Startup roadmap 2014 vecsenyi

Startup roadmap
Why? How? What?
Prof. János Vecsenyi
Janos.vecsenyi@uni-corvinus.hu

Contents
1. Why do you want to start a business?
2. Idea generation
3. The buinsess concept
4. The viability test
5. Risk management
6. Building your entrepereneurial team
7. Product development
8. Financing and Pitching
9. Business Plan
10. Foundation
11. Lean startup: Accelerating market entry
12. Market launch
13. Closing remarks
14. References
Startup Roadmap © J. Vecsenyi, 2014. 2

Even though you may be a born
entrepreneur, you can still learn about
entrepreneurship.
Even though you may not be a born
entrepreneur, you can still learn to become
one…. If you want.
Even if you don’t want to become an
entrepreneur now, you can still be a good
person.

If you want to cook, all you have to do is read
cookbooks and practice cooking.
The same can be said for starting a new
venture.
Having instincts is simply a plus.
4Startup Roadmap © J. Vecsenyi, 2014.
INGREDIENTS

The driving forces of a new business
Market
opportunity
External / Internal
resources
Entrepreneurial
team
Source: Timmons (1990) New
venture creation (3rd edition)
Opportunity
driven
Competency,
technology
driven

Idea
generation
Business
concept
definition
Entrepreneurial
team formation
Product
development &
design
Financing
Company
foundation
Market
entry
A startup roadmap
Lean
startup

WHY DO YOU WANT TO START A
BUSINESS?
Why?

Why does anyone want to start a business?
8
Opportunity
To become rich
FameIndependence
Startup Roadmap © J. Vecsenyi, 2014.
To make a livingGeneration change
It is better to be a job creator than a job seeker
Unemployement

What kind of business would I like to have?
9
A business that satisfies
local needs with typically
traditional products and
provides a moderate
living for its founder and
its employees. It has
moderate growth
potential and cannot
operate without its
founder in the long run,
like most SMEs.
E.g., Pop&Mom’s
Kitchen, T.J. The
plumber
A business built on
innovation based
products for global
markets with scalablility
and high financing needs.
Once turned into a
structured company, it
can function without its
founder and can be sold
off, like most Innovation
Driven Entreprises
(IDEs).
E.g., Prezi, Solvo, Ustream
Indextools
A temporary business to
utilize a relatively short
window of opportunity
with traditional or
innovative products to
gain short term profit as
soon as possible.
E.g,. selling an invention
or a seasonal service
Scalable &
sellable Temporary
Project
Provides a
Living
Source: Timmons (2003)

SME Entrepreneurship
• Initial focus on addressing local markets
only.
• Innovation is not necessary to SME
establishment and growth, nor is
competitive advantage .
• “Non-tradable jobs”—jobs that must be
performed locally (e.g. restaurants, dry
cleaners, and service industry).
• Most often family businesses or
businesses with very little external
capital.
• People who start them seek to maintain
control, not to create high growth. The
company typically grows at a linear rate.
• When you put money into the company,
the system (revenue, cash flow, jobs,
etc.) will respond quickly in a positive
manner.
IDE Entrepreneurship
• Focus on global/regional markets.
• The company is based on some sort of
innovation (tech, business process,
model) where they can go global or across
regions.
• “Tradable jobs”—jobs that do not have to
be performed locally.
• More diverse ownership base as the focus
of founders is on high growth and creating
company market value.
• The company starts by losing money, but if
successful will have exponential growth.
Requires investment.
• When you put money into the company,
the revenue/cash flow/jobs numbers do
not respond quickly.
What kind of business do we want to create?
Source: Aulet (2013)

Abilityandattitudeto
entrepreneurshipandchange High
Low Business and operational experience High
Dinosaurs
Traditional, large,
bureaucratic ventures
Ants
Traditional
small ventures
Gazelles
Fast growing. high
potential new ventures
Where do your venture want to fit?
Tigers
Dynamic, large,
expanding ventures
Source: Vecsenyi (1995)
11

12
A startup is a human institution designed
to deliver a new product or service under
conditions of extreme uncertainty.
(Ries, 2010)
A startup enterprise is a baby gazelle
venture with scalable market potential
combined with growth ambition and
global vision of the entrepreneur(s).
(Vecsenyi, 2013)

13
Do I want to be an entrepreneur?
Commitment
How much I want,
dare?
Lifestyle/ attitude
How would
I like to live?
Abilities
Who am I?
Competenecies
What do I know?
Aspirations, motivations
Why do I want to become
an entrepreneur?
Connections
Whom do I know,
who knows
me?
?

