1(e) Simplifying Shares
Shares are units that make up a company .Think of these as cells of a body,a corporate body .The major difference is that shares are numbered . A company is the legal vehicle you use to deliver your idea/solution to the consumer and in return, earn financial rewards through it. As you may have heard of Public companies or Private limited companies or Limited Liabilty companies -all these descriptions represent various legal vehicles with the major difference being in the share structures .
When people with an interest in a company are said to own shares in a company ,it means that they exchanged shares for money.The money they used to buy the shares is used as capital and it is known as share capital .The owners of shares ( those who exchanged money for the shares) become known as shareholders.Share holders are in actual fact the true owners of the companies .Shareholders appoint directors,directors employ managers ,and managers oversee workers .This is the hierarchy structure of companies .This formation appears in a business plan under the heading Organisation Structure .
Private companies And Public Companies .
Private companies are simply legal entities whose shares are owned privately. This means that the owners have no obligation to reveal the financial perfomance to anyone except to other private owners and tax authorities.Where a private company makes profits the dividend ( amount from the profits available to shareholders ) are paid out to the private owners . In some cases, the identity of shareholders in private companies is unkown to the public.
Public companies on the other hand are companies which are partly owned by the public.The founders of the company can still hold a controlling interest (majority shareholding) and release the rest of the company shares to the public. Company shares become available to the public through an Initial Public offer (IPO) .This happens when a previously private company intends to convert into a public compoany .The other turn of phrase to describe the process of going public is " listing" or " floating shares ".
The Process of Going Public ( Converting from Private Company to Public Company)
Stock Exchange Authorities have a series of requirements for companies that intend to go public. These companies must meet those requirements and must disclose certain information about the companies officers ,the company's compliance to Financial regulations such as Tax returns and its operations. All financial and operational information of public companies must be made public.This ranges from what qualifications and experience the company directors have , how much the directors are paid ,how many shares they hold in their capacities ,and the company's business and future plans .
A stock exchange or stockmarket is where public companies' shares are traded. To simplify this defination, it is basically known that a market is where goods and services are exchanged for money-where the buyer and seller meet . A stock market is where public companies shares are exchanged for money .Stockmarkets are where share owners or holders of buy and sell their shares through intermediateries called Stock Brokers. In basic economics the price of any commodity is determined by forces of demand and supply and where these two forces meet is where the price is determined this point is called the equilibrium . For instance, if there is flooding and the supply of potatoes is reduced and potaoes become scarce ,their price goes up because there is higher the demand for potatoes as compared to low supply of potatoes.
Now,lets say the flooding causes a bumper harvest of potatoes such that there is far too many potatoes to the point that they are even going bad because of low demand from buyers -the price of potatoes will fall so that buyers can buy them before they go bad on the seller .
We must also remember that there other factors that can affect the deamnd and supply of potatoes such as cost of transport, cost of agricultural imputs ,wages flactuations of potato farm workers ,effeciencies of farming systems (use of mechanised methods to improve output and quality,etc .The point here is there are many factors that can ultimately cause the price of potatoes as a commodity to move up or down.
The same principle operates on the stock market -where more people demand the shares(also known as equity) of a certain company, the price of the shares rises .Where more share holders/owners are selling their shares compared to those buying them, the price of the shares will drop. Certain factors can also affect the prices of shares besides demand and supply ,these can be information and perception of value of the company.
The Stock exchange or stock market is also referred to a Capital Market because it is where companies raise capital by going public. It is at the point of going public or listing that an entreprenuer makes genuine money and it is at this same point other investors exit a company ( most venture financiers exit here) . The point of going public is considered the ultimate measure of an entreprenuers success.It should be the goal of every entrepenuer who thinks big to take his company public.
Wednesday, February 9, 2011
Creating Successful Business Plans (Pre Business Plans Questions)
1(d)Pre Business Plan Questions
What structure will the business idea take ? In other words what legal vehicle will you choose to run the affairs of your business idea.
These are several I have listed some are American and some are those we use in African Countries ( the Law is more or less the same wherever you are ,regardless of different names or titles) :-
- Sole Proprieter :-here you are personally liable for all the companies assets and debts ( liabilites ) What this means is you're exposed if the business fails you must personally pay back every cent or penny .
