Description
Within this detailed explanation pertaining to the importance of entrepreneurship and seed funding.
Abhinav
International Monthly Refereed Journal of Research In Management & Technology
60
Volume II, September’13 ISSN – 2320-0073
www.abhinavjournal.com
IDLE CAPACITY: A COST-SAVING APPROACH FOR
EARLY-STAGE STARTUPS
Mustafa Seref Akin
Associate Professor, Fatih University Buyukcekmece Campus Istanbul Turkey
Email: [email protected]
ABSTRACT
This paper aims to explain the innovative approach of idle capacity for young entrepreneurs
to solve the financial and human capital problems through benefiting the idle capacity of
other enterprises in their networks. Seed funds merely exist in developing countries. An
unexploited opportunity is idle capacity which falls into barter options into In-Kind
Contributions. Idle capacity for startups is a specific form of barter agreement.
I benefited from idle capacity usage model of Altuntas, one of the dragons of Dragons' Den,
an entrepreneurship based TV show. A very important conclusion for entrepreneurial
lectures is that a more practical approach is to develop business ideas that fit around your
circle’s resources rather than any random business idea that comes into mind.
The Importance of Entrepreneurship and Seed Funding
Entrepreneurship is associated with the creation of wealth, technological innovation, positive
externalities, allocation efficiencies, improving quality, productivity improvement,
competitiveness, deregulation and job generation (Acs, et., al. 2004; Acs and Armington,
2006;Wennekers and Thurik, 1999). In cross-national studies, Djankov, et al. (2002)
suggest that nations with greater barriers to entry of new firms also have poorer-functioning
and more corrupt economies.
If the ecosystem does not tolerate mistakes and entrepreneurs are not encouraged to take
risks, innovative start-up companies will not emerge. The seed fund may be a key factor to
solve the puzzle through sharing the risk. A financial system is expected to evaluate
prospective entrepreneurs and choose the most promising projects (King and Levine, 1993).
However, traditional banking system works for the corporate and routine businesses. Many
initiatives have been launched to overcome financial bottleneck in entrepreneurship (table 1).
Seed funds merely exist in developing countries. An unexploited opportunity is idle capacity.
This paper aims to explain the innovative approach of idle capacity for young entrepreneurs
to solve the financial and human capital problems through benefiting the idle capacity of
other enterprises in their networks.
Idle Capacity: Concept and In-Kind Contribution
Idle capacity falls into barter options into In-kind Contributions (in table 1). Idle capacity
for startups is a specific form of barter agreement. In-kind contributions are not equivalent to
cash but they have liquid asset value (Strauss, 2011).
Abhinav
International Monthly Refereed Journal of Research In Management & Technology
61
Volume II, September’13 ISSN – 2320-0073
www.abhinavjournal.com
Table 1. Startup Funds
Traditional
Route
Own
Resources
Partnership Creative
Solutions
In-Kind
Contributions
Personal Asset
Bank Loans
SBA Loans
Equity Line of
Credit
Credit Cards
Friend- Family
Angel Investors
Venture Capital
Initial Public
Offering
Factoring
Retirement
Accounts
Government
Partnerships
Mergers and
Strategic
Alliances
Peer-to-peer
Lending
Crowd funding
Microfinance
Royalty-
Revenue
Sharing
Seller
Franchising
Business Plan
Competitions
Incubators
Barter
Source: Strauss (2011)
Barter is the exchange of your goods or services for another business’s goods or services
without trading dollars. Not all barters are using idle capacity. I might be working in
construction business. I don’t have money to sub-contractors. I may offer some flats in
exchange to build apartments. In this barter agreement, there is no idle capacity.
Idle capacity is referred to a barter of unused time, unused inventory or unused spaces. The
total capacity composes three parts. The first is productive capacity, which is the capacity
needed to process scheduled production. The second part is protective capacity, which is
held in reserve to ensure to meet the bottleneck operation. Any remaining capacity is
called idle capacity.
The economic literature focuses on the reasons of idle capacity. Proctor (1976) argues that
idle capacity exists since the production and investment decision of firms are very different.
In some cases, firms have idle capacity to deter entry (Bulow et. al., 1985). Bad information
on product costs leads to bad investment strategy (Cooper and Kaplan, 1988). Production
facilities remain unused because of a lack of demand.
The solutions of the idle capacity are suggested in inventory and production lot size control
(Banerjee and Eiamkanchanalai, 1999), managerial efficiency (Pacheco and Fernandes,
2003), and economies of scope (Panzar and Willig, 1981). In the last concept, within firms
managers decided to innovate or to sell a new product by using the existing resources such as
research and development or marketing departments. For instance, motorcycle research labs
and production facilities is used for car manufacturing.
