Objectives:

1
Chapter 4

• Objectives
• Learn the sources of opportunity entrepreneurs
  draw on to get business ideas
• Identify the way ideas are screened for business
  potential
• Understand how creativity methods can help
  business owners recognize new opportunities
• Understand the five pitfalls that hinder
  innovation
• Identify strategies for innovation in your
  business
• Learn how to conduct a comprehensive feasibility
  study for your business ideas
• Learn the model for pilot testing Internet
  businesses
• Understand the value of building a creative
  culture in your business

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Chapter 4

• Magnetic Poetry Dave Kapell
• Guitarist / songwriter
• Opportunity met need
• Lightbulb experience
• Product line features over a hundred products
• Shakespearean, Artist, Genius, Dog Lover,
  Romance, College kits

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Chapter 4

• Source of Business Ideas
• Why didnt I think of that?
• Innovation implementation of a creative idea or
  opportunity leading to profitable and effective
  outcomes
• Pay attention to the cues
• Ask many questions

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Chapter 4
Question

• What is the characteristic that allows a person
  to identify good opportunities, notice things
  that have been overlooked, and the motivation to
  look for opportunities?
• a) Light bulb experience
• b) Entrepreneurial alertness
• c) Innovation
• d) Creativity

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Chapter 4

• Entrepreneurial alertness a special set of
  observational and thinking skills that help
  entrepreneurs identify good opportunities the
  ability to notice things that have been
  overlooked, without actually launching a formal
  search for opportunities, and the motivation to
  look for opportunities

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Chapter 4
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Chapter 4
Question

• Which of the following is not a factor that has
  led people to new ideas?
• a) Serendipity (Luck)
• b) Work Experience
• c) Family and Friends
• d) These are all factors

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Chapter 4

• Factors that lead owners to their business idea
• Work experience
• A similar business
• Hobby or personal interest
• Chance happening (serendipity)
• Family and friends
• Education and expertise
• Technology

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Example
Chapter 4

• Good Technology Is Nice A Good Idea Is Better
• Wharton Professor David Hsu says in todays
  venture capital environment, ideas are valued
  more highly than innovative technology
• Initial Public Offering market has been difficult
  recently, but buyouts are prevalent
• Once a startup gets its business model right,
  Venture Capitalists start looking for a way to
  cash out

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Chapter 4

• Work experience idea grows out of listening to
  customer complaints
• Ideas can come from frustration
• Ideas can come from not finding what you are
  looking for as a consumer
• Similar business might see a business in an area
  that intrigues you
• Growing market expand on the opportunity

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Chapter 4

• Hobby/Personal interest turn hobbies into
  successful business
• Motley Fool online investment advice newsletter
• Owners were fans of dice baseball as kids
• Have interest and knowledge
• Serendipity being in the right place at the
  right time (luck)
• Being observant

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Chapter 4

• Family and friends open to their suggestions
• Use their knowledge and experience
• Education and expertise decide first to own a
  business, then searching for a viable idea for
  that business
• Look to their own skills and talents for business
• Consulting companies are prime examples

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Chapter 4
What Led To Your Business Idea?
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Chapter 4

• Technology transfer universities and government
  agencies
• Tremendous development of new technologies or
  refinements
• They never do anything with them!
• Find out about inventions through the technology
  transfer offices

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Chapter 4

• Screening Ideas
• What is your product or idea?
• What is the technology that underlies your
  product/idea?
• Is your underlying technology unique?
• Is your product or idea innovative?
• Who is your market and initial customer group?
• What needs of your customers does your product or
  idea address?
• Provide some indication of the general size of
  the market?
• How do you anticipate developing IP protection
  for your technology?

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Chapter 4

• Screening Ideas 3 additional questions
• Who are the people behind the idea?
• What resources are needed to take the idea and
  sell it to the customer?
• Can the idea generate sufficient profit?

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Chapter 4

• From Ideas to Opportunities Through Creativity
• Creativity a process introducing an idea or
  opportunity that is novel and useful, frequently
  derived from making connection among distinct
  ideas or opportunities

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Example
Chapter 4

• Innovation A Happy Meal for McDonalds
• McDonalds has saturated their market and can no
  longer continue to open stores as a strategy
• Improved Innovation Process
• McGriddle has improved breakfast sector
• Snack Wrap is huge hit for on-the-go eating
• Improved Coffee and warmer stores promotes
  business during slower hours

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Chapter 4

• SCAMPER a creativity tool that provides cues to
  trigger breakthrough thinking the letters stand
  for

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Chapter 4

• Substitute what might substitute for something
  else to form an idea
• Example a feature that allows your customers to
  order directly from your website rather than by
  mail or visiting your store
• Idea Trigger What opportunities can you think of
  that come as a result of substituting or
  replacing something that already exist?