-General Partnership (USA format) :- you partner with some one to run the business . Here you and your partner are responsible for all assets and liabilities . Should you go bank rupt you creditors will sue you and your partner to recover thier money.If you make profits you equally share them .
-Partnership ( African Format -Roman Dutch law ) :-This is the same as the one mentioned above and shares the same characteristics as in General Partnership. Most Law firms ,Accounting Firms and Medical Practices are structured in this format.
-Limited Partnership(USA format): -here you partner with several partners but the other partnesr have limited liability and interest ( right to profits ),At least one Generel Partner must exist within such a company .
-Limited Liabilty Company(USA format) :- Here the company is structured in such a way that th members have limited (or reduced exposure to) liabilty.This futher branches out into two formats that is -'C' Class Corporation -this is a corporation that affords you limited (or less exposure to) personal liabilty and in some instances no personal liabilty. However ,the company is required to pay Corporate tax and members arealso taxed personally.'S' Class Corporation -this is corporation is the same as a 'C' class the only difference is that S class are taxed at a persoal level .
Private Limited Company
According to Zimbabwe Company law ( Based on Roman-Dutch Law) -which I'm fimiliar with, a
when you apply for registration of a company the first stage is to involves ensuring that the chosen name for the company does not sound or appear like another as this may affect already registered entities . This means that the first stage involves a name search.
Upon satisfying the Registrar of Companies that your chosen company names( you will provide 5 options ) are unique, the Registrar will select one as the acceptable name .
The second stage involves submitting a Memorandum of Association this is a legal document which explains what your company sets out to doand an Articles of Association which spells out that the who members of the named company are ,when they met to form a company and what levels of exposure they have based on the shares they hold in the Private Company. In simplified terms the extent of members liabilty is limited by the shares they hold . The best arragement in this case is for members to hold one paid up share as the least of their exposure to liabilty.
Thereby,qualifying the term Limited Liabilty . The comlexity of such matters is best left to Corporate Legal experts .In that country that is how a company is incorporated and upon satisfying all the Registrar of Companies ' requirements ( and some that I've left out here ). The Company is brought to life when a Certificte of Incorporation is issued . It is supported by a Stamped Memorandum & Articles of Association, a Company Registration form 14 ( CR14)which lists the Names of the Directors& their Physical Addresses ,and a Company Registration form 6 ( CR6) which states the companies registered domicile .
Why a Company?Why not just do your thing and carry on with the business of making money? The truth is once your payments, for whatever business idea you have ,start to flow ,the tax authorities will pick them up unless you not using a bank acount and store all your revenue in a safe( only drug dealers and other illegals hide money from the authorities).If you are going to succeed financially then all routes for cashflow will have to be utilised and that includes using a Bank accounts . Remember ,bank notes belong to the Central Bank (their state Property ) and the State is obligated to charge us something for using their Bank Notes its called tax .It is wiser to have the company pay your taxes instead of you paying .
A registered comapny is the best way to do business for the entreprenuer because it becomes a representative of the entreprenuer ,actually his double ( and it takes almost all the risk ) while at the same time being a custodian of the business idea . If anything goes wrong,it is considered as the company failed not the entreprenuer . This means the entreprenuer can keep his house his furniture and his life even if the business idea (now the company) fails . He is only obligated to pay up to the extent of his liabilty -where the company is a Limited liabilty Company Structure.
A company is a legal person who acts on behalf of the entreprenuer while being controlled by the entreprenuer (whose exposure to the company's liabilites is at a minimal ) while controlling the company and earning profits or interest from it . ( Roman Dutch Law) or Private Company (UK format):-is similar to the Limited liabilty Company (USA format)of course without the 'C' &'S' class Corporations structures.The major similarity is that the members have limited liability (or exposure to liability) and no liabilty feature does not exist with Private Limited. On the tax matters ,the company is required to pay Corporate Tax.
What structure will the business idea take ? In other words what legal vehicle will you choose to run the affairs of your business idea.
These are several I have listed some are American and some are those we use in African Countries ( the Law is more or less the same wherever you are ,regardless of different names or titles) :-
- Sole Proprieter :-here you are personally liable for all the companies assets and debts ( liabilites ) What this means is you're exposed if the business fails you must personally pay back every cent or penny .