However, entrepreneurs look at the existence of idle capacity as an opportunity (Altuntas,
2012). In the economic literature, I did not counter experiences of entrepreneurs related to
this funding method. In this paper, we will explore some real life experiences. Usually,
entrepreneurial economics focuses on venture capital type of funding. However, in
developing countries, saving is low and funds are dedicated for the established business and
investment goods. The idle capacity might be a working option for entrepreneurs.
In table 2, we compare the R&D Expenditure in developing countries since the seed funds
merely exist and there is no data available. When we look the R&D expenditure in Turkey
Abhinav
International Monthly Refereed Journal of Research In Management & Technology
62
Volume II, September’13 ISSN – 2320-0073
www.abhinavjournal.com
and Iran, spend only 0.7% of their GDP on R&D. The sum of expenditure of R&D of Middle
Eastern and North African countries is much less than the U.S.A. Angel Investment. In the
U.S. there are 2000 venture capital companies and 250.000 Angel Investors actively invest in
startups. The main success (superiority) of the U.S. is the existence of seed funds to allow
startups experiment trial-errors in market.
The estimated seed fund (total venture capital, angel investment and government support)
amount in Turkey is less than 100 million U.S.$. Certainly, we need to raise this number but
on the other hand; we have to find some innovative ways to substitute cash constraints.
Table 2. The R&D Expenditure in GDP in some Developing Countries and USA ?n 2007
2007 In U.S.$
Turkey %0.7 4.2B
Iran %0.7 2B
Egypt %0.2 260
Tunisia %1 35M
Algeria %0.1 160M
Suudi Arabia %0.1 380M
U.S.A. R&D %3.2 470B
U.S.A. Venture Capital %0.15 20 B
U.S.A. Angel Investor %0.12 18B
Source: World Bank Development Indicator
Idle Capacity: Case Study from Altuntas
As a business economics professor, I am interested in the career paths of successful
businessmen and professionals. I especially focus on those who write books related to their
experiences. I assign these books at the beginning of semesters. I explain the key points of
the book and assign various pieces of homework related to them. At the end of month, I
invite these authors to the university campus to deliver lectures. What I hope to accomplish
is to fully integrate the authors’ speech with the written documents in order to allow well
prepared students to grasp the business approach. Students who are ready and prepared will
truly understand well-known businessmen and professionals. Questions and comments from
students are provocative, challenging and thoughtful.
My typical question in dealing with a businessmen or professional is: What is the secret to
their success? One of the books used in the past few years is Baybars Altuntas, one of the
dragons of Dragons' Den, an entrepreneurship based TV show, ‘My way to Dragons' Den- 66
Secrets For Entrepreneurs.’ The book is written in Turkish language but addresses important
topics related to an innovative solution for seed funds. He also alters some fundamental
approaches in business plan.
Putting innovative ideas into motion requires financial and human capitals. Since Altuntas
did not have them in the beginning, he used others’ resources without asking cash supports.
However, he just focused the idle capacities.
Altuntas recognized the shortcomings in the education sector. There were only classic
courses, such as English, computer and cutting-sewing. Concepts such as vocational training
Abhinav
International Monthly Refereed Journal of Research In Management & Technology
63
Volume II, September’13 ISSN – 2320-0073
www.abhinavjournal.com
or career courses did not exist. People have to pass university entrance exams to acquire a
professional degree. He searches for the appropriate professional degree.
At that time, there were 3500 travel agencies across Turkey, but none offered the training to
staff for these agencies. He decided to launch the first career course program for travel
agencies. After he picked the program, he needed to find the students.
To implement the certificate program tour operator training, he asked an owner of a real
estate agency, for free use of unused offices (table 3) for marketing. He used the staff, office
spaces and office equipments to promote the certificate programs. So he didn’t want money,
just idle capacity. The idle capacity is the stuff that firms do not use: office, car, tools and
equipment. It will be received positive response for the demand of idle capacity since there is
no loss for firms. When idle capacity exists, a firm can take on an incremental order without
increasing the fixed costs. Bartering these idle capacities allows the source owners to get
valuable assets in return. Altuntas start paying rents and shares the bills of the existence
office.
This spare capacity was something more valuable than money. This is the back bone of the
formula of Altuntas.
