The Role of Small Business and the Entrepreneur in the Cayman Islands Dr. Dax Basdeo Cayman Islands Investment Bureau

Overview Entrepreneurship Starting a Business Small Business in Cayman Small Business Support in Cayman

Entrepreneurship

Starting a Business

Small Business in Cayman

Small Business Support in Cayman

Entrepreneurship Comes from a French word “entre prendre” which means to undertake “ The process of creating or seizing an opportunity and pursuing it regardless of the resources currently controlled” “ The nexus of two phenomenon: the presence of lucrative opportunities and the presence of enterprising individuals”

Comes from a French word “entre prendre” which means to undertake

“ The process of creating or seizing an opportunity and pursuing it regardless of the resources currently controlled”

“ The nexus of two phenomenon: the presence of lucrative opportunities and the presence of enterprising individuals”

Entrepreneurial Opportunity An opportunity exists in a situation in which new goods, services, raw materials, and organizing methods can be introduced and sold at greater than their cost of production Different from enhancing the efficiency of existing goods, services, etc.

An opportunity exists in a situation in which new goods, services, raw materials, and organizing methods can be introduced and sold at greater than their cost of production

Different from enhancing the efficiency of existing goods, services, etc.

The Entrepreneur … An individual that makes the conjecture that a set of resources are not being put to their best use (i.e. an opportunity exists) Characteristics: Commitment and determination Leadership Opportunity obsession Tolerance of risk, ambiguity and uncertainty Creativity, self-reliance and ability to adapt Motivation to excel

An individual that makes the conjecture that a set of resources are not being put to their best use (i.e. an opportunity exists)

Characteristics:

Commitment and determination

Leadership

Opportunity obsession

Tolerance of risk, ambiguity and uncertainty

Creativity, self-reliance and ability to adapt

Motivation to excel

… as a driver of economic development Arbitrage Discovering the price gaps that exist and acting on that margin to close the gap Innovation Discovering new trading opportunities Discovering lower cost or new technologies – “creative destruction” Job Creation Diversification

Arbitrage

Discovering the price gaps that exist and acting on that margin to close the gap

Innovation

Discovering new trading opportunities

Discovering lower cost or new technologies – “creative destruction”

Job Creation

Diversification

… as an agent for social development & environmental protection Today’s social and environmental challenges are unmet market needs LOHAS consumers - Lifestyles of Health and Sustainability “ Geotourism”

Today’s social and environmental challenges are unmet market needs

LOHAS consumers - Lifestyles of Health and Sustainability

“ Geotourism”

What is the difference between a small business owner and an entrepreneur? Entrepreneurship is more than just mere creation of a new business It involves seeking opportunities, taking risks, tenacity to push an idea It is the process of innovation & new venture creation

Entrepreneurship is more than just mere creation of a new business

It involves seeking opportunities, taking risks, tenacity to push an idea

It is the process of innovation & new venture creation

What is a small business? U.S.: A business "that is independently owned and operated and which is not dominant in its field of operation." Varies from industry, but max employees = 500 E.U.: A business with fewer than 50 employees Cayman: A business that employs less than 11 employees and is not a subsidiary of an international business

U.S.: A business "that is independently owned and operated and which is not dominant in its field of operation." Varies from industry, but max employees = 500

E.U.: A business with fewer than 50 employees

Cayman: A business that employs less than 11 employees and is not a subsidiary of an international business

Small businesses are/ involve: independently owned and operated closely held ownership primarily local area of operations small scale compared to competitors small by design - lifestyle businesses intent may or may not be to be larger may or may not be scaleable or replicable not dominant player in the field not characterized as innovative

independently owned and operated

closely held ownership

primarily local area of operations

small scale compared to competitors

small by design - lifestyle businesses

intent may or may not be to be larger

may or may not be scaleable or replicable

not dominant player in the field

not characterized as innovative

Starting a New Business Business Plans Management Legal Structure Finding Money Success & Failure

Personal Considerations Satisfaction and rewards Sense of accomplishment Build a meaningful entity Solve an important problem Do something no one else has done Be your own boss - maybe Do what interests you Become rich - eventually, maybe

Satisfaction and rewards

Sense of accomplishment

Build a meaningful entity

Solve an important problem

Do something no one else has done

Be your own boss - maybe

Do what interests you

Become rich - eventually, maybe

Personal Considerations Potential pain and sacrifice Uncertainty, stress Very long hours, few vacations Can be harmful to family/personal life/career Financial/lifestyle sacrifices May have to give up “child” to see it succeed

Potential pain and sacrifice

Uncertainty, stress

Very long hours, few vacations

Can be harmful to family/personal life/career

Financial/lifestyle sacrifices

May have to give up “child” to see it succeed

Self Assessment Examine each of the skills areas listed in the chart. Ask yourself whether you possess some or all of the skills listed in the parentheses. Then rate your skills in each area by circling the appropriate number: 1 = low 2 = between low and medium 3 = medium 4 = between medium and high 5 = high

