Entrepreneur's Handbook
RESOURCES AND BUSINESS IDEA HARMONY
The biggest reason why many people who produce new ideas and want to have a job are hesitant to enter the entrepreneurship path and see entrepreneurship as risky, because the resources are limited, the needs are too much, and the companies that are currently operating have very large resources. Nevertheless, many new initiatives are launched every day and these people can turn their ventures, which they started alone with great efforts, into companies that achieve great things after a while. So why maybe some entrepreneurs with the same idea and equal financial capital are advancing their businesses with great success, while others find it difficult to enter new businesses and feel a constant need for resources? There is no easy answer to this, but first it should be noted that resources are not limited to capital and smart entrepreneurs find a way no matter what. It is possible to see that the project team ranks first when the features that successful investors look for in ventures are questioned. Other issues such as capital, technology, and even the idea itself come after the founding team when it comes to business success. In this section, first the characteristics of the project team, then other sources will be mentioned and how all these are effective in bringing the business idea to life will be examined.
1.1. Entrepreneur Team
Some ventures come to life with a single founder, while others emerge with a crowded teamwork. Whether the founding team is a single person or two or more people, it is very important that the resources, talents and vision of the team are in line with the business idea. This is also called opinion-founding harmony. It is one of the first points that people who evaluate the business idea look at. The founders are discussed in this section under four headings as history, vision, division of labor and partnership.
1.1.1. Past
Everyone can have a good idea, but not everyone is the right person to bring it to life. For example, a person who has an innovative idea about payment systems has a background in banking, finance, retail, collection, etc. It is expected to have experience in matters and to have an experience of the problem they want to solve. For example, when a marketing specialist, a medical doctor, a hotel clerk or a mechanical technician wants to develop a solution in a field they have never experienced before, they have low credibility and credibility to investors. Many investors say that the practice that expresses how the idea is brought to life is more important than the idea. For this reason, the first place that a person who wants to implement a new idea should look for to create business ideas should be his / her own background and expertise. Because this person will have a competitive advantage compared to others who plan to do the same job in this regard. This will allow this person to realize the business faster than others due to factors such as competitive advantage, expertise and environment.
1.1.2. Vision
The more important the past experiences are, the more important are the dreams set, the goals set and the commitment on this path. Tesla and SpaceX founder Elon Musk, Amazon founder Jeff Bezos, Apple founder Steve Jobs and Google founders Larry Page and Sergey Brin are the best examples of places where vision can take us. In Turkey, the founder of Simit Sarayı, Haluk Okutur, took Turkish bagel, which is a taste that is frequently and eagerly consumed in our country, from the streets and turned it into a product that is consumed in a pleasant environment, and by spreading this vision not only in the country but also in 23 countries of the world, the number of chain stores has reached nearly a thousand. Ancak Haluk Okutur did not have this vision overnight. This vision found him as a result of his years of hard work. The first project of Haluk Okutur, who is a graduate of the Department of Business Administration of METU and who set his mind to do a business in the retail field, was to prepare a guidebook for grocery stores to compete. While trying to enrich the book by putting all the necessary information into it, Haluk Bey, realizing that he was dealing with an unaccustomed business as the book became thick and some of the information lost its validity, says that the starting point of the Simit Sarayı idea is to seek the smallest money in people's pockets. His vision is to do with Turkish bagel in the world what McDonalds does with hamburger. For this purpose, he rejected the purchase request from Greece because he hesitated to use the Greek name of simit and was criticized by his then partners for rejecting a big business opportunity. However, in the past time, it opened to the world with its stores named in Turkish and had a documentary prepared on Turkish bagel in National Geographic. In the light of all these developments, Simit Sarayı is selling simit in Greece as well.
A vision is possible not only by dreaming but by firmly embracing a dream. Many entrepreneurs fall in love with the solution they have developed as a business idea, and they can't see anything else. However, the entrepreneur must be in love with the problem he wants to solve, not the solution he has developed, and must have a vision about it. In an interview he gave years ago, Sakıp Sabancı used the phrase "he was crazy about his job" while talking about his father. If we translate this idiom into the present, the entrepreneur must be troubled. The outsider may call the entrepreneur mad, crazy, cracked, but the entrepreneur is the person who tries a solution after solution to solve the problem he is dedicated to. Linda Rottenberg, the founder of Endeavor, named the book he wrote for this reason as "Insanity is a Compliment". In our culture, the saying, "They call the good horse is bay, and the better hero is crazy" confirms this situation.
