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New Business
Unit 11
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Navigare necesse est ...
Navigare
necesse est,
vivere non estnecesse (To sail
is necessary; to
live is notnecessary).
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Odysseus/Ulysses
He was one of the most famous seafarers
and travellers of the Ancient world. Ulysses
had been equally famous for his wit,
cunning and ability to find solutions in themost difficult situations.
In many ways he had set up an example for
future generations of adventurers ready toenter in the unknown.
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Many pitfalls on the path to success
Entering the business world of today might seem
to many unskilled and unexperienced persons both
an easy task, but also a venture full of risks. In the
UK alone more than half of all start-ups in newcompanies go out of business within the first 12
months of operation.
While the fundamental principles of starting a
business are not complex, in practice there aremany pitfalls on the path to success.
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How can one become a successful
entrepreneur?
Many people are attracted to the idea of
running their own business. However,
there is no blueprint for becoming a
successful entrepreneur without severalfeatures any such person must have:
1. A drive and determination to succeed,
2. Thinking quickly
3. Making good judgments and decisions
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Entrepreneur in English is ...
a person who is willing to launch a new
venture or enterprise and accept full
responsibility for the outcome.
Jean-Baptiste Say, a French economist, is
believed to have coined the word
"entrepreneur" in the 19th century - he
defined an entrepreneur as "one whoundertakes an enterprise, especially a
contractor, acting as intermediatory between
capital and labour".[
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A broader definition by the same FrenchEconomist J.B. Say (1800): "The
entrepreneur shifts economic resources out
of lower and into higher productivity and
greater yield.
An entrepreneuris, therefore, a personwho has possession of:
a new enterprise, venture or ideaand is accountable for the inherent risks and
the outcome
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Anyone can learn how to be an
entrepreneur
Entrepreneurs often have similar traits
and characteristics. Here are some of
the qualities that can go a long way inbolstering business success.
If you don't have all of these traits,
don't worry. Most can be learned withpractice.
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Businesses are built on ideas. In fact, the first
step to starting a business is to come up with
an original idea. Therefore, entrepreneursmust be open to thinking creatively. Are you
able to think of new ideas? Can you imagine
new ways to solve problems? Do you have
insights on how to take advantage of new
opportunities?
Many people believe that some individuals are
just born with creative minds, while others are
not. This might be true, but one can learnto
be more creative if s/he wants to become an
entrepreneur!
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The world is not enough
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The necessary qualities
Creative
Inquisitive
Driven
Goal-oriented
Independent
Confident
Calculated risk taker
Committed
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And other characteristics
Avid learner
Self-starter
Hard worker Resilient (able to grow from
failure or change)
High-energy level Integrity
Problem solving skills
Strong management and organizational skills
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Thinking About Starting
If youre thinking about starting a
small business, you should start by
weighing thepros and cons, so thatyou can make a wise decision.
Starting a business involvesplanning,
making key financial decisions andcompleting a series of legal activities.
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Consultant or mentor?
Once you're ready to start a business, you'llhave many important decisions to make. Thisis especially true in the first months of opening
your business. You might worry that you'll have to make every
decision on your own. Ultimately, you areresponsible for the decisions you make, but you
can always consult others to get guidance. Aconsultant or mentor could be an invaluableresource to you.
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A business mentor has
more entrepreneurial
and domain expertisethan you and can help in
improvingproductivity,
streamlining marketing
initiatives, build betterbusiness relationships
and in retaining key
human capital for your
Startup.
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Mentors can be the key tounlocking a network of
business contacts and tospread word of mouth thatyour business is up andrunning and ready to
perform for customers. Mentors can also provide
knowledge, expertise, andsupport for your business.A
mentor is more than just acontact in your networkamentor is a coach making along term commitment to
you.
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A mentor
A mentor is someone who has been down thesame path you're taking. A mentor is experienced,successful and willing to provide advice andguidancefor no real personal gain.
In Greek mythology, Mentor (Greek: gen.:)was the son of Alcumus. In hisold age Mentor was a friend of Odysseus whohad placed Mentor and Odysseus' foster-brother Eumaeus in charge of hisson Telemachus, and of Odysseus' palace,when Odysseus left for the Trojan War.
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A father-like teacher
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Near-paternal relationship with
aprotg When Athena visited Telemachus she took the
disguise of Mentor to hide herself from the suitorsof Telemachus' mother Penelope. As Mentor, thegoddess encourages Telemachus to stand up
against the suitors and go abroad to find out whathappened to his father. hen Odysseus returnsto Ithaca, Athena appears briefly in the form ofMentor again at Odysseus' palace.
