Entrepreneur's Handbook
ENTREPRENEURSHIP PROCESS
Entrepreneurship process basically refers to the process of creating a value and what stages a person must go through in his entrepreneurial adventure. Although there are some differences in details depending on the type of entrepreneurship and the type of enterprise to be established, each enterprise emerges through certain stages. These stages are generally as follows;
- Identification of Opportunities
- Business Model and Business Plan Development
- Finding Resources
- Growth and Exit
7.1. Identification of Opportunities
Value in entrepreneurship must always be based on two subjects: opportunity and problems. For a successful entrepreneur, the problems experienced by people as well as the desires and needs that have not yet been met or are not met adequately contain important opportunities. For example, the company "yemeksepeti.com" has achieved a significant success in the market by offering us the food ordering service that is not yet available in Turkey. This opportunity detection has revealed a service that the entrepreneur sees the lack of in the market and has earned his entrepreneur a lot of money and fame. However, not only opportunities but also problems experienced by people can be turned into opportunities. If the Yemeksepeti example is examined upside down, the company has produced qualified solutions for people who have trouble ordering food (limited choice, bad service, etc.). Therefore, the opportunity or problem in entrepreneurship actually means the same. The entrepreneur will either find a solution to a problem or seize an opportunity and create value for the target audience. For this reason, the entrepreneur must have a side that constantly searches for opportunities and evaluates them in relation to the business that he / she does or intends to do. The development of this aspect actually requires the entrepreneur to know where to look and what to evaluate.
Entrepreneurs looking for new opportunities have to search for sources of ideas that they can use as opportunities and constantly review them instead of imitating their competitors. These resources are;
- Changes in economic factors
- Technological changes
- Changes in demographic trends
- Changes in the legal environment
For example, the increase in the disposable income level in an economy creates a market opportunity for many products or services that were not in demand before. Nowadays, with the increase in income levels, there has been a serious increase in people's eating habits, mobile phone ownership, and air travel frequency. Therefore, changes in economic factors should be constantly reviewed.
Similarly, technology both affects the processes in which products are produced and determines the level of competition in the market. For example, with the spread of CNC technologies in the manufacturing industry, it has been possible to produce products in lower quantities at lower prices. With this technological change, in parallel with the development of Internet technologies, companies have become more personalized and the nature of competition has changed. While important opportunities arise for companies following these developments, it can be a cause of bankruptcy for others.
Demography, in other words, changes in population structure bring important business ideas and opportunities. For example, the gradual aging of the population brings about increases in elderly care services or leisure time services. Similarly, the increase in the education level of women and their participation in the workforce caused the services such as cleaning, cooking and child care that were produced at home to be purchased from outside.
Finally, legal changes bring opportunities. For example; Serious legal changes have been made recently in environmental, health and safety issues. On the one hand, these legal changes require products and services that were not offered in the past, on the other hand, they can force existing products to exit the market.
Of course, the determination of opportunity should not be limited to the analysis of macro environmental factors. In addition, it will be beneficial for entrepreneurs and entrepreneur candidates to examine product or service opportunities by making micro level analyzes. Even these micro researches and analyzes can be more effective when done together with the macro trends mentioned above. Regarding the review of existing products or services, it will be useful for entrepreneurs to evaluate the following issues:
- Changing the price or revenue model of the product and service
- Changing the distribution channel of the product or service
- Changing the communication style of the product or service
- Changing product or service content
- Changing the target audience of the product or service
- Changing the production process
7.2. Business Model and Business Plan Development
Although identifying opportunities is the first and important step of entrepreneurship, the main feature that makes an individual an entrepreneur is to take concrete steps by carrying out the necessary activities on the basis of the idea they identify. For this reason, one of the necessary steps after the business idea is revealed is a business model in which the basic components of how the business idea will be put into practice and a business plan must be developed in parallel with the nature and scope of the work to be done. The main purpose of these activities is to determine the basic parts of the work to be done and to reveal the feasibility of the work on paper.
Ideas are not put into practice as soon as they come to mind or are detected. Some decisions need to be taken on critical issues such as which value will be produced on the basis of this idea or opportunity, to which customer segments they will be presented to, how to establish a relationship with customers and which revenue model to operate with. It is important to prepare the business model, especially when the level of uncertainty is high. The business model is a brief description of how the business will create value, how to deliver this value to the customer and generate revenue. As explained in detail in Chapter 4 within the scope of the business model, activities to be done in nine basic areas are planned for the business idea.
