Site Loader
Rock Street, San Francisco

Launching
new business is a process that is mostly chaotic, nonsystematic and rarely
linear. There are controversial views of where the process of launching new
venture starts and where it ends. According to one view, it starts when person
or group of people decide to devote their time and resources to the formation
of a new business. However just having intent is not enough, “it is complex
process and starting new venture is a process that begins long before the business
over opens the door” (Allen 2012, p. 21). If the entrepreneur finds out a good
opportunity and decides to pursue an idea of a new start-up, there should be
formulated the vision of the business at the initial stage. It should be clear,
unique, purposeful and directed to meet customers’ needs. “It is imaginable
picture of the future” (Byers et al. 2015, p. 52). Moreover, at the initial
stage, there should be identified the mission statement, that will describe
goals and type of customers of the business. According to Byers (2015), it
should be short, concise and have a clear explanation of the product’s purpose.
“A good mission statement can help align all the stakeholders and provide a
rationale for allocating resources” (Byers et al. 2015, p. 54). Consequently,
“the intent to start a business is not enough to make things happen” (Allen
2012, p.14), i.e. start-up business has many stages to pass for making the
business function, and on this way, the business faces a lot of challenges. Accordingly,
for being successful, business should try to minimize risks.

At
the initial stage of launching start-up there is an uncertainty of outcomes in
the market and a lot of unknowns, therefore there are numerous risks.  The process of setting up a new start-up is
challenged with several types of risks such as financial, product, market,
management/team, and customer. When launching the business, there are some
risks associated with the financial aspects of the process. Especially the
start-ups that use lean approach are funded by smaller amounts of initial
capital and the business tries to find out incremental capital only when it
gets confidence in the market and is assured to be able to build viable
products. Consequently, start-up business should have a well-defined financial
plan, in order to ensure that the appropriate amount of the capital is
allocated.  According to Allen (2016) in
order to minimize financial risks, two questions should be analyzed and
answered, first whether the start-up business is financially feasible or saying
in other words if the capital requirements of start-up business are
appropriate. Second, the start-up business should make profitability analysis
and define if it is worth to make efforts in establishing firm. It is essential
that the financial figures are in line with the goals that the company sets and
that the goals are realistic and achievable. When all the aspects of start-up
business are considered in conformance, “the business plan with a full set of
financial statements can be developed. That process will further reduce the uncertainty
inherent in the start-up business” (Allen 2016, p. 22).

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

Another
risk associated with the launching of a start-up business is the product risk
that is related to an aspect that start-up may not succeed in producing the
product that it intends to generate. It happens because some start-ups are in
difficulty of making explanations about its product. Some start-ups fail to
explain what problems does their product solve and why it is worth to invest in
this product. If start-up business fails to address the following issues, it
will fail in addressing the market as customers would not be likely paying
attention to this product. Therefore, for minimizing this risk, start-ups
should focus on the problems of customers and fill the gap. Osterwalder, et. al
(2014) in the book “Value Proposition Design”, defined
that value proposition is obligatory for those creating a new venture. The
value proposition enables to outline key issues for understanding and finding
customers’ problems and getting their possible solutions.

Moreover,
before launching the business, it is essential to assess the market. Entering
unfamiliar market can present challenges for the start-up business. Therefore,
new ventures should be actively involved in the market for finding out
opportunities in the market. According to Byers (2015) market research is used for
gathering information and defining opportunities in the market. It is “critical to the new venture team: without is, a new venture
may launch a product only to find out that the customer does not value it” (Byers
et al. 2015, p. 31). Market research is essential
for business start-ups, as “it helps to understand better its customers,
evaluate trends in the market, find out about the demand of a product and know
about competition in the market. Moreover, it helps to define future
possibilities and considers strategic road mapping route” (individual journal,
30/11/2017). There are two types of market research: primary and secondary data
collection. The primary (first-hand data) that can be either qualitative or
quantitative and which deals with conducting face-to-face interviews, surveys,
and focus groups. The secondary (published data) is done by conducting research
reports, industry research, competitors’ websites, or other ways of
observation. The primary research, mainly face-to-face interview, is effective
for start-ups as it creates early evidence of validation and it helps to find
out about the potential market and to identify customer’s needs, solutions and
buyer personas. Identifying
buying personas for my group project work was crucial as it helped to become
more user-focused and enabled our team to put ourselves in customer’ shoes.
Moreover, having preliminary identified the buying personas enabled us to
understand the customer, its demands and plan further steps in developing the business
idea.

