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Nurturing the Entrepreneur in you A Presentation to the Association of Muslim Professionals. Niyi Yusuf. 21/07/2012.

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Presentation on theme: "Nurturing the Entrepreneur in you A Presentation to the Association of Muslim Professionals. Niyi Yusuf. 21/07/2012."— Presentation transcript:

1 Nurturing the Entrepreneur in you A Presentation to the Association of Muslim Professionals. Niyi Yusuf. 21/07/2012

2 Outline Background Introduction to Entrepreneurship Making the Transition Succeeding as an Entrepreneur Local Context 2

3 We are now in the ‘Age of Unreason’ THE NEW EQUATION (1/2 X 2 X 3)  Half of people working would lose their jobs in the next 10 years of the advent of the 21 st century.  Those that would retain their jobs would be paid twice as much as their current salaries  Those that retain their jobs would be required to produce 3 times as much.  Implications –Fewer jobs –Higher pay –Extremely long hours for the employed –No time to enjoy the purse. –Those without jobs would have all the time at their disposal but no money to spend. –To combat this paradox, we need to generate new ideas. Entrepreneurship: Plan, start and run successful businesses 3

4 Background  Many simply equate entrepreneurship with starting one’s own business. Most economists believe it is more than that  To some economists, the entrepreneur is one who is willing to bear the risk of a new venture if there is a significant chance for profit. Others emphasize the entrepreneur’s role as an innovator who markets his innovation. Still other economists say that entrepreneurs develop new goods or processes that the market demands and are not currently being supplied  In the developing world including Nigeria, successful small businesses are primary engines of job creation, income growth, and poverty reduction  Employees however are usually reluctant to transition to entrepreneurship due to risky aversion and preference for guaranteed income  Yet, Wealth can only be created by formation, running and sustaining of businesses – ise omo aseje, owo omo asela – You can be wealthy only if you own a business “ Nobody has ever eaten a better meal than that which one has earned by working with one’s own hand. The Prophet of Allah, Dawud, used to eat from the eanings of his manual labour ”. (Sahih Bukhari) 4

5 Outline Background Introduction to Entrepreneurship Making the Transition Succeeding as an Entrepreneur Local Context 5

6 Economically, Nigeria paints a mixed picture with GDP growth at an impressive 7.x%, however with high inflation rate of 12.x%, high levels of unemployment (especially youth unemployment), and poor infrastructure Nigeria has significant oil reserves but an undue reliance on oil– a typical one - pronged economic strategy well documented across Africa – Crude oil counts for 80 percent of Nigeria’s export earnings – Oil related revenue counts for 67% of tax revenue Factoring in the current instability of the global economy as a whole, a diversified, entrepreneur-led economy is crucial to Nigeria’s long term success and stability Information Sources:. World Bank, Central Bank of Nigeria 6

7 Local Context Small and Medium Enterprises Equity Investment Scheme Bank of Industry Community Banks/ Microfinance Banks NDE Scheme Cooperative Schemes Bank of Agriculture Small and Medium Enterprises Agency of Nigeria In order to stimulate entrepreneurial growth, the Nigerian government has over the years, instituted multiple schemes 7

8 Local Context Overall Nigeria currently ranks 133 rd out of 183 economies assessed on the ease of doing business Doing Business Ranking 2012 Information Sources:. Doing Business 2012, Economy Profile: Nigeria- The World Bank, IFC 8

9 Local Context Nigerian citizens however display high levels of entrepreneurial optimism – A high 79 per cent believe that the country offers a good environment for entrepreneurs – 86 per cent of Nigerians believe that hard work will help them get ahead in life. This is despite business start up costs of nearly 80% of GNI per capita – one of the ten highest, worldwide – The average time it takes to start a business in Nigeria is 31 days Compared with other countries in West Africa, there is a high interest in entrepreneurship in Nigeria with almost half (45%) of Nigerians surveyed in a Gallup poll, saying they plan to start a business in the next 12 months Information Sources:. Gallup Poll, Legatum Institute London - Survey of Entrepreneurs Nigeria 2011 9

10 Local Context There is a fairly mixed motivation among Nigerians for starting businesses, the main motivation however is for independence and the opportunity to “be my own boss” as well the opportunity to make a difference in society 10

11 Outline Background Introduction to Entrepreneurship Making the Transition Succeeding as an Entrepreneur Local Context 11

