I have had many business ideas over the years and the vast majority of them I have not acted upon, for various reasons. Sometimes it’s time, money or the fact I don’t have the core skills or resources to make this work. In this blog we are exploring this cognitive process which everyone undertakes to investigate the opportunity. The aim is to support you in using this best practice when discovering a business opportunity.
The process of discovering a business idea is a varied and complex one and may occur over several years or during a split second. However, we can summarise some of the key mechanisms which occur during this mental process. An idea is just that and needs to be added to and then validated to make an opportunity.
The nascent entrepreneur enters the process with three sets of characteristics which can be split into Sociological factors, Demographic factors and Psychological factors. The Demographic factors are Age, Gender, Education level, Marital Status, Occupation, Population Growth, and Migration. These Sociological factors are Religion, Family, Network, Income & Wealth , Transport, Social Mobility, and Household Composition. The Psychological factors are Need for achievement, Need for autonomy, Internal Locus of control, Risk-taking propensity, Entrepreneurial Self Efficacy, Creative & innovative, and Motivational.
These characteristics form the basis from which the nascent entrepreneur sees, finds and more importantly validates the business idea and the potential opportunity. This prior knowledge and competency in entrepreneurship sets the nascent entrepreneurs on the path. The trigger for this to occur varies, from long term intention to a point in time when either the need or the opportunity presents itself. The entrepreneur will bring forth a range of capitals which will be used to resource the venture these we term the Startup Entrepreneur Capitals. These can be brought down to Financial, Intellectual, Experiential (Human), Social, Cultural, Spiritual, and Material. These set what resources could be used in the first instances to start the business. After the business is started you can find new resources.
Once the basis for the idea is found, the next stage is to analyse if it is exploitable? On a cognitive level, the nascent entrepreneur needs to understand the probability of success based on the personal investment available of resources to facilitate enough time to get the venture to profit. Then we need to understand will the venture be profitable enough to compensate for their opportunity costs.
Once the nascent entrepreneur has validated an opportunity for them, they then need to scope it to understand the trajectory of the business and the potential scale. The required scale of a business is dependent on the industry and market and the ability of the team to manage it.
The business then requires to be designed by the nascent entrepreneur. However, with no or little experience in designing a business, they need to connect the opportunity with their vision, the businesses mission and set the strategy and objectives to meet.
Once they have thought this out they can start modelling the business, through tools like the business model canvas and potentially developing a business plan.
The impact of any economic activity on the individual should be to develop a ‘sustainable livelihood’ or value. This is measured through the resources which are available to that person, in terms of capital. Here we define capital as a resource which can be stored, held or used for the benefit of the entrepreneur.A number of academic papers have discussed what forms of capital should be measured and how this should be analysed (Scoones, 1998; Berkes & Folke, 1992; Bebbington, 1999) especially when analysing sustainable rural businesses. The impact of the economic activity should therefore be measured by evaluating the development of the entrepreneurs’ capital, based on the eight forms of capital:
Cultural – Cultural capital functions as a social-relation within an economy of practices (system of exchange), and comprises all of the material and symbolic goods, without distinction, that society considers rare and worth seeking.
Experiential (Human) – We accumulate experiential capital through actually organizing a project or solving problems and developing solutions.
Financial – Money, currencies, securities and other instruments of the financial system
Intellectual – The value of a company or organization’s employee knowledge or any proprietary information that may provide the business or entrepreneur with a competitive advantage
Material – Non-living physical objects form material capital
Natural – Made up of the world’s stock of natural resources, which includes geology, soils, air, water and all living organisms
Social – The networks of relationships among people who live and work in a particular society
Spiritual – Practices of personal values, religion, spirituality, or other means of connection to self and universe.
Entrepreneurial activity may increase one or more of these capitals depending on the entrepreneur, the type of business and the stage of the business. This connection to capital also connects with Ahmad & Hoffman (2008) who specify the ecosystem of entrepreneurship as the combination of three factors: opportunities, skilled people and resources. These factors can be driven from our Capitals. Skilled People is intellectual capital. Entrepreneurial opportunity from our social and spiritual capital.
I think we should look at this set of capitals at both a personal, business and community level, its about a set of ecosystems. At any level not all of the capitals have to be used (A Buddhist priest on a personal level may never use Financial capital, An online blogger on a business level may never use Natural capital, A town council may never use the Spiritual capital).
Each entrepreneur has a unique set of capitals, which have specific generic root causes from the entrepreneur themselves, the business industry, the addressed market and locality ecosystem they are active. The skill is understanding which and a what level is required to lead a successful business at what stage.
The UK is one of the best places for entrepreneurs to start a business but it still has a number of issues which needs to be resolved if this is to continue post Brexit.
The UK government has stated in its Industrial Strategy white paper “Our ambition to make the UK the best place to start and grow a business requires us to safeguard the things we do that already contribute to our success, and to act where necessary to make us even more attractive.”
So what action is needed to help Small Businesses?