-General Partnership (USA format) :- you partner with some one to run the business . Here you and your partner are responsible for all assets and liabilities . Should you go bank rupt you creditors will sue you and your partner to recover thier money.If you make profits you equally share them .
-Partnership ( African Format -Roman Dutch law ) :-This is the same as the one mentioned above and shares the same characteristics as in General Partnership. Most Law firms ,Accounting Firms and Medical Practices are structured in this format.
-Limited Partnership(USA format): -here you partner with several partners but the other partnesr have limited liability and interest ( right to profits ),At least one Generel Partner must exist within such a company .
-Limited Liabilty Company(USA format) :- Here the company is structured in such a way that th members have limited (or reduced exposure to) liabilty.This futher branches out into two formats that is -'C' Class Corporation -this is a corporation that affords you limited (or less exposure to) personal liabilty and in some instances no personal liabilty. However ,the company is required to pay Corporate tax and members arealso taxed personally.'S' Class Corporation -this is corporation is the same as a 'C' class the only difference is that S class are taxed at a persoal level .
Private Limited Company
According to Zimbabwe Company law ( Based on Roman-Dutch Law) -which I'm fimiliar with, a
when you apply for registration of a company the first stage is to involves ensuring that the chosen name for the company does not sound or appear like another as this may affect already registered entities . This means that the first stage involves a name search.
Upon satisfying the Registrar of Companies that your chosen company names( you will provide 5 options ) are unique, the Registrar will select one as the acceptable name .
The second stage involves submitting a Memorandum of Association this is a legal document which explains what your company sets out to doand an Articles of Association which spells out that the who members of the named company are ,when they met to form a company and what levels of exposure they have based on the shares they hold in the Private Company. In simplified terms the extent of members liabilty is limited by the shares they hold . The best arragement in this case is for members to hold one paid up share as the least of their exposure to liabilty.
Thereby,qualifying the term Limited Liabilty . The comlexity of such matters is best left to Corporate Legal experts .In that country that is how a company is incorporated and upon satisfying all the Registrar of Companies ' requirements ( and some that I've left out here ). The Company is brought to life when a Certificte of Incorporation is issued . It is supported by a Stamped Memorandum & Articles of Association, a Company Registration form 14 ( CR14)which lists the Names of the Directors& their Physical Addresses ,and a Company Registration form 6 ( CR6) which states the companies registered domicile .
Why a Company?Why not just do your thing and carry on with the business of making money? The truth is once your payments, for whatever business idea you have ,start to flow ,the tax authorities will pick them up unless you not using a bank acount and store all your revenue in a safe( only drug dealers and other illegals hide money from the authorities).If you are going to succeed financially then all routes for cashflow will have to be utilised and that includes using a Bank accounts . Remember ,bank notes belong to the Central Bank (their state Property ) and the State is obligated to charge us something for using their Bank Notes its called tax .It is wiser to have the company pay your taxes instead of you paying .
A registered comapny is the best way to do business for the entreprenuer because it becomes a representative of the entreprenuer ,actually his double ( and it takes almost all the risk ) while at the same time being a custodian of the business idea . If anything goes wrong,it is considered as the company failed not the entreprenuer . This means the entreprenuer can keep his house his furniture and his life even if the business idea (now the company) fails . He is only obligated to pay up to the extent of his liabilty -where the company is a Limited liabilty Company Structure.
A company is a legal person who acts on behalf of the entreprenuer while being controlled by the entreprenuer (whose exposure to the company's liabilites is at a minimal ) while controlling the company and earning profits or interest from it . ( Roman Dutch Law) or Private Company (UK format):-is similar to the Limited liabilty Company (USA format)of course without the 'C' &'S' class Corporations structures.The major similarity is that the members have limited liability (or exposure to liability) and no liabilty feature does not exist with Private Limited. On the tax matters ,the company is required to pay Corporate Tax.
Tuesday, January 25, 2011
Creating Concepts and Business Plans that Sell.
1(c)A Business Plan that Sells
Who are you making the businesss plan for ?
