1. The document discusses 10 common mistakes that entrepreneurs make that can lead their startups to fail, such as having no real passion for the business, no understanding of the market, no differentiation from competitors, and no business model or cash flow forecast.
2. It provides tips for entrepreneurs to avoid these mistakes like conducting thorough market research, developing competitive advantages, creating a balanced founding team, and developing financial plans with sales forecasts and budgets.
3. The key advice is that entrepreneurs must have a deep understanding of customer needs, competitors, and how to financially sustain the business in order to successfully start a new venture.
4. “ I don’t care about the product, I just want to make loads of money” 1 NO REAL PASSION FOR THE BUSINESS
5. Linking Market Demand with passion, skills and resources to create an entrepreneurial opportunity Market Demand Passion Skills Resources
6. The Key Elements in Creating an Entrepreneurial Opportunity Opportunity Market Demand Passion Skills Resources Entrepreneur
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8. “ We want one so everyone will want one ” 2 NO UNDERSTANDING OF THE MARKET
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10. “ We are going to be just like Amazon.com, only better” 3 NO DIFFERENTIATION
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 1 2 3 4 5 6 7 8 9 10 10 9 8 7 6 5 4 3 2 1
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 1 2 3 4 5 6 7 8 9 10 10 9 8 7 6 5 4 3 2 1
13. Strategy Formulation Questions What are the threats for the business? What are the opportunities for the business? What are our weaknesses? What are our strengths? Current status Where are we at? Who is responsible? What needs to happen in the next 30 days? What are our 1 year goals? What are our 3 year goals? Goals, Action & Priorities What must we do and how will we make it happen? How do we behave? What is not negotiable? What turns us on? What assumptions guide us? Organis-ational Character What is our organizational character? How will we evolve as a business? What makes us different? What is our value proposition? What is our org sustainability model? Business Recipe How do we create value ? Why do we matter? What value do we deliver? Whom do we serve? What are our personal objectives Purpose Why do we exist?
14. “ We are so unique that we have no competition in the market” 4 NO COMPETITORS
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17. Competitor Analysis Image Advertising Credit Policies Sales Method Appearance Location Company Reputation Expertise Stability Reliability Service Selection Quality Price Products Importance to Customer Competitor C Competitor B Competitor A Weakness Strength My Business FACTOR
18. “ We will work out our revenue and cost model as we go along” 5 NO BUSINESS MODEL
19. Business Model Critical Success Factors Investment Costs Source of Revenue Income Stream 3 Income Stream 2 Income Stream 1
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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
22. “ We are four CAs so all is okay” 6 NO BALANCE IN THE TEAM
23. 0 Rands Revenue Investment Extremist Revolutionary Growth Entrepreneur Lifestyle Entrepreneur Survivalist Breadline Time Types of Entrepreneurs
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. Manager, administrator Promoter Entrepreneurial Team Inventor
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26. “ Who cares about cash when you’ve got the profit margins we’ve got ” 7 NO CASHFLOW FORECAST
30. Sales Forecast * State the assumptions on which these numbers are based c Cat 2 Units Sold* d Sales Price Per Unit* cxd=Y Category 2 TOTAL M5 Budget M6 Budget … Z + Y Monthly Total axb=Z Category 1 TOTAL b Sales Price Per Unit* a Cat 1 Units Sold* Total Budget M12 Budget M4 Budget M3 Budget M2 Budget M1 Budget
31. Start Up Expenses XXX Other loans XXX Working capital XXX Reserve for contingencies XXXX TOTAL XXX Other expenses XXX Advertising and promotions XXXX TOTAL XXX Bank loans XXX Owners investment Sources of Capital XXX Opening inventory XXX Location and admin XXX Capital equipment XXX Real estate Start Up Expenses
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 = _ _ + + M5 Budget = _ _ + + M6 Budget … Units Sold = = = = = Closing Cash Balance _ _ _ _ _ Variable Cash Outflows _ _ _ _ _ Fixed Cash Outflows + + + + + Cash Inflows + + + + + Opening Cash Balance Total Budget M12 Budget M4 Budget M3 Budget M2 Budget M1 Budget
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38. “ We need R10m in venture capital and then we will get going” 8 NO MOMENTUM UNTIL CAPITAL IS RAISED
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
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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
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45. “ Our marketing plan will be a combination of print, TV and internet advertising” 10 MISGUIDED MARKETING PLAN
46. Simple Marketing Plan List price Discounts Allowances Payment period Credit terms 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? You need to find a balance between attracting customers and making profits. Price Product variety Quality Design Features Packaging Services Warranties Returns 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? Good marketing begins with a good product or service. Product Considerations Key questions to be answered by the entrepreneur Description of the component Marketing mix component
47. Simple Marketing Plan Advertising Sales force Public relations Direct marketing How will we make customers aware of the benefits of buying our product or service? Promotion is about communicating the merits of the product or service to target customers and persuading them to buy. Promotion Channels Coverage Transport 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? 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. Place Considerations Key questions to be answered by the entrepreneur Description of the component Marketing mix component
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