by the business to be paid back after 12 months

Portion of the business attributable to the owners

Total amount OWED by the business to lenders or owners

we need r10m in venture capital and then we will get going

8

NO MOMENTUM UNTIL CAPITAL IS RAISED

“We need R10m in venture capital and then we will get going”

new venture financing and the equity gap
New venture financing and the equity gap

Pre-seed

Seed / Start-Up

Early

Stage

Later

Government Funds

Founders

Family

Friends

Venture

Funds

Private

Equity

Angels /

Angel Alliances

Source

100k

500k

R5-10 mil

R20 mil

Demand

Supply

Equity Gap

Adapted from a model proposed designed by Jeffery E Sohl – Center for Venture Research, University of New Hampshire

the art of bootstrapping
The Art of Bootstrapping
  • Focus on cash flow, not profitability
  • Forecast from the bottom up
  • Ship, then test
  • Forget the “proven” team
  • Start as a service business
  • Focus on function, not form
  • Pick your battles
  • Understaff
  • Go direct
  • Position against the leader
  • Take the “red pill.”

Source: Kawasaki, G. The Art of the Start. 2004. Portfolio.

funding realities
Funding Realities
  • More likely sources of funding for startup:
    • Bootstrapping
    • Personal funds
    • Close connections
  • Some chance of getting funds for a startup:
    • Corporate investor
    • Government enterprise creation funds
  • Low chance of getting funds
    • Bank loan
    • Venture capital
slide43

9

NO FRUGALITY

“We have hired offices in Sandton, acquired Hummer’s for the directors and will pay the most to get the best”

slide44

Entrepreneurial Financial Management

  • Budget for CASH FLOW
  • Build your OWN models
  • Its not just about HOW MUCH but also about WHEN.
  • Know the NATURE of different cash flows
  • SHORT TERM = DETAIL; long term = big picture

BUDGETING

MONITORING

  • Your BANK BALANCE is your truth
  • Know your BASELINE (breakeven)
  • Keep UP TO DATE
  • Balance off being overly PEDANTIC versus dangerously LACKADAISICAL

REPORTING

10.Report results with PURPOSE

our marketing plan will be a combination of print tv and internet advertising

10

MISGUIDED MARKETING PLAN

“Our marketing plan will be a combination of print, TV and internet advertising”

new venture creation model
New Venture Creation Model

STRUCUTRE

Business Model

Legal Form

Tools / Facilities

Team

BUSINESS PLAN

OPPORTUNITY

Demand

Passion

Skills

Resources

SALES

Product

Price

Promotion

Place

Word of mouth

Research

Growth

FUNDING

Traditional financing

Bootstrapping

Cash flow

focus points in a business plan
Focus points in a business plan
  • The People. The men and woman starting and running the venture, as well as outside parties providing key services or important resources for it such as suppliers, lawyers and advisors.
  • The Opportunity. The need in the market for the proposed product or service. The size and growth of the potential market and the attractiveness of the industry in which the business will operate.
  • The Business Model. A summation of the core business decisions and trade offs employed by a company to earn a profit. The decisions and trade offs include revenue sources, key expenses, investment size and critical success factors
  • The Strategy. The methods and means of creating sustainable competitive advantage for the new business.
  • The Context. The big picture – the regulatory environment, interest rates, demographic trends, inflation and the like – factors that inevitably change but cannot be controlled by the entrepreneur.
  • Risk and Reward. An assessment of everything that can go wrong and right, and a discussion of how the entrepreneurial team can respond.
slide50

Business In A Box

www.biz-box.net

Email – Slidesgreg@learninglab.co.za

Blog – Slides

fisherg@blogspot.com

Go out and do it…