Because of Mentor's and Eumaeus' near-paternalrelationship with Telemachus, the personalname Mentorhas been adopted in English as aterm meaning a father-like teacher.
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The student of a mentor
The student of a mentor is called a protg.More accurately, the protg would be called a
telemachus(pl. telemachusesor telemachi).
Sometimes, the protg is also called a mentee.
The -or ending of the original name Mentor
does not have the meaning of "the one who
does something", as in other English words
such as contractoror actor. The derivation ofmenteefrom mentoris a kind
of backformation (cf. employerand employee).
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Identify your weak spots
One of the first things you need to do when
seeking out a mentor is to identify your weak
spots. And, then, start sking questions:
What things do you need to improve? Where arethe blind spots in your life that you know can be
changed? Where do you often fail? Think about the
things you needdo you often fail in your
finances? Find a numbers expert. Do you lackinternational experience? Seek out a global thinker.
Do you need to grow a small business?
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A few first steps
Find a successful CEO of a medium size
business. Matching the right mentor to
your needs is the first step to finding the
right mentor.
1. Find someone you trust.
2. Search your network of contacts to find a
mentor.
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3. Check with your company, school alumniassociation, or local group you are associated
with to see if they have a structured mentoringprogramme in place. These structured mentoringprogrammes often have years of trial and errorpresenting an opportunity for you to enter into asmooth running program.
4. These types of coaching programmes oftenperform personality and goal assessments tomatch you with a compatible mentor.Compatible could be someone with similar
personalitiesor could be someone who is verydifferent. Some mentoring programmes find thatdissimilar mentor/mentee relationships are bestfor success.
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Some tips about mentoring:
Be organized, prepared and consistent. No onewants to waste their time. Time is precious.
Planyour mentoring sessions in advance. Thesecould be as simple as having a one-on-one
consultation or lunch meeting once a month todiscuss where you are against your business goals,how best to tackle business obstacles, getting adviceon business processes or regulatory requirements
that you dont understand, and so on. Casual one-on-one sessions are good, but also have
more structured sessions that address differentaspects of starting, running, managing and growing
your business.
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Your personal attitude
Take notes, own action items and review
progress against these in your next session.
Be respectfulof your mentors time. Use
their insight and apply as you best see fit.
And last but not least, be thankful and
communicative about the value they bring.
This is about being in a mutually beneficialrelationship, after all.
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20 Questions Before Starting a
Business
1. Am I prepared to spend the time, money
and resources needed to get my business
started?
2. What kind of business do I want?
3. What products/services will my business
provide?
4. Why am I starting a business?
5. What is my target market?
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More questions ...
6. Who is my competition?
7. What is unique about my business ideaand the products/services I will provide?
8. How soon will it take before myproducts/services are available?
9. How much money do I need to get my
business set up?10. How long can I have to finance the
company until I start making a profit?
11. Will I need to get a loan?
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More questions ...
12. How will I price my product compared to
my competition?
13. How will I market my business?
14. How will I set up the legal structure of my
business?
15. How will I manage my business?
16. Where will I house my business?
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More questions ...
17. How many employees will I need to start
up?
18. What types of suppliers do I need to
contact?
19. What kind of insurance do I need to invest
in?
20. What do I need to do to ensure I am
paying my taxes correctly?
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Other questions Before Starting a
Business
1. Are you ready to start a business?
2. Is Entrepreneurship For You?
3. What are the Small Business SizeStandards?
4. Green Guide for New Businesses
5. Conducting Market Research
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Think and understand
6. Think about thepossibility of anunexpected
disaster7. Understand Your
Market and
EconomicConditions
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Every entrepreniural venture needs to have a
few fundamentals in place:
1. a superior product or
service that has been
rigorously tested,2. extensive market research,
3. an efficient supply chain,
4. a motivated team,
5. an adequate funding
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10 Steps to Starting a Business
1. Create a Business Plan
2. Get Business Assistance and Training
3. Choose a Business Location4. Finance Your Business
5. Determine the Legal Structure of Your
Business
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And other five ...
6. Register a Business Name ("Doing
Business As")
7. Get a Tax Identification Number8. Register for State, Entity/District and
Local Taxes
9. Obtain Business Licenses and Permits
10. Understand Employer Responsibilities
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Business Types
One of the first decisions youll make is thetype of business you will open. You haveseveral options to explore, including where
youll do business, how you will structureyour business, and how you will conductbusiness.