The first answer here should be ;for your business . Business Plans serve as guiding policy documents for your business . That is, the business will continue to depend on it even after the funding has come in . It should be open to amendment so that it remains relevent to a growing business and a changing enviroment.
The second answer should be ;for your funders. Who are these people ? Funders are the people who can finance your business idea . For the sake of simplicity, I have reduced them to 4 categories :-
- Individuals.
-Bank Loans officers.
-Angel Investors .
-Venture Capitalists.
Individuals -these can be friends or family members .They are closest to you ,trust your ability and believe in you.They always turn out to be a good first option for business idea funding.It would be ideal to make a business plan they understand aand can interpret.We are not ruling out yourself as funder .
Bank Loan Officers or Banks-these people see a lot of busines plans in their work and ,therefore it important that yours stands out from thr pile . Keep it simple and lean . It should not look like a bible. Remember, they will ask for collateral security. This means in the event your business fails to pay back the loan they can recover their money. If you have no collateral-get collateral or forget about banks and find other ways of raising capital . It helps to know who is looking into your business plan . If your application is unsuccessful; ask why it failed , learn and try again.
Angel Investors -these are wealthy individuals( some are entreprenuers who have succeeded )who have a lot of funds and are willing to take a risk by lending to an entreprenuer . I am told that about US$14 million worth of Angel investor funds circulates the globe daily seeking investment opportunities.In the First world countries these are widely accessible -there are directories for such people ( check google to confirm ) . This type of investor seeks to get to the entreprenuer before the Venture Capitalists arrive on the scene and secure a favourable position,say 60 % of your business idea . Most Angel investors prefer IT start-ups as these grow faster and offer a good return on investment.Some have specific preferences ,like some avoid gambling business ideas for moral reasons . Once again, tailor-make your Business plan to appeal and make sense to them and be especially realistic on the Financial forecasts ( hire an accounting person if necessary to ensure that the figures are realistic). Should your business fail they stand to lose their entire investment so bear in mind that they will do all in their power to prevent such a loss.
Venture Capitalists -are businesses which are in the business of investing in new business ideas and existing businesses . The often prefer businesses that will grow to the point of listing on Stock Exchanges . At this point ,they sell their stake (exit point ) and realise astronomical gains or continue well after shares have been floated and the company listed . For most entreprenuers these are the best people to go with but they will do all in their power to ensure that they gain the most from your business idea .However, a well negotiated deal with a venture capitalist(VC) is one that allows the entreprenuer to buy back all or most of the shares of the business at the point the VC(not meaning VietCong) intends to exit .As stated above ,VC also stand to lose their entire investment if the business idea doesn't succeed ,therefore they will place their people (considered experts ) to sit on the Board of Directors or occupy Senior Management positions . In reality, they will attempt to reduce your influence and run the show to ensure they make a profit on their investment. If an entreprenuer intends to involve venture capitalists it is recommended that the entrepenuer seeks the services( an loyalty) of a good accountant and a competent lawyer as preferred advisors .You will be required to fund at least 10% of your business start up as a show of your commitment to the success of the venture .
Who are you making the businesss plan for ?
The first answer here should be ;for your business . Business Plans serve as guiding policy documents for your business . That is, the business will continue to depend on it even after the funding has come in . It should be open to amendment so that it remains relevent to a growing business and a changing enviroment.
The second answer should be ;for your funders. Who are these people ? Funders are the people who can finance your business idea . For the sake of simplicity, I have reduced them to 4 categories :-
- Individuals.
-Bank Loans officers.
-Angel Investors .
-Venture Capitalists.
Individuals -these can be friends or family members .They are closest to you ,trust your ability and believe in you.They always turn out to be a good first option for business idea funding.It would be ideal to make a business plan they understand aand can interpret.We are not ruling out yourself as funder .
Bank Loan Officers or Banks-these people see a lot of busines plans in their work and ,therefore it important that yours stands out from thr pile . Keep it simple and lean . It should not look like a bible. Remember, they will ask for collateral security. This means in the event your business fails to pay back the loan they can recover their money. If you have no collateral-get collateral or forget about banks and find other ways of raising capital . It helps to know who is looking into your business plan . If your application is unsuccessful; ask why it failed , learn and try again.
