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.
The U.S. Patent Office currently reviews
more than 375,000 patent applications
per year.

The Elements Affecting NewVenture Performance

Environment
Entrepreneurs
Characteristics

Founding
Processes

Initial Firm
Characteristics

Performance

Pitfalls in Selecting New Ventures

Lack of Objective Evaluation

No Real Insight into the Market
Inadequate Understanding of Technical
Requirements
Poor Financial Understanding
Lack of Venture Uniqueness
Ignorance of Legal Issues

Critical Factors for New-Venture

Development

Uniqueness
Investment
Sales Growth

Lifestyle ventures
Small profitable ventures
High-growth ventures

Product Availability
Customer Availability

Why New Ventures Fail

Product/Market Problems
Financial Difficulties
Managerial 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

Entrepreneur
Lack of mgt. skill
Poor mgt. strategy
Lack of capitalization
Lack of vision
Poor product design
Key personnel
incompetent

Rank

1
2
3
4
5
6

Entrepreneur
Lack of mgt. skill
Poor mgt. strategy
Lack of capitalization
Poor external market
conditions
Poor product design
Poor product timing

Rank

1
2
3
4
5
6

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

NewVenture
Idea

Financial Analysis of financial

feasibility & resources
Organizational Analysis of financial
organizational and
personnel requirements
Competitive Analysis of the
competition

Determination
of Feasibility
of Planned
New Venture