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About this book

If you are looking for an engaging textbook, rich in learning features, which will help you to guide your students through the process of developing and launching a start-up, this is it. With his innovative New Venture Creation Framework, Paul Burns breaks the venture creation process up into three key phases: Research, Business Model Development, and Launch. At every stage crucial steps and considerations are revealed, providing comprehensive coverage of the subject. Practical advice is combined with academic research, enabling you to run a course which is both relevant and rigorous.

The second edition of this popular textbook is essential reading for any undergraduate or postgraduate course in new venture creation. It will also prove useful for shorter courses on entrepreneurship and in enterprise centres and entrepreneurship hubs.

Table of Contents

Research

Frontmatter

Chapter 1. What you bring to entrepreneurship

Abstract
The twenty-first century has so far been characterized by turbulent and unpredictable change and disruption - a world of ‘permanent revolution’. The rise of terrorism led to wars in Afghanistan and Iraq. The so-called Arab spring of 2011 led on to disruption and unrest in many countries in the Middle East, including the civil wars in Syria and Libya, which in turn led to the rise of ISIS. These led to increasing levels of migration into Europe, causing political unrest and even violence. And much of this volatility has been caused by business. The banking crisis of 2008 saw the failure of a number of banks such as Lehman Brothers and Citigroup in the USA and Royal Bank of Scotland (RBS) in the UK. It plunged the Western world into recession and saw disposable income in many countries shrink, particularly among the poorest and most vulnerable, leading to even more political unrest.
Paul Burns

Chapter 2. Finding your business idea

Abstract
Finding a good business idea is about being able to find a solution to a problem, a solution that sufficient people are willing to pay for. Successful entrepreneurs are able to match opportunities in the market place with innovative ways of meeting those opportunities. They link opportunity with creativity and innovation. But which comes first: seeing the commercial opportunity or the innovation? That ‘eureka moment’, when a good business idea is born, rarely happens by chance. Successful entrepreneurial firms such as Google or Samsung also go about seeking out ways of developing innovations that match commercial opportunities in a systematic way. Their success is not just down to good luck. In the same way, you can go about finding and developing a business idea in a systematic way that gives you a greater chance of business success.
Paul Burns

Chapter 3. Understanding your industry and markets

Abstract
Market research is essential before you launch a business. Just imagine being a football manager and not knowing anything about your team (your customers), who you are about to play against and how many players they are allowed to have (your competitors) or even the size of the pitch and duration of the game you are about to play (the nature of the market and industry). And then there is the little matter of the rules of the game (the laws affecting the industry). In such circumstances your chances of success would be slim. The President of Harvard Business School once said that if you thought knowledge was expensive, you should try ignorance. As we have seen, you can either create opportunity or you can spot opportunity, but in both cases your creative skills must be linked to a market need. So, you need to find out about market need - who your customers might be and why they should buy from you. You also need to find out about your competitors - who they are and what their strengths and weaknesses might be. This all helps minimize risk and uncertainty and provides some basis on which to make decisions about marketing strategy. For a start-up, any information is probably of value, but the key question that needs to be answered is: why should anyone buy from you rather than from your competitors? If the answer to that question is simply because you are cheaper than your competitors then you need to ensure that your costs are lower than theirs.
Paul Burns

Business Model Development

Frontmatter

Chapter 4. Structuring your business model

Abstract
So you have a business idea that looks viable. By now you should have some knowledge of how your industry and market operates, so it is time to start developing your business model - how you intend to bring this idea to life and make it happen. Entrepreneurs may not like formal planning in the big company sense (see Academic insight 4.1) but a simple framework for developing a start-up is extremely useful. The framework needs to be minimalist and easy to use, illuminating the issues and helping you to develop broad, flexible strategies that can change as market circumstances change. It needs to provide the link between the experience of running the business - the emerging opportunities and threats - and strategy. It should facilitate learning by doing and also the ability to translate this into action. For the less practised, such a framework helps organize and develop what would otherwise be an unstructured and disjointed experience.
Paul Burns

Chapter 5. Crafting your value proposition and branding

Abstract
Just as it is important that you understand why you want to start a business and what you want from it, it is also important that your business reflects your vision and values. After all, you will be spending much of your time developing it and, in many ways it is an extension of you and your personality. Most people find it very difficult to live their lives within organizations that do not share their values and beliefs. Indeed, this is often a reason for starting up your own business. The vision you have for the business and the values upon which it is based will help shape your business model.
Paul Burns

Chapter 6. Developing your marketing mix

Abstract
The previous chapter explained the importance of developing a brand identity consistent with your value proposition, and consistent with your product or service features. The marketing mix is a combination of factors about your service or product that you can use to influence customers. It is the vehicle that delivers your value proposition to your target customer segments. It should help you to create your brand identity and will support it. The marketing mix is often said to comprise the ‘Five Ps’ shown in Table 6.1.
Paul Burns

Chapter 7. Communicating your value proposition

Abstract
A good business idea and a persuasive value proposition do not guarantee success on their own. Customers will not queue up at the door of a start-up if they are unaware of its existence. Indeed, even if they are aware, they still might take some persuading to try a new, unproved product or service. As a newcomer to the market, you have little or no credibility or reputation. Even if you have a brand, customers will not initially recognize it. And then you still need to persuade them to purchase it again, and again. Your brand should help them do this, but building the relationship that underpins an effective brand will take time. You need to attract the customer segments you are targeting and persuade them to start the journey to become the valuable loyal customers we discussed in the previous chapter. It is not easy or straightforward, even if you have the best product/service in the world.
Paul Burns

