Entrepreneurship for Engineers

2. CREATION OF NEW VENTURE

I. Developing the Entrepreneurial Plan

A business plan is crucial to anyone who’s starting a business. The business plan
will serve as a guide to help entrepreneurs stay on the right track towards their
goals and at the same time, to make potential investors and lending institutions see
their business as profitable.

Developing a business plan requires a lot of time, effort, and planning. Here are
some of the steps to help you create a business plan for your business.

1. Executive Summary
➢ It is an outline of your business’ goals and purpose.
➢ Includes a brief description of your products and services.
➢ A summary of objectives.
➢ A justification for viability.
➢ A description of the market and growth potential.
➢ An overview of funding requirements.

2. Objectives & Overview: As an entrepreneur, for this part, you only need to;
➢ Summarize your current operation.
➢ Put it into detail, including your products and services.
➢ How you make them?
➢ How you deliver them?
➢ How you manage them? etc.

3. Business Environment
Your business plan must have a clear explanation of the business environment.
Share an analysis of your current and upcoming competitors, how you compare to
them, and any regulations that govern your business. You may also highlight your
current or anticipated industry changes.

4. Financial Statements
As an entrepreneur, this section of your business plan must also contain the current
analysis of profit and loss and cash flow. With lenders being restrictive in lending
to businesses, to increase your likelihood of successful funding having well
documented financial statements will allow the bank to appropriately understand
your risk profile and likelihood to meet your lending obligations.

Wolaita Sodo University, Ethiopia

Entrepreneurship for Engineers

5. Growth Strategy
Developing a business plan for an existing business needs dedicated time and
effort to create a business plan that will captivate investors and financial
institutions. Moreover, continuously updating your business will let you see the
growth of your business and areas for improvement that will allow you to develop
better strategies.

II. Developing Ideas and Business Opportunities

1. A Good Business Idea
Finding a good idea is the first step in the process of converting an Entrepreneur’s
creativity into an opportunity. Any good business ideas could be an invention, a new
product or service, or an original idea or solution to an everyday problem, or execution of
ordinary ideas.

Here are a few ways to build upon the already existing concepts:
(a) Develop ideas as an extension of an existing product (Ex. adding camera and song
features to a mobile phone).
(b) Create an improved service (Ex. fast delivery services).
(c) Market a product at a lower price (via e-commerce Ex. amazon.com).
(d) Altering their quality or quantity (Buy 1 get 1 free offer)
(e) Introducing automation, simplification, convenience (Ex. smart product).
(f) Changing the delivery method, packaging, unit size or shape.
(g) Simplifying repair, maintenance, replacement or cleaning (Warranty/guarantee).
(h) Changing their colour, material or shape.

2. Techniques for Generating Ideas

(a) Brainstorming
This is a process in which a small group of people interact with very little structure, with
the goal of producing a large quantity of novel and imaginative ideas. Normally, the
leader of the group asks the participants to share their ideas.

(b) Focus Groups

These are group of individuals who provide information about a new product area that
can result in market penetration using a structured format. Normally, a moderator will
lead a group of people through an open, in depth discussion.

(c) Observation: used to describe a person or group of people’s behaviors by probing:

(i) What do people/organizations buy?

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Entrepreneurship for Engineers

(ii) What do they want and cannot buy?

(iii) What do they buy and don't like?
(iv) Where do they buy, when and how?
(v) What are they buying more of?

(d) Surveys
This research technique requires gathering of data by asking people who are called
respondents for information either verbally or by using written questions. Questionnaires
or interviews are utilized to collect data on the telephone or face-to-face interview.

(e) Tradeshows and Media

This can be an excellent way to examine the products of many potential competitors,
uncover product trends and identify potential products.

3. Tasks in Developing Business Ideas

(a) Identify the value proposition of your business idea: A value proposition defines
the benefits your company’s products and services offer to the customer.
(i) Create a strong differentiation between you and your competitors.
(ii) Increase not only the quantity but also the quality of prospective leads.
(iii) Gain market share in your targeted segments.
(iv) Improve your operation efficiency.
(v) Increase your revenue.

(b) Discuss products/services with prospective customers

(i) Would they buy from you?
(ii) At what price they will buy?
(iii) At what frequency they will buy?
(iv) Why would they prefer your products to the competitors?
(v) Find out what they really expect?

(c) Assess the market using in-depth market research

(i) How is the market segmented (by price, location, quality, channel etc.)?
(ii) What segments are you targeting?
(iii) How large are these segments (in terms of volume) and how are they changing?
(iv) What is the price make up/structures?
(v) What market share might be available to you?