Angel Investors -these are wealthy individuals( some are entreprenuers who have succeeded )who have a lot of funds and are willing to take a risk by lending to an entreprenuer . I am told that about US$14 million worth of Angel investor funds circulates the globe daily seeking investment opportunities.In the First world countries these are widely accessible -there are directories for such people ( check google to confirm ) . This type of investor seeks to get to the entreprenuer before the Venture Capitalists arrive on the scene and secure a favourable position,say 60 % of your business idea . Most Angel investors prefer IT start-ups as these grow faster and offer a good return on investment.Some have specific preferences ,like some avoid gambling business ideas for moral reasons . Once again, tailor-make your Business plan to appeal and make sense to them and be especially realistic on the Financial forecasts ( hire an accounting person if necessary to ensure that the figures are realistic). Should your business fail they stand to lose their entire investment so bear in mind that they will do all in their power to prevent such a loss.
Venture Capitalists -are businesses which are in the business of investing in new business ideas and existing businesses . The often prefer businesses that will grow to the point of listing on Stock Exchanges . At this point ,they sell their stake (exit point ) and realise astronomical gains or continue well after shares have been floated and the company listed . For most entreprenuers these are the best people to go with but they will do all in their power to ensure that they gain the most from your business idea .However, a well negotiated deal with a venture capitalist(VC) is one that allows the entreprenuer to buy back all or most of the shares of the business at the point the VC(not meaning VietCong) intends to exit .As stated above ,VC also stand to lose their entire investment if the business idea doesn't succeed ,therefore they will place their people (considered experts ) to sit on the Board of Directors or occupy Senior Management positions . In reality, they will attempt to reduce your influence and run the show to ensure they make a profit on their investment. If an entreprenuer intends to involve venture capitalists it is recommended that the entrepenuer seeks the services( an loyalty) of a good accountant and a competent lawyer as preferred advisors .You will be required to fund at least 10% of your business start up as a show of your commitment to the success of the venture .
My Thoughts on Entreprenuership In Africa
Chapter 1 Developing Concepts that Sell
The Reality Is :The World rewards you when you provide solutions that solve problems !
The rewards come in form of money.This is the basic ,simple fact tha must motivate any entreprenuer .Solve small problems -earn small rewards .Solve Big problems -earn big rewards.
Any emtreprenuer who truly aspires to succeed must be on the ;lookout for problems.He must train his mind to spot these and estimate how many people they affect. The more people in need of the solution -the wider the sources of revenue.Bill Gates did that by providing an operating system for all computers ,world wide .Sometimes this requires looking into the future and recognising problems in advance- long before the problem is noticeable. Train yourself to see problems and picture yourself solving them . Interpret every problem,big or small,as a potential business idea .Seek to create solutions for daily problems you see. I know some problems can't be solved that easily , for example ,Global warming - but some affect us in many small ways everyday.These are the ones an entreprenuer must attempt to provide solutions for.
Africa has so many problems -big and small ones .In fact,it is also known as the continent of problems and hardship.This alone must motivate every entreprenuer make Africa their business laboratory.
Why Africa ?
Because economies in that continent are forcasted to grow and will be growing at above 5% on average . 7 out 10 of the fastest growing economies are from African countries the world over. Africa's economy is made up of a few big corporations (Multi- nationals /Conglomerates) and a lot of small scale /medium entreprises making the the bigger bulk of players in commerce .Compare this with the rest of the economies elsewhere on the globe.I am not ignorant to the challenges of doing business in Africa .They are many . Consider the differences in business perspectives, culture and language;not forgeting corruption,bureacracy-the list of negatives goes on . Thats not our focus( and shouldn't be for the entreprenuer)because they will always be hurdles -like people who will tell you it can't be done . That shouldn't matter -what matters is what you're seeing with your mind's eye-Your vision. Thats what should drive an entreprenuer and the passion to provide a solution -at a profit, of course.
1(a) Creating Concepts/Ideas Around Existing Business
We live in a time where technological advancements and the consequential transformation in consumer preferences is making old solutions irrelevent to the current problems.
