CHAPTER 05 VENTURES

INTRODUCTION

1. 42 percent of business owners said that they started their business from nothing,
23% purchased it, 22 percent said that the business was passed on to them from
the family, 5% reported it was a spin-off from another business, and the remaining
8% was “other”.
2. How important is the original idea to the development of a significant business? By
itself, not very important, but with hindsight it looks critical. The original
inspirational idea is likely to endure and become a business only if it is anchored
into a niche serving a specific customer and market need with real benefits derived
from a value concept.
3. The word “niche” is a French word, and it literally means “bird’s nest.” This
bird’s nest will safeguard, incubate, and nurture the entrepreneurial idea and
ultimately ensure the survival of the value concept, by providing answers to the
following fundamental questions during the initiation of the venture idea: Why is
the idea concept of any value? Why should a customer buy it, and why from your
niche? How does the value idea concept provide added value to a customer’s
buying decision? How does the customer’s decision to buy this particular value
idea concept compare relative to similar and/or other purchasing decisions that
can be possibly made? Good ideas do not look very good at first glance or even at
a second glance, but rather they sound strange, crazy, or obscure. As a matter of
fact, if people say you have a wonderful idea, you may be in trouble: an idea
everybody acknowledges as wonderful has probably arrived at the scene too late!

CREATIVITY

1. Innovation is the process of turning a new concept into commercial success or

widespread use. Invention is the creation of a new idea or concept. Creativity is the
act of turning new and imaginative ideas into reality.
2. Creativity is the act of conceiving something new, whether a variation on a theme
or something wholly new. Innovation is the act of putting something into practice.
It's the difference between conceiving of the idea of a craft that could fly through
space, and actually building a rocket that people can ride into space.
 3. Consequently, an innovator may or may not be the creative force behind an
innovation but is always the actual originator of the idea. Creativity, therefore, is the
mental process that leads to solutions, ideas, conceptualizations, artistic forms,
theories, or products that are unique or novel. Creative thought calls for the use of
the right side of the brain or “soft” thinking, as opposed to the logical left brain
and “hard” thinking.
4. Research has shown that creativity can be taught, especially as “mental
gymnastics engaging the conscious and subconscious parts of the brain”. It is a
mix of logic, intuition, imagination, and knowledge as they all relate to the ability to
see connections, contrasts, distinctions, and relationships among people, ideas,
things, and processes. Creativity is simply the ability to use different modes of
thought. Two basic types of creativity are internal and external creativity. Internal
creativity involves finding new ways of doing things or new things to implement
from our own thinking. External creativity means the introduction of new ideas from
outside sources. Both of these creativity types are sources for ideas for new
businesses.

INTUITION:

The definition of intuition is an immediate understanding or knowing something without

reasoning.

An example of intuition is love at first sight.

Long time ago, when a paper cup salesman noticed the long lines at a Walgreen Drug’s
soda fountain, he had a gut feeling that maybe milkshakes should be sold in paper cups
that would allow customers to carry them out. Drugstore managers however, dismissed
the salesman’s intuitive idea as a bunch of “crock” because they claimed that the extra
penny and a half for the cup would eat most of their profit on the 15- cent milkshake. The
young salesman staked his reputation and personal survival on his intuition and promised
the drugstore owners free paper cups for a month if they were willing to try his idea. Sure,
enough at the end, the take-out milkshake was not a bunch of “crock” and became a
big winner. The intuitive salesman, Ray Kroc made plenty of paper cup commissions, which
later helped him start his subsequent venture, McDonald’s Corporation (“When the
Paper-cup,” 1985). John Mihalasky, a professor at the New Jersey Institute of Technology,
has tested hundreds of business executives for intuitive ability and found that effective,
superior decision-making does indeed correlate highly with intuitive ability. In one
experiment Mihalasky chose twenty-five chief executive officers who had held top
positions for at least five years in their companies. All came from manufacturing
companies with less than $50 million in annual sales. In general, those who scored highest
on the intuitive test also reported the greatest increase in company profits. In fact, the high
scorer was also the top profit maker, and his company’s annual sales had increased from
$1.3 million to $19.4 million.

