Business fundamentals and entrepreneurship
Key topic
Knowing the basics of business is quite helpful even if your decision is not to follow entrepreneurship. We began our discussion on entrepreneurship in a previous lesson and focused on a comparison of entrepreneurship and regular employment. In this lesson, we will try to give you the fundamentals of entrepreneurship as well as focus on a number of business alternatives which are preferred by athletes as a post sports career entrepreneurial endeavor.
Learning objectives
- Learn the basics of business and entrepreneurship
- Find out how to develop a good business plan based on what you want, want you can do and your network
- Discover ways to be entrepreneurially successful
- Learn about social entrepreneurship, franchising and e-commerce
Business fundamentals for aspiring entrepreneurs
Today, we are again starting our lesson with a 6-minute video which features the basic model of how a business works.
The video gave us a basic idea of how a business works. Since your generations much more entrepreneurial than that of your parents, we believe that you need to acquaint yourself with some basic principles along with the realities of entrepreneurship.
The road to entrepreneurship: Where do you begin?
Now let’s take a look into the road to entrepreneurship. The entrepreneurship route has some basic steps which we list below:
- Coming up with the business idea
- Checking if your business idea has a prospective market
- Deciding how you will start your business and estimating your business set-up costs and how you will finance these costs
- Figuring out how the production/service process will work and estimating your production/direct running costs
- Coming up with a reasonable price that will result to a profit; the price will have to be competitive in comparison with the prices of similar products/services
- Coming up with a plan to promote your product/services and making sure that people will buy them
- Creating sales and product/service delivery procedures
- Keeping up-to-date financials which will enable you to monitor your profitability, cashflow and debt
Initially and most importantly, you need to identify your passion or interests. One of the most important aspects of starting a business, is to choose a field, industry, service or product about which you are passionate. Practically, it just doesn’t make sense to open a coffee shop when you don’t even drink coffee. After you’ve identified your passion, it’s vital to educate yourself and learn as much as you can about the topic or idea that you’ve chosen. Finally, after you’ve come up with the idea, it’s important that you solidify it through a business plan. Your business plan will act as your compass in your intended business endeavor.
Preparing a Business Plan
No self-respecting team runs onto the field without a game plan. When you have a business goal in mind, you need a solid plan. At the initial stage, the first draft need not be elaborate, don’t get bogged down in creating the “perfect” plan; there’s no such thing. Just getting some bullet point ideas down on paper will help. A business plan is a roadmap to creating the business you imagine and making it successful. The plan will change over time as your knowledge grows and new ideas come to mind.
The preparation of a business plan will force you to think strategically; strategic planning is the foundation of success for any start-up idea. Strategic planning encompasses the following business concepts and fundamentals:
Describe your goals
Accurately describe your business goals and objectives. Here is an example of specific objectives: “I will start an Internet marketing company. Fifty thousand people will have visited my site by January, and I will have made income exceeding US$25,000 from online advertising within a four-month period.”
Describe your product or service
What product or service will you offer? Describe your idea in as much detail as possible. Identify the strengths and weaknesses and set the price point (base price at which the product or service will be sold). Clarity of thinking at the outset will help develop all the details that must follow.
Finding the need
Find out early whether the market has a need for your product/ service. You should offer a solution to a problem for which people are actively looking or fulfill an unmet need. There must be a demand for your product/service, and people must be willing to pay for your solution. Additionally, you should verify whether other products or services already exist that offer the same solution at a better price.
Identify your competition
Thoroughly understanding your competition gives you an advantage when marketing your product or service. Learn what they offer, their pricing, and what makes them stand out. Learn the history of your competition and some of their top customers.
List your skills
What experience do you have that puts you in a great position to start this business? Understanding the skills you bring to the table gives you confidence to stand behind your product or service and gives your business a competitive advantage. A skill doesn’t have to necessarily revolve around education or qualifications; it can be your network and the close connections that you’ve built.