Business plans are more comprehensive documents than the business model. In practice, it is seen that business plans are prepared especially at the beginning of large-scale projects where the amount of investment planned to be made is high, or to find investment in the business idea from a public or private institution.
Although the content of the plan is not standard, technical, economic and financial feasibility studies related to the planned work are included in a comprehensive manner. After these studies are done, it can be said that the structure of the planned work is more evident and the business is more successful. In the researches, it is stated that the failure rate of the businesses established with the business plan is much lower than the others. (Barrow, 2004). Through the preparation of the pre-operational business plan, the business has the opportunity to see the possible difficulties on paper, as well as make calculations on key issues such as the amount of demand, the amount of required capital, etc.
The content of the business plans varies according to the audience to be presented and the purpose of preparation. Therefore, there is no standard content. For example, public institutions, angel investment organizations, incubation centers and banks declare in advance what format they want a business plan from entrepreneurs who will apply for investment. Entrepreneurs who will request investment from these institutions also prepare a business plan suitable for this format.
7.3. Finding Resources and Establishment
In the next step after the business plan is clarified, the entrepreneur should start his activities by gathering the necessary resources. These resources generally consist of human, capital and means of production. Depending on the developments in the business plan, the entrepreneur must harmoniously combine the required amount of capital, the specific competencies of the people, and the machinery, equipment and facilities required for the production and marketing of the product / service.
Among these resources, the source that plays the most important role in success is human. The entrepreneur often goes on an entrepreneurial journey together with a team, not alone. The success of the entrepreneur in this journey often depends on the team's ability to do their job well. For this reason, the more competent, self-sacrificing and knowing team an entrepreneur can create, the more likely it will be to be successful. In fact, access to the capital resource given in the second place will be easier. Especially the first issue that the managers of private entrepreneurship funds (angel investors, etc.) examine in an enterprise is not the business idea, the product, etc., but the entrepreneur and the team he established. If the team is good, this increases the likelihood of them investing in the business plan developed.
The second important source that entrepreneurs should find is capital. If all the required capital is provided by the entrepreneur himself, no search for resources is required. However, when we look at today's companies, it is seen that the number of businesses with more than one partner is very high. Therefore, the entrepreneur will be able to find the necessary capital from the following sources during the establishment phase:
- Equity capital
- Friends and family
- Angel investors
- Bank credits
- Public funds
Of these, equity refers to the venture established by the entrepreneur with his own savings. If this is not enough, the entrepreneur must obtain the necessary financial resources from foreign sources. The start-up phase of the venture is the hardest to raise capital due to the high risk. For this reason, the quality and persuasiveness of the prepared business plan becomes important. If the entrepreneur can obtain this capital from family members and friends in his close circle, other alternatives are generally not used. Of course, the amount of capital that can be obtained through this alternative route varies from person to person.
If there is no possibility to obtain capital from family and friends or if the amount is not sufficient, it may be possible to provide support from angel investors, loans from banks or public institutions such as KOSGEB, TÜBİTAK. Issues related to financing the venture are examined in detail in the following sections.
7.4. Growth and Exit
Businesses are not set up to go bankrupt or shut down. For this reason, the entrepreneur must pass the stage that requires a high amount of cash outflow as soon as possible, such as the establishment stage, and move to a stage that can finance itself and obtain the necessary cash sales revenues. Unfortunately, only 40% of the established enterprises can continue their activities in the first two years, and the remaining 60% end their activities (Bessant ve Tidd 2011).
The rapid transition of the established enterprise to the growth stage requires efficient use of financial resources on the one hand, and the correct and timely determination of strategies on the other. For this reason, it becomes important for the entrepreneur to attach importance to innovation, to develop his network (customer, supplier, distributor, etc.) and to invest in his business.
After the rapid growth phase, the entrepreneur should make a choice between continuing to operate or transferring the business to someone else and establishing new ventures in different areas (exit strategy). Continuing business is a decision made by most entrepreneurs. Indeed, entrepreneurs often do not think about selling off their businesses that they have successfully established and developed. There is no strategic mistake here. However, more innovation-oriented entrepreneurs may prefer to transfer the funds they obtain by selling their businesses to new ventures where they can achieve faster growth, especially after the rapid growth phase. In this strategy, which is called the "exit strategy", the entrepreneur both provides the high capital required by the enterprise by selling his business to large capital groups and utilizes the cash he obtains by investing in different fields.