Before you start your business, make your list….
What can I gain if I
start...
What would I regret
if I don’t start …
What would I lose,
if I start…
Pros Cons
Which is stronger?

THE IDEA GENERATION
What did I find?

The business idea
The great match
Market fit
Product fit

17
From an idea to a business opportunity
(unique, new) product/service for a
certain or potential need, ifThe idea
Market
opportunity
Business
opportunity
+ there is repeatable, growing buying
potential and
+ capable to create profit
+ socially acceptable
+ worth to start a new venture on it
+
+

Is your VP fit and sexy?
Is your offer relevant, unique, credible?
NEED
VALUE
PROPOSITION

Value proposition: what do I want to offer?
19
ServiceProduct Agency

Resource driven entrepreneurship
Invention/ competence look for market opportunity
Invention
Idea
Competence
WHERE
can it be used?
WHO
could use it?
WHY
Would anyone
use it?Accountancy
competence
Inventing heath
protection
material
Accounting
services
Covering
household
appliances

Opportunity driven entrepreneurship
Recognized need looks for solution
Unsatisfaction
Shortage,
problem
New need
Invention
idea
Competence
Hidden need
Frames for the paintings
Cordon for the qeue

The innovative idea
( Joseph Schumpeter)
22
• New combination (different, better, different way on
the target market)
• Innovation= invention * commercialization
5 + 1 forms of innovation of
1.new goods
2.new methods of production
3.the opening of new markets
4. the conquest of new sources of
supply
5. the carrying out of a new
organization of any industry
6.New business model (making
money in a different way)

What kind of idea?

• Established ground rules
• Well known products,
services
• Existing business model
• Low groth potential
• Forseeable market
• Market niche for new
innovations
In which industry is it worth starting your startup?
Traditional industries Creative industries
• No ground rules
• New, mostly knowledge
based creative products
• Mostly new business model
• High growth potential
• Very uncertain market
• The industry niche
Startups can be
launched in all
industries

Sources of ideas for new ventures:
• Determine customer wants/needs
• Follow previous job(s) experience
• Improve products and services already on
the market
• Be open on foreign trips
• Elicit suggestions from channel members
• Check the Patent Office files
• Conduct your own research & development
• Surf on internet

Idea-generation tools
1. Searching for shortage, dissatisfaction
 Observing domestic and foreign markets (open eyes)
 Idea notebook
 Brain storming
 Read newspapers, leaflets, brochures
 Internet surfing
2. Recognizing mistakes, failures
 From failure to the solution
 Penicillin, Teflon, Viagra
3. Finding market niche, blue ocean
 Where is a need for new invention with low
competition
 iPod, iPhone, Body Shop
4. Studying trends
 Political, economic, social, ecological, legal trends
 Industry reports, trends

THE BUSINESS CONCEPT
Can we make business out of it?

Conscious preparation for starting a new venture
Market need
Value
proposition
Operation
Entrepreneurial
team
Business model Financial model
Defining
the business
concept
Testing
the viability of
the business
concept
Risk and
strength
management
Strategy and
action plan
Decision on
the start
Deciding
on starting the
new venture
www.startmybusiness123.com

Startup Business Concept Map
Market
needs
Value
proposition
Operations
Entrepreneurial
team
Business model Financial model
Marketneed
WHY?
FORWHOM?
Opereations
HOW?
Businessmodel
FROMWHAT?
HOWMUCH?
Entrepreneurial
team
WITHWHOM?
Solution,offer
WHAT?
Financialmodel
FORWHAT?
HOWMUCH?

