The Workbooks - Entrepreneurship: Theory and Practice

PA R T 5 Introduction to the Workbooks

Workbook 2 provides a range of practical exercises to guide you through the development of a Business Model Canvas, a plan and a presentation for your start-up proposition. By the end of Workbook 2 you will have created a pitch deck and plan which comprehensively answer all 12 start-up questions identified in Chapter 5 and demonstrate the viability of your start-up.

Š Getty Images/EyeEm

Workbook 1 has a number of practical exercises designed to help you determine the desirability and feasibility of a start-up proposition. By the end of Workbook 1, you will have a clearer idea of whether or not to proceed with your proposition. This might be all that you need, particularly if there is no external audience or funders interested in your idea.

WORKBOOK 1

START-UP DESIRABILITY AND FEASIBILITY Learning Outcomes In this part of the workbook you will learn: Whether starting up a new venture is desirable.

If your start-up proposition is feasible.

If you have the basis for a start-up proposition.

Mini Contents List W.1.1 Introduction W.1.2 Me W.1.3 Market W.1.4 Money W.1.5 Evaluating the idea

329

330

WORKBOOK 1

W.1.1 INTRODUCTION This series of practical exercises helps you to assess whether a start-up idea is a desirable and feasible option.

It uses the ‘Me, Market and Money’ model (Chapter 4, pp. 80–84): ‘Me’ focuses on your motivations, dispositions, and skills. Through these exercises, you will selfevaluate if a start-up is desirable.

‘Market’ exercises help you to assess the competition, if there is an outline customer and if there is a ‘window of opportunity’.

‘Money’ exercises help you to start thinking about the financial and social capital needed to turn an idea into a start-up proposition.

By the end of Workbook 1, you should have a clearer idea of whether you have the basis for a startup proposition.

Workbook 2 builds on your start-up proposition to develop a feasibility study and a pitch (Chapters 5, 6, 7, and 8).

W.1.2 ME Reflect on your start-up dispositions, motivations and skills in the following exercises.

Exercise W.1.1: Do your personality attributes incline you towards entrepreneurship?

Entrepreneurship involves a complex set of tasks and responsibilities. To cope with these challenges, you might need particular traits and be prone to specific cognitive biases.

Score yourself on these opposing statements.

Statement 1.1: In evaluating a start-up opportunity, I am completely prepared to take risks.

Statement 1.2: In evaluating a start-up opportunity, I will only take well-informed risks.

Agree with statement 1.1

2

3

Neutral

5

6

Agree with statement 1.2

Statement 2.1: If my business failed, I would be likely to blame myself.

Statement 2.2: If my business failed, I would be likely to blame others or outside circumstances.

Agree with statement 2.1

2

3

Neutral

5

6

Agree with statement 2.2

START-UP DESIRABILIT Y AND FEASIBILIT Y

331

Statement 3.1: I think that in developing a successful start-up it is better to see what happens.

Statement 3.2: I think that in developing a successful start-up it is better to plan first.

Agree with statement 3.1

2

3

Neutral

5

6

Agree with statement 3.2

Statement 4.1: I have high levels of self-esteem about setting up a business.

Statement 4.2: I have low levels of self-esteem about setting up a business.

Agree with statement 4.1

2

3

Neutral

5

6

Agree with statement 4.2

Statement 5.1: If I set up a business, I am optimistic about it being a success.

Statement 5.2: If I set up a business, I am unsure about it being a success.

Neutral

5

6

Agree with statement 5.2

Statement 6.1: I am very confident that I would be able to set up a successful business.

Statement 6.2: I have little confidence that I would be able to set up a successful business.

Agree with statement 6.1

2

3

Neutral

5

6

Agree with statement 6.2

Statement 7.1: If I set up a start-up, my focus would be on maximising my return.

Statement 7.2: If I set up a start-up, my focus would be on limiting what I could afford to lose.

Agree with statement 7.1

2

3

Neutral

5

6

Agree with statement 7.2

The traditional view is that entrepreneurs are risk-takers (Statement 1.1), have a high locus of control (2.1) and, because they set goals, are more likely to be achievers (3.1). There is also an expectation that an entrepreneur has high levels of self-efficacy (4.1), optimism (5.1), is confident (6.1), and looks at what they can gain rather than lose (7.1).

RKBOO

3

K

1

O

2

W

Agree with statement 5.1

332

WORKBOOK 1

Exercise W.1.2: what are your motivations towards entrepreneurship?

Rank each of these in order (1= highest) In setting up a business, I would want to build a business that…

Rank

…will make me rich …supports my lifestyle …gives me flexibility and autonomy …gives me independence and self-fulfilment …provides for my family …actively contributes to the community …gets me out of what I am currently doing …will give me social status Other reason (please specify) Now imagine your business has come to the end of its life. What key phrase would you like it to be remembered by? Use the picture of the tombstone below and write the epitaph for your business. For example, it might say RIP [business name]. This business brought me [great satisfaction] because [It allowed me to support my community].

RIP [..........................................]

The business brought me [..........................................] because [..........................................]

WORKBOOK 2

Building Your Business Model for Start-Up Pitching and Planning Learning Outcomes In this part of the workbook you will: Learn how to use the Business Model Canvas to develop answers to the 12 startup questions.

Build up towards a pitch and plan that provides a comprehensive understanding of all 12 questions.

Develop a set of pitch deck slides and plan sections to demonstrate the viability of your start-up.

