Be an Entrepreneur

Epilogue

The Entrepreneur

The Business Plan

The Enterprise•Epilogue

Be an Entrepreneur

EPILOGUE

Harvesting and Exit Strategy

Activities

Icebreaker Glossary. Story: Amerigroup

Target higher growth

Integration: forward and backward.

Integration: horizontal and

vertical

Story: CareerBuilder

Geographic expansion,

diversification.

Harvesting: sell the business

Case Study: Simon Dunn

retires

Epilogue: overview

You’ve spent years building your small business. You’ve taken no vacations. Work pressure forced you to miss family events.

And you have succeeded.

Epilogue: overview

You now have a rhythm of regular sales for your company.

You now have an “engine of growth.”

Epilogue: overview

Now, you are wondering what is next. You wish to explore your options now.

Epilogue: overview

Time to ask yourself: Is the entrepreneurial experience satisfying, so far?

If yes, then good. Keep going. If not, then the logical next step is to

look for a way forward or a way out.

Epilogue: overview

Way forward 1: You could drive your single-product

company to expand to medium-sized status, or to the stature of a large multinational.

You could go global.

Epilogue: overview

Way forward 2: You could expand sideways into other

related industries, set up new lines of business, and become a diversified conglomerate.

Be global AND multi-product.

Epilogue: overview

Way out: Retirement is also an option. Remember that even great athletes

retire. They may win the world championship

five times in a row. Then they get out of the game. …

Epilogue: overview

In the end, do whatever enriches your life.

Think about the harvest. Be optimistic always, as you walk this

road …that branches out into alternative futures.

Coverage of the Chapter

• Target Higher Growth• Paths to the Future: integration• Paths to the Future: geographic expansion,

diversification

Coverage of the Chapter

• Paths to the Future: organic growth, or acquisitions.

• Mergers and acquisitions.• Harvesting• How to Value your Business

Learning Objectives

• Understand the concept of the engine of growth

• Understand some advantages of remaining a small company

• Reflect on noble goals for keeping a company running

Learning Objectives

• Learn the meaning of horizontal integration• Learn the meaning of vertical integration.• Understand the benefits of forward

integration• Understand the benefits of backward

integration

Learning Objectives

• Learn ways to achieve geographic expansion • Learn the meaning of diversification

Learning Objectives

• Contrast organic growth vs growth via acquisitions

• Appreciate the entrepreneur's motive for harvesting

Learning Objectives

• Learn the meaning of “exit strategy”.• Understand the need to calculate the value of

the business

Story from Real Life

AMERIGROUP Corporation grows from small to big—very quickly

• Jeffrey McWaters, Chairman & CEO, of Amerigroup, saw a unique niche in the healthcare market.

Story from Real Life

• His vision was to operate a community-focused managed-care company with an emphasis on the public sector health-care market.

• He wanted to develop a company whose services would ultimately result in better health for his fellow citizens.

Story from Real Life

• A venture capital firm invested. • Later on, AMERIGROUP did a successful IPO. • The company remains profitable, exceeding

$2 billion in sales with a market cap of $847 million, in year 2008.

Story from Real Life

• The company is a multi-state managed healthcare company.

• The company serves people who receive healthcare benefits through state-sponsored programs including

• Medicaid, • Children's Health Insurance Program (CHIP) • and Family Care.

Story from Real Life

• It is the largest private-sector corporation focused exclusively on this population's healthcare needs.

• They serve more than 1 million members in nine US states, and the District of Columbia (capital city).

Glossary

Acquisitions: the process of buying shares in other

companies, or acquiring majority control over other companies, so that your company becomes bigger. The acquired company usually loses its name.

Glossary

Diversification: To diversify means to engage in varied operations, to be present in more than one area, or to be involved in more than one activity.

Glossary

Engine of growth: a stable source of revenues for your

company.

Exit strategy: the planned disengagement from an

investment.

Glossary

Geographic Expansion: refers to the practice of expanding the

locations of your business, whether it be setting up more factories, more warehouses, more stores, or branches, and offices.

Glossary

Harvesting: collecting the fruits of your efforts and

hard work; being able to enjoy the benefits of your

entrepreneurial ventures.

