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Why do most New Ventures need financing or funding? Cash flow challenges Capital investments Lengthy product development cycles Alternatives for raising money for a new venture Personal funds Equity capital Debt financing Creative sources Bootstrapping finding ways to avoid the need for external financing through creativity Elevator speech brief, carefully constructed statement that outlines the merits of a business opportunity. Business Angels invest their personal capital directly in start-ups Venture Capital money that is invested by venture capital firms in start-ups and small businesses with growth potential Initial Public Offering (IPO) a company's first sale of stock to the public Sources of debt financing commercial banks SBA guaranteed loans SBA loan for small businesses that are not able to obtain credit elsewhere Vendor credit vendor extends credit to a business for start-up costs but defers payment until later Factoring a business sells its accounts receivable to a third party, called a factor, at a discount in exchange for cash Creative sources of financing or funding crowdfunding leasing SBIR and STTR Programs other grant programs strategic partners Crowdfunding funding a project or new venture by raising monetary contributions from a crowd typically via the Internet SBIR and STTR Grants provide cash grants to entrepreneurs who are working on projects in specific areas (STTR program requires participating researchers working at universities or other research institutions Marketing involves motivating people to enter your sales funnel, converting prospects to customers Brand a set of attributes-positive or negative-that people associate with a copany Intellectual Property any product of human intellect that is intangible but has value in the marketplace Four key forms of IP Patens Trademarks Copyrights Trade Secrets Patent a grant from the federal government conferring the rights to exclude others from making, selling, or using an invention for the term of the patent Franchising form of business organization in which a firm that already has a successful product or service licenses its trademark and method of doing business to another business or individual in exchange for a franchise fee and an ongoing royalty payment Product and Trademark Franchise An arrangement under which the franchisor Business Format Franchise an arrangement under which the franchisor provides a formula for doing business to the franchise along with training, advertising, and other forms of assistance Individual Franchise Agreement Franchisor to Franchisee Involves the sale of a single franchise for a specific location When to Franchise Franchising is most appropriate when a firm has a strong or potentially strong trademark, a well designed business method and a desire to grow. Ways Franchisors Can Develop the Potential of Their Franchisees -Provide mentoring that supersedes routine training -Keep operating manuals up-to-date -Keep products, services, and business systems up to date -Solicit input from franchisees to reinforce their importance in the larger system -Encourage franchisees to develop a franchise association -Maintain the franchise system's integrity Copyrights a form of intellectual property protection What are some advantages and disadvantages as a Method of Business Expansion Advantages- -Rapid, low cost market expansion -Income from franchise fees and royalties -franchisee motivation Disadvantages- -Profit sharing -Loss of control -Friction with franchisees -Managing growth What is Protected by a Copyright? Literary works Musical compositions Computer software Dramatic works Pantomimes and choreographic works Pictorial, graphic, and sculptural works Trade Secrets any formula, pattern, physical device, idea, process, or other information that provides the owner of the information with a competitive advantage over the competition Physical Measures for Protecting Trade Secrets Restricting Access Labeling documents Password protecting confidential computer files Maintaining logbooks for visitors Maintaining logbooks for access to sensitive material Maintaining adequate overall security measures The 4 Ps of Marketing for New Ventures Product Price Promotion Place Product the good or service a firm offers to its target Price the amount of money consumers pay for a product Promotion refers to the activities the firm takes to communicate the merits of its product to a product mix Landing Page the page that appears when a potential consumer clicks your PPC ad Public Relations refers to efforts to establish and maintain a company's image with the public Buying a Franchise -Purchasing a franchise is an important business decision involving a substantial financial commitment -Potential franchise owners should strive to be as well informed as possible before purchasing a franchise and should be aware that is often legally and financially difficult to exit a franchise relationship The Costs Involved With Buying a Franchise Initial Franchise Fee Capital Requirements Continuing Royalty Payment The Costs Involved With a Buying a Franchise Advertising Fees Other Fees Seven Steps in Purchasing a Franchise Step 1-Visit several of the franchisor's outlets Step 2-Meet with a franchise attorney Step 3-Meet with the franchisor and check the franchisor's references Step 4-Review ask franchise documents with the attorney Step 5-Sign the franchise agreement Step 6-Attend training Step 7-Open the franchise business Legal Aspects of the Franchise Relationship Federal Rules and Regulations -The offer and sale of a franchise are regulated at the federal level FDD-Franchise Disclosure Document Franchise Ethics -The majority of franchisors and franchisees are highly ethical -There are certain features of franchising, however, that make it subject to ethical abuse. These features are as follows: -The get-rich mentality -The false assumption that buying a franchise is a guarantee of business success -Conflicts of interest between franchisors and franchisees International Franchising Steps -Consider the value of the franchisor's name in the foreign country -Get a good lawyer -Determine whether the products or service is salable in the foreign country -Find out how much training and support you will receive from the franchisor product trademark franchise an arrangement under which the franchisor grants the franchisee the right to buy its products and use its trade name. agency theory argues that for organizations with multiple units, it is more effective for the units to be run by franchisees than by managers who run company-owned stores Three Things a Business Can Do to Prepare for Growth 1. Appreciate the Nature of Business Growth 2.Stay committed to a Core strategy 3.Plan for Growth Economies of Scale Occur when increasing production lowers the average cost of each unit produced Economies of Scope Occur when the scope(or range) of a firm's operations creates efficiencies Reasons for Growth Economies of Scale Economies of Scope Market Leadership Influence Power and Survivability Accommodate the Growth of Key Customers Attract and Retain Talented Employees Market Leadership Occurs when a firm holds the number one or the number two position in an industry or niche market in terms of sales volumes Influence, Power, and Survivability Larger businesses usually have more influence and power than smaller firms Accommodate the Growth of Key Customers Sometimes firms are compelled to grow to accommodate the growth of a key customer Stages of growth Introduction Early Growth Continuous Growth Maturity Decline Attract and Retain Talented Employees Growth is a firm's primary mechanism to generate promotional opportunities for employees Two Categories of Challenges for firm growth -Managerial Capacity Problem -Day to Day Challenges of Growing a Firm Day to Day Challenges of Growing a Firm Cash Flow Management Price Stability Quality Control Capital Constraints