Chapter 8. Scalability and growth

Abstract
Once you have proved that your business model works you will want to scale up your operations, particularly if you had a lean start-up or if your business model requires a rapid roll-out because of a lack of barriers to entering your market. Scaling-up may therefore be part of your launch strategy - a necessary part of making the project viable or sustainable. A ‘window of opportunity’ can be very small. Delay can attract unwelcome competitors. However, firstmover advantage can disappear rapidly if your product/ market offering proves too unattractive or too many elements of the market offering prove inappropriate, and there can be good cause for delaying until the market’s needs are clearer - a strategy called active waiting. The extent and speed of scale-up needs careful planning as this will affect the resources you need and when you need them. For some start-ups, scaling-up may come some way down the road but for others it can be of immediate concern.
Paul Burns

Chapter 9. Legal foundations

Abstract
One of the important things you need to think about is whether you can safeguard the intellectual property (IP) of your business idea. Th ere are a number of ways you can do this: patents, trademarks, copyrights, industrial design rights and, in some countries, trade secrets. For a start-up, the IP you have on your business idea may be one of the few real assets available to you, and IP remains probably the most valuable asset many technology fi rms like Apple or Google own. And it is not just competitors that you should be concerned about. In seeking fi nance for your business, you may have to expose your IP to many people, some of whom may be less scrupulous than others. In this case you would be well advised to seek the maximum intellectual property rights (IPR) you can fi nd.
Paul Burns

Chapter 10. Managing operations and risk

Abstract
The purpose of a business is to deliver products or services to customers and that means you have to understand how to do it. If you want to start a plumbing business, you need to understand how to plumb. You need to organize and manage yourself and, if you want the business to grow, you need to manage other plumbers. Managing is concerned with handling complexity in processes and the execution of work. Back in the nineteenth century Max Fayol defined the five functions of management as planning, organizing, commanding, coordinating and controlling. Today, these sound very much like the skills needed to lead a communist-style command economy. Fayol’s work outlined how these functions required certain skills which could be taught and developed systematically in people. Management on a day-to-day basis is about detail and logic. It is about efficiency and effectiveness. It involves being able to prioritize activities and decide which is more important than another. These priorities vary from business to business, and prioritization is a question of judgement. Nevertheless, it is vital that you are able to do this and, ultimately, compile a list of critical success factors (CSFs) - things that are essential to get right if the business is to achieve its mission; things that make or break the success of the strategy (e.g. getting a website up and running on time).
Paul Burns

Chapter 11. Managing and leading people

Abstract
business requires many resources such as buildings, vehicles, machinery or stock. Most can be purchased for cash although, as we have seen, there are ways of minimizing the investment needed. The one thing every business needs if it is to grow is people. Nevertheless, many entrepreneurs try to minimize the cost of people by doing as many things as possible themselves, despite the fact that this is not always a good idea as they may not have the necessary expertise. People cannot be purchased in the same way as other assets. They have to be attracted to join the business as employees or partners. Of course many new ventures do not employ anybody to start with, preferring instead to subcontract as many operations as possible. However, the only way you will grow is by recruiting appropriate staff, including managers, to deliver your product/service to more and more customers. Selecting, developing and managing staff will become a key activity, and it is something many entrepreneurs find difficult. When there is more than one founder, the issue of working with the other partners so as to become an effective management team can be just as challenging.
Paul Burns

Chapter 12. Financial resources

Abstract
Many new ventures require finance to get started. The more fixed assets you need, the higher your stock holding and the longer debtors take to pay, the greater your need for finance. And while a cash flow forecast will tell you how much you require and for how long (we deal with this in the next chapter), it will not tell you what sort of finance you require. The first thing to realize is that not all money is the same. Different sorts of money ought to be used for different purposes and not all types of money are available to all new ventures. In fact many entrepreneurs, particularly at start.up, try to avoid using money at all by borrowing or using other.
Paul Burns

Chapter 13. Preparing and using financial forecasts

Abstract
For a new venture to survive and grow it needs to be financially viable. This can mean a number of different things. For it to be attractive to an equity investor - and the founder - it needs to be profitable and efficient. For it to survive it needs to be sufficiently liquid to enable it to pay its bills. For it to be attractive to a banker offering to lend money it needs to be low risk - and risk is equally relevant to the founder and equity investor. To assess these things involves looking at a range of different concepts and measures. Profit is the difference between your sales/turnover and your costs. The higher the profits of a commercial business the better. However, profit is not the same as cash. You may not have received payment for your sales nor indeed paid your costs. You can therefore be profitable, but illiquid - or vice versa. The two things are different. Profit measures how all the assets of the business have increased through your trading activities (sales - costs), not just cash. It is true that eventually the profit should turn into cash, but meanwhile bills and wages have to be paid and, if you do not have the cash to pay them, you may go out of business. Profitability is shown in the income statement of a business.
Paul Burns

Launch

Frontmatter

Chapter 14. Preparing, using and validating the business plan

Abstract
Your business model underpins your business plan. You need to develop a business model before you can draw up a business plan. However, you may not want or need to draw up a formal business plan (see Academic insight 14.1). Developing a fl exible business model using the New Venture Creation framework takes a fraction of the time it takes to write up a formal business plan. Th ere is no point in formalizing frameworks and documenting plans unless they help in the planning process or are needed to help communicate those plans to the wider group of stakeholders in your venture. It is all a question of both the scale of the venture and nature of the stakeholders you wish to communicate with. Small-scale ventures may not need detailed or formal plans, but many providers of fi nance still expect them. Nevertheless, while you may not always need to write a formal business plan you will still need to strategize - to think about the future, analyse your options and develop strategies. Developing your business model and writing it down as a business plan allows you to crystallize your business idea and to think systematically through the challenges you will face before you have to deal with them.
Paul Burns
Additional information