Glossary

Integration: process of acquiring management

control over other companies, and making them part of your overall company.

Glossary

Horizontal integration: acquiring management control over

other companies in the same competitive space.

Vertical integration: acquiring management control over

your buyers, or suppliers.

Glossary

Mergers: the process of putting one company

together with another company to form a larger company.

The larger company may have a name that is different from the two companies that merged.

Glossary

Organic Growth: the growth of your company's sales and

profits, without counting newly-acquired companies or assets.

Glossary

Supply Chain is the long process of moving raw

materials to finished products ...to wholesale buyers ...on to retail buyers.

Glossary

Value the business: to estimate the potential selling price

for a company.

Points to Remember

• An “engine of growth” is a rhythm of regular sales for your company.

Points to Remember

There are benefits for a small company that stays small: • The company can be easily managed with

minimal effort.• The company achieves high profit margins

already on moderate sales. (continued)

Points to Remember

Benefits of staying small: (Continued)

• The company has tried increasing sales, but somehow also got increased cost of goods, plus higher selling expenses, thus lower profit margins.

• Members of the family are running the business; you see no need to hire outsiders who cannot be trusted. Product unit sales should be kept low to maintain the premium image.

Points to Remember

Noble goals: • to keep current employees happily employed. • To create more employment, create jobs for

unemployed people. You might want your company to lead campaigns to develop environmental consciousness or to build a better society.

Paths to Growth

Points to Remember

• Horizontal integration: the practice of acquiring management control over other companies in the same competitive space.

• Vertical integration: is the practice of acquiring management control over companies that are your buyers, or suppliers.

Points to Remember

• Forward integration: you acquire more control over sales outlets.

• Backward integration: you acquire more control over suppliers.

Points to Remember

• Geographic expansion: Go nationwide, or go global.

• Diversification: means to engage in varied operations, to be present in more than one area, or to be involved in more than one activity.

Points to Remember

• Organic growth: expanding within the same line of business

• Acquisitions: buying other companies. A fast way of achieving corporate growth, whether in the same line of business of in different lines. Different lines of business means, diversification.

Points to Remember

• Entrepreneur's motive for harvesting: to reap the fruits of labors; perhaps also, to rest and retire.

• Exit strategy: the planned disengagement from an investment.

Exit Strategy

Harvesting

Points to Remember

• Value of the business: Investors may be interested to buy some shares of

stock in your company. You need to know what is 'fair value" so that you can negotiate with the interested buyers. A business valuation expert can calculate for you the “fair value.”

Ask Yourself

• Do I now know, what I want, out of this business?

• If my business is earning US$100 million a year, do I consider it to be at the right size and at the right stage already?

Ask Yourself

• If my business is earning US$10 million a year, for five years straight, is it all right for me to think that my business will surely maintain this level of profits?

• Do I want my business to grow aggressively?

Ask Yourself

• Do I sometimes think that I can only go so far?

• Do I sometimes think that I cannot improve any more?

Ask Yourself

• Do I realize that I have limitations (which is true for all persons)?

• But in spite of that, do I exert efforts to overcome my limitations, so as to improve myself?

Ask Yourself

• Running a business, meeting challenges, might be a way for me to keep pushing myself to achieve personal growth and improvement. Do I see it that way?

Ask Yourself

• If I am selling bread in a bakeshop, would I want to control the company that supplies the wheat flour?

• If I am selling diamonds in a jewelry store, would I want to control the company that mines the diamonds?

Ask Yourself

• If I were an expert in manufacturing and selling furniture, would I want to diversify into clothing stores and pastry shops? Would I be able to make them into a successful conglomerate?

• If I were an expert in manufacturing and selling furniture, what related lines of business should I go into?

Ask Yourself

• If I were running a business that sells cars, would I want to buy the car manufacturing company? Would I buy just a few shares of stock in the car manufacturing company?

Ask Yourself

• If I were running a business that sells cars, would I want to buy other companies that manufacture boats, airplanes, or trains?

Ask Yourself

Let us say, you have a business that generates one million euros per year of cash inflow. In ten years, your business would bring in ten million euros in cash. If someone says, he wants to buy my business today for eight million euros, would I sell it today at that price? IF yes, then you have a transaction. If not, then what price would you quote?

