Entrepreneurship & Commerce in IT

06

Sachintha Gunasena MBCS http://lk.linkedin.com/in/sachinthadtg

recap so far…

Business Plan• Title Page and Table of Contents

• Executive Summary

• summarize the vision for the company

• General Company Description

• provide an overview of the company and the service it provides to its market

• Products and Services

• describe, in detail, the unique product or service

• Marketing Plan

• describe how the company will bring its product to its consumers

Business Plan Cont.d

• Management and Organization Plan

• describe the structure of the organization and the philosophy that governs it

• Operational Plan

• describe how the business will be operated on a day-to-day basis

• Financial Plan

• illustrate the working model for finances and the need from investors

Today

Today’s Discussion• Financing the Venture

• Sources of Capital

• Resource optimisation

• Profiling Entrepreneurs

• Idea Generation

Today’s Discussion Cont.d

• Expanding the Venture

• Goal Setting – Vision

• Penetration

• Diversification

• Five Forces Model

Today’s Discussion Cont.d

• Ending a Venture

• Exit Strategies

• Venture Liquidation

• Bankruptcy Listing

• Ventures Going Public

Financing the Venture

Sources of Capital• Personal Finances

• Friends & family

• Angel Investors

• Debt Financing

• Equity Financing

• Customer Financing

• Government-Sponsored Programs

Personal Finances

• own savings

• indicates confidence on the idea

• high risk

• loss/ gain is personal

Friends & Family• talk to family & friends

• easy to obtain

• depends on relationships

• may add ideas to the business

• loss/ gain affects others

Angel Investors• individuals who invest money in entrepreneurial venture

• can be serial entrepreneurs/ business executives

• not done in established market - informal capital

• easier to obtain than formal methods

• add their mind-share on company strategy

• can be demanding

• must agree on terms & conditions carefully

Debt Financing• loan money

• mostly commercial banks

• can contain mortgages

• comparably hard to obtain

• will contain terms & conditions but company control will be yours

• ROI will be high

• Risk will be High

Equity Financing• sell stocks (parts of company) to investing party

• done by venture capital firms

• very hard to obtain

• will be part of the company management

• risk will be distributed among investors

• terms & conditions will be demanding

Customer Financing• done by large corporations/ potential customers

• via equity/debt routes

• large corporations will support their suppliers for the benefit of both the parent company and the small company

• contains terms & conditions

• e.g.: Apple helping Corning Gorilla Glass

• helped financially

• obtained exclusive rights for the product for a year

Government-Sponsored Programs

• will be done by economic development section of the government

• could be hard to obtain

• will help on a lot of occasions

• will contains terms & conditions that may be less stricter than private companies

• e.g.: innovative research

What’s the Best Method of Financing to Your

Venture?• decide on the startup research

• can go to different options on different level-advancements of the company

• plan carefully

Resource Optimisation

Why Optimise Resources?

• Resource optimization is the set of processes and methods to match the available resources (human, machinery, financial) with the needs of the organization in order to achieve established goals.

• Resources play a vital role in development of the entrepreneurial venture

Key Factors

• Ability of the Entrepreneur

• Idea Generation

Profiling Entrepreneurs

• Cognitive abilities

• problem solving abilities, flexibility, choices of strategy, impulsiveness, memory and learning, planning capacities, self-efficacy and risk-taking propensity.

• effectiveness of the entrepreneurs' performance

• ability to monitor, self-correct and regulate the intensity, tempo and other qualitative aspects of delivery.

Read More…

• references at the end of the slide deck

• and search on how to optimise different businesses

Idea Generation

• new ideas

• new opportunities

Expanding the Venture

Goal & Mission Setting

• Goal

• Mission

• moving with the times

Penetration

• the selling of a company's products in a particular market or area.

• have to penetrate different areas

• new areas

• expand your business

Diversification• a corporate strategy to enter into a new market or industry which the business is not currently in, whilst also creating a new product for that new market.

• why diversify?

• examples

Five Force Competitive Model

How to Expand a Venture?

• ideas?

Ending a Venture

Exit Strategies

• The exit strategy is a way of "cashing out" an investment.

• Examples include an initial public offering (IPO) or being bought out by a larger player in the industry.

Just Take It• Pros

• Who doesn't like seven figures of take-home pay?

• Private jets are fun.

• There's no need to think hard about getting out: Just pull out the money when you need it.