The Patient Capital review industry panel identified the real issues and stated stated that “opportunities remain for improvement across the ecosystem, particularly with respect to the transformational development of some of these start-ups into large-scale businesses, where the proportion of UK start-ups which scale into large businesses lags significantly behind the US. This indicates that many UK-based businesses are unable to reach their full potential and either remain “stuck” in a mode of incremental growth, or accept a trade sale as the most convenient exit, both of which are ultimately to the detriment of the UK economy, tax receipts and job creation.”
… so I thought I would brainstorm an 11 point action plan for the UK government to act on in 2019, my:
UK Entrepreneurs Policy Wish List 2019.
1. Global Business Language
All business owners to be able to learn at least one of the top 5 business languages for free online: Top five languages: Chinese, Hindi, Spanish, Arabic and Portuguese
Business language and industry terms should be taught in all secondary schools
All schools teach Chinese as second language and not French to reflect international trade opportunities
2. Knowledge Economy
Online Knowledge Centres hosted by one business focused university per region which cover topics such as: Export, International Financial Transactions, International Legal Contracts, Global Insurance, International Taxation
Graduates who start businesses (and pay Corporation Tax) which employ more than 5 people (and pay PAYE) for more than 2 years get their student loan deleted
Creation of the national Innovation/Entrepreneurship/Export awards televised and sponsored by large businesses
3. Business Productivity
All businesses must report a productivity metric in their annual accounts to companies house. This should force them to look at how to improve it, to ensure they are inline with international benchmarks
5. To develop a better UK business centric culture, the BBC/Channel 4 news (government owned and run channels) to report good news stories on UK businesses and how they are exporting.
BBC/C4 measured on how many different UK based/citizen owned businesses they report on per year. The Total should be good news stories minus bad new stories.
The BBC/C4 charter to be changed to mandate promoting British Business Interests, especially British citizen owned SMEs and startups. It is currently the other way around.
6. Government Spending (Local, County, Region Government and NHS)
Local governments to report on how they support SMEs through awarding smaller multiple awarding contracts
All local council/NHS offered contracts to be offered to SME who have registered office within 30 miles of the county/region boundary
7. UK embassies driving UK exports
Set core focus of UK embassies to developing trade links and opportunities for UK businesses
To offer quarterly business networking sessions (<£50 per ticket)
To provide national reports/opportunities on monthly basis (free)
Set a new foreign office metric (UKP exports to that country per citizen of that country) which is reported to parliament each year
8. Business Taxation
Streamline the HMRC business tax system so everything can be done online without an accountant or dedicated software. If it can’t be done delete that aspect of the tax system
Business rates for UK headquartered businesses set to zero for businesses less than £10m turnover
Business corporation tax at 12.5% same as Ireland, our neighbour
9. SME Finance
British Business Bank to have focused fund for SME growth ( especially for businesses with £1m to £10m turnover)
Startup loans to continue with greater support in mentoring and global-export business best practice
CSR and charity donations to get better tax relief to encourage the long term development of a sustainable third sector
10. All new processes post Brexit
For import and export to be done online within 24 hours
For bringing talent to UK (immigration) streamlined to 36 hours with online forms (e.g. getting Visa and NI) and pay less than £200 per person/employee
11. Business Buildings infrastructure set for the new century
All new building (business+housing+retail) to have fibre broadband into the property (and not up to the curb) as the vast majority of businesses are run from home
The way we start businesses is changing and through academic research, additional knowledge, skills and tools, the process and issues around growing businesses have profoundly changed Entrepreneurship in the last twenty years. This article develops a new 9 Stages of Enterprise Creation model which is based on today entrepreneurial mindset and the business community ecosystem which molds entrepreneurs and allows their ventures grow.
The first three stages of the Enterprise Creation stages which emerged are: Discovery, Modeling, and Startup which form the new venture formation stages. The next three Existence , Survival and Success develop the business into a sustainable business entity. The last three stages: Adaption, Independence and Exit provide the entrepreneurship pathways for the entrepreneur. These final elements complete the entrepreneurship model by focusing on the success of the business, how the entrepreneur progresses beyond the business, their separation into different entities and the entrepreneurs eventual exit. The 9 Stages of Enterprise Creation are set out below:
Stage 1 – Discovery
This first stage of the 9 Stages of Enterprise Creation is centred around the focal competency of Opportunity recognition, creation and evaluation. These are the processes by which entrepreneurs identify and evaluate potential new business opportunities. An opportunity by definition is a favorable set of circumstances which creates a need for a new product, business, or service. Opportunity recognition is the process by which the entrepreneur comes up with a prospective idea for a new venture. Evaluating the opportunity takes research, exploration, and understanding of current needs, demands, and trends from consumers and others. The process of researching and surveying allows the product or service idea to develop, so that it can be modelled.
Stage 2 – Modeling
The second stage is about developing the business logic to create a business model. This is split into three parts and starts by setting out a Strategy, formulating a business model and setting the business processes to achieve the strategy . These form the key elements for the plan to start the business and, are an integral piece of submitting any proposal for an entrepreneurial or intrapreneurial business. The model should be underpinned by the resources available and those which may still need to be secured. Resource allocation and availability are extremely important to startups because sustainability and profit (not loss) depend on proper planning and understanding of the internal and external environments.