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Chapter 4

• Combine possible combinations that result in
  something completely different
• Books, coffee, and music Borders and Barnes
  Noble
• Idea Trigger What separate products, services,
  or whole business can you put together to create
  another distinct business?

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Chapter 4

• Adapt adaptation from existing products or
  services
• Radical innovations rejecting existing ideas,
  and presenting a way to do things differently
• Paper towels were invented because of a too-thick
  shipment of toilet paper.
• Idea Trigger What could you adapt from other
  industries or fields to your business?

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Chapter 4

• Magnify (or Modify) taking an existing product
  and changing its appearance or adding more
  features
• Example banks opening more branches
• M can also cue you to minimize something
• Idea Trigger What could I make more noticeable
  or dramatic, or different in some way from my
  competitors?

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Chapter 4

• Put to other uses challenge yourself to think of
  all the potential uses for a product or service
• Example frankfurters were too hot, so the vendor
  found bakery rolls, cut them in half, and hot
  dogs met buns
• Idea Trigger Suppose you learned that all the
  traditional uses for your product had
  disappeared what other uses might there be?

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Chapter 4

• Eliminate search for opportunities that arise
  when you get rid of something or stop doing
  something
• What if people didnt have to leave home to
  grocery shop, or do banking?
• Idea Trigger What could I get rid of reduce that
  would eliminate something my customer has to do?

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Chapter 4

• Rearrange (or reverse) a great example is the
  Magnetic Poetry story, which is a product that by
  definition is about rearranging things to inspire
  ideas
• Idea Trigger What can you rearrange or reorder
  in the way your product or service appears?
• SCAMPER helps you step outside the usual way you
  look at opportunities

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Chapter 4

• Get into an Innovative Frame of Mind
• Read magazines
• Invite someone youve never included before
• Scan the environment day
• Try a mini-internship
• Put yourself in others shoes
• Redesign your work environment

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Question
Chapter 4

• All of the following are common pitfalls,
  except
• a) Judging ideas too quickly
• b) Stopping with the first good idea
• c) Brainstorming
• d) Obeying rules that dont exist

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Chapter 4

• Avoid Pitfalls
• Identifying the wrong problem
• Judging ideas too quickly
• Stopping with the first good idea
• Failing to get the bandits on the train and ask
  for support
• Obeying rules that dont exist

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Chapter 4

• Types of Innovations Small Businesses Develop
• Imitative strategy an overall strategic approach
  in which the entrepreneur does more or less what
  others are already doing
• Incremental strategy taking an idea and offering
  a way to do something better than it is done
  presently

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Chapter 4

• Make Sure an Idea Is Feasible
• Feasibility the extent to which an idea is
  viable and realistic and the extent to which you
  are aware of internal and external forces that
  could affect your business

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Chapter 4

• Assessing Feasibility by Pilot Testing
• Pilot Test a preliminary run of a business,
  sales effort, program, or Web site with the goal
  of assessing how well the overall approach works
  and what problems it might have.

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Chapter 4

• Ways to Keep On Being Creative
• Culture a set of shared norms, values, and
  orientations of a group of individuals,
  prescribing how people should think and behave in
  the organization
• Encourages new ideas
• Embraces change

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Chapter 5

• Objectives
• Know when and why part-time entrepreneurship
  makes sense
• Learn the four major paths to entrepreneurship
• Understand what it takes to be successful in
  part-time entrepreneurship
• Learn how to optimize your delegation within the
  firm
• Learn the benefits of bootstrapping
• Learn the ethical challenges of part-time
  entrepreneurship
• Find out about the challenges of moving from
  part-time to full-time entrepreneurship

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Chapter 5

• Focus on Small Business Kathryn Otoshi
• BA in Graphic Design
• Created her own design firm called KO Design and
  worked part-time while freelancing with large
  corporations while working for George Lucas ILM
  full-time
• Quit ILM to publish illustrated childrens books
• Remains part-time between her book business and
  KO design with large corporations

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Chapter 5

• Why Part-time Businesses Are Important
• Part-time self-employment working for yourself
  for 35 or fewer hours a week
• Full-time self-employment 35 or more hours per
  week
• This is the way most people start in
  entrepreneurship.
• About 3/4 of those starting a business already
  work full-time for someone else.

