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Describe the new venture creation process
Compare and contrast business life cycles
with industry life cycles
Explain how opportunity recognition occurs
Discuss the critical components of a
business concept
Describe the feasibility analysis process
Explain bootstrapping as an entrepreneurial
strategy
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Start-Up Resources
The New Venture Creation Process
Launching a New Business
Feasibility Analysis
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The environment is the most
comprehensive component in the venture
creation process.
It includes all the factors that affect the
decision to start a business, for example,
government regulation, competitiveness,
and life cycle stage.
Within specific industries and in specific
geographic regions, environmental
variables and the degree of their impact
will differ.
The new venture process begins with an
idea for a product, service, or business.
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The entrepreneur develops an idea into a business
opportunity or business concept that is then tested
in the market through a process of feasibility
analysis.
Feasibility analysis is used to inform the
entrepreneur about the conditions required to move
forward and develop the business. This may involve
market research.
Once the entrepreneur has determined that the
concept is feasible, a business plan is developed to
detail how the company will be structured and to
describe its operation
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Testing the business concept in the real world is
what actually determines if the business has
viability. Thus, the business must actually be
launched and operated in the environment to
determine viability.
In a business, the term viability is the point when
the company is able to generate sufficient cash
flows to allow the business to survive on its own
without cash infusions from outside sources such
as the entrepreneur's own resources, investors, or
a bank loan.
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Pre Start-up
Start-up
Growth
Maturity
Rebirth or Decline
Three key issues in the pre-start-up phase:
1) Testing concept feasibility
2) Developing a business plan
3) Acquiring resources ($$$ and personnel)
Three key issues in the start-up phase:
1)
2)
3)
Finding customers
Building a structure
Generating positive cash flows
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Developing a product, service, process, or niche that
has not existed before. Opportunity recognition
requires high levels of creativity.
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Typically, opportunity creation involves an
invention process that is characterized by
four activities:
connection,
discovery,
invention, and
application
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Connection occurs when two ideas are brought together
that normally are not juxtaposed, such as nature and
machines, which produced the field of nanotechnology or
microscopic machines that copy nature in the way that
they operate.
Discovery happens once a connection has been made. It
is actually the result of the connection in the form of an
idea.
Inventions are the product of turning an idea into a
product or service.
Application comes about when the inventor is able to
apply the invention to a number of different uses or
applications in a variety of industries and situations.
The process of using
creative skills to identify a
new innovation --- (a product,
service, process, or marketing method)
--which is often based on
something already existing
in the marketplace.
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List all the ideas in no particular order.
Eliminate those ideas that can’t generate a
profit and don’t fit the business model very
well.
Review the remaining ideas and choose the
one that inspires the most passion and
enthusiasm
There are four essential elements required to test
whether or not a potential business idea is
feasible:
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What is the product and/or service that is the
basis for the business?
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Who is the customer likely to be?
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What is the benefit of your product/service to
the customer?
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How will the benefit be delivered?
The business concept (which is essentially a specific
product or service) is tested through a process
of feasibility analysis that answers three
fundamental questions:
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Are there customers and a market of
sufficient size to make the concept
feasible?
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Do the capital requirements to start,
based on estimates of sales and expenses,
make sense?
3.
Can an appropriate start-up team be
put together to make it happen?
Thus, there are actually four areas which are
tested in the feasibility analysis:
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The product/service
Industry/market/consumer
Founding team
Financials
See the feasibility questions in Table 3.1
To find out:
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Who is most likely to purchase the
product or service at market
introduction?
What do these customers typically buy,
how do they buy it, and how do they hear
about it?
What is their buying pattern? How often
do they buy?
What are the customers’ needs and how
can the new venture meet those needs?
Founders of successful companies have many
things in common. They are:
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A common vision
Passion and a willingness to dedicate themselves
Experience in the industry
Contacts for capital
Experience in basic business functions
Excellent credit ratings
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Bootstrappers are start-up
entrepreneurs who have no
financial resources beyond their
own savings.
They realize that to get what
they need to start their
businesses—location,
equipment, money, and perhaps
employees—they must possess
a double dose of ingenuity and
supreme self-assuredness.
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John Schnatter founded Papa John’s
International, the $164+ million pizza
restaurant franchise, with $1,600 in
personal savings.
Bill Gates and Paul Allen started Microsoft in
a cheap apartment in Albuquerque with
virtually no overhead, a borrowed
computer, and very little capital.
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Businesses that don’t
require a storefront
location can begin their
development in a spare
room or a garage.
Negotiate free rent and
lower lease rates in
buildings where a lessor is
having difficulty releasing
the space.
Lease a portion of a larger
company’s space and take
advantage of its reception
area and conference room.
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Putting together sufficient resources to start a
business requires enormous creativity and
persistence, with the ultimate reward being a
company that is able to reach critical mass and
take advantage of significantly more choices for
growth capital.
Many new ventures are initially funded by the
entrepreneur, because:
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No intellectual property rights or licenses to
give them a competitive advantage
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Many lack a significant track record of success
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Many ventures have not fully defined themselves
in the marketplace, which makes investment
risky.
Investors see new ventures as too risky