Additionally, you should exploreopportunities that exist for people withspecific characteristics.
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Possible choices of business types
Sole proprietorship,
Partnership,
Limited Liability Company (LLC), Corporation,
S corporation,
Nonprofit, or
Cooperative.
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Startups and High Growth
Businesses
In the world of business, the word "startup"
goes beyond a company just getting off the
ground. The term startup is also associated
with a business that is typically technologyoriented and has high growth potential.
Startups have some unique struggles,
especially in regard to financing. Thatsbecause investors are looking for the highest
potential return on investment, while
balancing the associated risks.
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Starting a Green Business
The explosion of organic and eco-friendly
products on retail store shelves is more than
just a passing fad. It's big business.
This reality presents opportunities for
environmentally minded entrepreneurs
ready to start their own company.
W O d B i fi
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Women Owned Businesses: five
barriers1. They dont know how to access finance,
2. A lot of business networks are set up and
dominated by men
3. They often display a lack of confidence,
4. Women are often not reaching high
positions in companies, so they often suffer
from the range of skills most men have
when starting a new business,
5. Slow to adopt new technologies.
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Nonprofit Organizations
A nonprofit organization uses its profit to
improve its services, rather than pay
dividends to investors.
If your organization is registered as a
nonprofit, you are eligible for certain
programmes including, in most developed
countries, grants, government surplus andother benefit for such a venture.
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Home Based Business
What doApple Computer, Hershey's, Mary KayCosmetics, and the Ford Motor Company have incommon? These well-known corporations all startedout as home based businesses. In fact, more than
half of all U.S. businesses are based out of an owner'shome.
If you have decided you are ready to start a homebased business, then you might already have an idea
and/or the products you want to market. If not, thinkabout your background, what you are good at, and
what experience you have. This exploration can getyou on your way to coming up with a sound idea.
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People with Disabilities
Starting a business can be a great opportunityfor many people with disabilities. In addition
to meeting career aspirations and goals,
owning your own business can provide
benefits such as work flexibility and financial
stability.
In countries, such as B&H, physical and
mentl disabilities are thought to be major
obstacles for new business due to the
traditional attitude to such persons.
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Minority Owned Businesses
A number of people that happen to be
outside the main social, ethnic or economic
groups often find hard to compete with tose
who belong to a certain interet group. Inmost European countries, Roma people fall
into this category, but there are a number of
other groups that can be clasified asminorities, so they deserve the equal chance
nder the law and social sensitivity.
V S i Di bl d V
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Veteran & Service-Disabled Veteran
Owned
A former war veteran or a service-disabled
veteran, should also have several options to
choose from when starting their business. As
a small business owner, they can be seen ascontinuing to serve themselves, their
respective family, or, in a larger context, the
whole local community, or society. Unfortuntley, in B&H this issue has not been
dealt with properly after the 1990s wars in the
region.
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A receptive business environment
Entrepreneurs also need a receptive
business environment.
Many small and medium-size business(SME) owners complain that
government regulations, commonly
known as red tape procedures, is one oftheir biggest headache.
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Writing a Business Plan
Now that youve decided that youd like to
open a small business, you should put your
thoughts down on paper. This way, your
business idea is expressed in a planaliving document that outlines every critical
aspect of its operation.
This step might sound intimidating, but itshighly important.
Do you really need to make
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Do you really need to make
a business plan?
The answer isyes !!!!The importance ofa
comprehensive,thoughtful business
plan is huge. Many
factors critical to
business success
de end u on our lan:
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Roadmap
Some people assume that if they are not
going to seek financial support from
lenders or investors to open their
business that they dont need to prepare
a business plan, but everybusiness
should have one.Writing a businessplan serves as a roadmap for your
venture when youre starting out.
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Think about your business objectively
Writingyour business plan also forces you to thinkabout your business objectively. When youredone, you will have a more realistic idea of theeffort it will require and whether it's a venture you
want to pursue at this time. Don't be intimidated. The process of sitting down
and writing out a business plan could spark yourcreativity and lead you to new business strategies
you may not have considered previously. You'll also find that having your business goals
written down enables you to refer to them at anytime. This will ensure you don't lose sight of your
original focus once you do start your business.