All candidates participating in the tour operator certificated programs had insufficient
English. He asked the dean of education (where he was a student) of Bosphorus University
to open a weekend certificate program in idle classrooms (in table 3). Therefore, lifelong
learning centers in Turkey started to work with this initiative and inspiration. Notice that he
did not want anything from Bosphorus University, he only requested idle capacity on
weekends. This project could serve as an example to other universities in the development
of national economy, and therefore could arise as a locomotive project that he has explained
to persuade the university administration. The right business idea, network and idle capacity,
coupled with the ability of persuasion, assure that the project endures for years.
He benefited the same formula while he obtains the IATA Training Representative of
Turkey. The general manager of his company had earlier links in IATA in Geneva. Having
seen the gap in Ticketing Expertise in Turkey, he used the connections of the general
manager’s network (table 3). Based on the formula and connections through his general
manager, his idle capacity in education center and the ability of convincing of Altuntas lead
to take one of the world's first IATA approval certificate programs.
Table 3. Altuntas’ Formula: Innovative Business Idea + Net Work + Idle Capacity
Innovative Business Idea NetWork Idle Capacity
Travel Agencies Tour
Operator Training
Azmi Saribay- A member
of Franchising Association
The idle office and
secretaries of Azmi Saribay
English Certificate
Program
Cem Alptekin- Dean of
Bosphorus University
Idle classes of Bosphorus
University
IATA Turkey
Representation
Halim Gures- Colleague
Idle capacity of Deulcom
classes
Source: Dragon’s Dens 66 Secrets.
Abhinav
International Monthly Refereed Journal of Research In Management & Technology
64
Volume II, September’13 ISSN – 2320-0073
www.abhinavjournal.com
Net Work Creation of Altuntas: 5 Whys
In Entrepreneurship literature networking draws a great deal of attention. This issue is
already covered from different aspects (Arun, 2010; Cooper, 2002; Aldrich and Zimmer
1986). Altuntas’ mother was an elementary school teacher and his father was retired from the
military. His father has six brothers and all of them were public officers. Altuntas has seven
brothers and they are also public officers! In the circle of his family, they did not have any
connections to business world. So he made his own networks. In the case of Altuntas, I will
consider one networking case between him and Azmi Saribay, real estate agency owner. To
follow the network building process of Altuntas, I will ask 5 whys (In the business literature,
inspired by Toyota, 5 whys are to explore the cause-and-effect relationships of a problem or
situation. The goal is to determine the root cause (Ohno, 1988)).
Why does Azmi Saribay accept the barter deal with university student 21-years-old boy (first
why)? Saribay witnesses how Altuntas established the franchising system from scratch
without spending a dime with a great success.
Why does Saribay get in touch with Turkish Franchising Association (second why)? Saribay
is the leader franchising real estate company of Turkey, Turyap ( a leader Turkish based real
estate franchising company competing to U.S. base real estate franchising i.e. Re-max and
Colliers)
Why does the idea of establishing of the Franchising Association become so successful (third
why)? Altuntas succeeded to draw the attention to the press and the businessmen since the
franchising concept is very new concept in Turkey in 1990s. He gets connected to German
Franchising Association. He invites the head of German Franchising Association. He builds
a similar structure of German Franchising Association.
Why does the head of German Franchising Association visit Turkey (fourth why)? Altuntas
invites him to introduce Turkish business community the franchising system.
Why does he connect to the Franchising Association at age 21 (fifth why)? He reads an
article about the franchising in a review and he sees the fax and phone number of German
Franchising Association. He realizes that in the future there will be big demand in Turkey.
As we witness that following an important idea brings an important chain of connection and
builds networks for Altuntas.
Teaching: Business Plan Preparation
When I assign my students to prepare a business plan, I ask them: What is opportunity in
business? What is the authenticity of his product and service? What are the marketing
channels and what is financial table? This type of well-known questions are details explained
in many entrepreneurship books (Allen, 2003; Frederick et.al., 2010; Bruce et.al., 2009 ) .
However, now, based on the Altuntas Business Formula, I ask them about idle capacity they
may use. To whom they know and what type of idle capacity they have. Shape your business
plan according to these available resources. Look primarily at the people around you and
consider their related businesses, networks and institutions. A more practical approach is to
develop business ideas that fit around your circle rather than any random business idea that
comes into mind.
Abhinav
International Monthly Refereed Journal of Research In Management & Technology
65
Volume II, September’13 ISSN – 2320-0073
www.abhinavjournal.com
Discussion on Idle Capacity Model
This idle capacity usage model has two aspects: i) use the other resources without asking
cash or credit and ii) develop business model based on the idle capacity in your network.
Certainly, the second aspect brings a constraint since as an entrepreneur; I cannot use my full
talent in a desired sector. On the other hand, it is hard to get financial support without a
successful track record. Additionally, the seed funds are very limited in developing
countries.