Stage 3 – Startup
The fourth stage is starting the enterprise. Once the resources detailed in the business plan are mobilised the entrepreneurial process can be effected and implementation can take place. In this stage the business may be trading or begin to research or develop a product. The aim of this stage is to have the processes in place so that the business can have a scalable, repeatable and profitable business focused on distinct customers within an identified market.
Stage 4 – Existence
At this stage the business has two core focuses; to gain enough customers to create a profitable business and, at the same time establishing production or product quality. The majority of businesses fail at this stage due, in part, to either one or both of these factors. At this stage the organisation is a simple one, the entrepreneur does everything and directly supervises subordinates, who should be of at least average competence. Systems and formal planning are minimal to nonexistent. The company’s strategy is simply to remain alive which requires the focal competency of tolerance of uncertainty, risk and failure
Stage 5 – Survival
At this stage the business should be a viable entity in terms of cash flow and resources, it has enough customers and satisfies them sufficiently with its products or services to gain repeat sales. The organisation is still simple. The company may have a limited number of employees supervised by a junior manager or supervisor. Neither of them makes major decisions independently, but instead carries out the rather well-defined orders of the entrepreneur. Formal planning is, at best, cash forecasting. The major goal is still survival, and the entrepreneur is still synonymous with the business. The entrepreneur starts to implement ideas through leadership and management which provides opportunities to scale.
Stage 6 – Success
Entrepreneurs at this point of the 9 Stages of Enterprise Creation have a number of options: capitalise on the company’s accomplishments, expand or, keep the company stable and profitable. The entrepreneur has a number of ways to capitalise, from exit to taking a ‘founders dividend’ from the business. If the entrepreneur want to expand then the core tasks are to make sure the basic organisation stays profitable so that it will not outrun its source of cash and, to develop managers to meet the needs of the growing organisation. Through the entrepreneurs leadership all managers within the business should now identify with the company’s future opportunities rather than its current condition demonstrating a success to its stakeholders.
Stage 7 – Adaptation
Businesses which reach this stage normally have a number of factors pushing them to adapt, these are normally grounded in changes either to the micro or macro environments. Businesses at this stage will normally be entering a phase of rapid change and will have to have secured the required finances to develop. At this point key management is in place with a set of operational systems. Operational and strategic planning are now a key focus. The organisation is decentralised and, at least in part, divisionalised. The key managers must be very competent to handle a growing and complex business environment. The systems, strained by growth, are becoming more refined and extensive. Both operational and strategic planning are being done and involve specific managers. The entrepreneur and the business have become reasonably separate, yet the company is still dominated by both the entrepreneur’s presence and stock control.
Stage 8 – Independence
A business at this stage should now has the advantages of size, financial resources, market share and managerial talent. Innovation and Intrapreneurship are now key factors in keeping the business in market position. The organisation has the staff and financial resources to engage in detailed operational and strategic planning. The management is decentralised, adequately staffed, and experienced. Business systems are extensive and well developed. The entrepreneur and the business are quite separate, both financially and operationally.
Stage 9 – Exit
The last of the Enterprise Creation stages is focused on exiting the business and making their separation permanent. An exit strategy will give the entrepreneur a way to reduce or eliminate their stake in the business and, if the business is successful, make a substantial profit. This stage removes the entrepreneur from primary ownership and decision-making structure of the business. Common types of exit strategies include Initial Public Offerings (IPO), strategic acquisitions and management buyouts. The organisation at this stage is generally profitable, has a definable set of resources with a clear and realistic strategy to continue. The CEO and founder(s) are separate.
9 stages of Enterprise Creation
The full paper which develops the 9 Stages of Enterprise Creation: Bozward, David and Rogers-Draycott, Matthew Charles (2017) Developing a Staged Competency Based Approach to Enterprise Creation. Proceedings of the International Conference for Entrepreneurship, Innovation and Regional Development. ISSN 2411-5320, can be found at http://eprints.worc.ac.uk/5377/
Co-founders are normally people involved in the initial launch of startup companies. Anyone can be a co-founder, but frequently co-founders are entrepreneurs, engineers, hackers, funders, web developers, web designers and others involved in the ground level of a new venture. The first step in finding your co-founder is to map yours needs. Make sure you are perfectly clear on what skillsets/resources will be the most important for the success of the startup, and best fill a hole in your own resume and desired management team.
Friends from University – It worked for the guys at Facebook and Google, so just get out and meet other students.
Former co-workers – If you’ve worked together as employees, you might be able to work together as co-founders. You have the history and know each others skill sets.
People you meet over coffee – We see hot beds of startups co-locating themselves in coffee shops, just talk to the guy next to you.
Former co-founders in another venture – There’s no better person to launch with than someone that has started a company before.
Accelerators – Related to some of the other co-working suggestions, simply applying to a startup accelerator can lead to finding a co-founder.
At meet-ups – Tech Meetups are great places to find co-founders and they are easy to find and also go to.