Mini Contents List W.2.1 Introduction W.2.2 Product-market fit W.2.3 Marketing and sales W.2.4 Revenue modelling W.2.5 Business operations and logistics W.2.6 Business identity, management and team W.2.7 Competition W.2.8 Growth and funding needs W.2.9 Financial plans and the go/no go assessment

347

348

WORKBOOK 2

W.2.1 INTRODUCTION Chapter 5 set the scene for the exercises in this Workbook. It suggested that start-up involves answering 12 core questions, such as who your customer and what are your plans for future growth.

Although there is no one way of sketching out your business model, the workbook first builds on Chapter 6 and its use of the Business Model Canvas (BMC) to help you answer these start-up questions (Chapter 5, pp. 98–99): Is there a market out there? and Who is the customer? (customer segments in the BMC).

Is the business idea worthwhile? (value proposition).

How does the business reach its customers? (customer relationships and channels).

How does the business source, make and distribute its products and services? (key activities, resources and partners).

How does it make money? (revenue and cost streams).

The exercises then examine the start-up questions explored in Chapter 7: Who are we?

Why is this the right team?

How is the offer different in the market?

The exercises end with considering the final three start-up questions (Chapter 8): What is the plan for growth?

What does the start-up lack?

Is the start-up viable?

W.2.2 PRODUCT–MARKET FIT These exercises focus on building an understanding of key questions such as ‘Is there a market out there?’, ‘Who is the customer? And ‘Is the business idea worthwhile?’.

This equates to the customer segment and value proposition parts of the BMC. It also relates to the Product and Market sections used in plans. The aim is that by the end of this section, you are able to: 1. Write up your BMC customer segment and value proposition sections 2. Develop a range of pitch deck slides that explain your product and market fit 3. Write up your product and market elements for a plan

Exercise W.2.1: How big is the problem?

One way of beginning to decide on how big the problem is to split the problem market into a favoured starting geography. Many entrepreneurs start locally, often close to where they currently live. At the other extreme, some entrepreneurs are ‘born globals’ (Chapter 10, p. 264) with a plan to start in international markets. Brainstorm in the box below the different problem markets your product or service would suit. Once you have done this, evaluate: a) whether it is betters to start locally, regionally, nationally or internationally and b) why your chosen location is better than possible alternatives.

BUILDING YOUR BUSINESS MODEL FOR START-UP PITCHING AND PL ANNING

349

a)

Figure W.2.1 The Market

Market size

Graph showing the size/dynamics of the market or key statistics/quote about the market

K

O

2

W

Go to your library website and find out what databases or sources of information it has on the market for your chosen problem. Dedicated databases such as Mintel offer you the ability to find information on market size and trends. Official statistics often provide regional and national demographic information on a country’s population whilst trade associations or special interest groups often have information on changing patterns.

Collect information on the problem. Develop an infograph for your chosen problem that shows its market size and dynamics.

Adapt Figure W.2.1 for your own needs. Another version of this is shown in Figure W.2.1. If a ‘problem’ slide is used (Figure W.2.1.), it is usually followed by a ‘solution’ slide (Figures W.2.2 and W.2.8).

RKBOO

b)

350

WORKBOOK 2

Figure W.2.2 The Problem

• Problem 1 (Statement about the problem) • Problem 2 (Statement about the problem)

Graph showing the size/dynamics of the problem

Graph showing the size/dynamics of the problem

Exercise W.2.2: Who are your likely customer segments?

Most products have obvious uses. If your business idea is to develop a new type of electric charger for a phone, the market you are likely to be focused on is consumer electronics. However, some products and services can have applications in different markets. Inventions like the Post-It Note, Viagra and bubble wrap were all intended to solve problems in other markets. For example, bubble wrap was originally developed as a wallpaper.

Use the box below to brainstorm alternative ways that your product or service can be used.

Use the box below to brainstorm as many different customer segments that you think face the problem you are addressing. Remember wild solutions are welcome, as is combining and improving ideas and a lack of criticism.

K

2

O

Using desk research, by talking to different potential customers, or doing some mystery shopping, profile your customer segments within the total mass market for your product or service.

For a B2C (Business to Customer), complete Table W.2.1. For a B2B (Business to Business) opportunity, complete Table W.2.2.

351

RKBOO

BUILDING YOUR BUSINESS MODEL FOR START-UP PITCHING AND PL ANNING

W

Table W.2.1  B2C segmenting Segment characteristics Demography

Geography

Psychology

Behaviours

Segment A

Segment B

Segment C

Segment D

352

WORKBOOK 2

Table W.2.2 B2B segmenting Segment characteristics Business type

Segment A

Segment B

Segment C

Segment D

Purchasing characteristics

Attitudes

Use Table W.2.3. to assess the attractiveness of the customer segments.

Table W.2.3 Evaluating customer segments Segment A (Rate 1–5, 5 is high)

Segment B (Rate 1–5, 5 is high)

Segment C (Rate 1–5, 5 is high)

What is the size and growth rate of the segment?

Does the segment have a real itch (currently uses a ‘workaround’ to solve their problem)?

Is the segment willing to pay for the offer?

Is the segment easy to market and sell to?

Is the segment guarded by a major competitor?

Total Score

Exercise W.2.3: What’s your TAM, SAM and SOM? In a pitch or a plan, a TAM, SAM and SOM diagram can help explain how you have used a ‘topdown’ and ‘bottom-up’ approach to arrive at your chosen target customer.

Adapt Figure W.2.3 for your own needs.