The first aspect related to use idle capacity is to save our cash. Bartering for the products and
services you need supports saving your capital for other things. Another important
implication of demanding cash versus non-cash value is that cash request is very delicate
issue. People become very sensitive however non-cash items are easier to ask (Ariely, 2010).
Probability of accepting a non-cash asset is much higher than a cash asset. If this non-cash
asset is idle, it is much easier to get approval of owner. When money is involved, people
hesitate to answer positively but they are more positive to accept to use the idle capacity
since the opportunity cost does not exist.
Barter system is a vast concept. Unused hotel rooms, rental cars, food or ad space in a
magazine, in a newspaper, online, or in radio or TV time (Strauss, 2011). Stores have extra
inventory, accountants have unused time, restaurants have empty tables (Strauss, 2011).
Eventually, Altuntas uses an open source opportunity to reach his goal, and shares the profit
if the business works well. Bartering allows using idle capacity to make good use of products
or time that may be otherwise wasted.
REFERENCES
1. Acs,Z J. & Armington,C, 2006. "Entrepreneurship, Geography, and American Economic
Growth," Cambridge Books, Cambridge University Press,
2. Acs, Z. J & Audretsch, D. B & Braunerhjelm, P. & Carlsson, B., 2004. "The Missing
Link: The Knowledge Filter and Entrepreneurship in Endogenous Growth," CEPR
Discussion Papers 4783, C.E.P.R. Discussion Papers.
3. Aldrich, H.E. & Zimmer, C. (1986). Entrepreneurship through social networks. In D.
Sexton
4. and R. Smilar (eds), The Art and Science of Entrepreneurship (pp. 3–23). New York:
5. Ballinger Publishing.
6. Allen, K. R. (2003). Launching new ventures: An entrepreneurial approach. Boston:
7. Houghton Mifflin.
8. Altuntas, B. 2012. ‘My way to Dragons' Den- 66 Secrets For Entrepreneurs. Destek
Press, Istanbul.
9. Ariely, D. 2010. Predictably Irrational. Harper Perennial.
10. Arun B. 2010. The Networking Entrepreneur. The Journal of Entrepreneurship, 19, 2:
209–221.
11. Banerjeeb, A.& Eiamkanchanalaia,S. 1999. Production lot sizing with variable
production rate and explicit idle capacity cost. International Journal of Production
Economics.
Abhinav
International Monthly Refereed Journal of Research In Management & Technology
66
Volume II, September’13 ISSN – 2320-0073
www.abhinavjournal.com
12. 59, 1–3, p. 251–259.
13. Bruce R. Barringer, B.R. and R. Duane. 2009. Entrepreneurship: Successfully Launching
New Ventures. Pearson Prentice Hall , 3rd Edition.
14. Cooper, A. (2002). Networks, alliances and entrepreneurship. In M. Hitt, D. Ireland,
15. S. Camp and D. Sexton (eds) Strategic Entrepreneurship: Creating a New Mindset.
16. Oxford: Blackwell Publisher
17. Cooper, R. & Kaplan, R.S. 1988. Measure costs right: make the right decisions
18. Harvard Business Review.
19. Djankov,S & Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 2002.
The Regulation Of Entry. The Quarterly Journal of Economics vol. 117(1), pages 1-37.
20. Jeremy Bulow, John Geanakoplos and Paul Klemperer. 1985. Holding Idle Capacity to
Deter Entry. The Economic Journal, 95, 377, pp. 178-182
21. King, R. G. And Levine,R. 1993. Finance, entrepreneurship, and growth Theory and
evidence
22. Journal of Monetary Economics 32, 513-542.
23. Kuratko, F.H. & Hodgetts, D.F. 2010. Entrepreneurship: Theory, Process, & Practice.
(2010). 2.nd ed. R.M. Publisher: Cengage Learning.
24. Ohno, T (1988). Toyota production system: beyond large-scale production. Portland, Or:
Productivity Press.
25. Pachecoa,R.R. and E. Fernandes. 2003. Managerial efficiency of Brazilian airports
26. Practice. 37, 8, p. 667–680.
27. Panzar, J.C. and Willig, R.D. 1981. Economies of Scope. American Economic Review,
71. 2, p.268-272
28. Proctor. M.S. 1976. Production, Investment and Idle Capacity. Southern Economic
Journal, 43, 1, pp. 855-863
29. Wennekers, S and Thurik, R. 1999. Economic Growth Linking Entrepreneurship. Small
Business Economics 13: 27–55.
30. Strauss, S. 2011. Get Your Business Funded. John Wiley & Sons, Inc.
doc_168883351.pdf
Within this detailed explanation pertaining to the importance of entrepreneurship and seed funding.