Just Take It Cont.d

• Cons

• The way you pull the money out may have negative tax implications. For example, a high salary is taxed as ordinary income, while an acquisition could bring money in the form of capital gains.

• Without careful long-term planning, you may end up pulling out money now you'll need later.

Liquidation• Pros

• It's easy and it's natural. Everything comes to an end.

• There's no negotiations involved.

• There's no worrying about transfer of control.

Liquidation Cont.d• Cons

• Get real; it's a waste! At most, you get the market value of your company's assets.

• Things like client lists, your reputation, and your business relationships may be very valuable, and liquidation just destroys them without an opportunity to recover their value.

• Other shareholders may be less than thrilled at how much you're leaving on the table.

Selling to a Friendly Buyer

• Pros

• You know them. They know you. There's less due diligence required.

• Your buyer will most likely preserve what's important to you about the business.

• If management buys the business, they have a commitment to making it work.

• Selling to family makes good on that regrettable offhand promise made 30 years ago, "Someday, son/daughter, all this will be yours."

Selling to a Friendly Buyer Cont.d

• Cons

• You can get so attached to being bought by someone nice that you leave too much money on the table.

• If you sell to a friend, they'll be peeved when they discover they just bought the liability for that decade's worth of taxes you forgot to pay.

• Selling to family can tear the company apart with jealousies and promotions that put emotion way ahead of business needs.

Acquisition• Pros

• If you have strategic value to an acquirer, they may pay far more than you're worth to anyone else.

• If you get multiple acquirers involved in a bidding war, you can ratchet your price to the stratosphere.

Acquisition Cont.d• Cons

• If you organize your company around a specific be-acquired target, that may prevent you from becoming attractive to other acquirers.

• Acquisitions are messy and often difficult when cultures and systems clash in the merged company.

• Acquisitions can come with noncompete agreements and other strings that can make you rich, but make your life unpleasant for a time.

IPO• Pros

• You'll be on the cover of Newsweek.

• Your stock will be worth in the tens--or maybe even hundreds--of millions of dollars.

• Your VCs will finally stop bugging you as they frantically try to insure their shares will retain value even when the lockout period expires (Warning: they won't necessarily be looking out for your shares, too.)

IPO Cont.d• Cons

• Only a very few number of small businesses actually have this option available to them since there are very few IPOs completed annually in the United States.

• You need financial and accounting rigor from day one far above what many entrepreneurs generally put in place.

• Some forms of corporation--S-corps, for example--will require a reorganization before they can be taken public.

• You'll spend your time selling the company, not running it.

• Investment bankers take 6 percent off the top, and the transaction costs on an IPO can run in the millions.

• When your lockout restrictions expire, your stock will be worth as much as a third world hovel.

Bankruptcy Listing

• Search for it…

What’s Your Exit Strategy?

• ideas?

References• http://www.go4funding.com/articles/Sources-Of-Startup-Capital.aspx

• http://ventureburn.com/2011/03/8-venture-capital-sources-for-your-startup/

• http://www.entrepreneur.com/article/41038

• http://sixteenventures.com/startup-time-management

• http://www.scienpress.com/Upload/BEJ/Vol%202_1_1.pdf

• http://www.sas.com/resources/asset/103650.pdf

• https://www.google.mv/url?sa=t&rct=j&q=&esrc=s&source=web&cd=5&ved=0CDcQFjAEahUKEwihttvzrdDHAhVNkI4KHf6TB9I&url=http%3A%2F%2Fwww.wider.unu.edu%2Fpublications%2Fworking-papers%2Fdiscussion-papers%2F2008%2Fen_GB%2Fdp2008-01%2F_files%2F78805634425684379%2Fdefault%2Fdp2008-01.pdf&ei=xrriVaG7HM2gugT-p56QDQ&usg=AFQjCNFOlYFMPk3bPe16cuu018VB4fqpEg&sig2=4GBsMmPe-DZOC6_8tDIYqw&cad=rja

• http://onlinelibrary.wiley.com/doi/10.1002/sej.1150/abstract

• http://www.actenum.com/files/Actenum-Whitepaper-Resource-Scheduling.pdf

• http://www.entrepreneur.com/article/78512

• http://www.investopedia.com/terms/e/exitstrategy.asp

• http://www.esbri.se/uppsats2_2001.pdf

Next Up…

• E-Commerce

Thank you.

Sachintha Gunasena MBCS http://lk.linkedin.com/in/sachinthadtg