Bad To Worse.Ppt

46,749
-1

Published on

Presentation of the major mistakes that lead new ventures to failure.

Published in: Economy & Finance, Business
0 Comments
4 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
46,749
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
190
Comments
0
Likes
4
Embeds 0
No embeds

No notes for slide
  • Bad To Worse.Ppt

    1. 1. BAD TO WORSE Why Some Start-ups Go Down the Tubes … and Others Don't GREG FISHER #1 BESTSELLER
    2. 3. Top 10 Mistakes of Entrepreneurs
    3. 4. “ I don’t care about the product, I just want to make loads of money” 1 NO REAL PASSION FOR THE BUSINESS
    4. 5. Linking Market Demand with passion, skills and resources to create an entrepreneurial opportunity Market Demand Passion Skills Resources
    5. 6. The Key Elements in Creating an Entrepreneurial Opportunity Opportunity Market Demand Passion Skills Resources Entrepreneur
    6. 7. Key questions to sourcing the right opportunity <ul><li>What do people need? Who will buy it? Why do they want it? How can I reach them? </li></ul><ul><li>What am I (are we) deeply passionate about? </li></ul><ul><li>How can I leverage my (our) unique skills ? </li></ul><ul><li>Where can I (we) get the resources to make it happen? </li></ul>
    7. 8. “ We want one so everyone will want one ” 2 NO UNDERSTANDING OF THE MARKET
    8. 9. Researching an Idea What needs to be researched? How can one gather the information? Customers <ul><li>Market size. </li></ul><ul><li>Growth </li></ul><ul><li>The needs pf customers </li></ul><ul><li>The buying decision of customers </li></ul><ul><li>Trade journals, market reports and industry associations. </li></ul><ul><li>Interviewing experts in the industry. </li></ul><ul><li>Interviewing, observing or surveying potential customers. </li></ul>Competitors <ul><li>Number of competitors </li></ul><ul><li>Product or service offerings of competitors </li></ul><ul><li>Where the competitors are situated. </li></ul><ul><li>The strengths and weaknesses of competitors </li></ul><ul><li>Become a customer of the competition. </li></ul><ul><li>Visit competitor websites, stores and read their promotional material. </li></ul><ul><li>Interview competitors customers </li></ul>Collaborators <ul><li>Suppliers </li></ul><ul><li>Funders </li></ul><ul><li>Partners </li></ul><ul><li>Visit suppliers </li></ul><ul><li>Discuss funding options with other entrepreneurs </li></ul><ul><li>Discuss funding options with the banks </li></ul><ul><li>Obtain and read the national venture capital association handbook </li></ul><ul><li>Search the web </li></ul>The Company Model <ul><li>Revenue </li></ul><ul><li>Cost drivers </li></ul><ul><li>Investment </li></ul><ul><li>Critical success factors </li></ul><ul><li>Consider different revenue models: </li></ul><ul><li>Evaluate the costs and the costs drivers. Distinguish between fixed, variable and semi variable costs. Consider the source of costs: </li></ul><ul><li>Do cash flow projections </li></ul><ul><li>Speak to industry experts </li></ul>
    9. 10. “ We are going to be just like Amazon.com, only better” 3 NO DIFFERENTIATION
    10. 11. Assessing an Opportunity [VENTURE] Concept Attractiveness Competitive Advantage [ENTREPRENERIAL TEAM] Low Low High High Market Size Market Growth Differentiation Customer Need Skills Resources Passion / Energy Network 10 9 8 7 6 5 4 3 2 1 1 2 3 4 5 6 7 8 9 10
    11. 12. Response [VENTURE] Concept Attractiveness Competitive Advantage [ENTREPRENERIAL TEAM] Low Low High High Avoid / Wait & Reassess in Future Build / hire / develop the required capabilities Identify / exploit a specific under served niche Revise product or business model Invest and pursue the opportunity 10 9 8 7 6 5 4 3 2 1 1 2 3 4 5 6 7 8 9 10
    12. 13. Strategy Formulation Questions Why do we exist? Purpose What are our personal objectives Whom do we serve? What value do we deliver? Why do we matter? Where are we at? Current status What are our strengths? What are our weaknesses? What are the opportunities for the business? What are the threats for the business? How do we create value ? Business Recipe What is our org sustainability model? What is our value proposition? What makes us different? How will we evolve as a business? What is our organizational character? Organis-ational Character What assumptions guide us? What turns us on? What is not negotiable? How do we behave? What must we do and how will we make it happen? Goals, Action & Priorities What are our 3 year goals? What are our 1 year goals? What needs to happen in the next 30 days? Who is responsible?