12 Introduction to Entrepreneurship An entrepreneur is one who bears uncertainty, buys labour and materials, and sells products at certain prices..Cantillon (1725) The entrepreneur is someone who searches for change, responds to it and exploits it as an opportunity..Drucker (1985) The entrepreneur is an innovator. He does new things in a new way. He supplies new products; makes new techniques of production, discovers new markets, and develops new sources of raw materials …Schumpeter (1934) Entrepreneurs are people who have the ability to see and evaluate business opportunities; to gather the necessary resources and to take advantage of them; and to initiate appropriate action to ensure success…Meredith, Nelson, Meck..(1991) What is an Entrepreneur? 12

13 Introduction to Entrepreneurship “The process of creating something new with value by devoting the necessary time and effort, assuming the accompanying financial, psychic, and social risks, and receiving the resulting rewards of monetary and personal satisfaction of independence.”… Robert Hisrich The mindset and process to create and develop economic activity by blending risk-taking, creativity and/or innovation with sound management, within a new or an existing organisation…Commission of the European Communities (2003) The dynamic process of identifying economic opportunities and acting upon them by developing, producing and selling goods and services”…OECD Entrepreneurship is the act of innovation involving endowing existing resources with new wealth- producing capacity…Drucker (1985) What is Entrepreneurship? 13

14 Introduction to Entrepreneurship - Different types of entrepreneurial activity Entrepreneur Self – employed (subsistence entrepreneurs) Social Entrepreneurs Value created/ captured by the entrepreneur little a lot Value created for others (whether employees, government or customers) littlea lot Those creating little personal value or little value for others are referred to as “self employed or subsistence entrepreneurs” Those creating value for others are categorised as “social entrepreneurs Those creating wealth of significant value for themselves and others are referred to as entrepreneurs Those creating little personal value or little value for others are referred to as “self employed or subsistence entrepreneurs” Those creating value for others are categorised as “social entrepreneurs Those creating wealth of significant value for themselves and others are referred to as entrepreneurs Model created by Bruyat and Julien (2000) 14

15 Introduction to Entrepreneurship - Intrapreneur Vs Entrepreneur There is a new school of thought on the “Intrapreneur” who is a person within a large corporation who takes direct responsibility for turning an idea into a profitable finished product through assertive risk-taking and innovation“ Employees are urged to be entrepreneurial, “take ownership” of particular components of the company's work and be remunerated accordingly for success SimilaritiesDifferences Both require a unique business concept that takes the form of a product, process, or service Intrapreneurs make risky decisions by using the resources of the company while entrepreneurs make risky decisions using their own resources Both require that the entrepreneur be able to balance vision with managerial skill, passion with pragmatism, and proactiveness with patience In start-up entrepreneurship, the entrepreneur takes the risk in intrapreneurship and the company takes the risk other than career- related risk Both are predicated on value creation and accountability to a customer In a start-up, potential rewards for the individual entrepreneur are theoretically unlimited whereas in intrapreneurship an organizational structure is in place to limit rewards/ compensation to the entrepreneur/ employee Both require the entrepreneur to develop creative strategies for leveraging resources Entrepreneurs prefer to develop tacit knowledge, instead of using procedures and mechanisms from other companies. On the other hand intrapreneurs work in organizations that have their own policies, procedures and bureaucracy 15

16 Outline Background Introduction to Entrepreneurship Making the Transition Succeeding as an Entrepreneur Local Context 16

17 Characteristics of an Entrepreneur Sees opportunity where others see challenges and problems Talent – constantly seeking to learn and develop their talents and harness the talents of others. Attitude – the I can do attitude – not about technical skill or money. What has Richard Branson got to do with aircraft/planes? Building – they do not run around doing everything; they build brand, team, resources, systems, security, etc. Focus – they focus on the critical success factors Communication – good listeners and speakers 17

18 Succeeding as an Entrepreneur This drives the development of new products or services or ways to do business. It is the push for innovation or improvement It is continuous learning, questioning, and thinking outside the box Creativity and Innovation This is the extremely strong desire that motivates the entrepreneur to work hard and achieve success It includes persistence and the ability to bounce back after setbacks Dedication and determination This is the ability to move quickly in response to changing market needs. Be willing to improve, refine and customize services to continually give customers what they want. Adaptability & Flexibility This is the capacity to follow through so that goals are accomplished Entrepreneurs seek opportunities, initiate projects, gather the physical, financial and human resources needed to carry out projects Leadership The planning, organizing, directing and controlling of the firm’s financial resources The entrepreneur needs to determine the sources of funds for his enterprise Financial Management The process of selecting among available alternatives Decision Making The following are key competencies and personal characteristics required for successful entrepreneurship 18

