Starting Your BusinessStarting Your Business

On Being Your Own Boss:On Being Your Own Boss:

I haven’t been wrong since 1961, when I I haven’t been wrong since 1961, when I thought I made a mistake.thought I made a mistake. Bob Hudson. Bob Hudson.

I may have my faults, but being wrong I may have my faults, but being wrong ain’t one of them.ain’t one of them. Jimmy Hoffa Jimmy Hoffa

Means of EntryMeans of Entry

• Start from scratchStart from scratch

• Purchase existing businessPurchase existing business

• FranchiseFranchise

• Inheritance (or marriage!)Inheritance (or marriage!)

Purchase vs. Start-upPurchase vs. Start-up

Key factors:Key factors:

• Skills and Interests of Skills and Interests of EntrepreneurEntrepreneur

• Costs of EntryCosts of Entry

Entrepreneurial SkillsEntrepreneurial Skills

InventorInventor EntrepreneurEntrepreneur

PromoterPromoter ManagerManager

Low HighLow High

General management skillsGeneral management skills

HighHigh

Creativity Creativity and and

innovationinnovation

Start-up QuizStart-up Quiz

Name the two individuals involved Name the two individuals involved with each start-upwith each start-up

• Apple ComputerApple Computer

• MicrosoftMicrosoft

• NetscapeNetscape

Implications of These Implications of These Entrepreneurial Teams?Entrepreneurial Teams?

Implications of These Implications of These Entrepreneurial TeamsEntrepreneurial Teams

• Starting a businesses is hard work, Starting a businesses is hard work, having a partner helps.having a partner helps.

• Members of team bring different skillsMembers of team bring different skills– ConceptualConceptual– Managerial Managerial – FinancialFinancial

• Over time, partners interests will likely Over time, partners interests will likely divergediverge

Key Advantages/Disadvantages of PurchaseKey Advantages/Disadvantages of Purchase

AdvantagesAdvantages DisadvantagesDisadvantagesLess hassleLess hassle Resistance to Resistance to

changechange

Easier financingEasier financing Usually more costlyUsually more costly

Greater probabilityGreater probability Less likely to beLess likely to beof successof success “home-run”“home-run”

Investigating the PurchaseInvestigating the Purchase

Want to be sure you aren’t buying Want to be sure you aren’t buying someone else’s problemssomeone else’s problems

(Akerlof’s Lemons)(Akerlof’s Lemons)

Key Advantages/Disadvantages of Start-upKey Advantages/Disadvantages of Start-up

AdvantagesAdvantages DisadvantagesDisadvantagesComplete controlComplete control Extensive effort Extensive effort

to startto start

Investment oftenInvestment often Financing often Financing often notnot

not substantialnot substantial available available

Good growth Good growth High failure rate High failure ratepotential potential

Key Reasons for Start-upKey Reasons for Start-up

• Develop new invention or serviceDevelop new invention or service

• Development of ideal locationDevelopment of ideal location

• Avoid negative policies and Avoid negative policies and precedents associated with existing precedents associated with existing firmsfirms

Small Business Management, 11th editionLongenecker, Moore, and PettySouth-Western College Publishing

Types of Ideas That Develop into Startups

New Market

Example:Targeting the “New Age” beverage market by selling soft drinks with nutritional value

New Technology

Example:Using high-tech computers to develop a simulated helicopter ride

New Benefit

Example:Developing a personal misting device to keep workers cool

TYPE A TYPE B TYPE C

TYPE A:Providing customers with a product or service that is not in their market but already exists elsewhere.TYPE B:Using new technology that provides the basis for new product or service ideas.TYPE C:Performing an old function for customers but in a new and improved way.

Sources of Business IdeasSources of Business Ideas

• WorkWork

• HobbyHobby

• TravelTravel

• ResearchResearch

• SerendipitySerendipity

Small Business Management, 11th editionLongenecker, Moore, and Petty©South-Western College Publishing

Sources of Startup Ideas

Prior Work Experience

45%

Family Business6%

Other4%

Chance Happening11%

Education/Courses6%

Suggestion7%

Personal Interest/Hobby16%

Friends/Relatives5%

CreativityCreativity

Nothing is more dangerous than an idea Nothing is more dangerous than an idea when it is the only one you have.when it is the only one you have.

- Emile Chartier- Emile Chartier

The best way to get a good idea is to get a The best way to get a good idea is to get a lot of ideas.lot of ideas.

- Linus Pauling- Linus Pauling

CreativityCreativity

Creativity is the ability to look at the same things Creativity is the ability to look at the same things as everyone else but to see something differentas everyone else but to see something different

• Willing to break the Willing to break the rulesrules

• Don’t fear failureDon’t fear failure

• Creativity is possibleCreativity is possible

Find the PatternFind the Pattern

Group 1: A E F H IGroup 1: A E F H I

Group 2: B C D G JGroup 2: B C D G J

Where do Where do K, R, TK, R, T belong?belong?

Assessing the Start-upAssessing the Start-up

• Clearly defined marketClearly defined market

• Sustainable competitive Sustainable competitive advantageadvantage

• Sufficient profitsSufficient profits

• Matches entrepreneur’s skills Matches entrepreneur’s skills and interestsand interests

Competitive AdvantageCompetitive Advantage

I’ve seen the future, and it is a lot I’ve seen the future, and it is a lot like the past, only longer.like the past, only longer.

Dan QuisenberryDan Quisenberry

• Barriers to entryBarriers to entry– Market size, locationMarket size, location

– Name,Name,

– Patent protectionPatent protection

Discussion of Silver LiningDiscussion of Silver Lining

Type of start-upType of start-up

Source of ideaSource of idea

Problems facedProblems faced

Attributes of Means of EntryAttributes of Means of Entry

Cost Cost Skills Skills FulfillmentFulfillment

Start-upStart-up Low High Med Low High Med

PurchasePurchase High Med Med High Med Med

FranchiseFranchise Med Low Low Med Low Low