Identify risk and reward
As with all investments, managing risk is an important part of starting a business— especially your first business venture. The ability to accurately evaluate risk is a key attribute of a successful entrepreneur. A common misperception is that entrepreneurs are crazy risk-takers. Successful entrepreneurs don’t take wild risks, only calculated ones.
Identify your target market and how to reach your customer
Who are your potential customers? Target market means those people who are most likely to purchase your product or service, and to whom your selling efforts will be directed. A true understanding of your target market is one of the most important pieces of your business plan. So, identify the people to whom you’re trying to sell.
Figure out the financing of your business venture
Who’s going to put the money for this business idea? It’s generally not recommended to just dive into all of your savings and pour money straight into the business. You could consider partnering with individuals or companies who’re more familiar with the industry. Furthermore, you could reach out to financial institutions (Banks) or venture capitalists and see if you could finance your idea through a loan (and under what terms) or an investment.
Estimate what is the return on your investment
As challenging as it sounds, it’s not as hard to do, assuming you have a good understanding of the industry. Try to figure out what will be the future revenues and what are the current and future costs. If that intimidates you, there are always experts who specialize at valuing your investment and projecting the returns.
Becoming an entrepreneur is not a task for the idle and the light-hearted. It takes a lot to be a successful entrepreneur. You should be aware that getting prepared for entrepreneurship will give you better chances of success in your entrepreneurial endeavors.
Remember Return on Investment is calculated as such:
ROI = (Profit / Investment) x 100%
We will now watch a 2-minute video from the Small Business Administration on how to write a business plan.
How to Write a Business Plan Step by Step in 2024
We will now go over various types of entrepreneurial options that are popular among athletes.
Franchising as a business option
If there is one thing athletes understand, it’s how to follow the game plan. Many athletes and ex-athletes buy into franchise business models, which provide a ‘business in a box’, with all the instructions. Just like any other business, franchising requires a serious commitment of both money and time. Before buying a franchise, you need to consider all the pros and cons of owning a franchise in order to decide if the franchising option is the right one for you. The International Franchise Association website (www.franchise.org) offers an abundance of tools to help aspiring franchisees decide whether franchising is right for them, the criteria through which they can select a particular franchise, and many more.
During the past decade we have seen a lot of athletes’ venture into entrepreneurship through franchising. Pro-athletes actually have a rising presence in the franchise world due to the notion that franchising provides athletes with an easy transition into post-retirement life. The truth is that franchising does provide a viable and easily accessible post sports career solution for athletes.
For many franchise systems, athletes are prime candidates for recruitment. Franchisee professional athletes usually have the funds to invest in franchises and they also have an edge when it comes to marketing the franchise. Franchising gives retired professional athlete the opportunity to return ‘back home’ and continue to be the entrepreneurial star of their community. Franchises are aware of this and recognize the competitive edge that local stardom can give to their business.
The advantages that franchising provides to a large number of athletes transitioning into their post sports lives are many. Athletes spend their sports career following the rules and receiving and executing instructions. Franchising provides a system that works a lot like a sports team with a support group and a book to follow. The franchisee is given a business plan and clear instructions on how it should be executed and implemented.
In addition, athletes are team players- used to working together and alternating roles within their teams and with their teammates. They have transferable skills: they are resilient, they focus on the target, they have self-control and a strong work ethic. This unique set of strengths along with their visibility makes athletes prime candidates for successful franchise ownership.
Also, franchises have an already established infrastructure so athletes do not have to ‘reinvent the wheel’ when transitioning into the business world. Franchisee athletes get mentored, receive training and ongoing support from the franchises which actually minimizes the risks associated with setting up a new business.
Another reason franchising constitutes an attractive option for athletes is because it combines the strengths of two brands, that of the franchise and that of the athlete. It basically offers athletes the opportunity to get involved in an already known brand which coupled with the usually positive marketing power of the athletes themselves, can lead to exceptional financial results. If there is one thing athletes know, it’s how to represent a brand. And that could be why so many pros buy into franchise business models, where large payouts can come from executing on an existing image and concept.