Abhinav
International Monthly Refereed Journal of Research In Management & Technology
60
Volume II, September’13 ISSN – 2320-0073
www.abhinavjournal.com
IDLE CAPACITY: A COST-SAVING APPROACH FOR
EARLY-STAGE STARTUPS
Mustafa Seref Akin
Associate Professor, Fatih University Buyukcekmece Campus Istanbul Turkey
Email: [email protected]
ABSTRACT
This paper aims to explain the innovative approach of idle capacity for young entrepreneurs
to solve the financial and human capital problems through benefiting the idle capacity of
other enterprises in their networks. Seed funds merely exist in developing countries. An
unexploited opportunity is idle capacity which falls into barter options into In-Kind
Contributions. Idle capacity for startups is a specific form of barter agreement.
I benefited from idle capacity usage model of Altuntas, one of the dragons of Dragons' Den,
an entrepreneurship based TV show. A very important conclusion for entrepreneurial
lectures is that a more practical approach is to develop business ideas that fit around your
circle’s resources rather than any random business idea that comes into mind.
The Importance of Entrepreneurship and Seed Funding
Entrepreneurship is associated with the creation of wealth, technological innovation, positive
externalities, allocation efficiencies, improving quality, productivity improvement,
competitiveness, deregulation and job generation (Acs, et., al. 2004; Acs and Armington,
2006;Wennekers and Thurik, 1999). In cross-national studies, Djankov, et al. (2002)
suggest that nations with greater barriers to entry of new firms also have poorer-functioning
and more corrupt economies.
If the ecosystem does not tolerate mistakes and entrepreneurs are not encouraged to take
risks, innovative start-up companies will not emerge. The seed fund may be a key factor to
solve the puzzle through sharing the risk. A financial system is expected to evaluate
prospective entrepreneurs and choose the most promising projects (King and Levine, 1993).
However, traditional banking system works for the corporate and routine businesses. Many
initiatives have been launched to overcome financial bottleneck in entrepreneurship (table 1).
Seed funds merely exist in developing countries. An unexploited opportunity is idle capacity.
This paper aims to explain the innovative approach of idle capacity for young entrepreneurs
to solve the financial and human capital problems through benefiting the idle capacity of
other enterprises in their networks.
Idle Capacity: Concept and In-Kind Contribution
Idle capacity falls into barter options into In-kind Contributions (in table 1). Idle capacity
for startups is a specific form of barter agreement. In-kind contributions are not equivalent to
cash but they have liquid asset value (Strauss, 2011).
Abhinav
International Monthly Refereed Journal of Research In Management & Technology
61
Volume II, September’13 ISSN – 2320-0073
www.abhinavjournal.com
Table 1. Startup Funds
Traditional
Route
Own
Resources
Partnership Creative
Solutions
In-Kind
Contributions
Personal Asset
Bank Loans
SBA Loans
Equity Line of
Credit
Credit Cards
Friend- Family
Angel Investors
Venture Capital
Initial Public
Offering
Factoring
Retirement
Accounts
Government
Partnerships
Mergers and
Strategic
Alliances
Peer-to-peer
Lending
Crowd funding
Microfinance
Royalty-
Revenue
Sharing
Seller
Franchising
Business Plan
Competitions
Incubators
Barter
Source: Strauss (2011)
Barter is the exchange of your goods or services for another business’s goods or services
without trading dollars. Not all barters are using idle capacity. I might be working in
construction business. I don’t have money to sub-contractors. I may offer some flats in
exchange to build apartments. In this barter agreement, there is no idle capacity.
Idle capacity is referred to a barter of unused time, unused inventory or unused spaces. The
total capacity composes three parts. The first is productive capacity, which is the capacity
needed to process scheduled production. The second part is protective capacity, which is
held in reserve to ensure to meet the bottleneck operation. Any remaining capacity is
called idle capacity.
The economic literature focuses on the reasons of idle capacity. Proctor (1976) argues that
idle capacity exists since the production and investment decision of firms are very different.
In some cases, firms have idle capacity to deter entry (Bulow et. al., 1985). Bad information
on product costs leads to bad investment strategy (Cooper and Kaplan, 1988). Production
facilities remain unused because of a lack of demand.
The solutions of the idle capacity are suggested in inventory and production lot size control
(Banerjee and Eiamkanchanalai, 1999), managerial efficiency (Pacheco and Fernandes,
2003), and economies of scope (Panzar and Willig, 1981). In the last concept, within firms
managers decided to innovate or to sell a new product by using the existing resources such as
research and development or marketing departments. For instance, motorcycle research labs
and production facilities is used for car manufacturing.
