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FOUNDATIONS OF ENTREPRENEURSHIP
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Transcript of FOUNDATIONS OF ENTREPRENEURSHIP
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FOUNDATIONS OF ENTREPRENEURSHIP
Elikem Nutifafa Kuenyehia
CLASS SEVEN: BUILD OR BUY? & IDEA GENERATION
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Class Agenda
• Mid-term assignment • Recap of last class• Build or Buy?• Idea Generation • Guest Speaker: Shirley Frimpong-Manso,
Managing Director, Sparrow Productions
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Mid-term Assignment
• Questions and issues
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Recap of last class
• What did you learn from legal and regulatory considerations?
• What did you learn from the Stellar Group’s acquisition story?
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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
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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
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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
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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
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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
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The buying stages
• Identification of opportunities • Screening opportunities• Evaluating• Valuation• Negotiation• Heads of terms or term sheet or letter of
intent• Acquisition/purchasing
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Idea Generation
From idea to profit? IDEA
OPPORTUNITY
CONCEPT
INSIGHT GENERATION
ENTERPRISE?
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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
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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
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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
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Sources of ideas (cont’d)
• Reading• Travel• Government• Personal Experience and Frustration• Skill Set• Franchises• Conferences, Workshops, Exhibitions• Brainstorming
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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?
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Which comes first?
IDEA
THE DESIRE TO START A BUSINESS?
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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
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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
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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 ?
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Guest Speaker
• Shirley Frimpong-Manso, Managing Director, Sparrow Productions