    13. 14. “ We are so unique that we have no competition in the market” 4 NO COMPETITORS
    14. 15. <ul><li>If no competitors … WHY? </li></ul>
    15. 16. <ul><li>Be REAL about your competition </li></ul>
    16. 17. Competitor Analysis FACTOR My Business Strength Weakness Competitor A Competitor B Competitor C Importance to Customer Products Price Quality Selection Service Reliability Stability Expertise Company Reputation Location Appearance Sales Method Credit Policies Advertising Image
    17. 18. “ We will work out our revenue and cost model as we go along” 5 NO BUSINESS MODEL
    18. 19. Business Model Income Stream 1 Income Stream 2 Income Stream 3 Source of Revenue Costs Investment Critical Success Factors
    19. 20. Key questions for building a business model <ul><li>What are the sources of revenue for the business? </li></ul><ul><ul><li>Single or multiple revenue streams? </li></ul></ul><ul><ul><li>Payment terms – upfront, over a period of time or post delivery? </li></ul></ul><ul><li>What are the cost drivers for the new business? </li></ul><ul><ul><li>Major costs incurred to generate revenue? </li></ul></ul><ul><ul><li>Nature of costs – fixed, variable or semi-variable? </li></ul></ul><ul><ul><li>Payment terms – upfront, over a period of time or post delivery? </li></ul></ul><ul><li>What size capital investment is required to launch and sustain the business? </li></ul><ul><ul><li>To sustain a positive cash balance? </li></ul></ul><ul><ul><li>To make profit? </li></ul></ul><ul><li>What are the critical success factors for this business? </li></ul><ul><ul><li>Identify the issues that will determine the success or failure of the business? </li></ul></ul>
    20. 21. Business Model Diagram New Business Inputs Required (Cost Drivers) People Product Premises Marketing etc. Buyers What they buying Range of products or services Volumes; Frequency How they pay Timing of payment Up Front Investment Equipment Premises Branding Training Working Capital Etc Input Output Input $ $ $ Critical Success Factors What are the factors that are required to ensure that this model works? Revenue Costs Investment
    21. 22. “ We are four CAs so all is okay” 6 NO BALANCE IN THE TEAM
    22. 23. 0 Rands Revenue Investment Extremist Revolutionary Growth Entrepreneur Lifestyle Entrepreneur Survivalist Breadline Time Types of Entrepreneurs
    23. 24. The Entrepreneurial Team Creativity and Innovation General management skills, business know-how and networks Low High High Source: Timmons & Spinelli. New Venture Creation.2004. McGraw Hill. Inventor Entrepreneurial Team Promoter Manager, administrator
    24. 25. Quality of the team <ul><li>Entrepreneurial Attributes </li></ul><ul><li>Commitment and Determination </li></ul><ul><li>Opportunity Obsession </li></ul><ul><li>Tolerance for Risk, Ambiguity and Uncertainty </li></ul><ul><li>Creativity, Self-Reliance and Ability to Adapt </li></ul><ul><li>Motivation to Excel </li></ul><ul><li>Leadership </li></ul><ul><li>Management Attributes </li></ul><ul><li>Marketing </li></ul><ul><li>Operations / Production </li></ul><ul><li>Finance </li></ul><ul><li>Administration </li></ul><ul><li>Interpersonal / Team </li></ul><ul><li>Law </li></ul>Source: Timmons & Spinelli. New Venture Creation.2004. McGraw Hill.