However, entrepreneurs look at the existence of idle capacity as an opportunity (Altuntas,
2012). In the economic literature, I did not counter experiences of entrepreneurs related to
this funding method. In this paper, we will explore some real life experiences. Usually,
entrepreneurial economics focuses on venture capital type of funding. However, in
developing countries, saving is low and funds are dedicated for the established business and
investment goods. The idle capacity might be a working option for entrepreneurs.
In table 2, we compare the R&D Expenditure in developing countries since the seed funds
merely exist and there is no data available. When we look the R&D expenditure in Turkey
Abhinav
International Monthly Refereed Journal of Research In Management & Technology
62
Volume II, September’13 ISSN – 2320-0073
www.abhinavjournal.com
and Iran, spend only 0.7% of their GDP on R&D. The sum of expenditure of R&D of Middle
Eastern and North African countries is much less than the U.S.A. Angel Investment. In the
U.S. there are 2000 venture capital companies and 250.000 Angel Investors actively invest in
startups. The main success (superiority) of the U.S. is the existence of seed funds to allow
startups experiment trial-errors in market.
The estimated seed fund (total venture capital, angel investment and government support)
amount in Turkey is less than 100 million U.S.$. Certainly, we need to raise this number but
on the other hand; we have to find some innovative ways to substitute cash constraints.
Table 2. The R&D Expenditure in GDP in some Developing Countries and USA ?n 2007
2007 In U.S.$
Turkey %0.7 4.2B
Iran %0.7 2B
Egypt %0.2 260
Tunisia %1 35M
Algeria %0.1 160M
Suudi Arabia %0.1 380M
U.S.A. R&D %3.2 470B
U.S.A. Venture Capital %0.15 20 B
U.S.A. Angel Investor %0.12 18B
Source: World Bank Development Indicator
Idle Capacity: Case Study from Altuntas
As a business economics professor, I am interested in the career paths of successful
businessmen and professionals. I especially focus on those who write books related to their
experiences. I assign these books at the beginning of semesters. I explain the key points of
the book and assign various pieces of homework related to them. At the end of month, I
invite these authors to the university campus to deliver lectures. What I hope to accomplish
is to fully integrate the authors’ speech with the written documents in order to allow well
prepared students to grasp the business approach. Students who are ready and prepared will
truly understand well-known businessmen and professionals. Questions and comments from
students are provocative, challenging and thoughtful.
My typical question in dealing with a businessmen or professional is: What is the secret to
their success? One of the books used in the past few years is Baybars Altuntas, one of the
dragons of Dragons' Den, an entrepreneurship based TV show, ‘My way to Dragons' Den- 66
Secrets For Entrepreneurs.’ The book is written in Turkish language but addresses important
topics related to an innovative solution for seed funds. He also alters some fundamental
approaches in business plan.
Putting innovative ideas into motion requires financial and human capitals. Since Altuntas
did not have them in the beginning, he used others’ resources without asking cash supports.
However, he just focused the idle capacities.
Altuntas recognized the shortcomings in the education sector. There were only classic
courses, such as English, computer and cutting-sewing. Concepts such as vocational training
Abhinav
International Monthly Refereed Journal of Research In Management & Technology
63
Volume II, September’13 ISSN – 2320-0073
www.abhinavjournal.com
or career courses did not exist. People have to pass university entrance exams to acquire a
professional degree. He searches for the appropriate professional degree.
At that time, there were 3500 travel agencies across Turkey, but none offered the training to
staff for these agencies. He decided to launch the first career course program for travel
agencies. After he picked the program, he needed to find the students.
To implement the certificate program tour operator training, he asked an owner of a real
estate agency, for free use of unused offices (table 3) for marketing. He used the staff, office
spaces and office equipments to promote the certificate programs. So he didn’t want money,
just idle capacity. The idle capacity is the stuff that firms do not use: office, car, tools and
equipment. It will be received positive response for the demand of idle capacity since there is
no loss for firms. When idle capacity exists, a firm can take on an incremental order without
increasing the fixed costs. Bartering these idle capacities allows the source owners to get
valuable assets in return. Altuntas start paying rents and shares the bills of the existence
office.
This spare capacity was something more valuable than money. This is the back bone of the
formula of Altuntas.