Wolaita Sodo University, Ethiopia

Entrepreneurship for Engineers

(d) Analyze your competitor

(i) Who are they and how do they operate?
(ii) Are they successful and why?
(iii) How would they react to your arrival?
(iv) What makes you think that you could beat the competition?
(v) At whose expense will you gain sales?

(e) Consider possible start-up strategies

(i) Will you seek a franchise or set up an in-store concession?
(ii) Will you start by buying semi-finished products for resale?
(iii) Will you contract out manufacturing?
(iv) Will you buy an existing business or form an alliance?
(v) Could you lease or hire equipment, premises etc. rather than buy?

(f) Research and Development

Research is a planned activity aimed at discovering new knowledge, with the hope of
developing new or improved products and services.

4. Capital consideration: Financing and revising your business idea

i) How much investment is needed, where will you go for this kind of financial support?
ii) How long will you be able to handle the initial losses using your own resources?
iii) What other resources can contribute to extend your involvement so that you can turn
your initial losses into profit?
iv) How long it might take to develop and execute the business plan so that it will be
profitable?
vi) How will you present the business proposal to investors so that they agree to get
involved with your business?

III. Difference Between Business Ideas and Business Opportunities

1. What is a business idea?
A successful business idea must meet the following three conditions:
(i) It must offer benefit to the customer by solving a problem or fulfilling a need.
Customers buy products and services for just one reason; to satisfy a need. So, if your
business idea cannot satisfy customers, it won’t be successful. Every successful business
idea must have a unique selling proposition.

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Entrepreneurship for Engineers

(ii) It must have a market that is willing to accept it. A promising business idea must
offer a product or service that would be accepted by a large market. It must also have
feasible arrangements for catering to that large market as well as unique values that
differentiates it from the competition.
(iii) It must have a mechanism for making revenue. A successful business idea must
show how much money can be earned from it and how the money will be earned.

2. What is a business opportunity?

A business opportunity on the other hand is a proven concept that generates on-going
income. In other words, a business opportunity is a business idea that has been researched
upon, refined and packaged into a promising venture that is ready to launch.
While multiple business ideas may strike you on a daily basis, only few of them will be
profitable in the long run based on market research and feasibility study conducted. These
few are the real business opportunities.
An opportunity is found to meet the following criteria:
➢ It must have high gross margins.
➢ It must have the potential to reach break-even cash flow within 12 to 36 months.
➢ It must have the potential for residual income.
➢ It must have the potential to keep on improving with time.
➢ It must have a low level of liability risk.

3. Stages in New Venture Creation

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Entrepreneurship for Engineers

IV. Five Steps to Technology Commercialization

The Discovery and Innovation process can be repetitive through trial, error, and learning,
until finally success. However, the process for commercializing that discovery can be
simplified to a five-step illustration of a complex process.

1. Identifying the Commercial Value

The opportunity phase consists of identifying the commercial value of the discovery/
invention/ idea. The commercial value is simply that there is a market and customers who
are willing to pay for your technology that it meets a need. Key steps in this process
include cultivating a professional network in your field of expertise, research and
documentation.

2. Protection
Once a careful and accurate description of the discovery is complete, a patent, trademark
or copyright protection process can be initiated.
➢ A patent gives you the exclusive right to prevent others from making and selling
your invention.
➢ Trademarks offer protection for brands, symbols, logos and colours.
➢ Copyrights protect original works of authors, composers, programmers and
screenwriters.

3. Business Case and Commercialization Plan

This part of the process will determine if the innovation or discovery is truly feasible. It
involves a comprehensive analysis of the industry, market and close identification of the
customer. You will also need to document the business operations, policies, legal
structure of the business, marketing and growth plans, financials, and the team.

4. Building the Team and Securing Capital

Having the right expertise in your team will make the project more viable. Investors need
to be assured that you have the necessary expertise to execute your plan. “You need to
prove to investors that you can make progress on your commercialization plan in a
specified amount of time.”

5. Executing the Plan and Developing the Product

This phase includes the deal-making negotiations of selling the technology to an existing
business or the start-up process of a new business venture. The start-up process includes
finding a location to operate your business, hiring personnel, organizing your business
workflow, stocking supplies, developing prototypes and general administrative
organization.

Wolaita Sodo University, Ethiopia

Entrepreneurship for Engineers

V. Formation, Development, and Growth of Technology-Based New Enterprises

Wolaita Sodo University, Ethiopia