    25. 26. “ Who cares about cash when you’ve got the profit margins we’ve got ” 7 NO CASHFLOW FORECAST
    26. 27. Financial Plan <ul><li>Sales forecast </li></ul><ul><li>Startup expenses </li></ul><ul><li>12 Month profit and loss statement (monthly) </li></ul><ul><li>12 Month cash flow statement (monthly) </li></ul><ul><li>3 – 5 Year profit & loss (high level – quarterly) </li></ul><ul><li>3 – 5 Year cash flow (high level – quarterly) </li></ul><ul><li>Opening balance sheet </li></ul><ul><li>Projected balance sheet </li></ul><ul><li>Breakeven analysis </li></ul>
    27. 28. Financial Plan <ul><li>Sales forecast </li></ul><ul><li>Startup expenses </li></ul><ul><li>12 Month profit and loss statement (monthly) </li></ul><ul><li>12 Month cash flow statement (monthly) </li></ul><ul><li>3 – 5 Year profit & loss (high level – quarterly) </li></ul><ul><li>3 – 5 Year cash flow (high level – quarterly) </li></ul><ul><li>Opening balance sheet </li></ul><ul><li>Projected balance sheet </li></ul><ul><li>Breakeven analysis </li></ul>
    28. 29. Cash Flow Forecast (NB) M1 Budget M2 Budget M3 Budget M4 Budget M5 Budget M6 Budget … M12 Budget Total Budget Units Sold Opening Cash Balance + + + + + + + Cash Inflows + + + + + + + Fixed Cash Outflows _ _ _ _ _ _ _ Variable Cash Outflows _ _ _ _ _ _ _ Closing Cash Balance = = = = = = =
    29. 30. Sales Forecast * State the assumptions on which these numbers are based M1 Budget M2 Budget M3 Budget M4 Budget M5 Budget M6 Budget … M12 Budget Total Budget Cat 1 Units Sold* a Sales Price Per Unit* b Category 1 TOTAL axb=Z Cat 2 Units Sold* c Sales Price Per Unit* d Category 2 TOTAL cxd=Y Monthly Total Z + Y
    30. 31. Start Up Expenses Start Up Expenses Real estate XXX Capital equipment XXX Location and admin XXX Opening inventory XXX Advertising and promotions XXX Other expenses XXX Reserve for contingencies XXX Working capital XXX TOTAL XXXX Sources of Capital Owners investment XXX Bank loans XXX Other loans XXX TOTAL XXXX
    31. 32. P & L Forecast M1 Budget M2 Budget M3 Budget M4 Budget M5 Budget M6 Budget … M12 Budget Total Budget Revenue + + + + + + + Cost of Sales _ _ _ _ _ _ _ Gross Profit = = = = = = = Expenses _ _ _ _ _ _ _ Profit before tax = = = = = = = Tax Expense _ _ _ _ _ _ _ Profit after tax = = = = = = =
    32. 33. P & L Forecast EXAMPLES Salaries & wages Other operating expenses Interest payments Depreciation EXAMPLES Direct cost of goods sold M1 Budget M2 Budget M3 Budget M4 Budget M5 Budget M6 Budget … M12 Budget Total Budget Revenue + + + + + + + Cost of Sales _ _ _ _ _ _ _ Gross Profit = = = = = = = Expenses _ _ _ _ _ _ _ Profit before tax = = = = = = = Tax Expense _ _ _ _ _ _ _ Profit after tax = = = = = = =
    33. 34. Cash Flow Forecast (NB) M1 Budget M2 Budget M3 Budget M4 Budget M5 Budget M6 Budget … M12 Budget Total Budget Units Sold Opening Cash Balance + + + + + + + Cash Inflows + + + + + + + Fixed Cash Outflows _ _ _ _ _ _ _ Variable Cash Outflows _ _ _ _ _ _ _ Closing Cash Balance = = = = = = =
    34. 35. Cash Flow Forecast EXAMPLES Cash sales of goods or services Collection of accounts receivable Interest earned Sales of fixed assets or investments Capital from investor Loan received EXAMPLES Payment of cash expenses Payment to creditors Payment of salaries and wages Purchase of inventory for cash Purchase of fixed assets or investments Payback loans Payout dividends M1 Budget M2 Budget M3 Budget M4 Budget M5 Budget M6 Budget … M12 Budget Total Budget Units Sold Opening Cash Balance + + + + + + + Cash Inflows + + + + + + + Fixed Cash Outflows _ _ _ _ _ _ _ Variable Cash Outflows _ _ _ _ _ _ _ Closing Cash Balance = = = = = = =
    35. 36. Balance Sheets Opening End Y1 End Y2 End Y3 Assets <ul><li>Current Assets </li></ul><ul><ul><li>Cash </li></ul></ul><ul><ul><li>Inventory </li></ul></ul><ul><ul><li>Acc receivable </li></ul></ul><ul><li>Fixed Assets </li></ul><ul><ul><li>Property </li></ul></ul><ul><ul><li>Equipment </li></ul></ul><ul><ul><li>Furniture </li></ul></ul><ul><ul><li>Vehicles </li></ul></ul>TOTAL ASSETS Liabilities & Equity <ul><li>Current Liabilities </li></ul><ul><ul><li>Accounts payable </li></ul></ul><ul><li>Long Term Liab. </li></ul><ul><ul><li>Loans </li></ul></ul><ul><li>Owners Equity </li></ul><ul><ul><li>Capital </li></ul></ul><ul><ul><li>Retain earnings </li></ul></ul>TOTAL LIAB & EQUITY