All candidates participating in the tour operator certificated programs had insufficient
English. He asked the dean of education (where he was a student) of Bosphorus University
to open a weekend certificate program in idle classrooms (in table 3). Therefore, lifelong
learning centers in Turkey started to work with this initiative and inspiration. Notice that he
did not want anything from Bosphorus University, he only requested idle capacity on
weekends. This project could serve as an example to other universities in the development
of national economy, and therefore could arise as a locomotive project that he has explained
to persuade the university administration. The right business idea, network and idle capacity,
coupled with the ability of persuasion, assure that the project endures for years.
He benefited the same formula while he obtains the IATA Training Representative of
Turkey. The general manager of his company had earlier links in IATA in Geneva. Having
seen the gap in Ticketing Expertise in Turkey, he used the connections of the general
manager’s network (table 3). Based on the formula and connections through his general
manager, his idle capacity in education center and the ability of convincing of Altuntas lead
to take one of the world's first IATA approval certificate programs.
Table 3. Altuntas’ Formula: Innovative Business Idea + Net Work + Idle Capacity
Innovative Business Idea NetWork Idle Capacity
Travel Agencies Tour
Operator Training
Azmi Saribay- A member
of Franchising Association
The idle office and
secretaries of Azmi Saribay
English Certificate
Program
Cem Alptekin- Dean of
Bosphorus University
Idle classes of Bosphorus
University
IATA Turkey
Representation
Halim Gures- Colleague
Idle capacity of Deulcom
classes
Source: Dragon’s Dens 66 Secrets.
Abhinav
International Monthly Refereed Journal of Research In Management & Technology
64
Volume II, September’13 ISSN – 2320-0073
www.abhinavjournal.com
Net Work Creation of Altuntas: 5 Whys
In Entrepreneurship literature networking draws a great deal of attention. This issue is
already covered from different aspects (Arun, 2010; Cooper, 2002; Aldrich and Zimmer
1986). Altuntas’ mother was an elementary school teacher and his father was retired from the
military. His father has six brothers and all of them were public officers. Altuntas has seven
brothers and they are also public officers! In the circle of his family, they did not have any
connections to business world. So he made his own networks. In the case of Altuntas, I will
consider one networking case between him and Azmi Saribay, real estate agency owner. To
follow the network building process of Altuntas, I will ask 5 whys (In the business literature,
inspired by Toyota, 5 whys are to explore the cause-and-effect relationships of a problem or
situation. The goal is to determine the root cause (Ohno, 1988)).
Why does Azmi Saribay accept the barter deal with university student 21-years-old boy (first
why)? Saribay witnesses how Altuntas established the franchising system from scratch
without spending a dime with a great success.
Why does Saribay get in touch with Turkish Franchising Association (second why)? Saribay
is the leader franchising real estate company of Turkey, Turyap ( a leader Turkish based real
estate franchising company competing to U.S. base real estate franchising i.e. Re-max and
Colliers)
Why does the idea of establishing of the Franchising Association become so successful (third
why)? Altuntas succeeded to draw the attention to the press and the businessmen since the
franchising concept is very new concept in Turkey in 1990s. He gets connected to German
Franchising Association. He invites the head of German Franchising Association. He builds
a similar structure of German Franchising Association.
Why does the head of German Franchising Association visit Turkey (fourth why)? Altuntas
invites him to introduce Turkish business community the franchising system.
Why does he connect to the Franchising Association at age 21 (fifth why)? He reads an
article about the franchising in a review and he sees the fax and phone number of German
Franchising Association. He realizes that in the future there will be big demand in Turkey.
As we witness that following an important idea brings an important chain of connection and
builds networks for Altuntas.
Teaching: Business Plan Preparation
When I assign my students to prepare a business plan, I ask them: What is opportunity in
business? What is the authenticity of his product and service? What are the marketing
channels and what is financial table? This type of well-known questions are details explained
in many entrepreneurship books (Allen, 2003; Frederick et.al., 2010; Bruce et.al., 2009 ) .
However, now, based on the Altuntas Business Formula, I ask them about idle capacity they
may use. To whom they know and what type of idle capacity they have. Shape your business
plan according to these available resources. Look primarily at the people around you and
consider their related businesses, networks and institutions. A more practical approach is to
develop business ideas that fit around your circle rather than any random business idea that
comes into mind.
Abhinav
International Monthly Refereed Journal of Research In Management & Technology
65
Volume II, September’13 ISSN – 2320-0073
www.abhinavjournal.com
Discussion on Idle Capacity Model
This idle capacity usage model has two aspects: i) use the other resources without asking
cash or credit and ii) develop business model based on the idle capacity in your network.
Certainly, the second aspect brings a constraint since as an entrepreneur; I cannot use my full
talent in a desired sector. On the other hand, it is hard to get financial support without a
successful track record. Additionally, the seed funds are very limited in developing
countries.
