Starting up a Business Developing a Business Model

Contents 1 The Business Model 2 Before you start 3 Start-up phase Start-up 4 Key business vocabulary

The Business Model How to make money from the products and services offered The Business Concept A concise description of an opportunity that contains four essential elements: 1. The customer definition 2. The value proposition and compelling story 3. The product/service 4. The distribution channel (production, wholesale, retail, customer)

The Five Stages of a Business’s Life Cycle • • • Pre Start-up Growth Maturity Rebirth or Decline Getty Images

Pre-start-up phase Four key issues: 1. 2. 3. 4. Opportunity recognition Testing concept feasibility Developing a business plan Acquiring resources and personnel Getty Images

Opportunity Recognition The process of using creative skills to identify a new innovation - a product, service, process, or marketing method. Getty Images

Testing concept feasibility Three essential elements required to test a potential business idea: 1. What is the product and/or service that is the basis for the business? 2. Who is the customer likely to be? 3. What is the benefit of your product/service to the customer?

Developing a business plan • So what if …? • Who cares…? • Why you…? • Where are you going…? • How will you get there…? • Advantages and disadvantages of running your own business? • How do you make money…?

Before you start It is critical to choose the right legal structure of your business.

Legal structures for start-ups The most popular are: • Sole trader (creating your own business) • Partnership • Limited liability companies

Business models • Established Businesses or Franchises • Social enterprises

A franchise • In cases when one wants to run a business but does not have a specific business idea. • When the franchisor (owner of a business) grants a license to another person or business (the franchisee) to use his business idea. • The franchisee trades under the brand name of the franchising business that gives help and support.

A social enterprise • A business with primarily social objectives. • The profit is reinvested for social purpose of the business or of the community. • If it is a charity, it gets a number of benefits, including tax relief.

Test for a start up business • Am I really interested in this business opportunity? • Is anyone else interested? • Will people pay for what is being offered? • Why me?

Why me? - Are you: • open vs. closed • supportive vs. controlling • secure vs. risk averse • genuine vs. hypocritical • respectful vs. disrespectful • negative vs. positive • egalitarian vs. superior • warm and accepting vs. cold and distant • dependable vs. conflicting • cooperative and collaborative vs. competitive • knowledgeable and skilled vs. inept (incompetent)

Start-up phase Three key issues: 1) Finding customers 2) Building a structure 3) Financing

Finding customers 1. Who is most likely to purchase the product or service at market introduction? 2. What do these customers typically buy, how do they buy it, and how do they hear about it? 3. What is their buying pattern? How often do they buy? 4. What are the customers’ needs and how can the new venture meet those needs?

Feasibility analysis • Are there customers and a market of sufficient size to make the concept feasible? • Do the capital requirements to start, based on estimates of sales and expenses, make sense? • Can an appropriate start-up team be put together to make it happen?

Financing - sources of funding • • Personal savings Money from family and friends Bank loans You will be required to pay government tax on the profit you make.

Key business vocabulary 1. Business ideas • To develop business ideas 2. Government tax • To pay government tax 3. A sales forecast • To make a sales forecast

Key business vocabulary 4. Your turnover • To predict your turnover 5. Financial projections • To create financial projections 6. An estimate of your costs • To make an estimate of your costs

Key business vocabulary 7. The right legal structure • To choose the right legal structure 8. Investors’ attention • To draw investors’ attention 9. Your business idea • To develop your business idea

Key business vocabulary 10. Market research • To carry out market research 11. Advice on business plans • To seek advice on business plans 12. A company • To launch a company

Answer the following questions: 1. What steps does an entrepreneur have to take before opening a business? 2. What are the ways of financing a startup? 3. What are the advantages of opening a franchise over running your own private business? Are there any drawbacks? 4. What does a social enterprise spend its profit on?

Find the words which have the following meaning: 1. A self-employed person who directs the affairs of the enterprise, bears all the risks and takes the profits and benefits: Sole trader 2. A type of non-profit business that uses its profit to help in solving social or environmental issues: Social enterprise 3. A type of business organization in which two or more individuals invest money, skills, and other resources, and share profit and loss: Partnership

Find the words which have the following meaning: 4. An enterprise in its early stage of operations or trading: A start up enterprise 5. A type of company whose shareholders’ responsibility is limited by the amount they have invested in case the company goes out of business: Limited liability company 6. A business ( often a store or a restaurant) that operates under a license granted by a company to market its products or service in a particular territory: A franchise

Synonyms - antonyms • • • Launch Massive Failure High Whether