Startup Business Concept Map
Customer
segments
Market size and
scalability
THE NEED, PROBLEM
OF THE CUSTOMERS
Distinctive
competencies
CSFs
Basic
conditions
CORE FUNCTIONS,
COMPETENCIES
Competitive
advantage,
Uniquness
Positioning,
pricing
VALUE PROPOSITION
(PRODUCT/SERVICE )
Key internal
people
External
partners,
suppliers
FOUNDERS/OWNERS/
OWNER MANAGERS
Mission,
vision
values
Sales strategy
and channels
REVENUE STREAMS COST STRUCTURE
Financing
needs
Financing
sources and
methods
Marketneed
WHY?
FORWHOM?
Operations
HOW?
Businessmodel
FROMWHAT?
HOWMUCH?
Entrepreneurial
team
WITHWHOM?
Solution,
offer
WHAT?
Financialmodel
FORWHAT?
HOWMUCH?

Road on the Startup Business Concept Map
Will we have
market?
Will we have
product?
Willwehaverevenue?
Will the revenue be
enough?
How much will it
cost?
4.TEAM3. OPERATION
Recognized
need
Recognized
solution
Will we have
the right
people?
You may want to repeat
the circle whenever you
have new data

On-line support software

1. Why is there a need and by whom?
Customer
segments
Market size and
scalability
THE NEED, PROBLEM
OF THE CUSTOMERS
Market need
WHY?
FOR WHOM?
a) What is the need, the problem and
why does this need exist?
b) Who are our customers and what are
their specific needs?
c) What is the size of the market and its
growth potential?

The need, the problem
Dissatisfaction
Shortage,
problem
New need
Hidden need
Dissatisfaction with current
offers regarding quality, style,
price, availability, assortment
Locally not available or
achievable offer, solution
Unmet need
Traditional bakery, fast
food, mobile application
These are issues and problems
that customers face but have
not yet realised
Drinking water, tapwater,
alternative energy
Mobile phone, alternative
energy
Smart phone, Rubik’s cube

Hierarchy of Your Customers’Needs
Emotional
benefits
Functional benefits
Product attributes What we build
into the offer
Functional benefits
sought from any
company
Psycho-social benefits
sought from any
company
Customers’
Values
Copyright © 2007 Impact Planning Group LLC.
To look for functional and emotional benefits vs. just product
attributes or features

Why is it important?
Family ties
What do your customers need?
Granma’s telephone example
Emotional
benefits
Functional benefits
Product attributes
Customers’
Values
Copyright © 2007 Impact Planning Group LLC.
Granma’s
telephone?
Why whould she like it?
Easy to use and pleasant
experience
How can we make it
for her?
• Big, sharp screen
• Big keyboard
• Fast dialing
• Big icons
• Few functions
• High voice
• Wireless
How?

Who would be our customers?
38
Target group:
the desirable and
reachable segments
According to
behavior
According to
desirability
Which is the
ideal spaghetti
sauce?
B2C
B2B
B2A
According to
decison making
Segments:
Groups with
similar behavior
pattern

Who would be our customers?
Seller
Free user
Paying customer
Primary income sources Secondary income sources
Consumer / end user
who eats it
Customer
who buys it
Buyer (Distributor)
who purchases it
Seller (Factory) who
manufactures the chocolate

Getting to know your customer
Who:
Who would make purchase decision? Focus on target market,
segments: the industry, location, buying behavior, direct and
indirect competitors, customer profile
What:
Exactly what are you selling from your perspective? Factors that
you try to sell and you should emphasize
When:
Time of the day, seasonality, frequency. Adjust to existing habits
Where:
Location, location, location. Focus on habits of your customer, offer
your product that is convenient to the customer
Why:
From the customer’s perspective, the specific reasons the customer
purchases your product. Understand primary reason or create a
reason
How:
Purchasing for cash, credit, barter? Customer’s preferred
purchasing method, technology.
Source: E. Solymossy, 2007

Market size
Total
Available
Market
Served
Available
Market
Ideal
Available
Market
Serviceable
Obtainable
Market
TAM: population of 30-
50 age group
SAM: Population of 30-50
age group with diabetes 2
IAM: Population of 30-50 age
group with diabetes 2 and
smart phone
SOM: Population of 30-50 age
group with diabetes 2 and
smart phone,
ready to change lifestyle

Window of opportunity
• Growing market need
Window of expansion
• Expanding market reach
Scalability potential

43
2. What do you want to sell, what is unique in it?
“People don’t buy what you do; people buy why you do it.” Simon Sinek
a) What is your value proposition product/
service you offer?
b) What is unique about your product, the
competitive advantage your customers
would buy?
c) Where will you position your offer on
the value-price range?

