Entrepreneurship for Engineers

CHAPTER TWO:
Creation of New Ventures
Be the change you wish to see in the world – Mahatma Gandhi

By-
Anteneh Hulluye
Lecturer, Department of IE
Hawassa Institute of Technology 2018
Topics For Discussion
 Entrepreneurial Plan

 Ideas versus Opportunities

 Commercialization of technology-based
innovation
 Formation, development, and growth of
technology-based enterprise
Ideas Versus Opportunities
 Entrepreneurial Opportunities
 Entrepreneurial opportunity consists of a set of ideas, beliefs and actions
that enable the creation of future goods and services in the absence of
current markets for them (Venkataraman,1997).
 An entrepreneurial opportunity Consists of four elements: New ideas or
innovations; with one or more ends, which are either subjective aspirations
or objective goals. Beliefs about things favorable to the Achievement of
those ends and possible implementations of those ends through the
creation of new economic artifacts.
 An idea is a concept or plan that carries the potential to create a new
product, service or venture. On the other hand, an opportunity is an idea
that has been evaluated and demonstrated to have the potential for profit
or success.
 Ideas Versus Opportunities
 Opportunity Development–(From idea to business concept) involves
uncertainty. However uncertainty gradually decreases as time goes- As the
entrepreneur becomes aware of the opportunities through time and
strategic and tactical approaches to over come challenges.
 What is a Business Idea?
 A business idea is the response of a person or persons, or an

organization to solving an identified problem or to meeting

perceived needs in the environment (markets, community,
etc.).

 Finding a good idea is the first step in transforming the

entrepreneur‘s desire and creativity into a business

opportunity.
 Business Idea…..

 Mapping an existing business model is one thing;

 Designing a new and innovative business model

 To come up with new or better options, you must dream up a grab

bag of ideas before narrowing them down to a short list of

conceivable options.

 idea generation, where quantity matters; and

 synthesis, in which ideas are discussed, combined, and narrowed down

to a small number of viable options.
Why Should you Generate Business Ideas?
 To respond to market needs-Markets are made up essentially of
customers who have needs and wants waiting to be satisfied.

 To exploit technology –Do things better, Technology has become

a major competitive tool in today‘s markets.

 Because of product life cycle- all products have finite life…

 To stay ahead of the competition

 Other Reasons……….

 Remember, if you do not come up with new ideas, products

and services, a competitor will.
How do you generate business ideas?
 Generating Ideas From Existing Ideas
 Changing existing ideas in order to develop new and original ideas.

 By changing Know About one or more parts of an

idea, we can develop useful new ideas.

 Some Way Includes:

 Make it bigger or add new parts

 Make it smaller or eliminate parts

 Modify parts or ideas

 Rearrange parts

 Reverse parts

 Substitute different materials, parts, or methods

Three sources of new business Ideas

1. Changing environmental trends

 Economic trends
 Social trends
 Technological advances
 Political and Regulatory changes
2. Unsolved problems

3. Gaps in the marketplace

 Unsolved Problems

 Many companies have been started by people who by trying to

solve a problem, create a business idea

 Entrepreneurs can capitalize by modifying products created by

advances in technology
Gaps in the Marketplace

 Key large retailers compete on price and target the mainstream

customer, leaving gaps in the marketplace.

 New business ideas can be formed by taking an existing

product and targeting a new market or geographic area.
Other source Include….

 Hobbies/Interests

 Personal Skills and Experience

 Franchises

 Mass Media

 Exhibitions

 Surveys

 Complaints
 Entrepreneurial Plan/Business Plan
 Without a Business Plan it‘s like driving a car at night without a head
lamp/light
 A written document that carefully explains every aspect of a new

business venture

 A summary of an entrepreneur‘s proposed business venture;

its operational and financial details; its marketing opportunities and
strategy; its managers‘ skills and abilities and more…
 Moreover, it should serve as a business card for introducing the business to
others: banks, investors, institutions, public bodies or any other agent
involved, when it comes time to seek cooperation or financial support of
any kind.
 What is a Business Plan?
 Inside the firm, the business plan is used to develop a road

map.

 Outside the firm, the business plan introduces potential

investors and other stakeholders to the business opportunities
 A plan is like a road map that serves as a guide on a journey through

unfamiliar, harsh, and dangerous territory. Don‘t attempt the trip

without a map!

NB: it is in every ones interests to make mistakes on paper, hypothetically

testing for feasibility, before trying the real thing.
 Who should Write the Plan?

 Depends on the type of business and the structure and size of the

company

 It can be prepared by the entrepreneur - if very small business

 It can be outsourced - if large and complex business

 The entrepreneur must understand every little detail, consult

experts, even give partnership to experts

 Who Reads the Plan?
 Two primary audiences

 Investors and other stakeholders

 Investors, potential business partners, potential

customers, grant awarding agencies who are being
recruited.

 Firm’s employees

 Looking for the vision and future of the firm

 What they Looking for?

