BBA220 Entrepreneurship

and New Venture

Management

Concluding week
(Week 13)
 What to expect today

Final housekeeping matters

Review of key topics covered this semester
Exam guide and format
Q & As
 Final housekeeping matters

Your assessment marks:

- Individual Report this is finalized
- Team NV Business Plan marks released by 10 Nov
- Pitch presentation marks released by 14 Nov
Please check emails and/or iLearn announcement on
marks and exam matters.
Please check your marks on iLearn Gradebook. If
marks are not recorded for assessments submitted,
please alert UC and tutor immediately, definitely
BEFORE Exam! Check too your DTS!
Steps in the Entrepreneurial Process
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Step 1 Step 2
Developing Successful Business Ideas
 Why Become an Entrepreneur?

The three primary reasons that people become

entrepreneurs and start their own firms

Desire to be their own boss

Desire to pursue their

own ideas

Financial rewards

What about you? Thinking about it? Has this Unit changed your mind?
 What is an Opportunity?
2 of 2

Four Essential Qualities of an Opportunity

http://www.bystephanielynn.com/2012/02/45-creative-
duct-tape-crafts-projects-saturday-inspiration-ideas.html
Three Ways to Identify an Opportunity
 Creativity

Five Steps to Generating Creative Ideas

 Techniques for Generating Ideas

Brainstorming Focus Groups

Library and
Internet Research
 Feasibility Analysis

Role of feasibility analysis in developing business ideas.

 Business Models

Business Model
A business model is a firms plan or recipe for how it
creates, delivers, and captures value for its stakeholders.
The proper time to develop a business model is following
the feasibility analysis stage and prior to fleshing out the
operational details of the company.
A firms business model is integral to its ability to succeed
both in the short and long term.
Standard business models versus Disruptive business
model
https://www.youtube.com/watch?v=XnLaQzi8xJc
Barringer/Ireland Business Model Template
 How Industry and Firm-Level Factors
Affect Performance
Firm-Level Factors
Include a firms assets, products, culture, teamwork among
its employees, reputation, and other resources.
Industry-Level Factors
Include threat of new entrants, rivalry among existing
firms, bargaining power of buyers, and related factors.
Conclusion
In various studies, researchers have found that from 8% to
30% of the variation in firm profitability is directly
attributable to the industry in which a firm competes.
 Studying Industry Trends
Environmental Trends
Include economic trends, social trends, technological advances, and
political and regulatory changes.
For example, industries that sell products to seniors are benefiting by
the aging of the population.
http://www.abs.gov.au/
https://home.kpmg.com/xx/en/home/insights/2016/01/emerging-trends-in-
infrastructure.html
Business Trends
Other trends that impact an industry.
For example, are profit margins in the industry increasing or falling? Is
innovation accelerating or waning? Are input costs going up or down?
https://www.westpac.com.au/content/dam/public/wbc/documents/pdf/aw/media/er
20170315BullConsumerSentiment.pdf
 The Five Competitive Forces Model
1 of 3

Explanation of the Five Forces Model

The five competitive forces model is a framework for
understanding the structure of an industry.
The model is composed of the forces that determine
industry profitability.
They help determine the average rate of return for the firms
in an industry.
Guidelines for Writing a Business Plan
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Types of Business Plans

10 important questions your Business Plan must
answer (Refer Table 6.4)

1. Opportunity with real potential 6. Sound marketing plan

2. Viable, significant value add
3. An exciting, growing industry
4. Well defined target market
5. Points of differentiation
7. Sound management team
8. Sound business operation
9. Realistic financial
10. Financials project a bright
future
 Initial Ethical and Legal Issues Facing a
New Firm

Establishing a strong Drafting a founders

Choosing an attorney
ethical culture agreement

Avoiding legal Obtaining business Choosing a form of

disputes licenses and permits business organization
 The Four Key Forms of
Intellectual Property

Patents Trademarks

Copyrights Trade Secrets

 The Process of Financial Management
1 of 4

Importance of Financial Statements

To assess whether its financial objectives are being met,
firms rely heavily on analysis of financial statements.
A financial statement is a written report that quantitatively
describes a firms financial health.
The income statement, the balance sheet, and the statement of
cash flows are the financial statements entrepreneurs use most
commonly.
Forecasts
Are an estimate of a firms future income and expenses,
based on past performance, its current circumstances, and
its future plans.
 The Process of Financial Management
2 of 4