Many people claim to know how to achieve the vision, but the path to the vision is unknown and takes shape over time. That's why many people fear visionary ideas, withdraw and try to dissuade others. Instead, they look for solutions they feel comfortable with. This is called plan or goal. A vision is more than a goal or a plan. In none of the superhero stories the heroes know how to solve the seemingly insoluble problem. But with their dedication to fixing the problem, they overcome seemingly insoluble problems every time. Chobani founder Hamdi Ulukaya, the fastest growing yogurt brand in the world and reaching a turnover of 1.5 billion dollars in 2017, tells the story of the establishment of his enterprise, and one day mentions the announcement of a yogurt factory for sale that he found in the garbage and sees that a factory worth $ 7 million is sold for 700 thousand dollars. Although he has no money, he buys the factory with the credit and grants he receives from the institution that can be considered as KOSGEB of America. In his first meeting by hiring four people remaining from the employees of the previous factory, while everyone is waiting for a concrete road plan from him, he explains that he has no plans but has a vision of making America's best yogurt. And for those who say what to do, he suggests painting the exterior wall of the factory, which has been neglected for thirty years. All employees, including him, start by painting the factory wall. This first movement, which everyone despises, is the beginning of the ideas that emerged in Chobani. Explaining that he never left the factory for the next three years and that he constantly experimented with the yogurt recipe in his vision, Ulukaya was selected as the entrepreneur of the year by Ernst & Young in 2012. Chobani, which he founded in 2007, was declared as one of the ten most innovative companies in the world by Fast Company magazine in 2017. Ulukaya, in his speech at the Uludağ Economic Summit in 2016, stated that the only thing he had on the first day was vision and opportunity, and that they started to work by painting the day he had no plans, referring to a word of Mevlana: "When you start walking, the road is visible."
1.1.3. Work sharing
At Butigo, which is described in the case study, we see that the trio of Harun, Berk and Gizem are a team that complements each other in realizing the business. While Harun is an expert in marketing, Gizem knows the design and fashion world, while Berk contributes as an engineer who knows both the shoe industry and the supply chain and operation processes. This type of triple structure appears as a recommended structure for successful initiatives. It is a useful formula to have an engineer who knows the cuisine of the business in good enterprises, a manager who knows the business issues such as marketing, sales and finance, and a designer who can reconcile all these with aesthetic and artistic perspective. In the absence of such a trio, the entrepreneur must have all these characteristics alone or the business needs only a uniform expertise. However, this is often not the case. For this reason, a project that is very successful academically cannot turn into a good product or a successful company in real life. Because mostly in an R&D team, there will be a passion to make the perfect product, and this will remain a product development activity rather than business development or customer development. This condition is called marketing myopia (Levitt, 1960). Companies with marketing blindness focus on the product, but customers buy the benefit of the product, not the product. For example, when a person buys a hammer, what he really needs is not the hammer itself. It is the benefit that the hammer will fulfill. A person using the hammer to hang a picture on the wall is actually buying the hole in the wall, not the hammer. This perspective is the foundation for marketing and creating value. Therefore, in a good team, there should be an outside world person who listens to the customer, understands the needs of the customer and communicates with the customer, the cook in the kitchen who turns these needs into a solution and a product, and the spirit of the artist who will add creativity to it.
1.1.4. Partnership and company structure
Another important factor in the success of the venture is that the partnership and company structure is correctly formulated. Unfortunately, establishing the partnership structure wrong from the beginning can cause very good business ideas to be dead. Partners must first do things that complement each other and support each other in their challenging entrepreneurial journey. Failure to share shares from the very first day or investors' demand for high share ratios are among the main factors that negatively affect the future of the business. Partners should have shares in proportion to their contribution and risk. There should first be a relationship of trust between the partners and beyond that there should be control and incentive mechanisms. In this way, healthy and sustainable relationships can be established. Partnering with friends or relatives with whom you already have good relationships carries high risks. In such cases, either your job or your relationship is at risk. All possibilities should be discussed first before making a partnership. The conditions required to work together and the conditions requiring the termination of the partnership should be determined from the first day. These are difficult conversations. However, delaying difficult conversations will only make these conversations more difficult and complicate things in the future. Realizing that they have established the business before these speeches are made, the partners should consult experienced people about these issues without wasting time and should establish their partnership structures on solid grounds as soon as possible.