What do you want to offer?
WHAT?
Same
SpecialNew
UNIQUENESS & COMPETIVE ADVANTAGES
perceived by customers

Who would be your competitors and how can you have
competitive advantage?
Direct Indirect Substitute
ACTUALPOTENTIAL
© 2007 Impact Planning Group LLC.
What and how do they offer?
Where do we want to be better, different?

Positioning
Quality/
Value
Price
Price/
value
PremiumMediumMass
High
end
Low
end

3. What are the preconditions and what would be your core and
distinctive competencies to start and operate?
a) What core competencies do you have to have to provide your
Value Proposition?What do you want to do on your own and
what will be outsourced?
b) What are your distinctive competencies and Critical Success
Factors (CSFs) which enable you to provide competitive
advantages?
c) What are the basic legal, official, physical, human conditions to
start your operation?

How do you want to create value?
HOW?
SAME
AS OTHERS
BETTER,
THAN OTHERS
DIFFERENT
THAN OTHERS
COMPETETIVECOMPETENCIESto
providecompetetiveadvantages

49
Operational competencies
Core
competencies
• Development
• „Core activity”
• Marketing and sales
• Finance
• Leadership and
management
Distinctive
competencies
• Human
• Phisical
• Economic
• Technological
• Marketing
• Legal
Creating Value
proposition
Creating competitive
advantage
Basic
conditions
• Legal condition
• Official licences
• Phisical and
equipment
conditions
Conditions to start
and operate

Core functions, core competencies
Core functions and competencies to create and capture
value
 Development
 Production / operations
 Marketing and sales
 Financial management
 Leadership and business administration
 Info-communication management

Critical Success Factors(CSFs)
CSFs are those factors which enables a business to be successful in a
particular industry and make the business capable to win the
competition. These are:
• Human CSFs: special knowledge or skills (e.g., an outstanding chef, PhD,
world class designer, a great team)
• Phisical CSFs: manufacturing, logistical capacity, machines, equipments,
location, sourcing reach, distribution channel (e.g., special, unique machine,
equipment, facility, App store, iTunes)
• Business CSFs: access to resources, economy of sale, economy of
distribution
• Technological CSFs: unique or proprietary technology, special method,
process, IT system
• Marketing CSFs: Innovation, customer intimacy, operational excellence
• Legal CSFs: patents, copyrights, franchises

Essential conditions
Essential conditions are those conditions which
are required by law or basics for operations
 Legal condition: Corporation, operational
licenses, opening a bank account
 Official authorization: marketing authorization,
operating permit, education, degree
 Technical, personal, physical, conditions:
facilities, tools and equipment (owned, rent)

53
4. Who would make it happen?
Key internal
people
External partners,
suppliers
FOUNDERS/OWNERS/
OWNER MANAGERS
a) Who are and will be the owners?
b) Who would we work with in the business,
who would be the key managers and
associates?
c) Who will be the external partners and
suppliers?

Creating an entrepreneurial team
Self anaysis
• Purposes
• Abilities
• Competencies
• Connections
• Experiences
Corporations
• Owner, co-
owners
• Key associates
• External
partners,
suppliers
Team
building
• Goals
• Roles
• Processes
• Interpersonal
relationship

Roles and responsibilities in the new venture
Suppliers
External
contributors
Employees
Owners
Founder
Complementary
competencies,
resources
personalities
Providing core
competencies
Required, but
outsourceable
competencies e.g.,
accountant, lawyer,
patent agent, designer,
programmer
Key managers
Advisory board
Board of
directors
Key personnel
Subcontractors

5. What would be the sources of revenue and
how would we get it?
a) What will be the sources of revenue,
what is the way of creating and
capturing value (the business model)?
b) Why do we want run the business?
c) How would we want to acquire revenue
by marketing and sales?

