Methods to Initiate VenturesLecture # 6 Agenda • Major pathways and structures for entrepreneurial ventures • Factors involved in creating a new venture • Elements involved in acquiring an established venture • Franchise and its structure • Benefits and drawbacks of franchising The Pathways to New Ventures for Entrepreneurs Creating the New Venture Acquiring an Existing Venture Pathways to New Ventures Obtaining a Franchise . Creating New Ventures New-New Approach Approaches to Creating a New Venture New-Old Approach . “2007 Hot List. Nichole L. and Sara Wilson. Kristin Ohlson.sponsored programs Exercise Yoga Niche gyms Children Nonmedical Pre-assisted living Assisted living transition services Niche Consumables Chocolate Burgers Coffee houses Exotic salads Home Automation and Media Storage Lighting control Security systems Energy management Comfort management Entertainment systems Networked kitchen appliances Emerging Internet Opportunities Emerging Technology Opportunities Mobile Advertising Cell phones PDAs Concierge Services Niche Social Networks Seniors Music fans Groups of local users Pet owners Dating groups Nanotechnology Wireless Technology Virtual Economies Online auctions Educational Tutoring Human Resources Services Matchmaking Virtual HR Online Staffing Source: Steve Cooper. .” Entrepreneur (December 2006): 80–93. Spaeder. Torres. Kooser. Amanda C. Karen E.Trends Creating Business Opportunities Emerging Opportunities Green Products Organic foods Organic fibers/textiles Alternative Energy Solar Biofuel Fuel cells Energy conservation Health Care Healthy food School and govt. DC: National Federation of Independent Business. Reprinted with permission. 1993) 27. .Sources of New Business Ideas Among Men and Women Source: William J. A Small Business Primer (Washington. Dennis. reward analysis Points out the importance of getting an adequate return on the amount of money risked . • How much money will the enterprise take in if all goes well? • How much will it gross if operations run as expected? • How much will it lose if operations do not work out well? • Risk vs.Examination of the Financial Picture • Upside gain and downside loss expectations The profits the business can make and the losses it can suffer. Checklist for Estimating Start-Up Expenses . Checklist for Estimating Start-Up Expenses (Contd) . Acquisition of a Business Venture Personal Preferences Examination of Opportunities Acquiring a Business Venture Asking Key Questions Evaluation of the Venture . Advantages of Acquiring an Ongoing Venture Less Fear about Successful Future Operation Reduced Time and Effort Buying an Ongoing Venture Purchasing at a Good Price . Sales. and Operating Ratios .Evaluation of the Selected Venture Factors Affecting Sale of the Venture The Business Environment Assets of the Venture Profits. Key Questions to Ask • Why is this business being sold? • What is the physical condition of the business? • What is the condition of the inventory? • What is the state of the firm’s other assets? • How many employees will remain? • What type of competition does the business face? • What does the firm’s financial picture look like? . Negotiating the Deal Information Time Factors Affecting Negotiations Alternatives Pressure . Interview the employees 6.“Do’s and Don’ts of Buying a Business” 1. Investigate. Find out the real reason the company is for sale . investigate. investigate! 5. Have an accountant examine the books and check the cash flow 4. Never rely on oral statements 3. Have a seller retain a minority interest in the business 2. or copyright has licensed others to use it in selling goods or services • Franchisee A purchaser of a franchise • Franchisor The seller of the franchise . trade name.Franchising: The Hybrid • Franchising Any arrangement in which the owner of a trademark. Engage in a continuing business relationship . Maintain a specified quality of performance 4. Follow a franchise fee as well as a percentage of the gross revenues 5. Obtain and maintain a standardized inventory and/or equipment package usually purchased from the franchisor 3.How a Franchise Works • Franchisee Obligations: 1. Make a financial investment in the operation 2. Professional management training for each independent unit’s staff 4. logos. Identifying symbols. equipment to run the operation. Sale of merchandise necessary for the unit’s operation. The company name that provides drawing power 2.) • Franchisor Provides: 1. if needed 6.How a Franchise Works (Contd. designs. Financial assistance. and the food or materials needed for the final product 5. Continuing aid and guidance to ensure that everything is done in accordance with the contract . and facilities 3. Franchising • Advantages Training and guidance Brand-name appeal A proven track record Financial assistance • Disadvantages Franchise fees Franchisor control Unfulfilled promises of franchisor . Evaluating the Franchise Opportunity The Franchise Opportunity Decision Finding Reliable Information Investigating the Franchisor Seeking Professional Help . THANK YOU! .