Part IV – Initiating Entrepreneurial Ventures Chapter 11 – Assessment and Evaluation of Entrepreneurial Opportunities Chapter 12 – Legal Structures for New Business Ventures Chapter 13 – Legal Issues Related to Emerging Ventures Chapter 14 – Sources of Capital for Entrepreneurs Copyright (c) 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Chapter 11 – Assessment and Evaluation of Entrepreneurial Opportunities

The Challenge of New-Venture Start-Ups 600,000 new firms have emerged in the United States every year since the early 1990s.600,000 new firms have emerged in the United States every year since the early 1990s. The U.S. Patent Office currently reviews more than 375,000 patent applications per year.The U.S. Patent Office currently reviews more than 375,000 patent applications per year.

The Elements Affecting New- Venture Performance Entrepreneur’s Characteristics Environment Founding Processes Initial Firm Characteristics Performance

Pitfalls in Selecting New Ventures Lack of Objective EvaluationLack of Objective Evaluation No Real Insight into the MarketNo Real Insight into the Market Inadequate Understanding of Technical RequirementsInadequate Understanding of Technical Requirements Poor Financial UnderstandingPoor Financial Understanding Lack of Venture UniquenessLack of Venture Uniqueness Ignorance of Legal IssuesIgnorance of Legal Issues

Critical Factors for New-Venture Development UniquenessUniqueness InvestmentInvestment Sales GrowthSales Growth –Lifestyle ventures –Small profitable ventures –High-growth ventures Product AvailabilityProduct Availability Customer AvailabilityCustomer Availability

Why New Ventures Fail Product/Market ProblemsProduct/Market Problems Financial DifficultiesFinancial Difficulties Managerial ProblemsManagerial Problems

Types and Classes of First-Year Problems 1. Obtaining external financing 2. Internal financial management 3. Sales/marketing 4. Product development 5. Production/operations management 6. General management 7. Human resource management 8. Economic environment 9. Regulatory environment

External Problems Experienced by Entrepreneurs

Internal Problems Experienced by Entrepreneurs

Determinants of New-Venture Failures Lack of mgt. skill Poor mgt. strategy Lack of capitalization Lack of vision Poor product design Key personnel incompetent Lack of mgt. skill Poor mgt. strategy Lack of capitalization Poor external market conditions Poor product design Poor product timing Entrepreneur Rank

The Evaluation Process

Asking the Right Questions

Comprehensive Feasibility Approach

Key Areas for Assessing the Feasibility of a New Venture Technical – Feasibility analysis of product or service Market – Determination of market opportunities and risks Financial – Analysis of financial feasibility & resources Organizational – Analysis of financial organizational and personnel requirements Competitive – Analysis of the competition New- Venture Idea Determination of Feasibility of Planned New Venture