However, the partners should make a sustainable contribution to the business in a predictable period and especially at the initial stage. Taking part in the beginning or having an idea does not require being a partner. Partners should continue to be or deserve to be partners in proportion to their contribution to meeting the critical targets set for certain maturities. The best way to achieve this is to construct the division of work not only with task sharing but also with its authorities and responsibilities.
1.2. Financial investment amount, return on investment and financial adequacy
The role of capital is crucial for the emergence and support of new ideas, and even for entrepreneurs to fail and try again to learn quickly. The abundance of capital plays an important role in Silicon Valley being the capital of the entrepreneurship ecosystem. In this way, money is invested even in ideas that can be described as absurd, strange or meaningless from the outside. Because entrepreneurship develops with creativity. Creativity is only possible by having the freedom to make mistakes. Capital is the most important tool that provides this freedom. However, capital requires rational investments. Jobs entered with unaccounted, hearsay information are unfortunately left to luck and external factors. An entrepreneur should make the calculation from the beginning and be prepared according to different scenarios. For this, investors want the entrepreneurs to make a monthly financial income and expense statement for the first year in the business plan.
Preparing such a table requires the entrepreneur to have some assumptions and make predictions. For example, a company that wants to provide architectural decoration services to homes should calculate its initial capital need and then, starting from the first month, it should predict "in which region, how many houses, how much cost, how much profit margin, how many people will work, how it will work and how much turnover it will make" and prepare itself according to pessimistic, optimistic and realistic scenarios. In addition, the company should make a break-even point to predict when the revenues will cover the costs and prepare for it. Break-even point account is an important critical step in terms of cash flow. The break-even point indicates that the entrepreneur can get the money invested by how many people with how much turnover in any month. The sooner the company to be established reaches the breakeven point, the more sustainable the enterprise will be. Another indicator that needs to be calculated is the payback time, which indicates when the net profit will meet the initial capital. If an entrepreneur who invests a hundred thousand TL in a business makes ten thousand TL profit per month starting from the fifth month, the payback period of this business can be calculated as 15 months.
Investors who analyze a business idea to make an investment decision try to validate the company over the next five to ten years. The concept of valuation is about how much the company itself can sell as a product in the long run. If the company already has revenues, it is relatively easy to make predictions and make some calculations. However, making a valuation of a company that does not have a turnover yet will be open to estimates, expectations and speculation. In this case, the history, vision, division of labor, partnership structure and some other variables of the team mentioned in the previous articles will be more effective than monetary factors. At this point, it is necessary to open a special bracket for technology companies that produce data. Although these companies do not earn money, they have high valuations with the big data they aim to obtain in the long term, and they receive high amounts of investment over the years even though they do not make a profit. For example, the investments made in the establishment of companies such as Facebok and Twitter are calculated on the potential of user data to return to revenue in the long term. Similarly, the company named Letgo, which acts as an intermediary to sell second-hand products, has received investments of nearly billion dollars for its operations worldwide, although it has not yet generated active income. Nevertheless, in these examples, even if companies did not generate income, they presented their forward-looking revenue models and plans from the very first day and explained to their investors what kind of income model they planned at what stage. Therefore, for the entrepreneur, the business to be sustainable and profitable depends on the correct construction of the income model and cash flow. For this reason, even if your plan is about not earning income in the short term, you should be able to explain how you plan to make money when it comes to.
After making all these calculations and studying various scenarios, the entrepreneur should be able to calculate how much initial capital he needs, as well as express how and how much resource he needs and what he will give in return. The most effective way to meet the capital needs for new ventures is to give shares. In this way, angel investment, venture capital funds and risk investments become partners in the venture in return for shares and meet the capital needs. This situation creates a system that is less risky, safer and more encouraging to be successful than the traditional method of borrowing from banks.
1.3. Human resources and intellectual competence
As stated in the previous headings, although the resources required for the realization of the business idea are diverse, the first resource that comes to mind is financial capital. Financial capital is absolutely important and necessary. However, the lack should not be an excuse for a business not to be realized. A good entrepreneur is someone who can access resources that he does not have. For example, this is one reason why the founders of many technology companies are computer engineers. Especially in software businesses, most of the capital needs are invested in human resources. If the founding partners are software developers, they can enter the kitchen of the business and develop the product themselves and eliminate the need for capital by sacrificing short-term earnings. The story of Cember.net sold to Xing in 2008 is just an example. If you have the expertise of the job you want to do, then you do not need any resources other than yourself.