Sources of revenue
Asset sale Usage fee Renting fee
Leasing fee License fee Lending fee
Advertising Subscription Brokerage

The business model
1. The story: For whom,
why, how do you create
value with what?
2. The value chain: How do
you create, capture
value?
3. The money making: The
revenue stream, the cost
structure, the profit, the
financing need, return?
Creating and capturing value

The business model
What are we doing for whom and why would anyone pay?
The story
59
Collection and
distribution of
job offers via
the Internet
Profession.hu
Printing and
copying
services for
customers and
businesses
Copy General
User-friendly,
personalized,
beautiful
everyday IC
objects
Apple

Sample revenue generation/business models
• Online auction business model
• Online content
• Premium business model
• Professional open-source
• Retailer
• Pyramid scheme business
model
• Razor & blades
• Servitization of products
business model
• Subscription business model
• Premium
• Wholesale
• Asset sale
• Auction business model
• All-in-one business model
• Brick & click
• Collective business model
• Cutting out middleman
• Direct sale
• Distribution
• Franchise
• Freemium
• Low-cost carrier business model
• Loyalty business models
• Monopolistic business model
• Multi-level marketing
• Network effects business model

Mission, vison, values: your story.
Mission, reason for
your busines exists
VISION, the state your
business wants to reach
VALUES which govern your
business life
VALUE PROP, the product
you provide

STP marketing strategy
Define market
for the business
Create market
segments
Evaluate
segments on set
criteria
Construct
segment profile
Evaluate the
attractiveness of
the segments
Selecting target
market
Develop
positioning
strategy
Develop and
implement
marketing mix
Review
performance
S
Segmenting
T
Targeting
P
Positioning

6. How will the venture be profitable and how much money
do you need for start and where do you want to get it from?
COST STRUCTURE
Financing
needs
Financing
sources and
methods
a) What will be your costs and how much
profit you can make?
b) How much money do you need and for
what to start your business?
c) Where do you get financing for starting
your business?

How will you make money?
– Costs 2. For what, how much, when do you
need to spend?
= Profit
3. How much profit can you make? When will
you break even?
Equity 4. How much capital do you need?
Return 5. When will your investment come back?
1. Who would pay, why, when and how
much? What would be the primary,
secondary sources of your income? How
much revenue will you calculate?
Revenues

What dou you need money for?
• Seed money
• Operational expenses
• Personal expenses
• Safety reserve

Sources of entrepreneurial financing
Founder
Bootstrapping
3Fs
(Family, Fiends,
Fools)
Private
investors
Business
Angels
Venture
Capital
Crowdfunding
Governamental
support
Bank loan

VIABILITY TEST
Are you sure it’s a good idea?

5+2 initial questions before starting a new
venture
1. Is there a real need/demand?
– Finding, creating, fulfilling market niche with the right product/service
(Marketable)
2. Can we win it with a competitive value proposition?
– Utilizing distinct competencies (better, special, different) (Competitive)
3. Can we do it?
– Launching, managing the new venture with the right people, technology
(method) and organization (Operational)
4. Is it worth doing?
– Making it profitable (Profitable)
5. Do I (we) really want it?
– Mobilizing competence and commitment of a socially responsible
private individual (Commitment and competence)
6. How much money do we need to start?
– Funds required to start the venture (Seed capital)
7. Do we have money for it?
– Getting the seed capital for launching and starting (Capitalization)

Is your business idea viable?
1. Would it be marketable?
2. Would it be competitive?
3. Would it be feasible?
4. Would it be profitable?
5. Would you and your team be
competent and committed?

Profitable
A viable business concept
with a competent and
committed team
Marketable Comptetitive
Technically feasible

RISK MANAGEMENT
How can you improve your chances?

Startup decision analysis
Risk and
strength
management
Strategy and
action plan
Decision on
the start

Startup decision
Why will it be fine to start?
Why do we wait to start?
Why do we not start?
Later

ENTREPRENURIAL TEAM FORMATION
With whom do we want to make it?

