Entrepreneurial pathways

• Which way for you? • Different pathways to

experiencing entrepreneurship

• Each has its own disadvantages and difficulties

• Don’t rush your decision

Chapter 5

Pathways to entrepreneurial ventures

Objectives1. To describe the major pathways that may lead to entrepreneurial

ventures2. To examine bootstrapping and minipreneurship as fast lanes to

gaining entrepreneurial experience3. To identify and discuss what is involved in acquiring an established

venture that already has some entrepreneurial momentum4. To outline key questions to ask when buying an ongoing venture

that is already generating value5. To define a franchise and outline its structure6. To examine the benefits and drawbacks of franchising7. To look at the route social entrepreneurs take to creating new

ventures

But first

• Assuming you have the desire and enough money to make either choice, which would you prefer?

• Are you more likely to establish your own business ‘from scratch’ or

• take over running an established business?

• Why?

?

Six common business

creation pathways

1. Bootstrapping

2. Minipreneurship

3. A new business start-up

4. Acquiring an existing venture

5. Buying a franchise

6. Establishing a social venture

7. Taking over the family business (Chapter 7)8. Starting a business for your employer (Chapter 8)

Pathway 1: Bootstrapping

• “Highly creative acquisition”• Using other people’s resources• Relies on:

– Networks, trust &– cooperation– wise use of existing resources.

• No debt / don’t give away equity• Look for ‘low hanging fruit’• Use a copycat idea

• Find quick, break-even, cash-generating products

• Keep growth in check• Focus on cash for healthy,

immediate returns• Avoid loss-making strategiesSee dozens of bootstrapping ideas in Chapter 5.

Pathway 2: Business assistance funding• Access to funds to support

start-ups and development of small businesses

• Often from government• Not just about funding, also:

– business information– training programs, workshops

and seminars– business referrals and networks– mentoring support

See URL list in Chapter 5 “Business Development Assistance in the Asia-Pacific”

Pathway 3: Minipreneurship

• Do you create rather than consume goods or services?

• eBay for product placement and marketing

• PayPal for accepting secure payments.

• Niche is the new mass.• Consumerism is now about

standing out rather than conforming to trends.

Selling to the long tail

Chocolate

Dark Chocolate

How to make chocolate

Fairtrade and organic beans

Where to buy cocoa beans

How to get cocoa beans from Samoa

Niche is the new mass. You only need a few thousand people in the entire world to be interested in what you offer.

Can you give your own examples of long tail products ?

What are the main drivers behind trend towards minipreneurship? • Entrepreneurs now have access

to resources and technologies previously only available to large companies

• 24/7 access to the marketplace• Access to marketplaces• Access to manufacturing• Partnering with top talent• Self-sufficiency, with a huge

support network Australian Murray River Pink Flake Salt is available for sale 24/7.

Pathway 4: Classic start-up

• Entrepreneurs launch a business when they can:– drive less innovative products

out of the market – advance the product frontier – lower prices– satisfy untapped demand or– broaden market penetration.

• Two ways to do this: – create a unique product or

service

– adapt or extend something that is currently on the market

The new-new approach• Identify trends that could become

products• Try making a list of annoying

products you deal with over a week (PITA products)

• Common sources of ideas are prior jobs, hobbies/interests and personally identified problems

• Most business ideas tend to come from people’s experiences.

The new-new approach1. Think about the last few days.

Identify a product you have used which left you annoyed. What could be done to fix it?

2. Identify a current social or educational trend. If people were caught up in the trend, what products or services would they want?

?

The new-old approach

• Rather than a totally new idea, piggyback.

• Bring an existing idea to a new place.

• Choose a product or service which is difficult to copy (to minimise or delay competition).

Opportunity trends

• Food: Gourmet chocolate, powdered alcohol drinks, special needs food, culinary tourism

• Green products: fibres and textiles, solar and wind, miniature power

• Business and analytics: Group buying, crowd sourcing, location-based marketing

• Personal and healthcare: niche gyms, wearable technology, medical marijuana

• Mobile: bump exchange, translators, locators, ultra-private technologies.

• See Table 5.2 for many more

The cost of start-up

• How much will it cost to stay in business for the first year?• How much revenue will the organisation generate during this time period?• If outflow of cash is greater than inflow, how long will it take to ‘turn the corner’?• Is the return adequate in terms of risk?

Start-up expense calculator on p. 164.

Salaries and wagesRentAdvertisingDelivery expensesSuppliesTelephoneInsuranceTaxes, superannuation and other employee on-costs

InterestMaintenanceLegal and professionalStart-up costsFixtures and equipmentStarting inventoryLegal and professional feesAdvertising and promotion

Go or no-go decisions• What is the ‘upside gain’ and

‘downside loss’?• What is the risk versus reward?• Analytic tools covered in this book

– Opportunity analysis (Chapter 9)– Feasibility analysis (Chapter 12)– Sensitivity analysis (Chapter 15)– Business planning (Chapter 16)

Advantages • Future success is likely• Reduced time and effort• Possibly, a good price

Key questions to ask• Why being sold?• Current physical condition of the

business?• Condition of inventory?• How many of the employees will

remain?• What type of competition does the

business face?• What does the company’s financial

picture look like?

Pathway 5: acquiring an existing venture

Pathway 5: buying a franchise

• Combining independence with the larger umbrella of a corporation.

• 1/3 of all retail sales generated by franchises.

• The franchisee is generally legally independent, but economically dependent.

Jim's Group, started in Perth in 1982, is now the world's largest

home franchise business.

Franchisee• A financial investment• Obtains standardised inventory• Maintains quality of

performance• Pays franchise fee and a

percentage of revenues

Franchisor• Allows use of the

company name• Provides management

training• Sells merchandise at

wholesale• Continued support

Advantages

• Training and guidance• Brand-name appeal• A proven track record• Financial assistance

Disadvantages

• Franchise fees• Franchisor control• Unfulfilled promises

Examples of green franchises

• Sustainable home energy • Carbon neutral dry cleaning• Ecological car cleaning and

detailing services• Pizza that use hybrid cars for

delivery• Rubbish removal companies

that completely recycle the waste

• Eco-friendly auto tune-ups • Organic lawn care• Chemical-free carpet

cleaning• Energy doctors to reduce

heating and cooling costs• Printer cartridge recycling

Social venturing

How would establishing a social venture be different to the preceding pathways??

Pathway 6: social venturing

• For the entrepreneur driven by a desire to find solutions to social injustice or environmental problems.

• Double challenge:– A strategy for accomplishing lasting social

change – A viable profit-making business model

• Apply business skills to solve real-world challenges and capture opportunities in new market niches.

Global social venture competition

Models of social venturing

• Social-purpose business to support or create economic opportunities for a particular target population, while with reference a financial bottom line.

Non-profit

enterprise

Social-purpose

Business-

develop-ment

service

Micro-finance

institution

Cooperat-ive

Key concepts

(close your books)1. Name the six pathways.2. Which pathway(s) would appeal

to you and why??

Key concepts

Six common pathways:1. Bootstrapping2. Minipreneurship3. A new business start-up4. Acquiring an existing venture5. Buying a franchise6. Establishing a social venture

• Don’t forget we’ll be covering two more pathways:– Taking over the family business

(Chapter 7)– Starting a business for your

employer (Chapter 8)