19 Succeeding as an Entrepreneur This gets entrepreneurs started and keeps them there. It gives entrepreneurs the ability to convince others to believe in their vision Passion and Energy This is the attitude of hopefulness and confidence about the future or the successful outcome of the business Optimism, Positivity and Positive Thinking This is the ability to work with people to ensure cooperative or coordinated effort on the part of a group of persons acting together in the interests of the business Team Work/ Interpersonal skills Adherence to ethical principles, soundness of moral character and honesty Ethics and Integrity Desire and determination for personal achievement and success Ambition The following are key competencies and personal characteristics required for successful entrepreneurship 19

20 Succeeding as an Entrepreneur Have a written plan. Without a plan, it is merely a dream. It doesn't have to be a book, but you need a few pages outlining specific objectives, strategies, financing, a sales and marketing plan, and a determination of the cash you need to get things done Don't marry your plan. Every great military general in history has known that even the best-laid plan sometimes has to be thrown in the fire when the bullets start flying. Adjust, confront and conquer. Keep your ego in check. This isn't about you; it's about the business. Don't take things personally and stay out of emotion. Do not let your ego take control. Listen to others. Advisors are crucial because you need people to bounce ideas off, inspect what you're doing, and push you to greater accomplishments, holding you accountable for what you are committing to do. Keep track of everything, and manage by the numbers. Know your numbers and check them daily and make all decisions based on what they tell you. One of the most important calculations is cash flow pro forma. Determine how much cash you need to do the business, and do not start without the required cash on hand. Delegate to employees and avoid micromanaging them. A manager's job is to delegate and then inspect progress. So don't be a control freak. Use an incentive-based rewards system, and maintain a no-problem attitude about issues that crop up. Connect with your customers. Build rapport with your market. Reinvent your business. It is net profit, not gross revenue, that you want to focus on. Separate yourself from your history and create a new competitive advantage, but not by discounting 20

21 Succeeding as an Entrepreneur Statistics show that – Family businesses account for more than 90% of businesses in North America – About 70% of all companies in the world are family owned – Two-thirds of all U.S. companies are family-owned and controlled – 40% of Fortune 500 companies are family owned – provide over 50% of employment in industrialized nations However – 70% of family businesses do not make the transition to the second generation – 90% do not make it to the third generation Failed Family Businesses have been attributed to – Lack of formal policies and procedures – Absence of delineated roles and responsibilities (Corporate Governance structure) – Sub-optimal board composition and performance – Limited access to capital – Lack of planning – Lack of interested successors – Fear of decision making 21

22 Succeeding as an Entrepreneur “Our Business in life is not to get ahead of others, But to get ahead of ourselves, To break our own records, To outstrip our yesterday By our today” Oando Group: from investing company to integrated energy company Dangote Group: from Trading to Manufacturing to Category Dominance GSM 2001 – 2010: different tactics and different results Nigerian Starch Mills Ltd : how not to play Ambition, Positive and Can-Do Attitude 22

23 Positive Attitude – Don’t give up easily Dig A Little Deeper Einstein was once asked what he considered the main difference between his own intelligence and that of other people. He thought for a while and replied: Well, when most people look for a needle in the haystack, they stop when they find it. But I continue looking to discover if I can find a second, third and, maybe, if am even lucky, a fourth or fifth needle. Equip yourself fully with knowledge Any man is educated who knows where to get knowledge when he needs it and how to organise the knowledge into definite plan of action 23

24 Positive Attitude – Go for the extraordinary Have and develop ‘Can – do’ attitude Look for opportunities. Be creative. What can you see? 24

25 Outline Background Introduction to Entrepreneurship Making the Transition Succeeding as an Entrepreneur Local Context 25

