Business Paper on Evaluation of Potential Venture Opportunities

Evaluation of Potential Venture Opportunities

Part A

Whether starting a new business or purchasing an existing franchise or company, it is imperative to evaluate the potential of the business based on the following:

Self-analysis

Most businesses fail due to poor management and the owner’s inability to cope with the limited resources. Prior to assessing the viability of the idea and market, it is crucial that one should ascertain the talents, desires, and goals that the person has. Therefore, establishing or anticipating the amount of time and energy required to make the venture successful, as well as the risks involved, is imperative to the anticipated outcomes.

Financial Components

After assessing one’s self, it is paramount to evaluate the availability of the required resources. It is essential to assess the company’s financial performance or potential financial performance over a given period. Moreover, it is imperative to evaluate the sales revenue, profit margins of goods and services, current sales trends, as well as a company’s cash flow statement. Examining the cash flow statement commission enables one to determine when one will obtain money and how much credit one needs to acquire.

Sales Assessments

Besides giving details on how sales have taken place and where improvement is required, the process gives insight into where products are selling and to what type of customers.

Market Data

Researching the market helps to determine whether it is being saturated or underserved. The detailed demographic analysis gives insights of potential marketplaces containing insignificant competition. Also, demographics like gender, age, marital status, as well as race help in determining the potential customers. These also explain why people may be drawn into a particular product or service.

Assets and Liabilities

It is essential to ascertain the assets a company has, how it depends on such assets, and what would happen if the company eluded them. Examples include copyrights, patent rights or trademarks. Liabilities such as debts, lawsuits, expiring assets, and expiring contracts should also be considered.

Relationships

Fundamental factors in most business’ success often encompass personnel, endorsements, and relationships. Hence, assessing the effects of losing a key relationship on a business’ income is important.

Opportunity Cost

Opportunity costs involve assessing the costs to be incurred when venturing into the new business prospect. For example, using one’s saving in venturing into a new business opportunity reduces their ability to settle debts, improve current facilities, as well as reduce one’s purchasing power.

Part B & C

Combined Model

Large Market Opportunity in a Fast-growing Sector

When evaluating a business venture, one should consider those ventures that have large market opportunities within a fast-growing business environment. This gives the company an opportunity to diversify its goods and services. This leads to high sales returns, which translates to a high return on investments for the investor (Roberts, 2007).

Competitive Edge

Evaluating a company’s specialty is also important. Then the investor is able to gain insights on the company’s competitive edge based on its goods and services.

Assets and Liabilities

It is important to investigate the assets of the company and how the company utilizes such assets. For example, analyzing patent rights is important as it enables an investor to identify the potential risk that may result from pirated copyrights and patent rights.

Team

Various aspects of a team exist. It is important to incorporate an aggressive technical founder with a sales-oriented entrepreneur in the team. The founder acts like an anchor while the entrepreneurs drive the other parts of the business.

Timing

Timing is critical to any successful business venture. Timing the investment and analyzing the rate at which money goes in and out makes the difference in the financial return.

Part D

The proposed new venture conforms to the outlined criteria as it starts with establishing the venture, evaluating the company’s business plan, identifies risks and rewards, and comes up with an exit procedure.

Part E

  1. What need are you addressing and how do you define your target market?
  2. A prospective new venture is evaluated based on its business plan and model. A competent entrepreneur’s business plan incorporates the technical and business opportunities, as well as how to analyze the numbers behind such opportunities.
  3. Determine the potential competitors and come up with strategic plans to ensure that potential competitors do not carry the same brand, as well as ascertaining that their new venture is patented.
  4. The venture capitalists divide ventures into two models. In the first model, market and products are fairly understood while in the second model, the venture capitalists have no clues.
  5. The team is composed of the founder and the entrepreneurs. The founder is the anchor. He understands the whole thrust behind the technology and industry dynamic around it. The entrepreneur drives the other components of the business and sells the visions to investors.
  6. Establishing value and inevitability is fairly transparent in mature companies. However, for early-stage ventures, venture capitalists have to apply more effort in getting the business opportunities presented. Consequently, they only invest once they are satisfied with the return on investment which should be between 5-10 percent (Roberts, 2007).
  7. Although it is rigid to quantify between a risk and a reward, it is important to view an opportunity as a multi-chapter novel. Hence, venture capitalists look at the business plan as a prologue to identifying risks and rewards (Roberts, 2007).
  8. Venture capitalists follow the process of establishing the business opportunity, analyzing potential risks and rewards, and executing the necessary measures therein.
  9. A prospective exit in the context relates to the range in which venture capitalists are willing to invest in the concerned company. It also addresses the principles that successful companies will establish their own exit plan as they grow, hence, a business plan should primarily focus less on ways to exit, and focus more on building a successful company based on the identified ideas. Therefore, before going into an investment with the company, venture capitalists engage the company in detail on their future endeavors, whether selling the company or not and if the company is on sale. They inquire about the prospective acquired. Hence, building lasting companies that grow consistently is a more reliable way of constituting finances rather than exiting the detail just in time.

 

 

Reference

Roberts, M. J. (2007). New business ventures and the entrepreneur. Boston, Mass: McGraw-Hill. Retrieved from https://www.hbs.edu/faculty/Pages/item.aspx?num=22168