Examine each of the skills areas listed in the chart. Ask yourself whether you possess some or all of the skills listed in the parentheses. Then rate your skills in each area by circling the appropriate number:

1 = low

2 = between low and medium

3 = medium

4 = between medium and high

5 = high

What is a Business Plan? A written outline (20 – 40 pages) that describes your business idea’s potential Explains the business concept Identifies resources needed Tells the reader why the business will succeed

A written outline (20 – 40 pages) that describes your business idea’s potential

Explains the business concept

Identifies resources needed

Tells the reader why the business will succeed

Business Plan Importance Helps you to better understand and communicate your business idea Useful for soliciting advice and opinion and for raising funding Forces you to set goals and targets which will enable you to track progress

Helps you to better understand and communicate your business idea

Useful for soliciting advice and opinion and for raising funding

Forces you to set goals and targets which will enable you to track progress

A few guidelines… Define your objectives for producing the business plan Allocate enough time and resources to research Get feedback on drafts Make sure your financial projections are believable Sample plans (e.g. www.caribbeantoolkit.org ) Write your own business plan

Define your objectives for producing the business plan

Allocate enough time and resources to research

Get feedback on drafts

Make sure your financial projections are believable

Sample plans (e.g. www.caribbeantoolkit.org )

Write your own business plan

5 critical questions What are your products/services? Who are your customers? How will you build the business? What is the work to be done? What measurable results will you achieve?

What are your products/services?

Who are your customers?

How will you build the business?

What is the work to be done?

What measurable results will you achieve?

Outline of a Business Plan Executive Summary Business Description The Market Development & Production Sales & Marketing Management Financials

Executive Summary

Business Description

The Market

Development & Production

Sales & Marketing

Management

Financials

Management Team Board of Directors, Board of Advisors Service Providers can offer invaluable help and also provide a sense of confidence for potential investors Attorneys Accountants Consultants Success rate increases dramatically with the “right” management team/mix Technical, marketing/sales and business skills Personal attributes Personalities Ethics and values

Board of Directors, Board of Advisors

Service Providers can offer invaluable help and also provide a sense of confidence for potential investors

Attorneys

Accountants

Consultants

Success rate increases dramatically with the “right” management team/mix

Technical, marketing/sales and business skills

Personal attributes

Personalities

Ethics and values

Legal Structure Sole Proprietorship Flexibility, profits vs. unlimited liability, lack of continuity Partnership More experience vs. tied to partners Corporation Limited liability, unlimited life, transfer of ownership vs. more regulated, costly to organize

Sole Proprietorship

Flexibility, profits vs. unlimited liability, lack of continuity

Partnership

More experience vs. tied to partners

Corporation

Limited liability, unlimited life, transfer of ownership vs. more regulated, costly to organize

Finding Money Not all money is the same Debt (borrow to pay back) Equity (borrow money in exchange for stock) Grants (Government or Private foundations) Contracts or customer advances Licensing fees and royalties Real revenues and profit

Not all money is the same

Debt (borrow to pay back)

Equity (borrow money in exchange for stock)

Grants (Government or Private foundations)

Contracts or customer advances

Licensing fees and royalties

Real revenues and profit

Pitching your business idea Investors rarely put money into a "product" -- they invest in a business and in you Be consistent Clearly define your assumptions Give the reader confidence that you understand your proposed business The “Elevator Speech” A 1 minute verbal ‘sales’ pitch describing your concept and why someone should pay attention to you.

Investors rarely put money into a "product" -- they invest in a business and in you

Be consistent

Clearly define your assumptions

Give the reader confidence that you understand your proposed business

The “Elevator Speech”

A 1 minute verbal ‘sales’ pitch describing your concept and why someone should pay attention to you.

Protecting your business ideas One common concern of entrepreneurs: the worry that by disclosing their business idea, someone else will ‘steal’ and exploit it. Perform your own due diligence Limit disclosure of sensitive information Use a non-disclosure / non-circumvent agreement

One common concern of entrepreneurs: the worry that by disclosing their business idea, someone else will ‘steal’ and exploit it.

Perform your own due diligence

Limit disclosure of sensitive information

Use a non-disclosure / non-circumvent agreement

Protecting your business ideas Trade Secrets are recipes, designs, processes, etc. that are kept secret to protect them from public knowledge A patent for an invention is the grant of a property right to the inventor to exclude others from making, using, offering for sale, selling or importing the invention A trademark is a word, name, symbol, or device that is used in trade with goods to indicate the source of the goods and to distinguish them from the goods of others Copyright is a form of protection provided to the authors of “original works of authorship” including literary, dramatic, musical, artistic, and certain other intellectual works, both published and unpublished.

Trade Secrets are recipes, designs, processes, etc. that are kept secret to protect them from public knowledge

A patent for an invention is the grant of a property right to the inventor to exclude others from making, using, offering for sale, selling or importing the invention

A trademark is a word, name, symbol, or device that is used in trade with goods to indicate the source of the goods and to distinguish them from the goods of others

Copyright is a form of protection provided to the authors of “original works of authorship” including literary, dramatic, musical, artistic, and certain other intellectual works, both published and unpublished.