The readers always considers the following points from the

written business plan
 Structure and style of the business plan

 Content of the business plan

 Measuring the business plan against your personal goals and

aspirations

 Recognizing that elements of the plan may change

 Objectives of a Business Plan
 Provide a Strategic Roadmap and Sense of Direction: (company's
mission, vision, and long-term goals; strategies and tactics for achieving
those goals)
 Secure Funding (Attract Investors and Lenders):to convince investors
(angel investors, venture capitalists) and lenders (banks) that the business is
a viable, profitable venture with a solid strategy for a return on investment.
 Validate the Business Concept (Assess Feasibility):assess whether the
business idea is viable, meets a market need, and can be profitable.
 Manage and Measure Performance: track progress and evaluate the
company's success and operational efficiency.
 Business Planning Process
Before preparing the plan entrepreneur should:
 Elements of a Business Plan

 Cover page and Table of  Critical risks

contents  Exit Strategy
 Executive Summary
 Appendix
 Business Description

 Funding Requirements

 The product/Service

 The Plan
 The cover Page
The cover page of the plan includes:-
 Name of the company
 Name of the principals

 Street address

 Contact information

 E-mail address

 Phone number

 Website address

 Date

 The cover should be eye-catching: picture of prototype

 Table of contents

 Include enough detail to easily find a section.

 Avoid excessive detail which uses too many pages

 Main sections

 Subsections

 Appendices
 Executive Summery

 Clear— identify concept and purpose

 Concise— one to two pages long

 Comprehensive (complete)— answer basic who, what, when, where,

and how questions

 Compelling (Convincing)— generate enthusiasm

 It appears first but Written last

 Business Description

Introduce the basic details of the company

Brief explanation of where the idea for the company came from

Company type? Mission, vision, goals & strategies

Describe the ownership type and the address of the business

 Mission, Vision, and Culture

 Mission- Describe the overall purpose of an organization: what

they do, who they do it for, and how and why they do it.

 Vision— broad ―picture‖ of what you want the organization to

become.

 Vision- Answer the question, what impact do we want to

have on society?

 Values- Answer the question, how do we carry out our mission?

 Business Description

 If company is already established…

 Summary of company‘s founding

 Overview of track record: business progress and financial

success

 If a start-up venture…

 Brief background story

 What has been done so far, and why

 Legal form of the business

 Funding Requirements
 Since the investors and financial institutions are examining the

business plan report and it is one of the primary objectives of

preparing the business plan report, a careful, well-planned
funding requirement should be documented.
 how much finance would the company require and how it would like

to fund the project

 The funding requirement should address the total fund required to

start and run the business and its potential sources

 It is also necessary to prepare the debt equity ratio

 The Product or Service
‒ What is your product or service?

‒ Customer wants and needs? value-add?

‒ why your product is better, cheaper, or faster and how that

creates value for the customer?

‒ Advantages: proprietary technology, patents, distribution,

and/or design or a combination

‒ What market entry and growth strategies? particular niche?

‒ Show the long term growth potential

 The Plan
1. Marketing Plan:

 A Marketing Plan is a careful study of the Market Situation and will

tell you many things:

 Who are our Customers, where are they, how to get them?

 Who are our Competitors and what makes us special above them?

 How do we market and package out Product to our Customers.

 How do we serve our Customers and Employers?

 The Plan
1. Marketing Plan:

 The marketing plan should outline and describe details regarding the
four marketing mix ( 4P‘s)
I. The Business’s product: what goods or serveries are you
producing and/or selling
II. Price of Goods/Services: list each product or service and its
price
III. Channels of distribution: How can you reach your customer?

IV. Promotion: how will you let customers know about your
product/services?
 The Plan
2. Operational Plan:

‒ The rational selection of the plant location

‒ describes the complete manufacturing process

‒ contractors, cost of sub-contracting

‒ describe the physical layout, the machinery & equipment needed,

purchasing or leasing?
‒ availability and cost of RM, L, the possible sources or potential suppliers
name, address, cost of manufacturing
‒ details of production cycle

‒ Estimation of production in days, months, or years

 The Plan
3. Organizational Plan:
 In this section, outline how you will manage your company. It

describes:
 its organizational structure/chart

 the backgrounds, experiences, qualifications, areas of expertise

 roles and responsibilities of members of the management team

 It also mention any other stakeholders, such as a board of directors or

advisory board(s), and their relevant relationship to the founder

 The budget requirement for organizational plan is drawn

 The Plan
4. Financial Plan:
 A financial plan seeks to forecast revenue and expenses; project a
financial narrative; and estimate project costs, valuations, and cash flow
projections.
 This section should present an accurate, realistic, and achievable financial
plan for your venture
 A Budget Plan can consist of a few sub- plans:-

 Operational Budget Plan

 Product Development Budget Plan
 Marketing Budget Plan
 Management Budget Plan
 Financial Plan
The financial plan is usually drawn the following projections:
 Projected Sales

 Projected Income and Expenditure Statement

 Breakeven analysis

 Projected Profit and Loss Statement

 Balance sheet projections

 Cash flow projections

Start-Up capital
Source of funds
Monthly sales plan
Monthly Cost plan
Profit plan
Tips on Preparing a Business Plan

 Your plan must prove that the business will make money (not

necessarily immediately, but eventually).

