Lecture 1 - New Venture Creation

transcript

http://emagine-group.com Brand Focused, Socially Active, Digitally Enabled

New Venture Creation An Overview

The journey to becoming an

entrepreneur is easy.

The path to becoming a successful one is filled with heartache, barriers, failure, ridicule, sacrifice and eventually success – if you can stick with it.

The problem that we have in Pakistan is that entrepreneurship is misunderstood and therefore ridiculed by everyone around us.

Our parents tell us that we are wasting our time and education with something that MIGHT earn some money

Our friends tell us that we are wasting our time and starving ourselves when it would be easier to just get a job.

Potential clients don’t take us seriously because we don’t have a huge financial base to work from, so we will probably shut our doors in a few months.

Sadly, all of these things are partly true, but they make our lives harder and more stressful because the approval from our inner circle isn’t there.

People don’t understand entrepreneurship, so they don’t

know what to make of it.

But the answer to all these problems are easy, if you know how to handle them.

First objective of the course: To teach you how to explain what you are doing to those around you in small manageable pieces so that you can get their support.

Second objective of this course: To take your idea and show you how to determine if it is viable, feasible and how to make it successful.

Third objective of the course: To teach you how to build a successful business

Entrepreneurship in Pakistan The Great Wasteland of Business

Entrepreneurship in Pakistan is a failure from the word go because of how our culture operates.

In Pakistan, we don’t accept new things with very much ease.

In Pakistan, we like to follow the crowd more than go our own way.

In Pakistan, we would rather be unhappy with our careers than dare to do something that takes hard work but makes us happy – for much less money (in the beginning)

All of these things make Pakistan a hard place to be an entrepreneur, but there are other things that keep us from succeeding.

Economic Breakup -‐ Pakistan

Wealthy

Middle Class

Business Environment -‐ Pakistan

Business Owners

Working Class

Pakistan follow patterns….

For decades there were only 2 choices when it came to career paths: Doctor Engineer

Then the software industry in India started to grow and people in Pakistan started opening software houses.

So Pakistanis had a new career choice – computer science

Then the banks started to grow and hire more and more people….

Pakistan had another new career choice – MBA

But when the economy turned south, unemployment went up and people decided to sit at home and do nothing rather than start their own businesses.

There are 3 reasons that stop people from starting their own business in Pakistan:

Reason 1: No support network

Around the world, universities encourage their students to be independent and give them the skills to be free thinkers

With free thinking comes confidence

So you are more comfortable taking chances and risk to achieve

But for an entrepreneur to succeed, they must have a support network

We need people who understand what we are struggling with to help guide us through the difficult times

We don’t have that in Pakistan.

Reason 2: No financial support

For any venture to succeed, there needs to be somewhere that capital can be sourced

In Pakistan, we only have 3 options: Parents (if they are wealthy) Banks (if we have collateral) Sethis (if we are desperate)

Financing Option 1 – Parents Many of the businesses that are started in Pakistan are funded by the family of the entrepreneur.

While that is a great option, family businesses require lots of money and many members of the family involved to make them successful.

When it’s only one person, the parents give them money so that they have something to do – there are no checks and balances – therefore, no drive to succeed.

But when your parents aren’t loaded, what options do you have?

Financing Option 2 – Banks Some entrepreneurs in Pakistan get bank loans to start their ventures.

Bank loans require a number of things: Collateral to secure the loan Proof of Concept Past Experience

Most entrepreneurs don’t have the collateral to secure a bank loan.

Most entrepreneurs need capital to be able to provide proof of concept.

Most of your past experience is either in working for others or none at all. Entrepreneurs that have past experience have the capital they need already.

But do you really want a bank loan?

Bank loans mean that you must make payments whether you have the revenue or not – and when you miss a couple of payments, you lose your business

Also, in our banking culture, loans come with a 22% interest rate

In the rest of the world, banks have small business loans with an interest rate between 2 – 10%.

So if you take a bank loan of Rs. 10,000,000 at 22% interest

You must be able to pay back Rs. 100,000 each month otherwise your business is at risk

And Rs. 100,000 in monthly revenue is very difficult – if not impossible for a new business.

Financing Option 3: Sethi The Sethi is one of the worst options for startup financing.

The Sethi sees your business as another investment – like gold and property – and expects returns immediately.

As a result, the investment they make is capitalized an any cost.

That means that you will be selling products or providing services cheaper than market rate so that the Sethi can get their money back and believe that you will succeed.

Reason 3: No credibility

New businesses have no credibility in the market because they don’t have the capital to survive.

Because of this most clients will not work with your venture or offer the high value contracts because they don’t believe you will be around in a couple of months.

Additionally, since you don’t have an existing body of work, you don’t have anything to convince the client that you can deliver the work they are expecting.

So you are stuck working with small ventures like yours that have the same capital problems as you do – which creates a vicious cycle that is difficult to get out of.

Third Objective of the Course: To show you how to get through these hard times and give you a support network to share with.

So Where Do We Go? Getting Around the Problems

In this course, we will teach you how to build successful businesses by testing and working out the best methods to go to market.

This includes idea generation, model development, operations planning, human resources and a variety of things that will make your new venture successful.

Our Method of Teaching

Idea Identification

Business Model Generation

Operations Planning

Human Resources

Product/Service Development

Pricing Model

Growth Strategy

Financial Plan

Next Week’s Lecture: Idea Identification

Readings for Next Week: From Paycheck to Paydirt Can Entrepreneurs Save The World? How I Did It? 100 Brilliant and Insightful Companies