The first aspect related to use idle capacity is to save our cash. Bartering for the products and
services you need supports saving your capital for other things. Another important
implication of demanding cash versus non-cash value is that cash request is very delicate
issue. People become very sensitive however non-cash items are easier to ask (Ariely, 2010).
Probability of accepting a non-cash asset is much higher than a cash asset. If this non-cash
asset is idle, it is much easier to get approval of owner. When money is involved, people
hesitate to answer positively but they are more positive to accept to use the idle capacity
since the opportunity cost does not exist.
Barter system is a vast concept. Unused hotel rooms, rental cars, food or ad space in a
magazine, in a newspaper, online, or in radio or TV time (Strauss, 2011). Stores have extra
inventory, accountants have unused time, restaurants have empty tables (Strauss, 2011).
Eventually, Altuntas uses an open source opportunity to reach his goal, and shares the profit
if the business works well. Bartering allows using idle capacity to make good use of products
or time that may be otherwise wasted.
REFERENCES
1. Acs,Z J. & Armington,C, 2006. "Entrepreneurship, Geography, and American Economic
Growth," Cambridge Books, Cambridge University Press,
2. Acs, Z. J & Audretsch, D. B & Braunerhjelm, P. & Carlsson, B., 2004. "The Missing
Link: The Knowledge Filter and Entrepreneurship in Endogenous Growth," CEPR
Discussion Papers 4783, C.E.P.R. Discussion Papers.
3. Aldrich, H.E. & Zimmer, C. (1986). Entrepreneurship through social networks. In D.
Sexton
4. and R. Smilar (eds), The Art and Science of Entrepreneurship (pp. 3–23). New York:
5. Ballinger Publishing.
6. Allen, K. R. (2003). Launching new ventures: An entrepreneurial approach. Boston:
7. Houghton Mifflin.
8. Altuntas, B. 2012. ‘My way to Dragons' Den- 66 Secrets For Entrepreneurs. Destek
Press, Istanbul.
9. Ariely, D. 2010. Predictably Irrational. Harper Perennial.
10. Arun B. 2010. The Networking Entrepreneur. The Journal of Entrepreneurship, 19, 2:
209–221.
11. Banerjeeb, A.& Eiamkanchanalaia,S. 1999. Production lot sizing with variable
production rate and explicit idle capacity cost. International Journal of Production
Economics.
Abhinav
International Monthly Refereed Journal of Research In Management & Technology
66
Volume II, September’13 ISSN – 2320-0073
www.abhinavjournal.com
12. 59, 1–3, p. 251–259.
13. Bruce R. Barringer, B.R. and R. Duane. 2009. Entrepreneurship: Successfully Launching
New Ventures. Pearson Prentice Hall , 3rd Edition.
14. Cooper, A. (2002). Networks, alliances and entrepreneurship. In M. Hitt, D. Ireland,
15. S. Camp and D. Sexton (eds) Strategic Entrepreneurship: Creating a New Mindset.
16. Oxford: Blackwell Publisher
17. Cooper, R. & Kaplan, R.S. 1988. Measure costs right: make the right decisions
18. Harvard Business Review.
19. Djankov,S & Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 2002.
The Regulation Of Entry. The Quarterly Journal of Economics vol. 117(1), pages 1-37.
20. Jeremy Bulow, John Geanakoplos and Paul Klemperer. 1985. Holding Idle Capacity to
Deter Entry. The Economic Journal, 95, 377, pp. 178-182
21. King, R. G. And Levine,R. 1993. Finance, entrepreneurship, and growth Theory and
evidence
22. Journal of Monetary Economics 32, 513-542.
23. Kuratko, F.H. & Hodgetts, D.F. 2010. Entrepreneurship: Theory, Process, & Practice.
(2010). 2.nd ed. R.M. Publisher: Cengage Learning.
24. Ohno, T (1988). Toyota production system: beyond large-scale production. Portland, Or:
Productivity Press.
25. Pachecoa,R.R. and E. Fernandes. 2003. Managerial efficiency of Brazilian airports
26. Practice. 37, 8, p. 667–680.
27. Panzar, J.C. and Willig, R.D. 1981. Economies of Scope. American Economic Review,
71. 2, p.268-272
28. Proctor. M.S. 1976. Production, Investment and Idle Capacity. Southern Economic
Journal, 43, 1, pp. 855-863
29. Wennekers, S and Thurik, R. 1999. Economic Growth Linking Entrepreneurship. Small
Business Economics 13: 27–55.
30. Strauss, S. 2011. Get Your Business Funded. John Wiley & Sons, Inc.
doc_168883351.pdf