Minimizing Investments and Fixed Costs at Launch Reduces Risk and Increases Flexibility

New Business Opportunities: Getting to the Right Place at the Right Time
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Why does the principle of minimal resources work for entrepreneurs? It reduces risk and lowers fixed costs, which favorably affects breakeven. And it lowers the cost of choosing to abort…Minimal resource commitment also lowers the risk of owning obsolescence. No wonder computer leasing caught on early and has prevailed, especially with entrepreneurs, given the rapid change rate in that technology! Once a system is bought and installed, you are stuck with it. Given the flux and uncertainty of market and technology in which most entrepreneurs must survive, the inflexibility of ownership can be a curse.

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New Business Opportunities: Getting to the Right Place at the Right Time, p. 70

Start-Well.com Review:

The late Jeffry Timmons was a pioneer in entrepreneurship education in the United States, and he wrote prolifically on the subject of new venture creation. Like the more recent Will It Fly? (2004) by Thomas McKnight, Timmons' New Business Opportunities (1990) is among the few book-length treatments of opportunity analysis available, which makes it a useful reference to keep at your side when screening business ideas. This book is also one of the few…read the full book review

Which Firms Get External Financing?

The Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By
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Although entrepreneurial talent and valuable business ideas undoubtedly affect whether or not founders get external financing, some more basic things also have a big effect on which new businesses get financing and which do not. One is the age of the business. The odds that a new business will get either external debt or equity financing increases as the business gets older. Simply surviving for a few years improves the odds that a new business will get money from external sources.

Another often-forgotten factor is the business’ level of development. Informal investors, and banks and other debt providers, tend to put their money into new businesses that have sales, positive cash flow, and employees. As a result, new businesses that have made sales or achieved positive cash flow are more likely to get capital from outside sources.

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The Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By, p. 85

Start-Well.com Review:

Very few empirical studies of entrepreneurship are accessible to a general audience, which is why The Illusions of Entrepreneurship is such a useful antidote to the stereotypes about entrepreneurs perpetuated in the media and popular culture. Along the way, Scott Shane dispels many of our most cherished ideas about who launches startups, what motivates them, and the economic impact of new ventures. The research described in his book will be of great…read the full book review

Why Most Business Plans Don’t Deliver

Getting to Plan B: Breaking Through to a Better Business Model
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Why don’t most business plans deliver? Over the years, the business plans we have seen share some common—and unfortunate—traits. First, far too many business plans are written in the first burst of enthusiasm without a shred of real evidence to support their assertions. Simply put, most business plans are written too soon. Analogs, antilogs, tested hypotheses? Few or none…Second, rarely is there anything like a plan to discover and learn. The plans assume that most everything is already known up front—not the case, as the company histories that comprise this book have shown. Third, and related to the second point, the rampant uncertainty about what lies ahead goes entirely unacknowledged. As General Douglas MacArthur is reputed to have once said, “No plan ever survives contact with the enemy.”

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Getting to Plan B: Breaking Through to a Better Business Model, pp. 207-208

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What do PayPal, Ryanair, and Google all share in common? It turns out that each of them began life pursuing a very different strategy before eventually hitting upon a winning business model. Had their founders stuck doggedly to their original plans, these companies would have lingered in obscurity or eventually folded. Ryanair, for example, fought a losing battle against Europe's national carriers for six years before embracing Southwest's low-cost…read the full book review

Growth Requires Focusing on a Particular Set of Customers—and Saying “No” to the Rest

The Origin and Evolution of New Businesses
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Focusing on a particular set of customers or needs usually involves the willingness to incur opportunity costs. As previously mentioned, the McKinsey partners turned away market survey work and studies for sale managers to build a “top management clientele.” Hewlett and Packard turned down large production contracts during the World War II [sic] to focus on developing high-quality instruments…The willingness to incur such opportunity costs likely derives from a strong conviction about the merits of the underlying principle, as well as considerable self-control and capacity to delay gratification.

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The Origin and Evolution of New Businesses, pp. 298-299

Start-Well.com Review:

As Amar Bhidé points out, startups tend to be "more celebrated than studied," which has led to a highly distorted view of entrepreneurship among the general public and policy makers alike. Bhidé’s The Origin and Evolution of New Businesses (2000) was among the first detailed empirical studies of entrepreneurship available in book form, and it remains every bit as relevant today as it was during the height of the Internet bubble. Bhidé's research is…read the full book review

Use Foothold Markets as a Low-Cost Entry Strategy

Seizing the White Space: Business Model Innovation for Growth and Renewal
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To successfully incubate a new business, you must identify a foothold market, a small geographic region or customer group that will serve as a low-cost laboratory. Preferably familiar or otherwise friendly, the market nevertheless needs to be representative of the larger target market you intend ultimately to pursue…Incubating a new business in your white space is filled with uncertainty, but it needn’t be filled with risk. Foothold markets allow for safe, low-cost, structured testing that yields demonstrable results.

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Seizing the White Space: Business Model Innovation for Growth and Renewal, p. 138

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Over the past decade, much has been written about product and service innovation (particularly by Clayton Christensen, Anthony Ulwick, et al.). The corporate imperative to "innovate or stagnate" is burned into the memory of most senior executives, but launching a breakthrough product frequently also necessitates the development of entirely new organizational capabilities. Mark Johnson's Seizing the White Space bridges this critical gap between product…read the full book review

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Focus on the Big Picture, Not the Numbers, to Create a Winning Strategy

Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant
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It’s no wonder that few strategic plans lead to the creation of blue oceans or are translated into action. Executives are paralyzed by the muddle. Few employees deep down in the company even know what the strategy is. And a closer look reveals that most plans don’t contain a strategy at all but rather a smorgasbord of tactics that individually make sense but collectively don’t add up to a unified, clear direction that sets a company apart—let alone makes the competition irrelevant. Does this sound like the strategic plans in your company?

