The Entrepreneurial Process- Contd...

The entrepreneurial process involves finding, evaluating, and developing an opportunity by overcoming the strong forces that resist the creation of something new.

Phase 1: Identify and Evaluate the Opportunity

1. Opportunity identification: Most good business opportunities result from an entrepreneur being alert to possibilities.

a. Fruitful sources include consumers and business associates.

b. Channel members in the distribution system—retailers, wholesalers, or manufacturer’s reps—are also helpful.

c. Technically-oriented individuals often identify business opportunities when working on other projects.

2. Each opportunity must be carefully screened and evaluated—this is the most critical element of the entrepreneurial process.

3. The evaluation process involves looking at:

a. The length of the opportunity.

b. Its real and perceived value.

c. Its risks and returns.

d. Its fit with the skills and goals of the entrepreneur.

e. Its uniqueness or differential advantage in its competitive environment.

4. The market size and the length of the window of opportunity are the primarily bases for determining risks and rewards.

a. The risks reflect the market, competition, technology, and amount of capital involved.

b. The amount of capital forms the basis for the return and rewards.

c. The return and reward of the present opportunity needs to be viewed in light of any possible subsequent opportunities as well.

5. The opportunity must fit the personal skills and goals of the entrepreneur.

a. The entrepreneur must be able to put forth the necessary time and effort required for the venture to succeed.

b. He or she must believe in the opportunity enough to make the necessary sacrifices.

6. Opportunity assessment should focus on the opportunity and provide the basis to make the decision, including:

a. A description of the product or service.

b. An assessment of the opportunity.

c. Assessment of the entrepreneur and the team.

d. Specifications of all the activities and resources needed.

e. The source of capital to finance the initial venture.

Phase 2: Develop a Business Plan

1. A good business plan must be developed in order to exploit the opportunity defined.

2. This plan is essential to developing the opportunity and in determining the resources required, obtaining those resources, and successfully managing the venture.

Phase 3: Determine the Resources Required

1. Assessing the resources needed starts with an appraisal of the entrepreneur’s present resources.

2. Any resources that are critical need to be differentiated from those that are just helpful.

3. Care must be taken not to underestimate the amount and variety of resources needed.

4. Acquiring needed resources, while giving up as little control as possible, is difficult.

a. The entrepreneur should try to maintain as large an ownership position as possible, particularly in the start-up stage.

b. As the business develops, more funds will probably be needed, requiring more ownership be relinquished.

c. Alternative resource suppliers should be identified, along with their needs and desires, in order to structure a deal with the lowest cost and loss of control.

Phase 4: Manage the Enterprise

1. The entrepreneur must use them to implement the business plan.

2. This involves implementing a management structure, as well as identifying a control system.