Creating the entrepreneurial team
Self
assessment
• Attitudes
• Abilities
• Competencies
• Network
• Experience
Partners
• Owner(s)
• Employees
• Partners
• Supplyers
Team
• Goals
• Roles
• Processes
• Interpersonal
relationship

‘Must haves’ to become an entrepreneur?
Network
Whom we know
Who knows me
Personality
sense …
abilities
motivations
ExperienceCompetencies
knowledge
skills
attitude
What I was
born with
What I learned,
am able and
want to apply
Those who
can add
value
What I
consciously
utilize
1.
Know yourself and
build on that
2.
Strengthen your
strengths
3.
Cooperate with
others!
4.
Learn from your
past!

Where is your strength?
Entrepreneur- expert
– Working in her/his business
– Executes things
– Likes to deliver product
Entrepreneur-entrepreneur
– Working on her/his business
– Oversees chaos
– Likes to create business
Entrepreneur-manager
– Working in her/his business
– Makes order in chaos
– Likes to operate business
Source: M. E. Gerber:
The E Myth Revisited.
1995

Whom do you need for your technology start-up?
Hackers
(experts in
technology)
Hipsters
(good in business
and management)
Hustlers
(great in sales and
marketing)
Business is not a one man show!

Early stage personal decisions
• Alone or with others?
• With family, friends, associates?
• Investors?
Founder
• Employee, subcontractor, or owner?
• Quality or availability and compensation?
• Individual contributor or manager?
Associates
• Whom I know, who knows me?
• Who would be the right external partners?
• Who would be the right supplyers, subcontractors?
Partners
Startup is teamwork!

81
Key roles at the beginning
CEO
CTO
- Staffing, motivating,
accessing people
- Managing Finances
- Executing business
strategy
- Networking, PR
- Product and technology
development
- Building knowledge
management system
CMO -Marketing
management
-Design
- Sales management
COO
- Organization design
- IT systems
- Sourcing
- Logistics

The role of the board of directors
• Involvement of external people
• Mentoring
• Review operating and capital
budgets
• Develop longer-term strategic
plans for growth
• Support day-to-day activities
• Resolve conflicts
• Ensure proper use of assets
• Networking

What do you need to clarify with co-owners and
employees?
83
Goals
Roles &
responsibilities
Processes
Interpersonal relationship
Conflictresolution
Planning
What are the key results, short, medium,
long term goals and the reasons for
existance?
Who does what?
What are the core values
and grand rules?
What are the core processes,
systems, action plans with
deadlines?
Source: Beckhard, 1975

PRODUCT DEVELOPMENT & DESIGN
What the product will be like?

How to create product from the idea?
Source: http://www.innecs.com/html/Product%20development.html

LEAN STARTUP
ACCELERATING MARKET PENETRATION
How can we create value faster and better?

The lean startup methodology for product
development
Ideas
Build
Product
Measure
Data
Learn
• Coding
• Designing
• Prototype /
Product building
• Check Quality
• Test with users
• Collect evaluations
• Raise statistics
• Learn from users
• Find conclusions
• Generate new
ideas
Source: www.kickstarter.com

Minimal viable product (MVP)
1. Helps entrepreneurs start the process of learning as quickly
as possible
2. The goal is to test fundamental business hypotheses
3. Only one hypothesis at a time
4. One total circle of Define, Measure, Learn at a time
5. Do not push perfection just show the prototype,
or the concept to the customer

Source: http://huitale.blogspot.hu/2010/12/

More startup failed because of
lack of customers than failures
of product development
Steve Blank

FINANCING
For what, how much, from where?

• Entrepreneurship:
Pursuing an opportunity beyond the
resources currently controlled / Howard
Stevenson
• Financing
Obtaining the missing resources

Why
For what
From where
How
When
you need
How much
money
at the early phase of your new business?

Financing categories
Equity financing
Investing
• Creates ownership
• Provides control and insight
• Equity increase expectations
• Occasionally dividend/ROI
expectations
• Net loss in case of insolvency
• Obtained from capital markets
• Investor sometimes provides
expertise too in startup phase
Debt financing
Crediting
 No ownership but collateral
and/or tangible asset (property)
is required
 Pre-defined time frame
 Interest bearing
 Payback obligation, requires
profit from operation (positive
EBITDA)
 Usually provided by banks, but
due to high associated risks is not
a preferred financing tool by
commercial banks in startup
phase

What financing do you need for?
Seed capital
for development
Startup capital
for quick start
Growth capital
for expansion

What does the venture need the money for?
1. How much money do you have and how
much will you need for personal use?
2. How much money will you need to start your
business (start-up cost) ?
3. How much money will you need to stay in
business (operational expenses) ?