Even though the franchise industry is a promising and lucrative one for athletes, there are obviously no guarantees for success. There are many factors that need to be taken into consideration when making the ultimate decision. First of all, there are so many franchises out there and athletes need to research and evaluate the particular ones that are right for them. This is not an easy task and it requires a lot of discipline and linear thought from the athlete’s part in assessing what type of franchise will be exciting while at the same time earn the athlete enough money to sustain a desired lifestyle.
Second, the athlete has to be prepared to receive training, not just on how the particular franchise operates but on the entrepreneurial side of it as well. Running a franchise requires a number of business and entrepreneurial skills as well as knowledge of business fundamentals. The above is key in running a successful business and athletes have to make sure that they educate and familiarize themselves with basic business concepts.
Third, athletes have to be prepared to complement what they lack in business and other necessary skills through working with the right professionals. Building a star team of business advisors and other professionals will provide athletes with the necessary tools to achieve success in their franchising ventures. Franchising is a lucrative option for athletes but at the same time it requires caution in selecting a franchise which aligns with the interests and skills of the athlete and has a desirable money earning potential.
Earvin “Magic” Johnson’s company The Magic Johnson Enterprises has ownership interests in Starbucks, TGI Friday’s, Loew’s Movie Theatres and a travel franchise, Magic Johnson Travel Group. Sixteen-year veteran Max Montoya got involved in franchising in 1995 and by the early 2010s he owned five Penn Station East Coast Subs restaurants in the state of Kentucky. Three-time Super Bowl winner Willie McGinest became the owner of two Wingstop Restaurants and a Swirlz Yogurt shop. There are numerous such examples out there.
We will now watch a 6-minute video which is basically an illustrated guide on how franchising works.
Online businesses as a career option
Before the Internet became an integral part of our everyday life, if you wanted to start a business you either had to have some savings or visit your local bank manager for a business loan. However, now, in the age of e-commerce, where a brick-and-mortar presence is not required, the cost of starting an e-business is quite low and can be reclaimed after a few months’ profits.
The fundamentals of commerce apply in the online business world as well: someone is trying to sell a product or service to another human to either fulfill an unmet need or solve a problem that needs solving. The Internet provides access to a growing global market with billions of people that can be potential customers. There were actually 4.66 billion Internet users in the world as at January 2021 compared to 4 billion Internet users in January 2020. Out of them, 1.92 billion people purchased something online in 2020 — and 2.14 billion people purchased something online in 2021.
Athletes with the visibility they usually acquire during their sporting days, are considered as one of the most direct channels to reach customers; the connection between fans, sport and athletes, develops the fan phenomenon which is unprecedented in any other sector of society. The vast virtual marketplace provides a unique opportunity for athletes to start their own internet enterprise and take advantage of the special characteristics of their brand, image and the relationship they have developed with fans and others:
- Customers are one of the most important assets a company can have. What puts athletes in an advantageous position when it comes to starting their e-business, is that they might not need to build a customer base from scratch, as they most probably already have a social media following that can be utilized as a base to promote their products or services. In addition to the pre-existing followers, athletes have useful information about these followers which if used properly, can tell a lot about their preferences and purchasing habits.
- The personal sports brand can be tied to products or services to increase the visibility of the message being sent to potential customers, without spending crazy amounts of money on advertising. Even if you have an excellent product or service to sell, you still need to make people aware of it, by using the channels the internet is offering, such as social media, online advertisement and search engine marketing. Utilizing the personal sports brand as a promotion tool for products or services serves as a low cost and effective advertising channel.
- Although the internet allows products or services to become visible in every corner of the planet, creating a marketing strategy to reach customers in different markets around the globe is not an easy task. Athletes, could possibly have a personal brand that may be recognizable across various countries and continents, therefore they have an edge in their attempt to reach even more customers globally.
