Venture capital

All posts tagged Venture capital

Entrepreneurial Dilemmas

Published March 29, 2013 by Mayrbear's Lair

entrepreneur-dilemma

Not every individual is cut out for entrepreneurship. Although to many it sounds quite exciting, others may describe it as nerve-wrecking, challenging, time-consuming, unpredictable, and overpowering. Entrepreneurs will face dilemmas in many aspects of the business problem-solving process including: maintaining inventory and cash flow; hiring and firing employees; establishing exemplary customer service; and managing technology (Strauss, 2012).  For example, one challenge we recently faced in our organization was upgrading our creative design software to keep current in the competitive market. Based on the current funds available as a young startup, this presented an opportunity to develop a creative solution. Rather than make a costly investment, the strategy applied was to lease the software at a monthly rate from a new streaming technology the software company makes available through their IT services.

disaster-plan

Every decision an entrepreneur is required to make will give the founder an opportunity to assess multiple options, especially when making critical decisions. Because of this, Wasserman (2012) suggests creating a disaster plan. By putting in writing a plan of action for worse-case scenarios, like irresolvable business conflicts or the dissolution of an organization, helps entrepreneurs define who has the final decision in an impasse (Wasserman, 2012). For example, an organization whose two founding members discover are no longer an organizational fit and want to separate will have to find a way to do so amicably. Having created a disaster plan will serve to make the transition a smoother one with guidance set forth in clear terms.

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Also at some time, an entrepreneur will need to engage in sensitive discussions to resolve issues. It is a good idea to induct a policy of being open and honest about every challenge that is presented in the workplace. This gives employees access to the founder for assistance, helps increase the likelihood of discussing sensitive issues, and establishes precedence which in the long term helps reduce conflicts. Most people resist confronting a difficult issue and would rather avoid a discussion hoping it will somehow resolve itself. When necessary, a referee can help with professional disagreements to help prevent them from getting personal.  Finally, whenever a dilemma arises, it is a good idea to create a paper trail, either by memo, letter, or another communication outlet to keep a record of the conflict and how it was resolved for future reference. One thing is definite, an entrepreneur will face many dilemmas that will require some kind of strategy to resolve. The better prepared an entrepreneur is to handle them, the quicker the resolution (Wasserman, 2012).

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References:

Strauss, S. (2012). The small business bible (3rd ed.). Hoboken NJ: John Wiley and Sons, Inc.

Wasserman, N. (2012). The founder’s dilemmas: Anticipating and avoiding the pitfalls that can sink a startup. Princeton, NJ: Princeton University Press.

Feasibility Study

Published March 11, 2013 by Mayrbear's Lair

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A feasibility study helps an entrepreneur structure a new venture with preliminary data that defines a business opportunity and helps determine whether it is practical and likely to succeed in the marketplace (Campbell, 2013). The purpose of a feasibility study is to identify the likelihood of challenges a business may encounter and present a variety of solutions that will help deliver outcomes the proprietor envisions. For example, one aspect of a feasibility study focuses on handling risks and uncertainties by examining statistics and probability concepts that identify issues a business owner may face in a particular industry. This can help an individual assess variables to help predict the best path for productivity. Other components of the analysis may include: (a) the history practice of an industry, (b) typical industry risks; (c) exploration of economics; and (d) the identification of weaknesses and strengths (Mian, 2011). Research can also include feedback from surveys and questionnaires to help develop a detailed sustainable business plan based on the data collected.

Driven Entrepreneurs

Driven Entrepreneurs

Entrepreneurs are a unique group of individuals that do not accept the world as it is and often become game changers from ambitious ideas and innovations. They possess an unbridled drive and passion, but often fail to take into consideration all the components required to make a venture successful. A feasibility analysis provides research that helps entrepreneurs confront the truth about a variety of aspects of a venture by examining uncertain parameters that can hinder an enterprise, taking into consideration long term goals and past experiences that can affect the process (Edmond, 2007). It can also be used as part of a greater venture capitalization plan because it provides a comprehensive detailed analysis that displays a psychological commitment to the enterprise from the entrepreneur which is an integral component to attract funding from investors, shareholders, and banks.

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A feasibility study can also help frame the venture opportunity and assess risks by identifying some of the following components: (a) who the competitors are; (b) is it a practical business; (c) what is the market share; (d) what is the location of similar businesses; (e) who the existing customers are; (f) determination of costs and break-evens; and (g) identifying potential pitfalls (Reilly & Milikin, 1996). In addition, a feasibility study can help business owners evaluate the basic financial requirements of a business, potential revenues, fixed and variable costs, and the working capital required to finance inventory, material, labor, marketing, shipping, and manufacturing costs. Zaharuddin (2008) developed a simple four step plan for reducing the risk involved with launching a new business: 1) identify the idea and vision; 2) create a feasibility plan to screen and test the idea to determine if its viable; 3) write a business plan; and 4) launch the business (Zaharuddin, 2008). These easy steps that include a feasibility study as part of the process can help entrepreneurs succeed in their entrepreneurial ventures.

References:

Campbell, J. (2013, February 25). Feasibility study and you: A dynamic duo by June Campbell. Retrieved from WebSiteMarketingPlan.com: http://www.websitemarketingplan.com/techniques/feasibility.htm/

Edmond, J. (2007, February 5). Planning your new business: Feasibility analysis. Retrieved February 25, 2013, from articlesbase.com: http://www.articlesbase.com/home-business-articles/planning-your-new-business-feasibility-analysis-part-one-100572.html#ixzz1U1ZGAPdD

Mian, M. A. (2011). Project economic and decision analysis. Tulsa, OK: PennWell Corp.

Reilly, M., & Milikin, M. (1996, August). Starting a small business: The feasibility analysis. Retrieved February 25, 2013, from Montguide MT0510: http://msuextension.org/publications/BusinessandCommunities/MT199510HR.pdf

Zaharuddin, H. (2008). A to Z entrepreneur in practice: Business Feasibility Study. West Java, Indonesia: Dian Anugerah Prakasa Publishing.