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Question
Chapter 5

• Of 25.8 million U.S. businesses, what percentage
  are part time?
• a) 25
• b) 50
• c) 75
• d) 10

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Chapter 5

• Part-time self-employment is a major portion of
  all current entrepreneurial companies in the
  United States
• Around half of 25.8 million businesses are
  part-time businesses.
• Volatility frequency of business starts and
  stops
• 6 million sellers online

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Chapter 5

• When to Consider Part-time Entrepreneurship

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Chapter 5

• What Kinds of Part-time Entrepreneurships Exist?
• 4 Major Categories
• Stands
• Homes
• Consignment
• Mail Order

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Chapter 5

• Stand retail one of the most ancient forms of
  business
• Mentioned in the Bible
• Tend to be semi-permanent
• Advantages little investment, variety of
  locations, quickly established, easily ended
• Disadvantages variable income, legal
  requirements
• Success Factors location, inventory

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Chapter 5

• Home retail parties and door-to-door
• Avon, Mary Kay, Pampered Chef
• Advantages ease of setup, low cost of start-up,
  ability to work away from home and employer
• Disadvantages working on the road, lack of a
  base to organize and work, variable income,
  finding ways for customers to reach you
• Success Factors hosts with good contacts,
  matching product to community, closing the sale

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Chapter 5

• Consignment stores and Auctions giving your
  product to someone else to sell
• Auctions are a variety of consignment stores
• Advantages permit full-time sales with part-time
  involvement, low cost, lack of risk, flexibility
• Disadvantages high potential for competing
  offerings, amount of time before payouts, low
  profitability due to sellers fees
• Success Factors location that attracts the right
  customers, condition of location and merchandise

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Chapter 5

• Mail order / Catalog sales offers customers a
  description and picture, and how to order by
  mail, phone, or online
• Advantages
• ability to sell on your schedule
• low costs
• potential for selling to large markets
• low inventory investments
• targeted customers
• Success Factors marketing, placing the ad where
  the target market sees it

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Question
Chapter 5

• Having just enough product on your shelves to
  meet the immediate purchases refers to
• a) Microinventory
• b) Macroinventory
• c) Just-in-time inventory
• d) Mass customization

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Chapter 5

• Microinventory A set of goods or services that
  consists of only one or a few items
• Just-in-time inventory Having just enough
  product on your shelves to meet the immediate
  purchases. This usually requires frequent
  shipment from your supplier.

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Chapter 5

• Online Sales
• eBay, largest online sales site, reports over 234
  million members worldwide in 2007
• Internet is an attractive setting for
  entrepreneurs looking to create a business
• Two major approaches
• eBay or other online site
• Web site of your own

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Example
Chapter 5

• Smarts From A Savvy eBay Seller
• Selling on eBay is not a piece of cake
• Must fight to get sales in todays eBay market
• Cory Kossack one of the 200 highest-grossing
  eBay sellers
• Started in his college dorm room
• Pulled in more than 1 million in revenue with
  nice profits as well

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Chapter 5

• Success Factors for Part-time Businesses
• Boundary separating and balancing business and
  home
• Time management
• Use a to-do list
• Prioritize
• Keep it in its own space (home based)

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Chapter 5

• Keisners Six Key Ideas for Success
• Do not waste time complaining
• Do not aim for perfection
• Do not dwell on the past
• Minimize time spent in meetings
• Schedule and protect quality time with family
• Schedule and protect time for yourself

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Chapter 5

• Exchange dealing with others
• Two key groups Government and Customers
• Government registration, licensing, taxes,
  zoning
• Customers central to making sales
• Sources for Network Connections were seen in
  Chapter Two

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Chapter 5

• Pricing and Costing
• Price goods or services to make profits
• Part-time owners often underestimate costs
• Recognize that your own time has value
• Price against competitors offerings

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Chapter 5

• Delegation and Outsourcing
• Key is leveraging other peoples time
• Delegation assigning work to those over whom you
  have power
• Outsourcing contracting with people or companies
  outside your business to do work for your business

