How to develop a strategic business plan for a new venture

by Jenny Bowes | Jul 01, 2021

a new venture's business plan is important

A key aspect of launching any new business venture is planning – but truthfully, many would-be entrepreneurs aren’t sure where to start.

Business planning has had a revamp in recent years. The old business plan has undergone a massive makeover that reflects the contemporary pace of modern business. Now, your forecasts and proposals can be much more sophisticated and yield better results. When the OKR method is included in this process, you’ll have all the tools you need to get your new business venture off to a strong start.

So, how can you put a strategic business plan in place for a new venture, and where’s the best place to begin? We answer this question in this article.

What is a strategic business plan?

A strategic business plan goes a few steps further than a traditional business plan. Business planning previously focused mainly on numbers. However, a strategic business plan takes a holistic approach, encompassing business values, vision and a variety of goals concerning your business’ philosophy, ethos and methodology.

It also focuses on how best to use and optimise your existing resources in a controlled manner.  It’s essential to account for incremental growth so that you don’t exhaust your current resources too quickly. Of course, when setting up a new business venture you don’t have previous data to work from – so a strategic business plan will use industry insights and competitor analysis to shape your organisational objectives.

Why use a strategic business plan for a new venture?

New business ventures are exciting. They leave you buzzing with the prospect of fresh opportunities approached with abundant enthusiasm. It’s easy to get lost within all the excitement that comes along with starting a new business, but getting down to the nitty-gritty is even more important for fledgling companies. That’s where strategic business planning comes in.

This will help you to streamline your business planning process so that you boost your chances of long-term success. We’ve covered some of the other main benefits below…

How can strategic business planning benefit your new venture?

Focus is key when starting any new venture. Without a clear idea of where you’re headed and how you’re getting there, you’ll likely hit some bumps in the road. Many business owners also cite time management as one of their key challenges. Overwhelm can lead to a scattergun approach, which in turn, impairs productivity. If you can clearly see where you need to focus your time, money and efforts at each stage, you can be confident that nothing is being overlooked as you progress.

  • Proactivity over reactivity

When you anticipate the good and the bad, you’ll be prepared for whatever life throws at you. Business can be unpredictable and external influences are not always under your control. However, forward planning for unexpected events enables you to prepare for any unfavourable scenarios before they occur. This allows you to act accordingly and minimise any negative impact. The same can be said for positive, yet unanticipated occurrences such as a steep rise in sales. 

Creating a strategic business plan puts you one step ahead of the game and significantly increases your chances of success!

  • Increased efficiency

Streamlining is key for new ventures. Many new businesses waste a significant portion of their resources during their first few years, simply because they’re unable to adequately manage them. Operational efficiency is key for any new business especially as it grows and evolves.

  • Improved resilience

Markets change and events occur that are not within your control – take Covid, for instance. But, with strategic business planning, you can increase your long-term resilience by building a more adaptable and flexible organisation. 

Things to consider during the strategic business planning process

Strategic business plans are comprehensive and incorporate multiple elements. Therefore, you’ll need to gather some information and consider various different aspects of your business (both now and how you want it to look in the future) before you begin.

To start with, consider the following elements:

Your vision and values: Who are you, what do you do and most importantly, why? What makes you different? What do you stand for?

Your industry and competitors: Who else is doing what you do, and how do they do it? What’s their market share – and what should yours be? How are you contributing to, or evolving your industry?

Your clients and customers: What does your ideal client or customer look like? Who are they, what do they do? Creating an avatar for your ideal customer can be useful especially for marketing and branding going forward. Go into detail about their salary, lifestyle, likes and dislikes and what other companies (both competitor and non-competitor) they engage with. 

Your products and services: What exactly do you offer? List absolutely everything with a detailed description.

Outlining the above provides a firm foundation for starting the strategic business planning process.

How to make a strategic business plan

There’s no one size fits all approach to the strategic business planning process. Each industry and company is entirely different, so of course, their plans will be unique too! Using a sample strategic business plan could help to guide you through the process, especially if it’s your first time setting up a new business.

You might like to start by sitting everyone down and talking about your business. Verbally communicating what you do and how you do it without the pressure of documenting things formally can allow you to be really open and creative. Doing this with your team will also enable you to gain a variety of insights and perspectives. It can relieve that stagnant feeling that can come with strategic business planning, as you simply talk it out and discuss your company candidly in a safe setting.