What does the venture need the money for?
Development, startup costs Operational expenses
Living costs Reserve needs
Research and development cost, Licenses,
permits, Fixtures, equipment, Installing
fixtures, equipment, Beginning inventory
costs, Rent deposit, Insurance fee,
Advertising for opening, Legal, professional
fees, Unanticipated expenses
Be more realistic with the projections
Minimum of 3-6 months operative
expenses or 10-30%
Food, clothing, utilities, insurance, rent,
entertaintment, transportation, health
care, etc.
Employee wages, Your living expenses,
Rent, Supplies, Utilities, Advertising,
insurance, Taxes, Maintenance,Delivery
/ Transportation, Accounting fee,
Membership fee,
Miscellaneous

The Business model: Making money
– Cost 2. Spending on what, how much,
when?
Profit 3. How much, when will break-
even be reached, positive cash
flow?
Investment
4. How much investment is
needed?
Return
5. When will the investment return?
1. Who will pay for what, how
much, when?
Revenue

Money
Fix cost
Volume/Time
Break-even analysis
Fix
cost
Variable
cost
Profit
Break- even point
Minimum volume
Minimum Price
Realistic?
Enough?

Sources of entrepreneurial financing
Founder(s)
Bootstrapping
3F
(Family,
Fiends, Fools)
Private
investors
Business
Angels
Venture
Capital
Crowdfunding
Governmental
support
Bank loan

How can we get out from the Valley of Death?
Valley of
Death
Source:

Return
1. When will the operation become profitable?
– Operating break-even
2. When will the return on investment reach its
break-even point?
– Duration of the Return on investment
3. What is the rate of investment compared to
other investments?
– ROI

Two pitches for two kinds of audience
• Investment pitch wants to
convince investors to give
money to your business
• Sales pitch wants to convince
customers to buy your
product/service

Elevator pitch for investors
1. What is the
problem/ need?
2. What is the
solution/value
proposition?
3. What is the value
for the market and
for the investor?
• 2-5 minutes pitch
• Raises investor’s attention to
the new venture
1. No nonsense
2. Easy to understand
3. Greed inducing
4. Irresistable
5. What we offer to,
what we request
from the investor?
4. Who are the
members of the
winning team?

Preparation for the elevator pitch
1. Define your business concept
2. Define why do you want to pitch, what do you want to
accomplish
3. Formulate what do you want to tell and how
4. PRACTICE, PRACTICE, PRACTICE
5. Ask for feedback
6. Tell your pitch to the investors
7. Listen to the questions
8. Give brief answers to the questions. Be prepared for
expected questions
9. Be calm in taking the results
10. Assess your performance and be prepared for the next
pitch
10

CREATING YOUR BUSINESS PLAN
How can you convince the investors?

www.startmybusines
s123.com
Self confident
Profound
Concious
Execution
Why do you need a business plan?
109
Detailed
BUSINESS PLAN
Viable
STARTUP BUSINESS
CONCEPT
Idea
Systematic
thinking using
WHY?
For the
founders, for
3F investors
and business
angels
For the founders,
investors
FOR WHOM? HOW? WHAT?
Detailed
planning with
Business plan
toolkit
Convincing
profound
arguments
Self confident
Planned
Concious
ExecutionConvincing,
credible
document

A business plan for a new venture is
… a convincing and credible document for starting and financing
a new venture to prove that in the next 2-3 years the new venture
 with its products and services
 on the target market
 with the entrepreneurial team
 can make profit
 and manage risk
…prepared
 for and by the founders to make a conscious decision on
starting a new venture
 for the investor to convince financing institutions or
private investors