Review Questions

What is an “engine of growth”What are some advantages of

remaining a small companyWhat are some noble goals for

keeping a company running?

Review Questions

What is the meaning of horizontal integrationvertical integration.

What are the benefits of forward integrationbackward integration

Review Questions

What are some ways to achieve geographic expansion.

What is the meaning of diversification

Review Questions

Contrast organic growth vs growth via acquisitions.

What is the entrepreneur's motive for harvesting.

Review Questions

What is the meaning of exit strategy.Why is there a need to calculate the

value of the business.

Case Study questions

• What were the options that Mr. Simon considered? Why did he reject three options?

• What is the cost and benefit of floating a company on a stock exchange?

Case Study questions

• The sales director has been with the business for twelve years. • Is he a good candidate to take over the business? • Why or why not. • Cite facts from the case.

REVIEW OF ALL CHAPTERS

Outline

Part One of the book

Part ONE of the book explains the requirements for being a successful entrepreneur.

It challenges the young person to demonstrate his power of creativity, innovation, and bravery.

Part One of the book

Thereafter, it guides the young person in selecting a viable business opportunity.

Part Two of the book

Part TWO teaches the discipline of writing a plan for the business.

It starts by explaining the usefulness of taking everything into consideration.

Part Two of the book

Then it goes into the details of the marketing aspect, which gives a sense of potential sales.

It talks about what the start-up entrepreneur can expect when moving forward with operations, estimating costs and expenses.

Part Two of the book

Then the financial plan ties all of these projections together.

It evaluates the returns and risks on investment.

Part Three of the book

Part THREE implements the business plan.

The business owner secures funding from venture capitalists or angel investors.

Part Three of the book

He hires managers, specialists, and staff. He manages day-to-day operations.

He monitors progress and puts in control mechanisms. This rhythm of work could continue for a long, happy time.

Epilogue of the Book

After the start-up phase, the entrepreneur would have a smoothly-running “engine of growth,” which is a stable and growing source of cash inflows.

From then on, he has options.

Epilogue of the Book

The entrepreneur can push the small company to reach medium-sized status (perhaps nationwide in scope).

He can turn it into a large multinational operation. The future is bright.

Epilogue of the Book

He can opt to sell the business, and retire. The entrepreneur can look forward to

harvesting the fruits of his efforts.

Part 1 The Entrepreneur

Chapter 1 What is an EntrepreneurChapter 2 Qualities of EntrepreneursChapter 3 Ownership Structure of

the BusinessChapter 4 Determine the Business

Opportunity

Part 2 The Business Plan

Chapter 5 The Business PlanChapter 6 The Marketing PlanChapter 7 The Operations PlanChapter 8 The Financial Plan

Part 3 The Enterprise

Chapter 9 Secure FundingChapter 10 Hire PeopleChapter 11 Manage Day-to-Day

OperationsChapter 12 Monitor and Control

Ending

Epilogue: Harvesting & Exit Strategy

How to target further growth.How to sell the business.How to value the business.

Conceptualize Opportunity

Plan the Business

Set-up the Business

Manage the Business

Reap the Rewards

Chapter 1What is an Entrepreneur

Chapter 5The Business Plan

Chapter 9:Secure Funding

Working capital: Pay suppliers.

Epilogue. Growth & expansion. Take over other firms?

Chapter 2 Qualities of an Entrepreneur

Chapter 6The Marketing Plan

Chapter 10:Hire People

Collect from customers.

Plan your Exit. Sell the business? Go public IPO?

Chapter 3 Ownership Structure

Chapter 7The Operations Plan

Build factory, store, & get equipment. Fixed assets. Implement Operations Plan.

Chapter 11 Manage Day-to-Day Operations

Harvest. Transfer Ownership. Retire. (If business fails, close it down.)

Chapter 4 Determine the Business Opportunity

Chapter 8The Financial Plan

Promote, market, and sell the product. Implement Marketing Plan.

Chapter 12 Monitor and Control

Start a New Cycle of Entrepreneurship

Make broad choices

Finalize details Make Decisions Make Decisions Long-term Strategy

In terms of building a business, we can group the chapters under five columns.

HAVE A SUCCESSFUL BUSINESS

Good luck