In addition, competitor and target market research will be a key element for any new venture – as you’re not working with your own existing data. If you’re looking to disrupt the market you’re in, you’ll be using these insights in reverse.

Once you’ve gathered plenty of notes from your brainstorming session, begin bit by bit to fill in each section of your strategic business plan. Think of this as your first draft – it’ll go through several refinements during this process until you have something solid to work from.

If you’re still struggling to get it right, don’t worry. Getting expert support from strategic planning specialists may be the best way to go.

At There Be Giants we help organisations to execute their strategic plans by using OKRs . The OKR process and strategic planning process go hand in hand. Using both methods can help to boost your chances of achieving sustained business growth.

If you want to learn more about executing your strategic plans, speak to one of our Giants today to learn more about how we can help you.

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a new venture's business plan is important

The importance of a business plan

Business plans are like road maps: it’s possible to travel without one, but that will only increase the odds of getting lost along the way.

Owners with a business plan see growth 30% faster than those without one, and 71% of the fast-growing companies have business plans . Before we get into the thick of it, let’s define and go over what a business plan actually is.

What is a business plan?

A business plan is a 15-20 page document that outlines how you will achieve your business objectives and includes information about your product, marketing strategies, and finances. You should create one when you’re starting a new business and keep updating it as your business grows.

Rather than putting yourself in a position where you may have to stop and ask for directions or even circle back and start over, small business owners often use business plans to help guide them. That’s because they help them see the bigger picture, plan ahead, make important decisions, and improve the overall likelihood of success. ‍

Why is a business plan important?

A well-written business plan is an important tool because it gives entrepreneurs and small business owners, as well as their employees, the ability to lay out their goals and track their progress as their business begins to grow. Business planning should be the first thing done when starting a new business. Business plans are also important for attracting investors so they can determine if your business is on the right path and worth putting money into.

Business plans typically include detailed information that can help improve your business’s chances of success, like:

  • A market analysis : gathering information about factors and conditions that affect your industry
  • Competitive analysis : evaluating the strengths and weaknesses of your competitors
  • Customer segmentation : divide your customers into different groups based on specific characteristics to improve your marketing
  • Marketing: using your research to advertise your business
  • Logistics and operations plans : planning and executing the most efficient production process
  • Cash flow projection : being prepared for how much money is going into and out of your business
  • An overall path to long-term growth

10 reasons why you need a business plan

I know what you’re thinking: “Do I really need a business plan? It sounds like a lot of work, plus I heard they’re outdated and I like figuring things out as I go...”.

The answer is: yes, you really do need a business plan! As entrepreneur Kevin J. Donaldson said, “Going into business without a business plan is like going on a mountain trek without a map or GPS support—you’ll eventually get lost and starve! Though it may sound tedious and time-consuming, business plans are critical to starting your business and setting yourself up for success.

To outline the importance of business plans and make the process sound less daunting, here are 10 reasons why you need one for your small business.

1. To help you with critical decisions

The primary importance of a business plan is that they help you make better decisions. Entrepreneurship is often an endless exercise in decision making and crisis management. Sitting down and considering all the ramifications of any given decision is a luxury that small businesses can’t always afford. That’s where a business plan comes in.

Building a business plan allows you to determine the answer to some of the most critical business decisions ahead of time.

Creating a robust business plan is a forcing function—you have to sit down and think about major components of your business before you get started, like your marketing strategy and what products you’ll sell. You answer many tough questions before they arise. And thinking deeply about your core strategies can also help you understand how those decisions will impact your broader strategy.

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2. To iron out the kinks

Putting together a business plan requires entrepreneurs to ask themselves a lot of hard questions and take the time to come up with well-researched and insightful answers. Even if the document itself were to disappear as soon as it’s completed, the practice of writing it helps to articulate your vision in realistic terms and better determine if there are any gaps in your strategy.

3. To avoid the big mistakes

Only about half of small businesses are still around to celebrate their fifth birthday . While there are many reasons why small businesses fail, many of the most common are purposefully addressed in business plans.

According to data from CB Insights , some of the most common reasons businesses fail include:

  • No market need : No one wants what you’re selling.
  • Lack of capital : Cash flow issues or businesses simply run out of money.
  • Inadequate team : This underscores the importance of hiring the right people to help you run your business.
  • Stiff competition : It’s tough to generate a steady profit when you have a lot of competitors in your space.
  • Pricing : Some entrepreneurs price their products or services too high or too low—both scenarios can be a recipe for disaster.

