THE BUSINESS START-UP PROCESS

25 RULES OF THUMB FOR MICROENTERPRISE SUCCES

Stephen Gibson, the founder of The Academy for Creating Enterprises, has been teaching entrepreneurship in the Philippines for over 14 years. They have written a compilation of 25 Rules of Thumbs for Microenterprise Success. These rules are designed for entrepreneurs in developing nations. We have adopted these rules in our curriculum as they addresses crucial principles adapted to the cultural realities in western Africa. These rules are studied every semester and reinforced with activities throughout the curriculum. The form a powerful framework of ideas that help our students what they need to do and what they cannot do (like sell on credit) to be successful. Here are some of the rules (in no specific order):

Sell What the Market Will Buy
Practice Separate Entities
Start Small; Think Big
Don’t Eat Your Inventory
Buy on Credit; Sell for Cash
Hire Slow; Fire Fast
Work on Your Business Ten Hours a Day and 5 ½ days per week
Have Written Agreements
Use Multiple Suppliers
Turn Your Inventory Often
See appendix for a list and description of each rules.

The curriculum will continually change and improving but we do not expect a major pivot in the coming 2 or 3 years.

[1] The word curriculum here refers to the course of study for the first phases which is the educational phase of the program of the Institute.

[2] Kaufman, Josh; The Personal MBA; Penguin Books; 2010; p. 36

[3] Gibson, Stephen W. and Huntsman, Tina J.; Where There Are No Jobs: Volume 1 – 25 Rules of Thumbs for Microenterprise Success; The Academy for Creating Enterprise; p. ii. Available at: http://www.byubookstore.com/ePOS/form=robots/item.html&item_number=4478504&store=439&design=439

5 PARTS OF EVERY BUSINESS

The business portion of the curriculum is also centered on these 5 elements that every successful business must have. Josh Kaufman the author of The Personal MBA says it eloquently: “At the core, every business is fundamentally a collection of five interdependent processes, each of which flows into the next:

Value Creation – Discovering what people need or want, then creating it.
Marketing – Attracting attention and building demand for what you’ve created.
Sales – Turning prospective customers into paying customers.
Value Delivery – Giving your customers what you’ve promised and ensuring that they’re satisfied.
Finances and Accounting – Bringing in enough money to keep going and make your efforts worthwhile.”[2]
The curriculum covers many more subjects but these 5 basics skills remain the core of our program.

THE TRADING GAME ACTIVITY

As mentioned in the Key Success factors this 4 week long activity where the students start with a small object like a paperclip and must learn to trade, buy and sell to create hundreds of dollars of value is fundamental to our program. We will be using the information that we learn from our students during the trading game to improve our selection process and to improve our curriculum.The trading game activity has 5 objectives:

It improves learning about the subject and creates an opportunity to re-emphasise what we teach;
It gives them a chance to practice and attain a certain level of competence and mastery especially since the trading game is repeated each semester;
They discover their own personal strengths and limitations and learn to overcome them. Many students have to overcome their fear of rejection, or laziness, or justification just to name a few.
They are confronted to the real world and the difficulty of competing in the market place and dealing with clients and suppliers. Failure is a powerful educator. They learn first-hand that the 25 rules of thumbs of entrepreneurship must be respected to increase the odds of success.
They learn to trust and collaborate with their fellow students which will lead to a stronger network of leaders in the future.

Scaling and Growing

The last step is to grow the business. This means that you learn to serve more clients or provide more value to existing clients. Growing takes time and must be managed so that harmony prevails within the business.

Adding Resources

Having newly learned what a business must do to become profitable, we must now learn to make it efficient and disciplined. This may mean many things but often include creating systems and processes, hiring technicians, buying equipment or anything else that will prepare the business for growth. The objective to too free up the entrepreneur so that he can focus on growth while making sure the company continues to serve its clients and stays profitable.

Becoming Profitable

Now is the moment of truth. Can the student execute and find a way to create a profitable business with the opportunity before he runs out of capital. Profitability is indispensable. It means that “you’re able to pay all the bills and have enough cash to move forward with the plan.” It gives exactly what the business needs to grow: more time and more cash. This step started during the Pre-Launch when the student was validating his assumptions (learning) and started to make key relationships. In a real sense becoming profitable is as much about discovery as it is about execution. The primary attribute the entrepreneur needs is determination and smarts. The business must focus on sales and marketing, keeping fixed costs low, increasing the gross margin as fast as possible, testing ideas, measuring results and changing while keeping both eyes on the cash. This is the objective of the 3rd and final phase of the program of the institute.

