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Assessment and Evaluation of Entrepreneurial

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The Challenge of NewVenture 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 New-Venture Performance

Environmen t Entrepreneur s Characteristic s Founding Processes Initial Firm Characteristic s Performanc e


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 NewVenture 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 7/18/12

External Problems Experienced by Entrepreneurs

Location 11.1% Pricing 8.4% Expansion 5.5% Market Knowledge 19.3%

Product Issues 7.6%

Market Planning 14.4% Competitors 6.3%

Customer Contact 27.3%

Internal Problems Experienced by Entrepreneurs

Inventory Control 12.3% Facilities/Equipment 12.6%

Human Resources 12.0%

Cash Flow 14.9%

Leadership 11.1% Adequate Capital 15.9% Organizational Structure 10.8% Accounting Systems 10.4%

Determinants of New-Venture Failures


Lack of mgt. skill Poor mgt. strategy Lack of capitalization Lack of vision
7/18/12 Poor product


Entrepreneur 1 2 3 4 5 6

Lack of mgt. skill 1 Poor mgt. strategy Lack of capitalization Poor external market conditions
2 3 4 5 6

The Evaluation Process

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Asking the Right Questions

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Comprehensive Feasibility Approach

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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

NewVenture Idea

Determination of Feasibility of Planned New Venture