The exercise of creating a business plan can help you avoid these major mistakes. Whether it’s cash flow forecasts or a product-market fit analysis , every piece of a business plan can help spot some of those potentially critical mistakes before they arise. For example, don’t be afraid to scrap an idea you really loved if it turns out there’s no market need. Be honest with yourself!

Get a jumpstart on your business plan by creating your own cash flow projection .

4. To prove the viability of the business

Many businesses are created out of passion, and while passion can be a great motivator, it’s not a great proof point.

Planning out exactly how you’re going to turn that vision into a successful business is perhaps the most important step between concept and reality. Business plans can help you confirm that your grand idea makes sound business sense.

A graphic showing you a “Business Plan Outline.” There are four sections on the left side: Executive Summary at the top, Company Description below it, followed by Market Analysis, and lastly Organization and Management. There was four sections on the right side. At the top: “Service or Product Line.” Below that, “Marketing and Sales.” Below that, “Funding Request.” And lastly: “Financial Projections.” At the very bottom below the left and right columns is a section that says “Appendix.

A critical component of your business plan is the market research section. Market research can offer deep insight into your customers, your competitors, and your chosen industry. Not only can it enlighten entrepreneurs who are starting up a new business, but it can also better inform existing businesses on activities like marketing, advertising, and releasing new products or services.

Want to prove there’s a market gap? Here’s how you can get started with market research.

5. To set better objectives and benchmarks

Without a business plan, objectives often become arbitrary, without much rhyme or reason behind them. Having a business plan can help make those benchmarks more intentional and consequential. They can also help keep you accountable to your long-term vision and strategy, and gain insights into how your strategy is (or isn’t) coming together over time.

6. To communicate objectives and benchmarks

Whether you’re managing a team of 100 or a team of two, you can’t always be there to make every decision yourself. Think of the business plan like a substitute teacher, ready to answer questions any time there’s an absence. Let your staff know that when in doubt, they can always consult the business plan to understand the next steps in the event that they can’t get an answer from you directly.

Sharing your business plan with team members also helps ensure that all members are aligned with what you’re doing, why, and share the same understanding of long-term objectives.

7. To provide a guide for service providers

Small businesses typically employ contractors , freelancers, and other professionals to help them with tasks like accounting , marketing, legal assistance, and as consultants. Having a business plan in place allows you to easily share relevant sections with those you rely on to support the organization, while ensuring everyone is on the same page.

8. To secure financing

Did you know you’re 2.5x more likely to get funded if you have a business plan?If you’re planning on pitching to venture capitalists, borrowing from a bank, or are considering selling your company in the future, you’re likely going to need a business plan. After all, anyone that’s interested in putting money into your company is going to want to know it’s in good hands and that it’s viable in the long run. Business plans are the most effective ways of proving that and are typically a requirement for anyone seeking outside financing.

Learn what you need to get a small business loan.

9. To better understand the broader landscape

No business is an island, and while you might have a strong handle on everything happening under your own roof, it’s equally important to understand the market terrain as well. Writing a business plan can go a long way in helping you better understand your competition and the market you’re operating in more broadly, illuminate consumer trends and preferences, potential disruptions and other insights that aren’t always plainly visible.

10. To reduce risk

Entrepreneurship is a risky business, but that risk becomes significantly more manageable once tested against a well-crafted business plan. Drawing up revenue and expense projections, devising logistics and operational plans, and understanding the market and competitive landscape can all help reduce the risk factor from an inherently precarious way to make a living. Having a business plan allows you to leave less up to chance, make better decisions, and enjoy the clearest possible view of the future of your company.

Understanding the importance of a business plan

Now that you have a solid grasp on the “why” behind business plans, you can confidently move forward with creating your own.

Remember that a business plan will grow and evolve along with your business, so it’s an important part of your whole journey—not just the beginning.

Related Posts

Now that you’ve read up on the purpose of a business plan, check out our guide to help you get started.

a new venture's business plan is important

The information and tips shared on this blog are meant to be used as learning and personal development tools as you launch, run and grow your business. While a good place to start, these articles should not take the place of personalized advice from professionals. As our lawyers would say: “All content on Wave’s blog is intended for informational purposes only. It should not be considered legal or financial advice.” Additionally, Wave is the legal copyright holder of all materials on the blog, and others cannot re-use or publish it without our written consent.

a new venture's business plan is important

A business journal from the Wharton School of the University of Pennsylvania

Knowledge at Wharton Podcast

How entrepreneurs can create effective business plans, march 2, 2010 • 16 min listen.