INNOVATION

• Innovation means to improve or to replace something, for example, a process, a

product, or a service. The first electric vehicles introduced in the car's market were
also an innovation, and new batteries with longer ranges that keep coming out are
also an example of innovation.
INVENTION
• Inventors might just as well be called “problem solvers” since they refuse to put
up with life’s problems in the world as it is today. The best inventors not only
solve problems, but they recognize needs and value concepts in a world “the way
it ought to be” and that no one else can see.
• Invention is about making new items or finding new ways of making items.
Innovation involves bringing this new idea to the market, that is, turning
an invention into a product. A business can use the law to protect its business idea.
• A patent is an exclusive property right of an invention which is issued by the
Commissioner of Patents and Trademarks of the United States Department of
Commerce. This patent gives the inventor the right to prevent others from making,
selling, or using that invention for seventeen years, and is valid only in the United
States and its territories and possessions. In order to market and protect a patented
product in a foreign country, one should apply for patent protection in the
particular country to prevent infringement.
• There are four statutory classes of patents. First, there are machine patents, which
are primarily mechanical or electrical. Second, there are method patterns for a
process or a series of at least two steps. Third, there are patents granted for
composition of matter, especially for chemically produced items. If after preliminary
analysis and patent search the invention appears to be patentable, a patent
application covering the invention must be prepared and filed in the name of the
inventor with the Commissioner of Patents and Trademarks.
HOBBY:
 • During downturns, consumers fill their needs for luxury by buying things made by
hand that are beautiful but not too expensive. Regardless of the state of the
economy, the basic rule is that only quality sells, and whatever the hobbyists do,
they need to do it well. Additionally, even the amateur has to be professional,
businesslike, and original. There are too many truly talented people who will not
succeed, simply because they failed to grasp the importance of such elementary
things as market research, record keeping, and the promotion of one’s business.

HOME-BASED BUSINESSES
• Working out of the home is not a novel idea. There is a very old name for it:
“cottage industry.” It does take a certain type of person to run a business at
home, whether making canoes, computers, or chocolate chip cookies. It is hard to
get financing, and the success rate is not high.
• People start a business at home for fi nancial reasons. Saving money on overhead
is very important at this stage. One common reason is that they can stay home with
their children, but there is more to the decision to work at home than that. There is
also the convenience of a home-based business. The hours are fl exible, there is no
need to commute, and those who do not see clients do not have to go to the
expense of buying a business wardrobe or commit to an expensive offi ce
overhead. In addition, homebased businesses get tax breaks.
• But the home-based businessperson also faces unique challenges. There are
questions such as: Are my prices right? My service is good, but how do I develop a
professional business identity? Am I keeping the necessary business records? How
can I persuade my family and friends to take my business seriously and not treat it
as a hobby? When do I devote my time to my family and when do I demand their
cooperation?
MOONLIGHTING
• Moonlighting refers to the practice of working a second job outside normal
business hours. Therefore, an employee may work a normal 9-to-5 job as a primary
source of income but work nights at a different job in order to earn extra money.
• Moonlighting for an entrepreneur is a good way to start a new venture while
maintaining the safety net of an existing job. Moonlighting for the primary
employer may not be looked at with a positive light, especially if the new venture is
in a similar field.
• However, moonlighting also provides the opportunity to hedge bets in case of an
entrepreneurial venture failure. Moonlighters rely on a secure career as a
 “fallback” position that allows them to take a risk and to start part-time
businesses, sometimes at the expense of neglecting their main jobs.
• “The guy who cuts my trees has a very nice tree business. But that doesn’t mean
he should leave his job with the phone company, with all its benefits and pension
plan.”

BUYING AN EXISTING FIRM

• On the downside, buying a business is often more costly than starting from scratch.
However, it's often easier to get financing to buy an existing business than to start a
new one. In addition, buying a business may give you valuable legal rights, such as
patents or copyrights, which can prove very profitable.
• Entrepreneurs do not always start a new business from scratch, but rather purchase
a going concern. There are many reasons why some individuals choose to buy an
existing business. The major reason is that it is easier to buy a business that is
already in operation than start one up. Of course, a going concern must be
researched carefully before a decision to purchase can be made.
DIRECT MAIL
• Direct mail is marketing material or product mailed directly to the homes of
consumers or offices of business buyers. Examples include postcards with an offer,
catalogs that display goods, coupons, solicitation letters from nonprofits or free
samples sent by businesses.
• Direct marketing includes not only mail-order catalog sales, but also telephone
sales and direct-response advertising in newspapers, magazines, television, and
radio. Catalog sales are so impressive that the major department stores find their
turf getting crowded. Some 10,000 companies rely on mail order for more than 15
percent of their sales, and independently owned specialty houses appear to be
growing even faster than the rest.
“UNINCORPORATED” EXECUTIVES
• a privately owned business, often owned by one person who has unlimited liability
as the business is not legally registered as a company.

STARTING UP AGAIN
• The urge to re-emerge sometimes strikes the entrepreneur who started a
company, made a success of it and then got bored with day-to-day management.
Dozens of executives in such circumstances have left comfortable, remunerative
 jobs in recent years for the excitement and uncertainties of starting over. “Some
people like to climb mountains; others like to start companies.
• to start something again and hope that it will be more successful than before.

FRANCHISING
• Franchising is a form of marketing and distribution in which the owner of a business
system (the franchisor) grants to an individual or group of individuals
(the franchisee) the right to run a business selling a product or providing a service
using the franchisor's business system.
• Franchising is an arrangement where franchisor (one party) grants or licenses some
rights and authorities to franchisee (another party). Franchising is a well-known
marketing strategy for business expansion.