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El m nt f B in Pl n
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Elements of a Business Plan
Cover sheet Executive summary
(statement of the businesspurpose)
Table of contents Body of the document
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Financial data
Loan applications Capital equipment
and supply list Balance sheet
Breakeven analysis Profit and loss
statements
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Three-year summary
Detail by month, first
year
Detail by quarters,
second and third year Assumptions upon
which projections were
based Pro-forma cash flow
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9 elements for a solid Business Plan
Like many other planning activities for
starting your own business, a solid Business
Plan contains a number of important
elements a future entrepreneur must be fullyaware of in order to cover each step of the
way and enter the business world without
skipping any of them. There are nine basic elements present in
any solid Business Plan.
Part 1 : Business Plan Executive
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Part 1 :Business Plan Executive
Summary
It is the most important section of your plan.It provides a concise overview of the entireplan, along with a history of your company.
It tells your possible financierswhere yourcompany is and where you want to take it.It's the first thing they can see; therefore, itis the thing that will either grab their interestand make them want to keep reading ormake them want to put it down and forgetabout it. More than anything else, it tells thefinanciers why you think your business ideawill be successful.
Contents of the Executive Summary:
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Contents of the Executive Summary:
The Mission Statement
The mission statement briefly explainsthe thrust of your business. It could betwo words, two sentences, a paragraph, or
even a single image. It should be as direct and focused as
possible, and it should leave the reader
with a clear picture of what your businessis all about.
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Time & Human factor
Date the business began
Names of the foundersand the functions they
performNumber of employees
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The company growth &
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The company growth &
management's future plans
Summary of company growth including financialor market highlights (for example, your companydoubled its worth in a 12-month period; youbecame the first company in your industry to
provide a certain service) Summary of management's future plans. With the
exception of the Mission Statement, all of theinformation in the Executive Summary should be
highlighted in a brief, even bulleted, fashion.Remember, these facts are laid out in-depth withinthe plan itself.
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When defining the nature of your
business (or why you're in business), be
sure to list the marketplace needs that you
are trying to satisfy.
This should include the ways in which
you plan to satisfy these needs using your
products or services.
Finally, list the specific individuals
and/or organizations that you have
identified as having these needs.
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S l
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Sales strategy
A sales force strategy
If you are going to have a sales force, do
you plan to use internal or independentrepresentatives? How many salespeople
will you recruit for your sales force?
What type of recruitment strategies willyou use? How will you train your sales
force? What about compensation for
your sales force?
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Your current funding requirement, your future
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Your current funding requirement, your future
funding requirements over the next five years, how
you will use the funds you receive, and any long-
range financial strategies that you are planning that
would have any type of impact on your funding
request.
When you are outlining your current and futurefunding requirements, be sure to include the amount
you want now and the amount you want in the future,
the time period that each request will cover, the type
of funding you would like to have (i.e., equity, debt),and the terms that you would like to have applied.
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P rt 8 Fin n i l
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Part 8: Financials
The financials usually need to include:
1. Historical Financial
Data
2.Prospective FinancialData
If you own an established business, you will be
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If you own an established business, you will be
requested to supply historical data related to your
company's performance. Most creditors request
data for the last three to five years, depending on
the length of time you have been in business.
The historical financial data you would want to
include would beyour company's incomestatements, balance sheets, and cash flow
statements for each year you have been in business
(usually for up to three to five years).
Often creditors are also interested in any collateralthat you may have that could be used to ensure
your loan, regardless of the stage of your business.
Prospective Financial Data
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p
All businesses, whether startup or growing, will be
required to supply prospective financial data. Mostof the time, creditors will want to seewhat you
expect your company to be able to do within the
next five years. Each year's documents should
include forecasted income statements, balancesheets, cash flow statements, and capital
expenditure budgets.
For the first year, you should supply monthly orquarterly projections. After that, you can stretch it
to quarterly and/or yearly projections for years two
through five.
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Part 9: The Appendix
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Part 9: The Appendix
This section should be provided to readers on anas-needed basis. In other words, it should not be
included with the main body of your business plan.
Your plan is your communication tool; as such, it
will be seen by a lot of people. Some of the
information in the business section you will not
want everyone to see, but, specific individuals
(such as creditors) may want access to thisinformation in order to make lending decisions.
Therefore, it is important to have the appendix
within easy reach.
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And other paperwork
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And other paperwork
Legal documents
Copies of leases
Building permits
Contracts
List of business consultants, including
attorney and accountant
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Venture Capital
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Venture capital is a type of equity financingthat addresses the funding needs of
entrepreneurial companies that for reasons
of size, assets, and stage of developmentcannot seek capital from more traditional
sources, such as public markets and banks.
Venture capital investments are generallymade as cash in exchange for shares and an
active role in the invested company.
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Still interesed in new business?
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Still interesed in new business?
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