When an entrepreneur has identified a potential business opportunity, the next step is developing a business plan for the new venture. What exactly should the new plan contain? How can the entrepreneur ensure it has the substance to find interest among would-be investors? In this installment of a series of podcasts for the Wharton-CERT Business Plan Competition, Wharton management professor Ian MacMillan explains that business plans must contain several crucial elements: They must articulate a market need; identify products or services to fill that need; assess the resources required to produce those products or services; address the risks involved in the venture; and estimate the potential revenues and profits.

a new venture's business plan is important

An edited transcript of the interview appears below:

Knowledge at Wharton: Professor MacMillan, thank you for speaking with us about the necessity of entrepreneurs writing business plans. To start with a basic question, what exactly is a business plan?

Ian MacMillan: A business plan to me is a 25-page, maximum 30-page, document, which is a description, analysis and evaluation of a venture that you want to get funded by somebody. It provides critical information to the reader — usually an investor — about you, the entrepreneur, about the market that you are going to enter, about the product that you want to enter with, your strategy for entry, what the prospects are financially, and what the risks are to anybody who invests in the project.

Knowledge at Wharton: Could you explain some of these elements in a little more detail and describe how entrepreneurs can develop an effective business plan?

MacMillan: Let me start by saying that you probably want to avoid developing a detailed business plan unless you have done some initial work. Basically what happens is that by doing a little bit of work, you earn the right to do more work. The first thing I would do before you start a business plan is think about a concept statement. A concept statement is about three to five pages that you put together and share with potential customers or investors just to see if they think it’s worth the energy and effort of doing more detailed work.

The concept statement has a few pieces to it. You are going to have a description of the market need that has to be fulfilled; a description of the products or services that you think are going to fulfill that need; a description of the key resources that you think are going to be needed to provide that product or service; a specification of what resources are currently available; an articulation of what you think the risks are; and then a sort of rough and ready estimate of what you think the profits and profitability will be.

The idea is to put together this concept document and begin to share it around with people who are going to have to support your venture if you take it forward. This allows you to rethink as a result of feedback that you get. You might get word back from the various stakeholders — like potential customers or distributors — that this really wasn’t such a good idea after all. That saves you the energy and effort of putting together a big business plan.

Knowledge at Wharton: Assuming the concept statement works out and you want to move towards the business plan, what else would you need? And where can you find the information? Some information can be hard to locate, especially about your competitors.

MacMillan: It’s really important to go out and speak to your potential customers. You need to find the people who you think will buy your product and talk to them about what dissatisfies them with their current offerings. You should get a sense from them about who is providing the alternative at the moment. Remember, the world has gone for maybe 100,000 years without your idea — and people are getting by; they’re not dying. Something out there is servicing their need. So what is the closest competitive alternative to what you want to offer?

That is what you need to find out — and that involves talking and listening. And for all the enthusiasm you have for your venture or your idea, you really need to listen to people who are eventually going to write a check for it.

Before you go on to write a business plan, you have to do some more work. If the concept statement looks good, then the next step is to do a 15- to 20-page feasibility analysis. This means we are now going to take this idea to the next level. We’ve learned from potential customers and distributors. We’ve learned who the major competitors are. We’ve shaped the idea more clearly, and now we’re digging deeper.

The next challenge you face is to say, well, if you start this business, what evidence do you have that the market actually wants it? Who do you think would write a check for your product? You need to articulate what makes your product or your service feasible. What has to be done in order to make this thing real? You need a description of how you intend to enter the market, a description of who the major competitors are, a preliminary plan — a very rough plan — which specifies what you think your revenues and profits are going to be, and an estimate of what you think the required investment will be. And only then, once you have articulated that, and once again shared it with your stakeholder community, will you perhaps be able to go and write a business plan.

Knowledge at Wharton: Once you have done your feasibility analysis and assuming you get the go ahead from your stakeholders, what is the next step?

MacMillan: The idea of the business plan is to convince the stakeholders. First, what we need to do in a business plan is show that we understand the needs — the unmet needs — of potential customers. Second, we need to understand the strengths and weaknesses of the current most competitive offering out there. Third, we need to understand the skills and capabilities that you and your team have as entrepreneurs. Next we need to understand what the investors need to get out of their investment, because they have to put their money in and they need to have some kind of sense of what they are going to get in terms of returns. In addition, the investment needs to be competitive with alternative investments that the investors might make.