Forecasts (continued)
New ventures typically base their forecasts on an estimate
of sales and then on industry averages or the experiences of
similar start-ups regarding the cost of goods sold and other
expenses.
Budgets
Are itemized forecasts of a companys income, expenses,
and capital needs and are also an important tool for
financial planning and control.
 Financial Statements

Historical Financial Statements

Reflect past performance and are usually prepared on a
quarterly and annual basis.
Publicly traded firms are required by ASX to prepare financial
statements and make them available to the public.
Pro Forma Financial Statements
Are projections for future periods based on forecasts and
are typically completed for two to three years in the future.
Pro forma financial statements are strictly planning tools and are
not required by govt depts.
 The Process of Financial Management
3 of 4

Financial Ratios
Depict relationships between items on a firms financial
statements.
An analysis of its financial ratios helps a firm determine
whether it is meeting its financial objectives and how it
stacks up against industry peers.
https://www.youtube.com/watch?v=TZZFBkbC2lA ratios 2.54

Importance of Financial Management

Many experienced entrepreneurs stress the importance of
keeping on top of the financial management of the firm.
 New-Venture Team

New-Venture Team
Is the group of
founders, key
employees, and
advisors that move a
new venture from an
idea to a fully
functioning firm.

Elements of a New-venture team

 Selecting a Market and Establishing a
Position in the Market
Important Questions That All Start-ups Must Ask
In order to succeed, a new firm must address this important
issue: Who are our customers and how will we appeal to
them?
A well-managed start-up approaches this query by
following a three-step process:
Segmenting the market.
Selecting a target market.
Establishing a unique position.
The Process of Selecting a Target Market
and Positioning Strategy
 Establishing a Unique Position
1 of 2

After selecting a target market, the

firms next step is to establish a
position within the market that
differentiates it from its rivals.
Positioning
A position is the part of a market
that the firm is claiming as its own.
A firm establishes a unique
position in its customers minds
by drawing attention to two or
three of the products attributes.
 Establishing a Unique Position
2 of 2

Positioning (continued)
Firms often develop a tagline to reinforce the position
they have staked out in their market, or a phrase that is used
consistently in a companys literature and thus becomes
associated with the company.
Examples:
 Branding
1 of 3

Establishing a Brand
A brand is the set of attributespositive or negativethat
people associate with a company.
Brand Management
Some companies monitor the integrity of their brands
through a program called brand management.
Establishing a Brand
So how does a firm establish a brand?
On a philosophical level
On a more practical level
A firms name, logo, Web site design, Facebook page, and even its
letterhead are part of its brand.
The Four Ps of Marketing for New Ventures

Product Price

Marketing Mix

Promotion Place (or

distribution)
 Public Relations Techniques

Traditional media
Press release
coverage

Social media Articles in industry

coverage press and periodicals

Blogging Monthly newsletter

Civic, social, and community

involvement
 Other Promotions Techniques
Viral Marketing
Facilitates and encourages
people to pass along a
marketing message about a
particular product or service.
Guerrilla Marketing
A low-budget approach to
marketing that relies on
ingenuity, cleverness, and
surprise rather than
traditional techniques.

https://www.entrepreneur.com/article/2062
02

http://www.boredpanda.com/cool-and-
creative-street-ads/
 Sources to raise money for a
new venture

Personal Funds Equity Capital

Debt Financing Creative Sources

 Sources of Personal Financing

Personal Funds
The vast majority of founders contribute personal funds,
along with sweat equity, to their ventures.
Friends and Family
Friends and family are the second source of funds for many
new ventures.
Bootstrapping
Finding ways to avoid the need for external financing or
funding through creativity, ingenuity, thriftiness, cost
cutting, or any means necessary.
Many entrepreneurs bootstrap out of necessity.
https://smallbiztrends.com/2016/03/entrepreneurs-who-
bootstrapped.html
Preparing to Raise Debt or Equity Financing

Equity Funding Debt Financing

Means exchanging Is getting a loan.

partial ownership in
a firm, usually in the
form of stock, for
funding.
 Sources of Equity Funding

Venture Capital Business Angels

Initial Public
Offerings
 Sources of debt financing

Commercial banks
Historically, commercial banks have not been viewed as a
practical source of financing for start-up firms.
This sentiment is not a knock against banks; it is just that
banks are risk averse, and financing start-ups is a risky
business.
Banks are interested in firms that have a strong cash flow, low
leverage, audited financials, good management, and a healthy
balance sheet.
 Other Sources of Debt Financing