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Chapter 5
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Chapter 5
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Question
Chapter 5

• Using low-cost or free techniques to minimize
  your cost of doing business refers to
• a) Bootstrapping
• b) Undercapitalization
• c) Outsourcing
• d) Moonlighting

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Chapter 5

• Making Do When You Are Starting Out
• Bootstrapping using low-cost or free techniques
  to minimize your cost of doing business
• Undercapitalization not having enough money
  available to the business to cover shortfalls in
  sales or profits

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Example
Chapter 5

• Walk This Way
• Most entrepreneurs must finance their own way, by
  cutting corners and putting all their earnings
  back into the business
• Greg Easley, co-founder of Bottle Rocket Inc.,
  poured everything back into his business for 8
  months
• Easley says Bootstrapping is scary, but in
  retrospect, its worth it
• Learned to use the resources they had
• Valuable lesson is learning how to function on a
  shoestring budget

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Chapter 5

• Key Ideas of Bootstrapping
• Do without
• Cut expenses
• If you need something, borrow, barter, or rent it
• Substitute a lower-cost alternative
• Ask to stretch out payments
• When using a credit card, limit purchases
• Always keep track of your cash!

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Chapter 5

• Ethics and Part-time Small Business
• Moonlighting working on your own part-time after
  your regular job
• Conflict of interest
• Cannibalizing sales
• Poisoning the well
• Aggrandizing making your business or yourself
  seem more accomplished than it is

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Chapter 5

• Moving from Part-time to Full-time
• Key question is usually financial
• Wait until there is a solid income
• Make use of any transition services offered by
  the former employer
• Recognize that initially, you will spend all your
  time running and marketing the business

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Chapter 6

• Objectives
• Describe five ways that people get into small
  business management
• Learn the rewards and pitfalls of starting a
  small business
• Understand the opportunities and pitfalls of
  purchasing an existing business
• Explain four methods for purchasing an existing
  business
• Understand the advantages and disadvantages of
  buying a franchise
• Understand the problems of management succession
  in a family-owned business
• Describe how hired managers become owners of a
  small business

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Chapter 6

• Focus on Small Business Tuckers Cozy Corner
• Michael Tease, unemployed due to a back operation
• Father was an entrepreneur
• Well known and influential in San Antonio
• Reopened Tuckers Cozy Corner Lounge after being
  vacant for a year

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Question
Chapter 6

• Which of the following is not a path to business
  ownership?
• a) Starting business from scratch
• b) Buying existing business
• c) Inheriting a business
• d) All of the above

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Chapter 6

• Five Paths to Business Ownership
• You may start a new business
• You may buy an existing business
• You may franchise a business
• You may inherit a business
• You may be hired to be the professional manager
  of a small business

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Chapter 6

• Starting a New Business
• Often, the most risky path promises the greatest
  rewards.

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Chapter 6

• Advantages of start-ups several advantages over
  buying, franchising, or being an employee
• Begin with a clean slate
• Use the most up-to-date technologies
• Provide new, unique products or services
• Can be kept small deliberately to limit the
  magnitude of possible losses

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Chapter 6

• Disadvantages of start-ups offset the advantages
• No initial name recognition
• Require significant time
• Very difficult to finance
• Cannot easily gain revolving credit
• May not have experienced managers and workers

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Chapter 6

• Creating a New Business
• Step One Determine what the business is to be
• Starting a copycat business provides some
  protection from failure
• Two-thirds of all start-ups are based on ideas
  from prior work experience, hobbies, and
  family-businesses

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Chapter 6

• Increasing the Chance of Start-up Success

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Chapter 6

• Special Strategies for Starting from Scratch
• Home-based businesses Businesses that are
  operated from the owners home
• Partnering the process of two or more entities
  agreeing to work together for a common goal
• Reduce the amount of personal investment in time
  and money required to make the business succeed
• leverage the contributions of the partner to
  provide faster growth and higher returns on the
  investment made in the start-up

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Chapter 6

• Buying An Existing Business
• Advantages of purchasing an existing business
• Established customers
• Business processes are already in place
• Often requires less cash outlay

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Chapter 6

• Disadvantages of purchasing an existing business
• Finding a successful business for sale that is
  appropriate for you
• Existing employees may resist change
• Reputation
• Facilities and equipment may be obsolete

