Intro to entrepreneurship Ch6

feasibility criteria approach

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

start-up problems

a perceived problem area in the start up phase of a new venture, such as lack of business training, difficulty obtaining lines of credit, and inexperience in financial planning

lifestyle venture

a small venture in which the primary driving forces include independence, autonomy, and control.

comprehensive feasibility approach

a systematic analysis incorporating external factors.

small profitable ventures

a venture in which the entrepreneur does not want venture sales to become so large that he or she must relinquish equity or ownership position and thus give up control over cash flows and profits, which it is hoped will be substantial.

failure prediction model

based on financial data from newly founded ventures; assumes the financial failure process is characterized by too much initial indebtedness and too little revenue financing.

prestart-up phase

begins with an idea for the venture and ends when the doors are opened for business

start-up phase

commences with the initiation of sales activity and the delivery of products and services, ends when the business is firmly established and beyond short-term threats to survival.

challenges to predicting new-firm performance?

environmental effects (risk of new products), the entrepreneurs personal goals, and the diversity of the ventures themselves

customer availability

having customers available before a venture starts.

critical factors

important new-venture assessments

Internal Problems

involve adequate capital, cash flow, facilities/equipment, inventory control, human resources, leadership, organizational structure, and accounting systems.

Poststart-up Phase

lasts until the venture is terminated or the surviving organizational entity is no longer controlled by the entrepreneur.

new venture motivation

need for approval, need for independence, need for personal development, welfare. perception of wealth, tax reduction and indirect benefits, following role models

a fully developed new firm

one that requires the full time commitment of one or more individuals, is selling a product or service, has formal financial support, and has hired one or more individuals.

technical feasibility

producing a product or service that will satisfy the expectations of potential customers

external problems

related to customer contact, market knowledge, marketing planning, location, pricing, product considerations, competitors, and expansion.

product availability

the availability of a salable good or service at the time the venture opens the door

growth of sales

the growth pattern anticipated for new venture sales and profits

uniqueness

the special characteristic and design concepts that draw the customer to the venture, which should provide performance or service that is superior to that of competitive offerings.

high growth ventures

when sales and profit growth are expected to be significant enough to attract venture capital money and funds raised through public or private placements.

the challenge of new venture legitimacy

legitimacy enables new ventures to overcome newness and allows acquisition of resources such as financial capital, human resources, and strategic relationships

growth stage

the third stage of new venture life cycle, typically involving activities related to reformulation strategy in the light of competition.

minimum viable product

three As of metrics, actionable, accessible, auditable.

why new ventures fail?

three majors categories for causes 1.) product/market problems 2.)financial difficulties 3.)managerial problems

profile analysis

tool that enables entrepreneurs to judge a business ventures potential by sizing up the ventures strengths and weaknesses along a number of key dimensions or variables

Design Methodology

A process that shapes and converts ideas into form, whether that is a plan of action, an experience, or a physical thing.

managerial problems

1.) concept of a team approach 2.) human resource problems

mechanisms to establish legitimacy

1.) identity mechanisms 2.) associative mechanisms 3.) organizational mechanisms

financial difficulties factors

1.) initial undercapitalization 2.) assuming debt too early 3.) venture capital relationship problems

common pitfalls in the selection of new venture ideas

1.) lack of objective evaluation (objectivity) 2.) no real insight into the market 3.) Inadequate understanding of technical requirements. 4.) Poor financial understanding 5.) Lack of venture uniqueness. 6.) ignorance of legal issues

most ventures fit into one of these three classifications

1.) lifestyle venture 2.) small profitable ventures 3.) high-growth ventures

product/market problems/factors

1.) poor timing 2.)product design problems 3.)inappropriate distribution strategy 4.) unclear business definition 5.) overreliance on one customer

3 phases of a new venture

1.) prestart-up 2.)start-up 3.)poststart-up

the traditional venture evaluation process methods

1.) profile analysis 2.) feasibility criteria approach, and 3.) comprehensive feasibility method

5 critical factors in pre and start up phases.

1.) relative uniqueness of the venture 2.) the relative investment size at start-up 3.) The expected growth of sales and /or profits as the venture moves through its start-up phase. 4.) the availability of products during the prestart-up and start-up phases 5.) the availability of customers during the prestart-up and start-up phases

logics and audiences judging legitimacy

1.) state logic (government agencies) 2.) professional logic (venture capitalists) 3.) corporate logic (corporate venture capitalists) 4.)community logic (crowdfunding platforms) 5.) marker logic (angel investors)