Vendor Credit
Also known as trade credit, is when a vendor extends credit
to a business in order to allow the business to buy its
products and/or services up front but defer payment until
later.
Factoring
Is a financial transaction whereby a business sells its
accounts receivable to a third party, called a factor, at a
discount in exchange for cash.
Creative Sources of Financing or Funding

Crowdfunding Leasing

Strategic Partners Grant and Assistance

Programs
 Three Things a Business Can Do to
Prepare for Growth
3 of 3

A firm should establish

growth-related plans.
Writing a business plan
Plan for Growth greatly assists in preparing
growth plans.
Its also important for a firm
to determine, as soon as
possible, what its growth
strategies will be.
 Reasons for Growth
1 of 2

Reason for Growth Explanation

Economies of Occur when increasing production lowers the

scale average cost of each unit produced.
Economies of Occur when the scope (or range) of a firms
scope operations creates efficiencies.
Market Occurs when a firm holds the number one or the
Leadership number two position in an industry or niche
market in terms of sales volume.

Influence, Power, Larger businesses usually have more influence

and Survivability and power than smaller firms.
 Reasons for Growth
2 of 2

Reason for Growth Explanation

Accommodate the Sometimes firms are compelled to grow to
Growth of Key accommodate the growth of a key customer.
Customers

Attract and Retain Growth is a firms primary mechanism to

Talented generate promotional opportunities for
Employees employees.
 Managing Growth
Its important for a business owner to know the stages of growth, along
with the unique opportunities and challenges that each stage entails.

Which stage is the most difficult to manage and why?

 Challenges of Growth

Two categories of
challenges for firm
growth
Managerial Capacity Problem

Day-to-Day Challenges of
Growing a Firm
Managerial Capacity Problem
4 of 4

Impact of the Managerial Capacity Problem

Day-to-Day Challenges of Growing a Firm
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Challenge Explanation

Cash Flow A firm requires an increasing amount of cash as

Management it grows.

Price Stability If growth comes at the expense of a competitors

market share, a price war could ensue.

Quality An increase in firm activity can result in quality

Control control issues if a firm is not able to increase its
resources to handle the extra work.

Capital Constraints Capital constraints are an ever-present

problem for growing firms.
Internal and External Growth Strategies
2 of 2
 Exam Tips

Read the instructions carefully spend some

time on this rather than rushing into writing
something straight away. Make sure you
understand the questions.

Preview the exam and budget your time

accordingly.

Bring a watch to help with this.

Note the number of questions and what they

are worth this will give you a rough guide of
how much time to spend on each question
and what amount of written text is expected
for the essay questions. 67
 Exam Tips

For essay questions spend several

minutes at the start to read the
questions and underline key words.

Is it a one or two part question?

What are you been asked to do? Look for key words,
eg. Define, explain, describe, discuss, compare,
evaluate, recommend, differentiate, give examples,

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 Exam Tips

Then take some time to plan your answers: write

notes at the back or on a separate sheet of paper, with
section headings and notes on the content. If you do
this at the start, there is less chance of forgetting
important things!

If you draw a blank at first dont panic ask yourself

what do I need to know to answer this question and
then start writing down your thoughts in note form.
Avoid negative self talk focus on the task ahead
instead of yourself and how you are feeling.

Review your answers when finished and make any

corrections if required. Make sure you have answered
everything that was asked for. 69
 Exam Tips

Try to use all the time allocated some

things can pop up from your memory at
any point so if you use up all the time you
may benefit.

Try to be as neat and tidy as possible in

your presentation: use headings, proper
paragraphs with spacing, and ensure your
handwriting is legible.

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Exam Format

Essay Questions Format.

3 Hours plus 10 minutes reading time.

Closed book.

Exam consists of Part A and Part B.

Answer all questions in Part A and attempt two (2) out of three (3) questions
in Part B.

Part A is worth 20 marks and each question in Part B is worth 10 marks.

Total marks for this exam is 40.

Make sure to define and apply relevant concepts, and to provide

analysis and interpretation when writing your essay answers.

Illustrate your answers with examples.

73
Exam Format

Example question Remember this is just an example

of the type of short essay question used for this exam.

Ron Matthews, a very close friend of yours, has been running his own
business for the past 5 years. He has a good reputation in the
neighbourhood. One evening, while having drinks with Ron, he confided
in you that his business is experiencing slow growth. He appears tired
and even said to that hes losing passion for his own business.

With the knowledge you have gained from your studies, explain to him
the challenges of growing ones own business. Recommend to him, his
next step of action.

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 Questions?

Good luck everyone!