Building Lasting Success Essential Skill for Entrepreneurs: Enhancing Social Competence Creating Trust Managing Conflict Exerting Influence Dealing with Stress Building the New Venture's Human Resources: Recruiting, Motivating, and Retaining High-Performing Employees

Essential Skill for Entrepreneurs:

Enhancing Social Competence

Creating Trust

Managing Conflict

Exerting Influence

Dealing with Stress

Building the New Venture's Human Resources:

Recruiting, Motivating, and Retaining High-Performing Employees

Avoiding Failure Poor or inadequate market research Understanding of market, lack of objective feedback Weak financial planning Insufficient capital (money), lack of experience, mixing personal and business funds Setting sights too high Over-optimistic forecasts, poor planning, focus on profit vs. sales volume

Poor or inadequate market research

Understanding of market, lack of objective feedback

Weak financial planning

Insufficient capital (money), lack of experience, mixing personal and business funds

Setting sights too high

Over-optimistic forecasts, poor planning, focus on profit vs. sales volume

Avoiding Failure (cont.) Taking your eye of the competition Poor supplier and customer controls Unreliable suppliers, bad credit Poor stock and asset management Poor inventory management, over-investment in fixed assets Hiring the wrong people Failing to delegate

Taking your eye of the competition

Poor supplier and customer controls

Unreliable suppliers, bad credit

Poor stock and asset management

Poor inventory management, over-investment in fixed assets

Hiring the wrong people

Failing to delegate

Exit Strategies - harvesting your rewards At some point, every entrepreneur ends their relationship with their business To maximize the value you get from your business, it is essential to plan for this occurrence. This will help you to: shape your business into the ideal shape to maximize its value to you once you exit; groom successors – especially if it is a family business; attract investors and raise financing if required; exit at a time of your choosing.

At some point, every entrepreneur ends their relationship with their business

To maximize the value you get from your business, it is essential to plan for this occurrence. This will help you to:

shape your business into the ideal shape to maximize its value to you once you exit;

groom successors – especially if it is a family business;

attract investors and raise financing if required;

exit at a time of your choosing.

In what ways can you exit a business? Family succession Selling your business Close your business IPO

Family succession

Selling your business

Close your business

IPO

Business Stages Startup Emerging growth Maturity Decline or renewal 1 2 4 3

Small Business in Cayman Small Business Needs Survey, 2003: Department of Employment Relations Sister Islands Investment Climate Survey, 2006: Cayman Islands Investment Bureau

Statistics: Small Businesses 56.6% of business in Cayman are classified as small businesses 92.4% of business in Sister Islands – 317 people employed (31%) 81.4% of businesses have fewer than 26 employees 96.2% of business in Sister Islands – 383 people employed (37%)

56.6% of business in Cayman are classified as small businesses

92.4% of business in Sister Islands – 317 people employed (31%)

81.4% of businesses have fewer than 26 employees

96.2% of business in Sister Islands – 383 people employed (37%)

Statistics: Type of Organization

Statistics: Demographic Information Age of Respondents: 25 to 77, mean = 45 Sex: Male = 35%, Female = 65% Education: High School = 52.6%, Associate = 9.5%, Bachelor = 17.5% Years Trading:

Age of Respondents: 25 to 77, mean = 45

Sex: Male = 35%, Female = 65%

Education: High School = 52.6%, Associate = 9.5%, Bachelor = 17.5%

Years Trading:

Statistics: Funding Initial Ongoing

Initial

Ongoing

Support for Small Businesses in Cayman

Gov’t Support for Small Businesses Advice Cayman Islands Investment Bureau (CIIB) Employment Services Centre Funding Cayman Islands Development Bank (CIDB) Cayman Angel Investor Network (CAIN)

Advice

Cayman Islands Investment Bureau (CIIB)

Employment Services Centre

Funding

Cayman Islands Development Bank (CIDB)

Cayman Angel Investor Network (CAIN)

CIIB : Advice & Counselling Business Plan Templates Guidance on regulatory process Detailed guides on establishing a business Workshops & Seminars Register: [email_address] Small business resources & materials: www.investcayman.ky/entrepreneurs.cfm

Business Plan Templates

Guidance on regulatory process

Detailed guides on establishing a business

Workshops & Seminars

Register: [email_address]

Small business resources & materials:

www.investcayman.ky/entrepreneurs.cfm

Funding CIDB Micro business loans (Max: CI$25,000) Small business loans (Max: CI$500,000) CAIN Angel Investors are individuals with an interest in investing in small, promising businesses Confidentiality, Advice, Feedback, Success! US$25,000 to US$100,000

CIDB

Micro business loans (Max: CI$25,000)

Small business loans (Max: CI$500,000)

CAIN

Angel Investors are individuals with an interest in investing in small, promising businesses

Confidentiality, Advice, Feedback, Success!

US$25,000 to US$100,000

e: dbasdeo@investcayman.gov.ky t: (345) 244-2268