Part 3.1: Tactics: Developing an Entrepreneurial Plan

The Evaluation Process: Feasibility Criteria Approach

Involves the use of a criteria selection list from which entrepreneurs can gain insights into the viability of their venture.

Marketability: General Information Sources

1. General economic trends 2. Market Data 3. Pricing Data 4. Competitive Data

Venture Classification: Product Availability

1. Goods or services must be available. 2. lack of product availability can affect the company's image and its bottom line.

Marketability: 3 Major Areas involved

1. Investigating the full market potential and identifying customers. 2. Analyzing the extent to which the enterprise might exploit this potential market 3. Using market analysis to determine the opportunities and risks

Venture Classification: Customer Availability

1. Risk Continuum (2 Extremes) a. customs willing to pay cash before delivery b. Venture begun not knowing exactly who will buy the product 2. Two Critical Considerations a. How long will it take to determine who the customers are? b. What are the customers' buying habits?

common pitfalls for new ventures

Lack of objective evaluation - Failed to rigorously challenge validity of ideas No real insight into the market (Ch. 9) - Is there a demand for the product? What's the life cycle for introducing a new product? Is now the right time? Too early? Too late? Inadequate understanding of technical requirements (Ch. 9) - Technical problems are time consuming and costly

Critical Factor for New-Venture Development: Uniqueness

PRODUCT, MARKET, and or PROCESS

Comprehensive Feasibility Approach: Marketability

a. 3 major areas b. general information sources

Venture Classification: Small Profitable

a. Financial considerations play a major role b. Autonomy and ownership control are important factors

Comprehensive Feasibility Approach: Technical Feasibility

a. Functional design of the product and attractiveness in appearance b. Flexibility for ready modification c. Durability of the materials from which the product is made d. Reliability e. Product Safety f. Reasonable Utility g. Ease and low coast of maintenance h. Standardization i. Ease of processing or manufacture j. Ease in handling and use

Venture Classification: Lifestyle

a. Independence, autonomy control are the primary driving force. b. Sales and Profits are deemed to provide a sufficient and comfortable living for the entrepreneur.

Feasibility Criteria Approach (Key Questions to ask)

a. Is it proprietary? b. Are the initial production costs realistic? c. Are the initial marketing costs realistic? d. Does the product have potential for high margins? e. Is the time required to get to market and to reach break-even realistic? f. Is the potential market large? g. Is the product the first of a growing family? h. Is there an initial customer? i. Are the development costs and calendar times realistic? j. Is this a growing industry? k. Can the product and the need for it be understood by the financial community?

Pitfalls in Selecting New Ventures

a. Lack of objective evaluation b. No real insight into the market c. Inadequate understanding of technical requirements d. Poor financial under sting e. lack of venture uniqueness f. Ignorance of Legal Issues

Venture Classification: High-Growth

a. Significant Sales and profit growth are expected. b. May be possible to attract venture capital money

The Evaluation Process

A critical tasks of starting a new business is conduction solid analysis and evaluation of the feasibility of the product/service ideas getting off the ground. A) Profile analysis B) Feasibility Criteria Approach C) Comprehensive Feasibility Approach

Growth of Sales: Venture Classification

a. Lifestyle Ventures b. Small Profitable Ventures c. High-Growth Ventures

Critical Factor for New-Venture Development: Investment

1. Can vary considerably 2. Extent and timing of funds needed 3. Key questions to ask

Growth of sales: Key Questions to Ask?

1. What is the growth pattern anticipated for the new-venture sales and profits? 2. Are sales and profits expected to grow slowly or level off shortly after start-up? 3. Are large profits expected at some point with only small or moderate sales growth? 4. Are both high sales growth and high profit goeth likely? 5. Will there be limited initial profits with eventual high-profit growth over a multi-year period?

Key questions to ask when investing

1. Will industry growth be sufficient to maintain break-even sales to cover a high fixed cost structure during the start-up period? 2. Do the principal entrepreneurs have access to substantial financial reserves to protect a large initial investment? 3. Do the entrepreneurs have the appropriate contacts to take advantage of various environmental opportunities? 4. Do the entrepreneurs have both industry and entrepreneurial track records which justify the financial risk of a large-scale start-up?

Critical Factor for New-Venture Development

A. Uniqueness B. Investment C. Growth of Sales D. Product Availability E. Customer Availability

Why New Ventures Fail

Every year millions of dollars are spent on starting new enterprises, but only a small percentage of new businesses is successful. Most studies have found that the factors underlying the failure of new ventures is within the control of the entrepreneur.

Comprehensive Feasibility Approach

Incorporates external factors in addition to those included in the criteria questions. 1. Technical Feasibility 2. Marketability

The Evaluation Process: Profile Analysis

Involves identifying and investigating the financial, marketing, organizational, and human resource variables that influence the business's potential before the new idea is put into practice. 1. Different variables need to be investigated before the new idea is put into practice 2. Enables the entrepreneur to judge the potential of the business 3. Internal profile analysis a) checklist approach b) allows the entrepreneur to identify major strengths and weaknesses c) Can be used for the financial