    36. 37. Balance Sheets Goods or resources owned by the business to be transformed utilized / realized in 1 year Goods or resources owned by the business that have a life span exceeding 1 year Amounts owed by the business to be paid back within 12 months Amounts owed by the business to be paid back after 12 months Portion of the business attributable to the owners Total amount OWNED by the business Total amount OWED by the business to lenders or owners Opening End Y1 End Y2 End Y3 Assets <ul><li>Current Assets </li></ul><ul><ul><li>Cash </li></ul></ul><ul><ul><li>Inventory </li></ul></ul><ul><ul><li>Acc receivable </li></ul></ul><ul><li>Fixed Assets </li></ul><ul><ul><li>Property </li></ul></ul><ul><ul><li>Equipment </li></ul></ul><ul><ul><li>Furniture </li></ul></ul><ul><ul><li>Vehicles </li></ul></ul>TOTAL ASSETS Liabilities & Equity <ul><li>Current Liabilities </li></ul><ul><ul><li>Accounts payable </li></ul></ul><ul><li>Long Term Liab. </li></ul><ul><ul><li>Loans </li></ul></ul><ul><li>Owners Equity </li></ul><ul><ul><li>Capital </li></ul></ul><ul><ul><li>Retain earnings </li></ul></ul>TOTAL LIAB & EQUITY
    37. 38. “ We need R10m in venture capital and then we will get going” 8 NO MOMENTUM UNTIL CAPITAL IS RAISED
    38. 39. New venture financing and the equity gap Stage Source Demand Supply Pre-seed Seed / Start-Up Early Later Founders Family Friends Angels / Angel Alliances Venture Funds Private Equity 100k 500k R5-10 mil R20 mil Government Funds Equity Gap Adapted from a model proposed designed by Jeffery E Sohl – Center for Venture Research, University of New Hampshire
    39. 40. Sources of finance for a business Equity Funding Sources Debt Funding Sources <ul><li>Personal savings </li></ul><ul><li>Family and friends </li></ul><ul><li>Informal individual investors </li></ul><ul><li>Venture capitalists </li></ul><ul><li>Government agencies </li></ul><ul><li>Partnerships / strategic alliances with corporations </li></ul><ul><li>Private equity investors (for established businesses) </li></ul><ul><li>Listing on stock exchange </li></ul><ul><ul><li>Alt-X </li></ul></ul><ul><ul><li>Main Board </li></ul></ul><ul><li>Loans from family and friends </li></ul><ul><li>Loans from government agencies or NGO’s supporting entrepreneurs </li></ul><ul><li>Bank loans </li></ul>Advantages Disadvantages Advantages Disadvantages <ul><li>Often comes with useful management input and advice. </li></ul><ul><li>Equity investors can give access to a network of useful contacts </li></ul><ul><li>No immediate strain on cash flow in terms of repayments of the capital </li></ul><ul><li>Lose a portion of the ownership of the business. </li></ul><ul><li>Equity owners can be controlling which can cause friction with the founders </li></ul><ul><li>Difficult to value an entrepreneurial business when allocating shareholdings </li></ul><ul><li>Founder maintains full ownership of the business. </li></ul><ul><li>Founder can manage and run the business as he/she sees fit </li></ul><ul><li>Loan must be paid back which can create strain on cash flow for the new business. </li></ul><ul><li>Bank is unlikely to assist in opening doors, giving advice or introducing founders to useful contacts. </li></ul>
    40. 41. The Art of Bootstrapping <ul><li>Focus on cash flow, not profitability </li></ul><ul><li>Forecast from the bottom up </li></ul><ul><li>Ship, then test </li></ul><ul><li>Forget the “proven” team </li></ul><ul><li>Start as a service business </li></ul><ul><li>Focus on function, not form </li></ul><ul><li>Pick your battles </li></ul><ul><li>Understaff </li></ul><ul><li>Go direct </li></ul><ul><li>Position against the leader </li></ul><ul><li>Take the “red pill.” </li></ul>Source: Kawasaki, G. The Art of the Start. 2004. Portfolio.
