Seminar 1 Flashcards
What is Business Venture?
A new business that is formed with a plan and expectation that financial gain will follow;
Business venture is born out of a need for something lacking in the current market;
Typically begins with a small amount of financial resources + involves risk => you need to have a good plan.
Example of business venture
Problem (urban coyotes )=> Solution - a tennis ball that’s weighted with sand and tied with flagging tape (UofA research).
What makes a good business idea?
1) Requires little to no training - good small business idea will ideally leverage your existing filed of expertise or require little to no training
2) Low Setup Costs - should be cheap to start
3) A great business idea needs few supplies and little inventory management
4) The best business ideas are based online
5) A good business idea - to run your business on your own - at the start you don’t have money to hire other people
Things to consider
About 80% of new businesses close down in the first year;
50% of companies do not make it after 5 years;
only 4% of the newly started businesses manage to reach the 10-year mark;
Microenterprises (businesses with 1 to 4 employees) have a slightly lower business failure rate.
Why Small Businesses Fail?
Poor management and Leadership – lack of experience and knowledge to run the businesses, no commitment to learning => huge impact on teamwork + pursuit of common goals;
No vision => a road trip without a map;
No business plan or poor planning -Plans have a way of becoming reality => no/poor plans = failure;
No marketing plan (a component of the overall business plan) => failure to reach your target audience. Marketing budget = must have;
Why Small Businesses Fail? Pt.2
Failure to understand customer behavior => failure to make better decisions about products and services. Remember - the customer is always right;
Weak Sales => poorly structured “economic/financial” part => nothing hurts a new business faster than not reaching its sales goals = > “negative profit”;
Inventory mismanagement - if you’re not keeping track of your top-selling items or when they’re in high demand => you’re going to experience inventory shortages that will shrink your profits;
Why Small Businesses Fail? Pt.3
Lack of Capital and Resources – inadequate access to working capital + inability to borrow from financial sources;
Inefficient Supply Chain Management => procurement of raw materials + parts + delivery;
Changes in government policies (taxes, fees, regulations) => higher taxes, fees, and greater regulations can kill businesses or entire industries;
Bad economy (recession, depression) => could be a chance though…
Unpredicted circumstances : war, trade war; pandemic; natural disaster.
How to avoid failing?
Know: (a) the (external) environment; (b) yourself (strengths and weaknesses).
Use PESTLE (Political, Economic, Social, Technological, Environmental and Legal) analysis to study the key external factors that can influence your organization
Use SWOT analysis to help assess and understand the internal and external forces that may create opportunities or risks for an organization
Steps to take action?
Step #0: Get clear on WHY (reason) you Want to Start a Business:
Why do you really want to start a business?
Step #1: Organize your Idea with a Mind Map (brainstorming)
Purpose: helps you to group together single ideas +
create hierarchies => structure.
Step #2: Simplify & Clarify
Describe your venture idea in 1 sentence
Example: My company, (insert name of company), is developing (a defined offering) to help (a defined audience) (solve a problem) with (your product/service).
Step #3: Refine your Idea with Feedback
Step #4: Define your Target Market
Remember: it is impossible to be equally attractive for everyone!
Step #5: Competition (direct/indirect) + pricing model => your course of action.
Step #6 - What will be the supply and demand for your products or services? => use supply and demand matrix.
What is The Demand Matrix?
High end (top left): Venture Idea that have a high rate of profitability… but probably won’t give you a lot of customers (e.g., Rolls-Royce, Gucci, Prada).
Logic: less competition => you’ll be able to charge a high price vs. you’re going to struggle finding your customers.
Mass market (bottom right): VI`s areas where you’ll be able to find a TON of customers since your business appeals to a lot of people… you won’t be able to charge premium prices for your offerings.
Logic: plenty of people want those things… but you’re not going to charge a lot for them + a lot of competitors.
Labor of love(bottom left): low cost/low demand products and services (may be related to a specific request, or a special interest) => products/services aren’t likely to generate any substantial profit and therefore are rarely worth the time and investment - the worst business ideas ever — however, you might be very excited about them.
Golden Goose (top right) =>products/services desired by many clients despite the higher price - ideas that will command a premium price with no shortage of people willing to pay for them (Apple’s iPhone or P90X).