A business plan is…
when the founder
 Analyzed the market and
industry
 Planned actions to market
entry
 Defined and designed products
and services
 Designed operational
conditions of the business
 Identified the necessary staff
 Calculated the profit making
potential
 Calculated risks and risk
management tools
 to the founder that to
start the business is
rewarding and possible
 to the investor that
financing the new
business is rewarding
and safe
when it proves
Convincing Credible

Content of a business plan
1. Cover sheet
2. Executive summary
3. Introducing the business
4. Industry, market, competitor analysis
5. Product /service
6. Marketing plan
7. Operational plan
8. People and organization
9. Financial and financing plan
10. Risks and risk management
11. Attachments

Analyzing business environment
Industry
Industry trends
Growth potential
Market segments and
groups
Industry success
factors
Official regulations
Technology trends
Preferred purchasing
and payment methods
Purchasing power
Payment moral
Competitors
Competitive value
props
Industry value chain
Labor market
Networks
Legal system
Investors’ ecosystem
Accounting Act
Tax Act

How much money will your startup make?
114
Income statement
Income statement
Sales
- Costs
Net income
Balance sheet
Debt
Assets
Equity
Cash-Flow statement
Cash in
- Cash out
Cash Flow
Financial statements for entrepreneurial answers
Would it be
profitable?
Would it be
liquid?
Would it be
thriving?
Financing
Closing
Balance
Sheet
Beginning
balance
sheet

FOUNDATION STEPS
How to start?

Business conditions
116
Tax
regulations
Legal
form
People
Organization
Core activities
and products
Accounting
Accountant
Experts
Advisors
Investment
Site, office
Bank
selection
Licences
Basic conditions for launching a new venture?
Patents
Insurance
Name
selection
Sales strategy
and force
Technical, organizational, human
Legal conditions

MARKET ENTRY
How do we start selling?

Steps to the market
1. Who would be our
customers, what do
we know about their
buying behavior?
(Segmenting)
2. What are the needs
of our targeted
segments? (Needs
analysis)
3. What do our
competitors offer?
(Competitive
analysis)
1. What do we sell, to
whom, satisfying
what needs?
(Positioning)
2. How do we price?
(Pricing)
3. How will we
communicate to the
market?
(Promotion)
4. Where and how will
we sell? (Sales
channels, strategies
execution)
Market
research
Market
entry
Market
retention
1. How do we get feedback
from our customers?
(Correction needs)
2. How will we react to
correction needs, short
term? (Reactive
customer service,
complaint management)
3. How will we react to
correction needs, long
term? (Proactive
actions, product
development)

CLOSING REMARKS
Do you still want to start a business?

Instinct can never replace knowledge,
but perfectly complement it.
Kristina Ohlsson, 2012
It is not enough to invent it…
You should make it…
You should sell it…
You should make money out of it

Staircase of entrepreneurial success
Technical
success You can make it
Sales
success
You can sell it
Business
success
You can make money out of it
Social
success
It is useful, not harmful
to society
Personal
success
You are happy

Enjoy the journey
not just the
destination!

1. Aulet (2013) Disciplined Entrepreneurship
2. Blank, Steve (2013) The Four Steps to the
Epiphany
3. Béza és társai (2013) Kisvállalkozások
finanszírozása. Perfekt
4. Gerber Michael E. (2001) The E-Myth Revisited
5. Ries Eric (2011) Lean startup
6. Szirmai P.-Klein S. Üzleti tervezés kívül és belül.
Induló vállalkozások tervezése. EDGE 2000 Kiadó,
Budapest
7. Timmons, J. (2003) New venture creation.
Entrepreneurship for the 21st century. Irwine
8. Vecsenyi János: (2012) Kisvállalkozások indítása és
működtetése. 72h
9. Wasserman, Noam (2012) The Founder’s dilemmas
Videos
1. http://www.ted.com/talks/lang/eng/simon_sinek_
how_great_leaders_inspire_action.html
2. 8 secrets of success
3. If You Don’t Understand People, You Don’t
Understand Business
4. http://www.ted.com/talks/malcolm_gladwell_on_
spaghetti_sauce.htm
5. Marketing Strategy
6. http://www.youtube.com/watch?v=Tq0tan49rmc
7. On pitching to VCs
8. The era of open innovation
9. Before Avatar ... a curious boy
Sources

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