The most important idea in the business plan is to articulate and satisfy the different perspectives of various stakeholders. This process sets in motion some basic requirements in the business plan — to tee up right from the start — evidence that the customer will accept it. Probably a third of the ventures out there that fail are because some person came up with the right product that they thought the world would love and then found out that the customers couldn’t care less. What you want to try to do in a business plan is convince the reader that there are customers out there who will in fact buy the product — not because it’s a great product, but because they want it and they are willing to pay for it.

Moreover, you need to convince the reader that you have some kind of proprietary position that you can defend. You also need to convince your readers that you have an experienced and motivated management team and that you have the experience and the management capabilities to pull it off. You need to convince potential investors that they are going to get a better return than they could get elsewhere, so you need to estimate the net present value of this venture. You need to show that the risk they are taking will be accompanied by appropriate returns for that risk. If we look at the contents of a typical business plan, you need to be able to articulate all these issues in some 25 to 30 pages. People get tired if they have to read too much.

Now let’s look at the various components of the business plan document:

First, you need an executive summary that grabs the attention of the potential investor. This should be done in no more than two pages. The executive summary is meant to convince the potential investor to read further and say, “Wow! This is why I should read more about this business plan.”

Next, you need a market analysis. What is the market? How fast is it growing? How big is it? Who are the major players? In addition, you need a strategy section. It should address questions such as, “How are you going to get into this market? And how are you going to win in that marketplace against current competition?”

After that, you need a marketing plan. How are we going to segment the market? Which parts of the market are we going to attack? How are we going to get the attention of that market and attract it to our product or service?

You also need an operations plan that answers the question, “How are we going to make it happen?” And you need an organization plan, which shows who the people are who will take part in the venture.

You need to list the key events that will take place as the plan unfolds. What are the major things that are going to happen? If your plan happens to be about a physical product, are you going to have a prototype or a model? If it happens to be a software product, are you going to have a piece of software developed — a prototypical piece of software? What are the key milestones by which investors can judge what progress you are making in the investment? Remember that you will not get all your money up front. You will get your funds allocated contingent on your ability to achieve key milestones. So you may as well indicate what those milestones are.

You should also include a hard-nosed assessment of the key risks. For example, what are the market risks? What are the product risks? What are the financial risks? What are the competitive risks? To the extent that you are upfront and honest about it, you will convince your potential investors that you have done your homework. You need to also be able to indicate how you will mitigate these risks — because if you can’t mitigate them, investors are not going to put money into your venture.

After that, what you get down to is a financial plan where you basically do a five-year forecast of what you think the finances are going to be — maybe with quarterly data or projections for the first two years and annual for the next three years.

You need a pro forma profit and loss statement. You need a pro forma balance sheet if you have assets in the balance sheet. You need to have a pro forma cash flow. Your cash flow is important, because it is the cash flow that kills. You may have great profits on your books but you may run out of money — so you need a pro forma cash flow statement. And you need a financing plan that explains, as the project unfolds, what tranches of financing you will need and how will you go about raising that money.

Finally you need a financial evaluation that tells investors, if you make this investment, what is its value going to be to you as an investor. That is basically the structure of the plan.

Knowledge at Wharton: Let’s say you have written a business plan and presented it to your investors. How closely do you have to be tied to the plan? Does it mean that once you are executing against the plan, you should reject new opportunities you find because they are not part of your plan? Or should you build in some flexibility that allows you to explore emerging opportunities?

MacMillan: Is this an opportunity for me to speak about discovery-driven planning?

Knowledge at Wharton: Of course.

MacMillan: Okay. The thing about most entrepreneurial ventures is that your outcome is uncertain — because what you are doing is very new. It is very, very hard to predict what the actual outcome is going to be. One of the most fundamental flaws is that in the face of unfolding uncertainty, you single-mindedly and bloody-mindedly pursue the original objective.

The reality is that the true opportunity will emerge over time. What venture capitalists do is they will put a small amount of money into the project, allow the entrepreneur to enter that market space and then — contingent on performance and contingent on what apparent traction you can get in that market space — completely re-plan to find out what the true opportunity really is. It is insanity to insist that people actually meet their plan as it was originally written.

This doesn’t mean you compromise your objectives. The idea is that I want to keep on trying to meet my objectives, but how I meet them must change as the plan unfolds. That’s basically what led to all the work that Wharton has done in the last few years on discovery driven planning. It’s a way of thinking about planning that says, “I’m going to make small investments. If I’m wrong early, I can fail fast, fail cheap and move on. But as I find out what the true opportunity is, I can aggressively invest in what this opportunity is.”