26 Making the Transition from Employee to Entrepreneur - Key decisions and considerations Making the transition starts with becoming entrepreneurial in your current organisation. It also includes the following key decisions and factors 1.Do you truly want to be responsible for a business? 2.What product or service should be the basis of the business? 3.What is the market and where should it be located? 4.Is the potential of the business enough to provide a living wage for its employees and the owner? 5.How can the required capital be raised? 6.Should the individual work full time or part time to start the new business? Should the person start alone or with partners?..the entrepreneur needs to gather as much information as possible before making these and other crucial decisions. Other preparatory work includes evaluating the market opportunity, developing the product or service, preparing a good business plan, figuring out how much capital is needed, and making arrangements to obtain that capital Key Factors Motivation : What is the incentive for starting the business? Is it money alone? Money is almost always tight in the early phases of the business Strategy: What is the strategy for distinguishing the product or service? The strategy to compete only on the basis of selling price is not feasible Realistic Vision: Is there a realistic vision of the enterprise’s potential? Entrepreneurs often underestimate start-up costs and overestimate sales revenues in their business plans 26

27 Making the Transition from Employee to Entrepreneur - Other key considerations Choosing a form of business Determine the preferred form of organisation ranging from sole proprietorship, partnership or corporations Creating a business plan Document a business plan to gain a deeper understanding of the opportunity and its viability, assist management in planning, attract investors and financing The business plan will help the entrepreneur to allocate resources appropriately, handle unexpected problems, and make good business decisions Choosing a product and a market Ask key questions to generate ideas e.g. ˗What limitations exist in current products and services? ˗Are there other uses for new technology? ˗What are innovative ways to use or provide existing products? ˗What groups have unfulfilled needs in the society? Business ideas usually fit the following categories ˗An existing good or service for an existing market ˗A new good or service for a new market ˗A new good or service for an existing market ˗An existing good or service for a new market Entry Strategies Distinguish the venture through product differentiation, niche specification, and innovation Financing Identify sources of capital including personal savings, friends and family, credit cards, commercial and microfinance banks, venture investors and government programs such as Small and Medium Enterprises Scheme, Small and Medium Enterprises Equity Investment Scheme, Small and Medium Enterprises Agency of Nigeria, Bank of Agriculture and Bank of Industry 27

28 Making the Transition from Employee to Entrepreneur - Have a Clear Business Model 5 elements of a successful business model – Revenue Model – who will buy, how often/frequent, how soon, at what cost? – Margin Model – difference between revenue and direct costs? – Operating Model – beyond COGS, what else must money be spent on to support the sale: premises, people, marketing, IT, etc? – Working Capital Model – inventory, receivables, payment of suppliers vs customer receipt? – Investment Model – how much cash must be spent upfront before customers spend can cover operating costs? 28

29 Getting Support There are institutions that exist to support you to realise your own dream: – Enterprise Development Agencies – FATE Foundation – SMEDAN’s Business Development Centres, Matori and Ikeja – LEAP Africa – Lagos Business School – Many other NGOs and private bodies 29 “It is not the critic who counts, not the man who points out how the strong man stumbled or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs and comes short again and again; who knows the great enthusiasms, the great devotions, and spends himself in a worthy cause; who, at the best, knows in the end the triumph of high achievement, and who, at worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who know neither victory nor defeat.” - Theodore Roosevelt (1858 – 1919)

30 In closing Develop the “spirit” of entrepreneurship ….one of risk taking, innovation, and pushing the limits of what's known and understood. Entrepreneurs dream up visions. And when they make these visions real, they create value - financial, social or cultural. Entrepreneurs view change as a force of possibility rather than as a creator of problems. They see every challenge as a business opportunity By managing fear so that it doesn't become an obstacle, you are able to harness opportunity. Self-trust is paramount for risk-taking A healthy entrepreneurial spirit requires trust in yourself and your intuition, an ability to make clear choices, a flare for mobilizing resources, and a capacity to move beyond obstacles created by fear. Entrepreneurs swim in Blue Ocean “ Don't play what's there, play what's not there.” – Miles Davis 30

31 Remember what Allah says in the Glorious Qu’ran … “Allah does not change the condition of any community until the people change what is in their hearts” Q13:11 “That man can have nothing but what he strives for; that (the fruit of) his striving will soon come in sight; that he will be rewarded complete; that to thy Lord is final goal” Q53:39-42 But seek with the (wealth) which Allah has bestowed on thee the Home of the Hereafter nor forget thy portion in this world: but do thou good as Allah has been good to thee and seek not (occasions for) mischief in the land: for Allah loves not those who do mischief." Q28:77 Remember also what the Prophet of Islam, Muhammad (PBUH) said: – Whatever you desire and work towards, you achieve. It is in your hands …there is no limit! 31

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