    41. 42. Funding Realities <ul><li>More likely sources of funding for startup: </li></ul><ul><ul><li>Bootstrapping </li></ul></ul><ul><ul><li>Personal funds </li></ul></ul><ul><ul><li>Close connections </li></ul></ul><ul><li>Some chance of getting funds for a startup: </li></ul><ul><ul><li>Corporate investor </li></ul></ul><ul><ul><li>Government enterprise creation funds </li></ul></ul><ul><li>Low chance of getting funds </li></ul><ul><ul><li>Bank loan </li></ul></ul><ul><ul><li>Venture capital </li></ul></ul>
    42. 43. “ We have hired offices in Sandton, acquired Hummer’s for the directors and will pay the most to get the best” 9 NO FRUGALITY
    43. 44. BUDGETING MONITORING REPORTING <ul><li>Budget for CASH FLOW </li></ul><ul><li>Build your OWN models </li></ul><ul><li>Its not just about HOW MUCH but also about WHEN . </li></ul><ul><li>Know the NATURE of different cash flows </li></ul><ul><li>SHORT TERM = DETAIL ; long term = big picture </li></ul><ul><li>Your BANK BALANCE is your truth </li></ul><ul><li>Know your BASELINE (breakeven) </li></ul><ul><li>Keep UP TO DATE </li></ul><ul><li>Balance off being overly PEDANTIC versus dangerously LACKADAISICAL </li></ul>10.Report results with PURPOSE Entrepreneurial Financial Management
    44. 45. “ Our marketing plan will be a combination of print, TV and internet advertising” 10 MISGUIDED MARKETING PLAN
    45. 46. Simple Marketing Plan Marketing mix component Description of the component Key questions to be answered by the entrepreneur Considerations Product Good marketing begins with a good product or service. Does it meet a specific need? What is that need? Must we customize our product or service? Do we deliver the appropriate quality for the customer? Product variety Quality Design Features Packaging Services Warranties Returns Price You need to find a balance between attracting customers and making profits. What does it cost us to produce the good or service? What are the competition charging for similar goods or services? Why are we charging more or less than the competition? How would revenue and profits be affected if we increased or decreased the price? List price Discounts Allowances Payment period Credit terms
    46. 47. Simple Marketing Plan Marketing mix component Description of the component Key questions to be answered by the entrepreneur Considerations Place This is about getting the product or service to the customer. Customers will only buy products or services that they have access to, thus it is critical to have distribution channels that reach the customer. Are we going to sell locally, regionally, nationally or globally? How will we reach the customer? Do we need more than one channel for reaching the customer? Should we create our own distribution channel or partner with an established distributor? Channels Coverage Transport Promotion Promotion is about communicating the merits of the product or service to target customers and persuading them to buy. How will we make customers aware of the benefits of buying our product or service? Advertising Sales force Public relations Direct marketing
    47. 48. New Venture Creation Model OPPORTUNITY Demand Passion Skills Resources STRUCUTRE Business Model Legal Form Tools / Facilities Team FUNDING Traditional financing Bootstrapping Cash flow SALES Product Price Promotion Place Word of mouth Growth Research BUSINESS PLAN
    48. 49. Focus points in a business plan <ul><li>The People . The men and woman starting and running the venture, as well as outside parties providing key services or important resources for it such as suppliers, lawyers and advisors. </li></ul><ul><li>The Opportunity . The need in the market for the proposed product or service. The size and growth of the potential market and the attractiveness of the industry in which the business will operate. </li></ul><ul><li>The Business Model . A summation of the core business decisions and trade offs employed by a company to earn a profit. The decisions and trade offs include revenue sources, key expenses, investment size and critical success factors </li></ul><ul><li>The Strategy . The methods and means of creating sustainable competitive advantage for the new business. </li></ul><ul><li>The Context . The big picture – the regulatory environment, interest rates, demographic trends, inflation and the like – factors that inevitably change but cannot be controlled by the entrepreneur. </li></ul><ul><li>Risk and Reward . An assessment of everything that can go wrong and right, and a discussion of how the entrepreneurial team can respond. </li></ul>
    49. 50. <ul><li>Go out and do it… </li></ul>Business In A Box www.biz-box.net Email – Slides [email_address] Blog – Slides [email_address]
    1. A particular slide catching your eye?

      Clipping is a handy way to collect important slides you want to go back to later.

    ×