foundations of entrepreneurship
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FOUNDATIONS OF ENTREPRENEURSHIP. CLASS SEVEN: BUILD OR BUY? & IDEA GENERATION. Elikem Nutifafa Kuenyehia. Class Agenda. Mid-term assignment Recap of last class Build or Buy? Idea Generation Guest Speaker: Shirley Frimpong-Manso, Managing Director, Sparrow Productions. - PowerPoint PPT PresentationTRANSCRIPT
FOUNDATIONS OF ENTREPRENEURSHIP
Elikem Nutifafa Kuenyehia
CLASS SEVEN: BUILD OR BUY? & IDEA GENERATION
Class Agenda
• Mid-term assignment • Recap of last class• Build or Buy?• Idea Generation • Guest Speaker: Shirley Frimpong-Manso,
Managing Director, Sparrow Productions
Mid-term Assignment
• Questions and issues
Recap of last class
• What did you learn from legal and regulatory considerations?
• What did you learn from the Stellar Group’s acquisition story?
Build or Buy?• A key decision entrepreneurs may have to
make early is whether to build or buy?• Build – start a business from scratch• Buy – buy an existing business• Need to carefully evaluate options
available before making a decision • Most people become entrepreneurs by
starting enterprises from scratch with only a small number buying existing enterprises
Buying an existing enterprise• Assets purchase • Share purchase • Purchase a share in a partnership• What is included in an acquisition? – Real Estate – Staff – Technology – Customers and contracts – Suppliers – Branding and intellectual property
Pros of buying vs. starting from scratch
• ‘Easier’ route to entrepreneurship • A history of success• Predictability of income stream• Experience of the previous owner• Lower risk• Easier to find finance• Eliminate competitor(s)• Eliminate barriers to entry
Difficulties of buying vs. starting own enterprise
• Legacy issues • Culture/Employee related issues• Difficulty to get an enterprise that suits
the entrepreneur’s idea• Customer and supplier relationships may
not be inherited• Obsolete technology and/or inventory • Special talent by owner• Enterprise may be overpriced• Valuation difficulties • Lack of choice
Due diligence guidelines• Ask Questions • When you hear an answer, make sure you
also see the answer• Use the Colombo method• When co-investing, do your own due
diligence• Painstakingly review information about all
aspects of the company
The buying stages
• Identification of opportunities • Screening opportunities• Evaluating• Valuation• Negotiation• Heads of terms or term sheet or letter of
intent• Acquisition/purchasing
Idea Generation
From idea to profit? IDEA
OPPORTUNITY
CONCEPT
INSIGHT GENERATION
ENTERPRISE?
What is an idea?
• An idea is a conception or plan formed by mental effort
• Every entrepreneurial venture rests on at least one fundamental business idea
• It is an entrepreneur’s initial dream & mental picture for his enterprise
Nature of ideas• Need not be outstanding/complicated• Need not be original
– Search & Spin – Though some entrepreneur are inventors
• To form the basis of a business, must provide a solution to a customer need– Customer Pain (Gari Soakings)
•An unmet need•Existing enterprises may fall short
unless– Using additional features & benefits
Sources of ideas• Opportunity & Environment Scanning
– Keeping eyes wide open/alert to opportunities
– Various changes:•Social•Economic•Technological•Changing customer tastes &
preferences• Media
– In all forms – NB: what you might not typical pay
attention to
Sources of ideas (cont’d)
• Reading• Travel• Government• Personal Experience and Frustration• Skill Set• Franchises• Conferences, Workshops, Exhibitions• Brainstorming
IdeaQuest
• Be very observant– Keep your eyes open for inspiration: use a
notebook• Interest: what you like doing• Take a critical look at your major irritations• Skills – what are you good at? (irrespective of
whether you like doing them)• Personality/Work Styles• What product or service will make my life
easier?
Which comes first?
IDEA
THE DESIRE TO START A BUSINESS?
Ideas vs. Opportunity • A good idea is not enough• It must be underpinned by an
opportunity• An idea may be underpinned by
opportunity through: – Patent Opportunity– Tacit Discovery
Ideas vs. Opportunity For an idea to be considered an opportunity it
must:• Meet a customer need• Create value for the customers• Create value for stakeholders – depends on:Number of potential buyersPurchasing power of potential buyersReturn on investment
• Be the right fitReflect values, interests, aspirations Match resources & skills
• Pass the realistic/sense check
Concept Development • What is the customer pain that the enterprise will
remove?• How is the pain dealt with at present (competitor
products/substitutes)?• How it will remove the pain (customer value
proposition and how different is it from the competition)?
• Description of target market• Distribution – how will you distribute the product? • Production – how you will make the product?• Idea of cost of set up/production and key
resources required• Idea of pricing ?
Guest Speaker
• Shirley Frimpong-Manso, Managing Director, Sparrow Productions