ASSESMENT OF ENTREPRENEURIAL

OPPORTUNITIES
Pitfalls in Selecting New Venture
Important pitfalls commonly encountered in the process of selecting
new venture
1. Lack of objective evaluation
Many entrepreneurs lack objectivity
Don’t fall in love with an idea for a product or service
Lack of scrutiny for a design or project
Pitfalls in Selecting New Venture cont…!
2. No real insight into the Market
Managerial shortsightedness
Not understanding life cycle of the product or service
No product is instantaneously profitable
Timing is critical
Action taken too late or too soon result in failure
Pitfalls in Selecting New Venture cont…!
3. Inadequate Understanding of Technical Requirements
Failure to anticipate technical difficulties related to developing or
producing a product
Entrepreneurs cannot be too thorough(competent)
Problem delay time and increase cost
Pitfalls in Selecting New Venture cont…!
4. Poor financial understanding
Underestimating the cost leads to problems
Ignorance of costs due to inadequate research planning
It is not unusual for estimates to be less than half of what is
eventually required
Pitfalls in Selecting New Venture cont…!
5. Lack of venture Uniqueness
A new venture should be unique
Performance of service should be superior to competitive offerings
Product differentiation
Customers awareness of difference
Pitfalls in Selecting New Venture cont…!
6. Ignorance of Legal issues
Business is subject to legal requirements
Safe working environment
Reliable and safe product and services
Patent, Trademarks and copyrights
Critical Factors for New-Venture
Development
A number of critical factors are important for new- venture assessment
A new venture goes through three specific phases
1. Pre start-up
2. Start-up
3. Post start up
Critical Factors for New-Venture
Development cont….!
1. Uniqueness
A new venture’s range of uniqueness can be considerable, depending
on the amount of innovation required during prestart-up
2. Investment
The capital investment required to start a new venture can vary
considerably.
Critical Factors for New-Venture
Development cont……!
3. Growth of Sales
Are the sales and profits expected to grow solely or level off shortly
after start up?
Are large profits expected at some point, with only small or moderate
sale growth?
Critical Factors for New-Venture
Development cont…..!
4. Product Availability
Product availability refers to the availability of salable good or service,
at the time venture opens its doors
Products or services is still in development and needs further
modifications or testing
Lack of product availability in finished form
Critical Factors for New-Venture
Development cont…..!
5. Customer availability
Two fundamental criteria for entrepreneurial success
1. Having a customer who is willing to pay you a profitable price for
product or service
2. produce and deliver the product or service
Why New Ventures Fail
Some of the major reasons for the failure of the new ventures are
categorized into three:
1. Product/market problems
2. Financial difficulties
3. Managerial problems
Product/Market Problem
1. Poor timing
Pre mature entry into the market place
2. Product designs problems
When the essential make up of the product or service changed,failure
result.
3. In appropriate distribution strategy
Whether it is based on Commissioned sales, representatives, or direct
sales at trade shows, the distribution strategy had to be geared
toward the product and customer.
Product/Market Problem cont…..
4. Unclear business definition
Uncertainty about the “exact” business cause firms to undergo change
and to lack stabilization.
5. Overreliance on one customer
Failure to diversify
Financial difficulties
1. Initial under capitalization
2. Assuming debt to early
3. Venture capital relationship
Managerial problems
1. Lack of management experience
2. Hiring and promotions on the basis of nepotism rather than
qualifications
3. Poor relationship with parent companies and venture capitalist
4. Incompetent support professionals (e.g. attorneys to read on
contract or collect on court judgements etc.)