Funding and Launching

Funding is not always required.  Some businesses can be started with very little to no capital and grow organically. However, some funding can help to accelerate growth or improve the probability of success.  Students will have the opportunity to present their project to funding sources during the second phase of the program. Securing the funding will take work and could take 3 to 6 month.  Funding will provide the resources to launch including creating the legal structure of their business and opening a bank account.  Once they have their start-up capital and have registered their business they have already moved to the next step.

Pre-Launch

When you start a business there are always multiple risks that could lead to a failure.   This step is really a soft launch – starting informally with very little money so that you can learn as much as you can before real money is committed.  A Smart entrepreneur prefers to trade time and effort before the launch to test and learn everything he can now so that you will not waste time and money latter on. This step has 3 objectives: 1) Validating as many assumptions as possible, 2) Give the student with final Go or No-go decision and 3) Increasing the probability of success and all of this while using as little money as possible.  The primary tool is to test what you think will be true in a real world setting with real customers and suppliers.   It will either validate or disprove each element in the plan that should lead the business to success.  Elements that could be tested are the business model, price points, a location, marketing material, sales approaches, new features on a product, a guarantee offer, important costs and expenses, distribution channels your business or anything that could cause the business to not generate revenues and profits.  Student can also build key relationships that will be useful when they launch and prepare any documentation needed to secure funding.

In-depth Analysis

The following step is to take more time to analyse and even test each of the 3 or 4 promising opportunities identified in the first step. This deeper analysis will help the student understand the barriers of entry, the cost structure and the suppliers, the customers and the sales prospects and the pressure on price, the competition and their approach to the market, the potential substitutes, the marketing and distribution channels and the financial analysis including profit margins, the break-even point and the capital need to start the business.  As this analysis progresses week by week the student will learn if the opportunity should be pursued, modified and adapted or simply aborted.  During each In-depth analysis the student will present his findings to a review board that will provide open feedback and questions the student should consider if he desires to launch a business based on the opportunity.  The objective of this step is for the student to identify a very promising opportunity to launch during phase 3 of our program.

Opportunity Creation

The entrepreneur identifies many potential business opportunities. Capturing the basic concept of his idea on a one page opportunity canvas and completing a quick analysis (market demand, feasibility and financial viability) of the opportunity. This step is more about discovery and creation – looking for ways to modify a product or service so that it is more aligned with the needs and problems of the customer.   We expect each student will create 40 to 50 opportunity canvases during their first year of study. With the information on the opportunity canvas and the quick analysis the student select the 4 most promising business opportunities he has discovered.

THE BUSINESS START-UP PROCESS

After receiving valuable insight from Salvael Ortega (BYU Marriott School of Business – Innovation Design Lab) and Rich Christiansen (Serial Entrepreneur and author of the book ZigZag Principle) M. van Duyse designed a step by step process that could be followed to start a successful business.  The objective of this process is to help entrepreneurs to be successful in launching a new business.  I am not talking about the Venture Capital type of launching a business, where an entrepreneur tries to start “something that has never been done” to attract large venture capital funds in order to start big.  Our entrepreneurial philosophy could be better described as a mixture of the lean methodology (build – measure – learn) and bootstrapping. We much prefer to see entrepreneurs who start a business with a first objective to becoming profitable and generating income by bootstrapping his way forward and systematically testing each idea and learn how to succeed.  Then with time, a profitable business becomes a new beginning position to move into a larger opportunity.  Our business start-up process is composed of 7 steps:

How will the program be structured?

The first semester of the first year each student will spend the bulk of their time learning English or French and will read about six leadership books.

The second semester of the first year the student will read about 30 books on business and leadership.

The second year, about 42 books will be read, 70% on business and the other 30% on leadership. The student will be expected to create a business plan and present it in an online PowerPoint presentation and phone conversation with prospective investors in North America. The purpose of this plan is to generate funding for business plans through large and small donations that are paid to the school, which will manage and distribute the money to students as they meet specific benchmarks for the implementation of their business and as they progress with their business plan.

The third and final year, the student must implement the business plan full time. The only school work required will be that the student must read one business leadership book and discuss it.

There will be weekly and monthly mentoring sessions through which the student can meet their business milestones and report about how the business is doing. The money that was previously collected will be paid out in phases to the student for implementing the business plan as milestones are met.

What is required to graduate from the university?

To graduate, the students business plan must have been implemented and currently generating 100,000 F CFA per month ($200 US dollars).

Are Books included in the tuition?

Yes, all books will be read on Kindles, and all in English. The books will be loaded onto the Kindle as each session begins.

Will all students be required to learn a foreign language?

Yes. Each student will be required to learn English if their native language is French, or French if their native language is English.

What is the ultimate goal of the Leadership University?

Our ultimate goal is to have our students operating a business which is generating 2-300,000 F CFA per month two to three years post-graduation. They would at that point only be working 4-5 hours per week. This would free them up so that they in turn, can go out and do something greater than simply working.