The advent of the internet is one such example. The Postal service offered by Post Offices has been replaced by electronic mail . This has affected the postman . In some countries the postman no longer exists . This development has also impacted the production and sales of stamps ,envelopes and post cards.
The arrival of Amazon .com means books have become electronic .How do you thnik this will affect writers,publishers,paper milling and manufacturing companies ,and the forestry companies that were reliant on fast selling paper backs ( I'm not saying paper sales have declined ).
Similar changes have affected airline travel agents who used to physically sell airline tickets to commuters and now the same commuter can purchase their tickets and secure a booking on any airline from the comfort of their home or office .
All these changes mean old solutions are no longer relevent and this presents an oopportunity for the budding entreprenuer to innovate around these existing businesses.Once again, it requires the entreprenuer searches for the problems,first.Todays entreprenuers must see themselves as modern day inventors . This is why Thomas Edison ,Alexander Graham Bell and Henry Ford made fortunes ( it appears they made a lot more than Bill Gates has today if you factor in inflation )-they simply invented solutions for everyday problems . Problems which affected everyone .
Alexander Graham Bell figured out that long distance communication by telephone would revolutionalise the world . I find the same concept at work at Facebook today. The only difference is Mark Zuckerman found out that people love to see pictures of themselves -just like they love their images on a mirror and would spend hours in front of it . Communication is still at the heart of both concepts .
Zuckerman innovated and created around several existing businesses.So can you !
I wll explore what Facebook's core business is in one of my next Chapters . Ineed you to tinkabout it and take a guess. If you have the answer -make a contribution and join our debate here or on my facebook wall
http://www.facebook.com/LovemoreMhindu
1(b) Turning your Solution into a Business
Why build a business around your solution ?
Businesses are built for two reasons
(1) To provide a financial return on Capital upon selling it.
(2) To provide regular cashflow or revenue
You can build your business with the aim of selling it .Sabeer Bhatia ,an Indian Software engineer ,designed ,built and ran Hotmail before selling it to Microsoft.As an entreprenuer,you may also build a business which you will keep and grow,earning revenue from it as it grows and expands .For the sake of simplicity,lets say the first reason is-build to sell and the second reason is - build to keep and earn (most family owned business have this characteristic).
As an entreprenuer you need to be clear on which path you will take . It is also significantly important to remove all emotions from business and view your business purely as a business not your baby.
Building a business starts with a plan . No one I know of ever tried to build a house without a plan . Even in the poorest African villages ,the builder has some sought of mental picture of where he will build a hut ,what material he will use and how much . Who he will build it with and for how long( perhaps it must be completed before the rains start-kind of time frame .Think of it ,its crazy to start a constuction project with out a comnstruction plan or to attempt to build a house using just any other building plan designed for another site elsewhere.
I've lost count of how many business plans I've seen that look alike .I agree that some form of uniformity must exist when making a business plan however,I feel a business plan for a website development company must not be the same as that of a private medial centre.The two businesses are not the same but its amazing how the same format is used for both.
My opinion is ,the entreprenuer is the inventor of the solution only he/she knows best how the solution must change the lives of those its intended for. your business plan must be made in the same unqueness as your solution . It cannot be a copy of another business at all.
The Reality Is :The World rewards you when you provide solutions that solve problems !
The rewards come in form of money.This is the basic ,simple fact tha must motivate any entreprenuer .Solve small problems -earn small rewards .Solve Big problems -earn big rewards.
Any emtreprenuer who truly aspires to succeed must be on the ;lookout for problems.He must train his mind to spot these and estimate how many people they affect. The more people in need of the solution -the wider the sources of revenue.Bill Gates did that by providing an operating system for all computers ,world wide .Sometimes this requires looking into the future and recognising problems in advance- long before the problem is noticeable. Train yourself to see problems and picture yourself solving them . Interpret every problem,big or small,as a potential business idea .Seek to create solutions for daily problems you see. I know some problems can't be solved that easily , for example ,Global warming - but some affect us in many small ways everyday.These are the ones an entreprenuer must attempt to provide solutions for.
Africa has so many problems -big and small ones .In fact,it is also known as the continent of problems and hardship.This alone must motivate every entreprenuer make Africa their business laboratory.
Why Africa ?
