Methods to Initiate Ventures
Lecture # 6
Agenda
Major pathways and structures for entrepreneurial
ventures
Factors involved in creating a new venture
Elements involved in acquiring an established
venture
Franchise and its structure
Benefits and drawbacks of franchising
The Pathways to New Ventures
for Entrepreneurs
Creating the
New Venture
Acquiring an
Existing Venture
Pathways to New
Ventures
Obtaining a
Franchise
Creating New Ventures
New-New
Approach
Approaches to
Creating a New
Venture
New-Old
Approach
Trends Creating Business Opportunities
Emerging Opportunities
Green Products
Organic foods
Organic fibers/textiles
Alternative Energy
Solar
Biofuel
Fuel cells
Energy conservation
Health Care
Healthy food
School and [Link] programs
Exercise
Yoga
Niche gyms
Children
Nonmedical
Pre-assisted living
Assisted living transition
services
Niche Consumables
Chocolate
Burgers
Coffee houses
Exotic salads
Home Automation and
Media Storage
Lighting control
Security systems
Energy management
Comfort management
Entertainment systems
Networked kitchen
appliances
Emerging Internet Opportunities
Emerging Technology Opportunities
Mobile Advertising
Cell phones
PDAs
Concierge Services
Niche Social Networks
Seniors
Music fans
Groups of local users
Pet owners
Dating groups
Nanotechnology
Wireless Technology
Virtual Economies
Online auctions
Educational Tutoring
Human Resources Services
Matchmaking
Virtual HR
Online Staffing
Source: Steve Cooper, Amanda C. Kooser, Kristin Ohlson, Karen E. Spaeder, Nichole
L. Torres, and Sara Wilson, 2007 Hot List, Entrepreneur (December 2006): 8093.
Sources of New Business Ideas Among Men
and Women
Source: William J. Dennis, A Small Business Primer (Washington, DC: National
Federation of Independent Business, 1993) 27. Reprinted with permission.
Examination of the Financial Picture
Upside gain and downside loss expectations
The profits the business can make and the losses it
can suffer.
How much money will the enterprise take in if all goes well?
How much will it gross if operations run as expected?
How much will it lose if operations do not work out well?
Risk vs. reward analysis
Points out the importance of getting an adequate
return on the amount of money risked
Checklist for Estimating Start-Up Expenses
Checklist for Estimating Start-Up Expenses
(Contd)
Acquisition of a Business Venture
Personal
Preferences
Examination
of
Opportunities
Acquiring a
Business Venture
Asking Key Questions
Evaluation of
the Venture
Advantages of Acquiring an Ongoing Venture
Less Fear about
Successful Future
Operation
Reduced Time
and Effort
Buying an
Ongoing
Venture
Purchasing at a
Good Price
Evaluation of the Selected Venture
Factors Affecting
Sale of the
Venture
The Business
Environment
Assets of the
Venture
Profits, Sales, and
Operating Ratios
Key Questions to Ask
Why is this business being sold?
What is the physical condition of the business?
What is the condition of the inventory?
What is the state of the firms other assets?
How many employees will remain?
What type of competition does the business face?
What does the firms financial picture look like?
Negotiating the Deal
Information
Time
Factors Affecting
Negotiations
Alternatives
Pressure
Dos and Donts of Buying a Business
1. Have a seller retain a minority interest in the business
2. Never rely on oral statements
3. Have an accountant examine the books and check the
cash flow
4. Investigate, investigate, investigate!
5. Interview the employees
6. Find out the real reason the company is for sale
Franchising: The Hybrid
Franchising
Any arrangement in which the owner of a trademark,
trade name, or copyright has licensed others to use it
in selling goods or services
Franchisee
A purchaser of a franchise
Franchisor
The seller of the franchise
How a Franchise Works
Franchisee Obligations:
1. Make a financial investment in the operation
2. Obtain and maintain a standardized inventory and/or
equipment package usually purchased from the
franchisor
3. Maintain a specified quality of performance
4. Follow a franchise fee as well as a percentage of the
gross revenues
5. Engage in a continuing business relationship
How a Franchise Works (Contd.)
Franchisor Provides:
1. The company name that provides drawing power
2. Identifying symbols, logos, designs, and facilities
3. Professional management training for each
independent units staff
4. Sale of merchandise necessary for the units
operation, equipment to run the operation, and the
food or materials needed for the final product
5. Financial assistance, if needed
6. Continuing aid and guidance to ensure that
everything is done in accordance with the contract
Franchising
Advantages
Training and guidance
Brand-name appeal
A proven track record
Financial assistance
Disadvantages
Franchise fees
Franchisor control
Unfulfilled promises of
franchisor
Evaluating the Franchise Opportunity
The Franchise
Opportunity Decision
Finding Reliable
Information
Investigating the
Franchisor
Seeking
Professional Help
THANK YOU!
