Professional Documents
Culture Documents
new ventures
Pathways to new venture creation
• Every prospective entrepreneur wants to know the best methods for
launching a new venture.
• we will examine: bootstrapping, creating a new venture, acquiring an
existing venture, buying a franchise and establishing a social venture.
Bootstrapping
• Bootstrapping is a means of starting a new venture through highly
creative acquisition and use of (sometimes other people’s) resources.
• Some people say that bootstrapping means starting a new business
without financing.
• Bootstrapping relies greatly on networks, trust, cooperation and wise
use of existing resources, rather than going into debt or giving away
equity.
Look for the ‘low-hanging fruit’. Use a
copycat idea.
Find quick, break-even, cash-
generating products.
Focus on cash (not on profits, market
share, or anything else).
CREATING NEW VENTURES
• Theory Proposed Joseph Schumpeter
• Schumpeter’s theory of creative destruction is that entrepreneurs distort the
market equilibrium by introducing new products and innovations. In so doing
entrepreneurs drive less innovative products out of the market and advance
the product frontier
• Actually there are two ways to split this. The most effective way to
approach a new business venture is to create a unique product or
service –
• one that is not being offered today but would be in great demand if it
were.
• The next-best way is to adapt something that is currently on the
market or extend the offering into an area in which it is not presently
available.
• The first approach is often referred to as new-new, the second as
new-old.
How does one discover or invent new
products?
• make a list of annoying experiences or hazards encountered with
various products or services during a given period of time.
• new-new approach indicates the importance of people’s awareness
of their daily lives (work and free time) for developing new business
ideas.
• Most small ventures do not start with a totally
unique idea. Instead, an individual piggybacks on
someone else’s idea by either improving a product
or offering a service in an area in which it is not
currently available – hence the term new-old
approach.
• setting up restaurants, clothing stores, or similar
outlets in sprawling suburban areas that do not
have an abundance of these stores.
• Potential owners considering this kind of enterprise
should try to offer a product or service that is
difficult to copy.
Examination of the financial picture
• Prospective entrepreneur decides that a new venture is a wise one, it
is imperative to remember that the plan may not work perfectly.
Some modification may be necessary.
• Thus, the entrepreneur has to be flexible. If something does not work
out, a contingency or backup plan.
Examination of the financial picture
• The prospective entrepreneur of a new venture must evaluate the
enterprise’s financial picture.
• How much will it cost to stay in business for the first year?
• How much revenue will the firm generate during this time period?
• If the outflow of cash is greater than the inflow.
• How long will it take before the business turns the corner?
• Advantages • Disadvantages