This brings us to the second principle of blue ocean strategy: Focus on the big picture, not the numbers. This principle is key to mitigating the planning risk of investing lots of effort and lots of time but delivering only tactical red ocean moves.

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Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant, p. 82

Start-Well.com Review:

In Blue Ocean Strategy (BOS), authors W. Chan Kim and Renée Mauborgne aim to show managers how to compete successfully by ignoring competitors, or more precisely by making them irrelevant. The "blue ocean" metaphor refers to the creation of an entirely new market space by redrawing market boundaries in a way that dramatically increases customer value. The key to this process is focusing not on the needs of your existing customers, but rather on latentread the full book review

So What is a Solid Business Concept?

[T]hink of your business in terms of the overall value proposition: Are the elements in place to proceed with a new venture? Is there a reasonable likelihood of success? Typically, five things characterize a viable business, each of which we’ll explore in the sections to follow:

  • It represents a new approach to existing business processes, ideally by applying technology in a new way.
  • Real, existing corollaries exist in the marketplace, today.
  • Today’s market for the solution is large, representing revenues of at least $1 billion a year
  • Equally large ancillary markets, either vertically or horizontally aligned to the space, also exist.
  • Most important of all, the startup team possesses good execution skills in the chosen space.
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A Good Hard Kick in the Ass: Basic Training for Entrepreneurs, p. 22

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Following close behind the tech wreck of the early 2000s, A Good Hard Kick in the Ass: Basic Training for Entrepreneurs is a wake-up call for entrepreneurs—especially in VC-backed startups—to return to the fundamental principles of business. Lest we forget, basic blocking and tackling were thought to be outmoded concepts in the heyday of the “New Economy.” Entrepreneurs and financiers alike became preoccupied with getting to market first and achieving…read the full book review

Successful Entrepreneurs are Just Like You

Never Bet the Farm: How Entrepreneurs Take Risks, Make Decisions—and How You Can, Too
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Dozens of traits have been peddled as integral parts of the ideal entrepreneur: high levels of energy, intelligence, determination, and resourcefulness; a high degree of motivation, diligence, creativity, youthful bravado, and self-confidence; a high need for achievement, and the ability to look at things differently, to persevere, and to make quick decisions. Successful entrepreneurs have also been said to be self-directed, outgoing, proactive, in control, hardworking, deadline-oriented, the oldest child or the only child—just to name a few. But common sense tells us that no one could possess all those attributes.

Several noted management gurus, such as Henry Mintzberg of Canada’s prestigious McGill University, convincingly argue that there is no such thing as the ideal entrepreneur—that entrepreneurs display a diverse range of personality traits; gregarious or taciturn, conservative or not, analytical or intuitive; some see the big picture; others do not—in short, entrepreneurs are no different from the rest of us.

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Never Bet the Farm: How Entrepreneurs Take Risks, Make Decisions—and How You Can, Too, pp. 7-8

Start-Well.com Review:

Never Bet the Farm is a collection of rapid-fire essays aimed squarely at first-time entrepreneurs by co-authors Anthony Iaquinto and Stephen Spinelli, Jr. In punchy, easy-to-read prose, the authors lay out fifteen enduring principles that guide successful business founders. There are no MBA-level concepts like CAPM or unlevered free cash flows to confuse readers, just sound advice to help you navigate the perils of launching a startup.

To those needing…read the full book review

Test Demand for Your Product Cheaply Before Building It

If You Build It Will They Come?: Three Steps to Test and Validate Any Market Opportunity
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The Aim process develops the differentiation, features, and details of your product offering before you’ve actually built the product…In the real business world, there is a risk that you will have spent the effort on Aim and found yourself without a viable market. That is a very real possibility. Let’s step back to first Market Validation principles: We are investing, up front, 5 percent of the development budget to figure out if there is a market for our product. If the answer is no, we may not like the answer. But we have accomplished our goal.

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If You Build It Will They Come? Three Steps to Test and Validate Any Market Opportunity, pp. 145-146

Start-Well.com Review:

Rob Adams' latest book, If You Build It Will They Come? Three Steps to Test and Validate Any Market Opportunity (2010) builds on his earlier work, A Good Hard Kick in the Ass (2002). Both are well written, straightforward, and offer loads of practical advice for entrepreneurs. While A Good Hard Kick… covers many facets of launching a technology startup, If You Build It… focuses more narrowly on the task of validating the demand for a new product or…read the full book review

Successful Businesses are Often Built on Unfair Advantages

Will It Fly?: How to Know if Your New Business Idea Has Wings...Before You Take the Leap
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Competition is a wonderful thing…if you are on the buy side…However, if you are on the sell side, preempting and dominating a market could mean the difference between a successful business and bankruptcy. The entrepreneur must consider the possibility of preempting others from sharing the bounty of his or her idea. The higher that possibility, the more likely the company and its products will persist in the face of a determined competitor. If there are already others in the market, it is too late for preemption, but there is still a chance for domination—can the new venture dominate the market?

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Will It Fly? How to Know if Your New Business Idea Has Wings...Before You Take the Leap, p. 172

Start-Well.com Review:

Confusing an idea with a business opportunity is one of the most common mistakes entrepreneurs make, but few books address the crucial task of opportunity analysis in sufficient detail. Instead, most entrepreneurship books begin with the opportunity in hand and focus on how to write a detailed business plan, raise money, or launch the venture. It's not that these other tasks aren't important. It's just that these efforts will be for naught if you charge…read the full book review

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