Entrepreneurship

Session # 03
Types of Start-ups
Life-Style Firm
30-40 employees
Revenues: USD 2 Mn p.a.

Foundation Company
40 400 employees in 5-10 years
Revenues: USD 5 10 Mn p.a.

High-Potential Venture
500 employees in 5-10 years
Revenues: USD 20 30 Mn p.a.
Types of Ownership
Sole Proprietor

Partnership

Corporation
Sole Proprietorship
Advantages:
Ownership of all profits
Ease of Formation
Ease of Dissolution
Tax Savings
Personal Interest
Minimum Legal Constraints
Secrecy
Credit Standing
Freedom of Action
Low Cost
Sole Proprietorship
Disadvantages:
Unlimited Liability
Difficulties in Management
Limited Size
Lack of Opportunities for Employees
Uncertain Life
Partnership
Advantages:
Easy and cheap to setup.
Run it as they set fit.
Complement skills.
No complicated legal or tax systems.
Business termination is simple.
Can have maximum 20 members.
Partnership
Disadvantages:
A partnership is automatically dissolved if
a partner leaves or a new partner joins;
Unlimited Liability
Disputes between partners are common;
The partnership will be dissolved if a
partner dies
Corporation
Advantages:
Separate legal entity.
Limited Liability
Maximum 50 members
Shares are easily transferable;
Continuity
Separate entity for tax purposes.
Staff, or the public, can buy shares.
Corporation
Disadvantages:
A company pays a constant rate of
tax regardless of income
The law requires a greater disclosure
of financial affairs; and
An annual audit must be performed.
Failure Record
24% of new businesses fail after two years.

51% fail within four years.

63% fail within six years.
Deadly Mistakes
1. Management incompetence

2. Lack of experience

3. Poor financial control

4. Failure to develop a strategic plan
Deadly Mistakes
5. Uncontrolled growth

6. Poor location

7. Improper inventory control

8. Incorrect pricing
BCG Matrix
BCG Matrix
Stars (High growth, high market share)
Use large amount of cash & are leaders in the business.

Cash Cows (Low growth, high market share)
Profit & cash generation is high.

Dogs (Low growth, low market share)
Avoid and minimize dogs
Deliver cash, otherwise Liquidate

Question Marks (High growth, low market share)
Have the worst cash characteristics of all, because of high demand and
low returns.
High probability of getting converted into dogs.
ANSOFF Matrix
ANSOFF Matrix
Market Penetration
the firm seeks to achieve growth with existing products in their current
market segments, aiming to increase market share.

Market Development
the firm seeks growth by targeting its existing products to newer
market segments

Product Development
the firm develops new products targeted to its existing market
segment.

Diversification
the firm grows by diversifying into new businesses by developing new
products for new markets.
Small Business
Today more than 16 million small business account
for approximately 97 percent of all non firm business.

Between 1999 and 2010, 66 percent of all new jobs
globally were in firms with fewer than 1000
employees generating less than $10 million in annual
sales.
Small Business
A small business is one that does not dominate its industry.

Fast food franchises, such as McDonalds, generate million in
sales with only a few employees.

On the other hand, firms with several thousand workers may
have low sales volume.

In general, small business seldom dominate their industries and
rely on filling a niche in local or regional markets.
Small Business
Family enterprises are locally owned and operated,
often by one person called a sole proprietor.

In the absence of a successor, the life of a venture
is limited to the working life of its founder.

Succession is a serious problem, and successful
business owners often must resign themselves to
dissolving their firms.
Family Enterprises
Interaction between two separate but connected systems the business
and the family with uncertain boundaries and different rules.

The way of communication within a family may be inappropriate in business
situations.

Attracting and retaining non-family employees can be problematic.

Trouble determining guidelines and qualifications for family members hoping
to participate in the business.

Paying salaries to and dividing the profits among the family members who
participate in the firm.
Small Business
Personal service firms rely crucially on unique skills of
their founders or key employees.

In most instances, the business is the person, and
succession is unlikely unless a son or daughter
develops comparable skills.
Franchising
Franchising is a method of doing business by
which a franchisee is granted the right to offer
sell or distribute goods or services under a
system created by the franchisor.

Franchising is a special form of licensing that
involves rights to a business concept.
Joint Ventures
Moving up the scale of international involvement,
entrepreneurs can pursue joint ventures with foreign
companies.

A joint venture is a shared ownership by two or more
organizations in which the investors have an equity
investment in separate enterprise.

The crucial point here is that unlike a license or franchise
that seldom requires direct investments, the joint venture
requires specific equity investments by all parties.
THANK YOU