 Use spreadsheets to generate financial forecasts.

 Always include cash flow projections.

 Keep your plan ―crisp‖ – between 25 and 50 pages long.

 Tell the truth – always.

Commercialization of technology-based innovation

 The technology transfer can be defined as an agreement in which

technology flows from an entity that owns the technology (the

provider) to an entity seeking the technology (the receiver).

 Technology commercialization is the process of converting ideas into

businesses and consequentially, jobs .

 CT plays a critical role in economic development, as it effectively

transfers ideas from the mind or the laboratory to the marketplace.

Commercialization of technology-based innovation

 Primary sources of new technology are universities, laboratories or

Research and Development divisions within private-sector companies in

which knowledge is the primary outcome.

 However, to have social and economic impact, additional value must be

created. Commercialization is the process through which such value is

infused into an innovation by coupling the innovation with the business

development necessary to build a revenue- and job producing entity.

Commercialization of technology-based innovation
1. Opportunity:
 This phase consists of identifying the scientific and commercial value of the

discovery. For many inventors and scientists, the scientific value may be

more straightforward than revealing the commercial value.

 Key steps in this process include cultivating a professional network in your

field of expertise, research and documentations an integral part of the

protection of your innovation.

 Keep detailed records and do not make public disclosures concerning your

idea.
Commercialization of technology-based innovation
2. Protection:
 Once a meticulous description of the discovery is complete, a patent,

trademark or copyright protection process can be initiated.

 A patent gives you the exclusive right to prevent others from making and

selling your invention.

 Trademarks offer protection for brands, symbols, logos and colors.

 Copyrights protect original works of authors, composers, programmers

and screenwriters. In some cases, acquiring a patent may take longer than

the window of opportunity for commercialization will allow.

Commercialization of technology-based innovation
3. Business Case and Commercialization Plan:
 This step determines if the innovation or discovery is truly feasible.

 It involves a comprehensive analysis of the industry and market, creating

the value proposition, and close identification of the customer.

 It is imperative to hone in on the customers‘ needs and expectations , as it

will impact everything from product features to the distribution plan.

 It needs to document the business operations, policies, legal structure of

the business, marketing and growth plans, financials, and the team needed

to make your venture a success.

Commercialization of technology-based innovation
4. Building the Team and Securing Capital
 Entrepreneurs need to be assured that you have the necessary

expertise to execute your plan. In this phase, ―you have typically

exhausted your friends, family and fools network and need additional
funding to move forward
 Ownership issues and partnership opportunities need to also be

considered and outlined for the investors.

 It can connect any business to angel investors, venture capital funds

and other state and federal grant opportunities.

Commercialization of technology-based innovation

4. Executing the Plan and Developing the Product

 preparation for starting the business or executing your
commercialization plan.
 Roughly, the start-up process includes finding a physical location to

operate your business, hiring personnel, physically organizing your

business workflow, stocking supplies, developing prototypes and
general administrative organization.
 At every step along the way, the business development plan will need

to be reviewed, modified and refined.

Formation, development & Growth of Technology
based new enterprises
 Formation of technology based enterprise

 Enterprise can be formed based on the commercial registration and licensing

law 980/2016 of Ethiopia.

 According to this commercial code business organization shall attain legal

personality up on registration. No person shall obtain any kind of business

license without being registered.
 Founders or members of the business organization shall before signing the

memorandum and article of association apply to registering office and get

verification that an other person has not occupied the name of the business
organization.
Development and growth of technology based
enterprise
 Development and growth of technology based
enterprise
 Manufacturing enterprises development is more challenging than trade and

service sector. Because they require more technical skills, infrastructure,

conducive business environment, technology, working premises, market
support.
 Enterprise can grow from Micro to small; from small to medium, from

medium to large and or very large

 Growth Stages of Technology Based Enterprises

 Stage of enterprise development differs from country to country.

 In Ethiopia the micro and small enterprises development

strategy,(2010,2013) describes that micro enterprise pass through

three growth stage and same works for small enterprise.

 The fist stage is Startup, the second is growth stage and the third is

maturity stage and then finally it will be graduating to medium

startup enterprise. This can be summarized in the table below

Growth Stages of MSM Enterprises
Growth Stages of MSM Enterprises
 Causes for Enterprises failure
 Incompetence- The owners simply do not know how to run the

enterprise.

 Unbalanced experience- do not have rounded experience in the

major activities of business production.

 Lack of managerial experience. Do not know how to manage

production.

 Lack of experience in the line- the owner has entered a business field

in which he or she has very little knowledge.

 Causes for Enterprises failure

 Neglect- the owner does not pay sufficient attention to the

enterprise.

 Fraud- involves intentional misrepresentations or deception

(purchasing materials or goods for him/her self with the company‘s
money)

 Disaster- refers to some unforeseen happening or ‗act of God‘

THE END