- All the people you athletes met or worked with throughout their sporting days are part of a useful network that they can utilize in their e-commerce endeavors; they can either ask people from their network to mentor them when it comes to e-trade, they may also reach out to people from their network to invest in their upcoming business venture, or they can look into their network for talented people who can work for their business.
The online marketplace constantly develops and changes but the principles of starting and growing a successful online business remain quite the same. Athletes with visibility, a good network, and possibly a solid social media following, have a high probability of success with a prospective internet-based business venture.
Social entrepreneurship
Becoming a successful entrepreneur and building your own business from scratch, is definitely something admirable. But that shouldn’t be your endgame. If you can combine your commercial skills with social issues, you can create positive changes in the society and improve the lives of people around you. This is the notion behind social entrepreneurship, a constantly growing field, which is gaining popularity and attracting lots of talented individuals and funds.
Social enterprises work to solve social issues by using money they make by selling something to consumers, or by using grants and government money. Their success is not only measured in terms of financial profit, but with the positive change they manage to make in the world, however that is defined.
Athletes have been leading social change throughout the course of history and some people argue that they have a pivotal role to serve as role models for their fans and followers. Living in a sports-focused society, at the intersection of sports and business, athletes have the power to reach people from all different walks of life. Fortunately, many athletes have taken advantage of the power that stems from their sports fame to become social entrepreneurs and launch successful social enterprises that aim to make a difference and help the world become a better place:
- Former Manchester United, Chelsea and Spanish international soccer player, Juan Mata, has partnered with football charity organization, Street Football World, to launch his charitable movement Common Goal. Soccer players who sign up for the cause pledge 1% of their salaries to a central fund that is allocated to high-impact organizations that harness the power of football to advance the United Nations Global Goals.
- Successful Indian American professional tennis player and Princeton graduate, Shikha Oberoi, launched her media and lifestyle company, SDU Seva Inc., in 2013. Using the power of sports and television, she made six documentaries to push towards people becoming more involved in positive social reform within India. Through her media company in India, she has also created a reality show that is used as a platform for social entrepreneurs to gain visibility.
The secret to a successful social enterprise lies not only in focusing on a cause you are passionate about, but following the same principles as building any other business.
If you haven’t already aligned yourself with a charitable cause or mission that you deeply believe in, perhaps you should consider it. Giving back to the community is not only a moral obligation but a way to show your deep altruism and an important component of your brand. If you need to decide on a cause, you can ask yourself: What are the things happening in the world that make me feel like I want to change them and make them better?
- You can research organizations that are already involved in the cause about which you feel passionate. If for example you are passionate about sports and its power to change the world you can visit sportsaid.org.uk or www.streetfootballworld.org to see how these organizations are making a difference using sports as a tool.
- Use your free time to volunteer for organizations that triggered your interest so that you can learn even more about them. A volunteer athlete can always attract more people to the cause resulting to increased media attention.
- Set a clear, big-picture goal for what you want to achieve. For example, you want to organize international soccer matches with famous ex-players to raise money for bringing electricity to rural areas in Africa. Your network and connections, from the sports industry such as coaches, ex-teammates, etc., can be very useful.
- Take action and make a difference!
It is a really difficult task to set off to change the world alone; before entering into your next venture to create a positive change you should consult with a trusted advisor and form a solid plan to ensure the success and impact of your social venture.
Let’s watch a short clip about social entrepreneurship
Lesson wrap-up
In our final senior program lesson, we pivoted our attention to entrepreneurship. We began with some basics of business that are a must for everyone, and went over business plans. We then discussed some specific options: franchising, online businesses (e.g., e-commerce) and social entrepreneurship. The key lies in identifying what fits you best, based on your skills and interests.
At this point we will wrap up today’s lesson. First, we will go over the learning objectives of this lesson and we want your feedback as to whether they have been achieved and then we will address any questions you may have. Please feel free to ask anything you’d like in relation to today’s lesson and we would love to hear how the concepts we discussed today relate to you and your life!