Because economies in that continent are forcasted to grow and will be growing at above 5% on average . 7 out 10 of the fastest growing economies are from African countries the world over. Africa's economy is made up of a few big corporations (Multi- nationals /Conglomerates) and a lot of small scale /medium entreprises making the the bigger bulk of players in commerce .Compare this with the rest of the economies elsewhere on the globe.I am not ignorant to the challenges of doing business in Africa .They are many . Consider the differences in business perspectives, culture and language;not forgeting corruption,bureacracy-the list of negatives goes on . Thats not our focus( and shouldn't be for the entreprenuer)because they will always be hurdles -like people who will tell you it can't be done . That shouldn't matter -what matters is what you're seeing with your mind's eye-Your vision. Thats what should drive an entreprenuer and the passion to provide a solution -at a profit, of course.
1(a) Creating Concepts/Ideas Around Existing Business
We live in a time where technological advancements and the consequential transformation in consumer preferences is making old solutions irrelevent to the current problems.
The advent of the internet is one such example. The Postal service offered by Post Offices has been replaced by electronic mail . This has affected the postman . In some countries the postman no longer exists . This development has also impacted the production and sales of stamps ,envelopes and post cards.
The arrival of Amazon .com means books have become electronic .How do you thnik this will affect writers,publishers,paper milling and manufacturing companies ,and the forestry companies that were reliant on fast selling paper backs ( I'm not saying paper sales have declined ).
Similar changes have affected airline travel agents who used to physically sell airline tickets to commuters and now the same commuter can purchase their tickets and secure a booking on any airline from the comfort of their home or office .
All these changes mean old solutions are no longer relevent and this presents an oopportunity for the budding entreprenuer to innovate around these existing businesses.Once again, it requires the entreprenuer searches for the problems,first.Todays entreprenuers must see themselves as modern day inventors . This is why Thomas Edison ,Alexander Graham Bell and Henry Ford made fortunes ( it appears they made a lot more than Bill Gates has today if you factor in inflation )-they simply invented solutions for everyday problems . Problems which affected everyone .
Alexander Graham Bell figured out that long distance communication by telephone would revolutionalise the world . I find the same concept at work at Facebook today. The only difference is Mark Zuckerman found out that people love to see pictures of themselves -just like they love their images on a mirror and would spend hours in front of it . Communication is still at the heart of both concepts .
Zuckerman innovated and created around several existing businesses.So can you !
I wll explore what Facebook's core business is in one of my next Chapters . Ineed you to tinkabout it and take a guess. If you have the answer -make a contribution and join our debate here or on my facebook wall
http://www.facebook.com/LovemoreMhindu
1(b) Turning your Solution into a Business
Why build a business around your solution ?
Businesses are built for two reasons
(1) To provide a financial return on Capital upon selling it.
(2) To provide regular cashflow or revenue
You can build your business with the aim of selling it .Sabeer Bhatia ,an Indian Software engineer ,designed ,built and ran Hotmail before selling it to Microsoft.As an entreprenuer,you may also build a business which you will keep and grow,earning revenue from it as it grows and expands .For the sake of simplicity,lets say the first reason is-build to sell and the second reason is - build to keep and earn (most family owned business have this characteristic).
As an entreprenuer you need to be clear on which path you will take . It is also significantly important to remove all emotions from business and view your business purely as a business not your baby.
Building a business starts with a plan . No one I know of ever tried to build a house without a plan . Even in the poorest African villages ,the builder has some sought of mental picture of where he will build a hut ,what material he will use and how much . Who he will build it with and for how long( perhaps it must be completed before the rains start-kind of time frame .Think of it ,its crazy to start a constuction project with out a comnstruction plan or to attempt to build a house using just any other building plan designed for another site elsewhere.
I've lost count of how many business plans I've seen that look alike .I agree that some form of uniformity must exist when making a business plan however,I feel a business plan for a website development company must not be the same as that of a private medial centre.The two businesses are not the same but its amazing how the same format is used for both.
My opinion is ,the entreprenuer is the inventor of the solution only he/she knows best how the solution must change the lives of those its intended for. your business plan must be made in the same unqueness as your solution . It cannot be a copy of another business at all.
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