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Chapter 6

• Finding a business to buy
• First problem is finding a business for sale
• Should be in an industry in which you have
  experience
• Product or service that has demand and high
  margins
• Adequate financing
• Contact business brokers

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Example
Chapter 6
Example10 Things to Look Out for When Buying a
Business

• Ask about sales taxes and payroll taxes
• Find out if you can assume the seller's lease
• Are there prepaid expenses?
• Negotiate a "letter of intent
• Watch out for bulk sales laws

• Get an indemnity from the seller
• Make sure the seller sticks around for a while
• Get to know the employees
• Determine who will deal with the accounts
  receivable
• Make sure you're buying the assets, not the
  business

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Question
Chapter 6

• What is due diligence?
• a) An agreement between the buyer and the
  seller
• b) Process of separating part of an operating
  business into a separate entity
• c) Process of finding an existing business to
  purchase
• d) Process of investigating a business to
  determine its value

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Chapter 6

• Performing Due Diligence
• Due diligence process of investigating a
  business to determine its value
• Conduct extensive interviews
• Study financial reports
• Personal examination of the site
• Interview customers and suppliers
• Detailed business plan
• Negotiate an appropriate price
• Obtain sufficient capital

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Chapter 6

• Determining the Value of the Business
• 5 Methods
• Discounted cash flows cash flows reduced in
  value because they are to be received in the
  future
• Book value difference between original
  acquisition cost and the amount of accumulated
  depreciation

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Chapter 6

• Determining Value Cont.
• Net realizable value amount for which an asset
  will sell, less the costs of selling
• Replacement value cost to acquire an essentially
  identical asset
• Earnings multiple ratio of value of a firm to
  its annual earnings

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Chapter 6

• Structuring the Deal
• 4 ways to buy
• Buy out sellers interest
• Buy in
• Buy key assets
• Takeover

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Chapter 6

• Franchising A Business
• Trade name franchising agreement that provides
  to the franchisee only the rights to use the
  franchisor's trade name and/or trademarks
• Product distribution franchising agreement that
  provides specific brand name products which are
  resold by the franchisee in a specific territory

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Chapter 6

• Franchising A Business
• Conversion franchising agreement that provides
  an organization through which independent
  businesses may combine resources
• Business format franchising agreement that
  provides a complete business format, including
  trade name, operational procedures, marketing and
  products or services to sell

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Question
Chapter 6

• All of the following are advantages of
  franchising, except
• a) Marketing, product placement, advertising,
  and promotion is all controlled for you
• b) Often less risky than starting or acquiring a
  business
• c) Franchisor often sets policies
• d) Receive training and management support

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Chapter 6

• Advantages of franchising
• Proven successful business model
• Receive training and management support
• Proprietary computer programs
• Marketing, product placement, advertising, and
  promotion is all controlled for you
• Often less risky than starting or acquiring a
  business

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• Disadvantages of franchising
• Give up control of marketing and operations
• Franchisor often sets policies
• Must buy inventory from specific vendors
• Regularly inspected
• Success is determined by success of franchise
  itself

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Chapter 6

• Franchise Opportunities
• Entrepreneur Magazine
• Entrepreneur.com lists over 500 franchises
• Google search of franchise opportunity returned
  788,000 pages
• International Franchise Association
• http//www.franchise.org
• Australian site
• http//www.smallbusiness.gov.au
• British Government site
• http//www.businesslink.gov.uk

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Example
Chapter 6

• 2007 Fastest-Growing Franchises
• Top Ten
• 1. Subway
• 2. Jan-Pro Franchising Int'l. Inc.
• 3. Dunkin' Donuts
• 4. Coverall Cleaning Concepts
• 5. Jazzercise Inc.
• 6. Jackson Hewitt Tax Service
• 7. RE/MAX Int'l. Inc.
• 8. CleanNet USA Inc.
• 9. Bonus Building Care
• Jani-King

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Chapter 6

• Inheriting A Business
• Family-owned businesses usually fail after death
  or retirement of the founder
• Less than 30 are successfully transferred after
  a second generation
• Less than 13 succeed long enough to be inherited
  by the third generation

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Chapter 6

• Keys to Success
• Establish a formal management structure
• Develop a comprehensive business plan
• Hire professional managers to run those functions
  that family members cannot
• Founder and successor have to work closely
  together

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