MgtC39 - New Business Planning & Creation #12 - Review and Exam Preview
MANAGEMENT

 

Announcements - Final Exam Scheduling

Date:		tba
Time:		tba
Place:		tba
	10 true-false	10 marks
	5 definitions	15 marks
Format:	case study	2 questions - 20 marks
	short answer	1 question - 5 marks
		Total = 50 marks

 

 

 

 

 

Course Outline and Review

 

Lecture 1: Entrepreneurial Venture Sector in Canada

Size of small firm sector: # of firms
Size of small firm sector:# of jobs

Importance of small firm sector: job creation

Dynamism of new venture sector: youth employment
innovation
R&D spend

Typology	generic small firms:	} definitions,
of small	life style ventures:	} limitations,
firms:	gazelles:	} characteristics

Lecture 2: Entrepreneurs and Entrepreneurship

New venture failure rates
Expectations of entrepreneurs
Definition of entrepreneurs
Importance of entrepreneurial activity
Demographic characteristics of entrepreneurs
Psychological characteristics of entrepreneurs
Motivational drives: NAch, NPow, NAff
"Push" vs "Pull" factors for starting small firms
Internal vs. External locus of control
Male vs. female entrepreneurs

Lecture 3: Identifying Your Market

Definition of marketing
Discussion of "marketing concept"
Target markets
Market segmentation: various types
Industrial vs. Consumer markets: definitions
Industrial vs. Consumer markets: characteristics
Consumers' propensity to buy new products

 

Lecture 4: Doing Market Research

Primary vs. secondary
Observation vs. communication
Qualitative vs. quantitative
Market research methodologies: characteristics,
Market research methodologies: advantages & disadvantages

 

Lecture 5: Developing Your Marketing Strategy

"Product": broad appreciation of features and benefits

"Price": ability to set price = f(level of competition)
price normally based on cost + mark-up
mark-up strategy: skimming vs. penetration
fixed vs. variable costs
break-even analysis

"Promotion": advertising
personal selling
sales promotion
publicity

"Place": wholesale, retail, agents

Lecture 6: Determining Your Capital Needs & The Venture As Investment

Investment defined

Investment cash flow diagram

Factors affecting attractiveness of investment:

Size of initial capital outlay
Time lag between investment and returns
Size of forecast returns
Risk or uncertainty of returns
Returns obtainable from other investments

Return on Investment

Start-Up vs. Operating capital

Lecture 7: Finance 1 - Forecasting Sales

Methods for forecasting sales
"sales" vs. cash flow
cash flow impact of accepting orders
collection periods
"write-offs" i.e. non-collectible debt

Lecture 8: Finance 2 - Forecasting Profits

The income statement: purpose and construction
Sales
Cost of goods sold
Gross profit: definition and significance
Gross profit margin
Overhead expenses or operating costs: characteristics
Operating profit: definition and significance
Interest expense
Taxation: Small business tax rate
Corporate tax rate
Net income
Disposition of net income: dividends or reinvestment

Lecture 10: Valuing The Investor's Shares

Selling Equity: smaller piece of a bigger pie
Valuing the Pie: = f (all future cash flows)
Choosing forecast horizon: investors seek exit < 5 years
Present value theory
Choosing appropriate discount or hurdle rates
Cash flow of new ventures: there is none
Realising the investment: Trade sales vs. IPOs
Valuing a maturing or "steady state" firm
Discounting the value of selling the venture
Risk, return, opportunity cost

 

Lecture 11: Venture Capital and Business Angels

V.C. is a form of company finance

Money supplied by "institutions": pension funds, insurance cos.
A small % of their portfolio, to try and increase overall returns.
Some pension funds invest in v.c. directly
Most back private venture capital firms as limited partners

Ventures are high risk investments - need managing
Entrepreneurial teams may lack skills - marketing, strategy, finance
Investors have right to nominate Directors

V.C.'s looking for: 3X investment in 3 years
5X investment in 5 years
Equals: 40% compound return on investment - minimum
Higher ROI sought for "seed" capital
Lower ROI sought for "expansion" capital

Stages: Seed, Start-Up, Expansion, Later stage, Mezzanine

Getting Venture Capital is Difficult

100 plans
50 "binned" within first hour
50 proceed to get second or third read
25 proceed to meetings, discussions
10 - 15 proceed to "due diligence" (detailed investigation)
5 - 10 proceed to outline offer
5 proceed to serious negotiation of terms
2 - 3 receive investment

V.C. Seeks Capital Gains - Not Dividends

Rule of 2:6:2

20% "dogs"
60% "problem children"
20% "stars"
result: overall portfolio return circa 20%

Profits Made on Sale of Shares