Another
risk associated with new venture creation is management/team risk. It is
associated with the fact that start-up can fail to meet its objectives due to
poor teamwork or because the team is composed of people that do not have
appropriate skills or knowledge. Therefore, it is crucial for a start-up
business to have a good team. As only with the help of good team it will be
possible to overcome or minimize risks. 
Good teamwork is essential in finding out ideas for new product
development and in bringing ideas into the market.

Moreover,
the process of setting a new start-up is associated with the risk of customers,
mainly uncertainty of customer’s needs, problems and values. As the start-up
business operates in an uncertain environment, where the company does not know
its customers and have ambiguous views on what their product should look like,
it gets harder for them to forecast the future success.  According to Reis (2011) usually the start-ups do not have
long, stable operating history and the environment they operate is uncertain,
consequently, it is vital for start-ups to meet the needs and values of the
customers. Before starting the business, ventures should focus on acknowledging
what is essential to customers and afterward process to build “minimum viable
product”. According to Onyemah (2013), companies should figure out if there is
demand for their initial product offerings and afterward immediately should
start selling the product not waiting until the product is perfect. Subsequently,
on the way of company development, additional features of the product could be
added.

To
sum up, the abovementioned analyze of the different type of risks shows that
there are a lot of challenges when starting the business and entrepreneurs
should try to reduce the level of risk if it is not possible to eliminate it at
all. Moreover, company’s disposition to risk growths as the venture become
larger and due to high risks associated with new venture creation, a lot of
entrepreneurs prefer to give up and to drop out at an initial stage before the
start-up business is transformed to an already well-established firm. Therefore
“understanding where the risk lies enables entrepreneurs to respond effectively
through process improvement strategies and buffer strategies” (Allen 2016,
p.439).

Recently
radically new approach has been emerged and obtained the great importance. This
approach is called “lean start-up” and it makes the process of starting a business
less risky. “It favors
experimentation over elaborate planning, customer feedback over intuition, and
iterative design over traditional “big design up front” development” (Blank 2013). According to Reis (2011), lean start-up represents a new approach to
creating a continuous innovation. The lean start-up has pushed the traditional approach
of launching a new venture and has the advantage over it as lean start-up
approach first validates the market in order to see if the business is
profitable, thus the risks are minimized. Validating the market is essential as
start-ups do not have long, stable operating history or a relatively static
environment. Moreover, the traditional approach uses the business plan composed
of many pages, that takes a lot of time and effort therefore in order not to
waste time and have less paperwork, lean suggests to make a roadmap instead of
using a business plan.

In addition, in the lean start-up framework “designers and
entrepreneurs often rely on Persona to imagine user-centered, undreamed of
concepts that they subsequently test and improve through short iterations and
continuous customer involvement” (Buisine, et. al. 2016). Outlining the buying persona also
enables to minimize risks when starting a business as it helps to identify the
needs of customers and address the product accordingly. “The origins of buyer personas reside
with the person– Alan Cooper. Personas put a face on the user—a memorable,
engaging, and actionable image that serves as a design target. It is some
character that represents the segment of the population and is described in
terms of needs, goals, and tasks (individual journal, 30/10/2017).

The lean start-up process uses the principles such as
building business model canvas for outlining hypothesis, “get out of the
building” approach that is called customer development that is used to assess
hypothesis and agile development, that belongs to process where minimum viable
product is created by start-up business and where there is abolished the excess
time and the product is built in short cycles. When launching a new venture,
the business model canvas is effectively used in the lean start-up in
preference to an old method of creating of business plan model. Business
model canvas is composed of nine building blocks: customer segment, value
proposition, channels, customer relationship, revenue streams, key resources,
key activities, key partnership, cost structures. These blocks define various
groups of people or organizations that the business aims to reach and serve.
This business model looks at nine building blocks of the business at one page,
that makes the process more efficient. According to Osterwalder and Pigneur
(2010) “A business model describes the rationale of how an organization
creates, delivers, and captures value”. It is a diagram of how business creates
value for customers and itself. “Business model canvas is used to easily
describe the model of business and to create new strategic alternatives” (individual journal, 03/12/2017). Consequently, accurate
business model and value proposition can reduce uncertainty for a start-up
business and boost business in tough situations. Lean approach rather than
traditional methods can help start-up businesses to launch products that
customers’ desire, quicker and cheaper and even make the process of launching
smooth and less risky. 

Post Author: admin

x

Hi!
I'm Velma!

Would you like to get a custom essay? How about receiving a customized one?

Check it out