Knowledge at Wharton: Could you give an example of a company that has used this discovery-driven planning process to take its business to the next level?

MacMillan: One company that has done the most in this area is Air Products. What they have been able to do is use discovery-driven planning to unfold completely different businesses from the ones that they were in. Air Products makes things like carbon dioxide and oxygen and nitrogen. It is a very old-line company. Using discovery-driven planning, they have been able to move aggressively into, for instance, the service sector. Once they recognized that they were able to deliver reliably and predictably in the face of uncertain demand, they developed a set of skills that allowed them to enter the service business where the return on investment and return on assets are far higher than putting a huge plant in place.

Knowledge at Wharton: Professor MacMillan, thanks so much.

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How to launch a new business: Three approaches that work

COVID-19 and its ongoing repercussions have forced business leaders to reevaluate their priorities and strategies. One area where businesses across all regions have accelerated their commitments is around building new businesses. Leading growth businesses in particular have made this strategy a top priority, according to recent McKinsey research .

About the authors

This article was a collaborative effort by Ralf Dreischmeier , Philipp Hillenbrand , Jerome Königsfeld , Ari Libarikian , and Lukas Salomon, representing views from Leap by McKinsey, McKinsey’s business-building practice.

Yet despite the growing enthusiasm for business building, incumbents with good ideas, strong commitments, and big ambitions will frequently run headlong into a big question: How do we actually go about building a business? Getting the answer to this question right is crucial because it shapes the entire operating model of the business-building venture, with significant implications in terms of budget, organization, and strategic direction.

A leading industrial company learned this at a cost. When executives wanted to optimize operations in their factories, they believed setting up a fully independent start-up dedicated to developing new factory concepts was the only way to make it happen. Despite millions of dollars of investment, however, it didn’t work. The start-up struggled to access data and insights, failed to fully grasp the challenges of the core business, and did not attain sufficient support in the parent organization to test and implement changes. This example supports our research, which shows that fewer than a quarter of businesses launched ten years ago are viable large-scale enterprises today .

Figuring out the right approach to business building is especially important now as new opportunities for innovation surface. Prompted by the pandemic, new business-building archetypes have emerged, such as remote service provision, digital retail, and collaboration platforms.

As is true for many complex undertakings, there is no single right approach for launching a new business successfully. In addition, certain strategies will be important no matter which approach a company takes. Joint ventures and alliances, for example, can help to reach scale and enter new markets, and working with partners in ecosystems that, in some cases, include erstwhile competitors can expand offerings, access capabilities, and accelerate scale.

After analyzing more than 200 corporate business builds that we have supported, we have identified three major approaches that have proven successful. While other approaches can certainly work, the three we explore in this article have an established track record and clear conditions for success. The characteristics of each are unique, and so, too, are the criteria and conditions for success (Exhibit 1).

Would you like to learn more about Leap , our business-building practice?

1. internal vc-like incubator.

In this approach, incumbents develop a broad portfolio of ideas, with the goal of producing a few winners that can be successfully commercialized. Teams within the parent organization develop concepts for new businesses and pitch them to a dedicated venture-capital-style board comprising internal and external experts, who select the most promising ones. Successful teams receive milestone-based funding and resources to validate core assumptions and develop a minimum viable product (MVP)—a crucial governance necessity no matter what approach a business chooses (Exhibit 2).

The business has to be vigilant to ensure that the start-up culture “sticks” and that the legacy corporate culture doesn’t slowly start to take over. One way to do that is to assign an experienced business-building coach to each team to build up and nurture an agile test-and-learn culture.

Establishing an incubation approach is particularly suitable for incumbents that have a clear overall sense of the future direction of their business and sector, as well as a strong pipeline of promising early-stage ideas. They may, however, lack initial certainty on what the “winning concepts” will be and how they should be set up for the long term—as an internal division or an external spinout, for example. In our experience, the internal incubation approach works best when the new business is expected to focus on the parent’s core business.

A leading consumer food company achieved great success with this internal incubation approach. After a successful restructuring program, the company’s CEO and board first set a clear vision and ambition that new ventures should primarily benefit the core business and enable significant improvements in the top and bottom lines. Management then invited employees to form small teams that included a team lead and a management sponsor, such as the division head.

Over the course of six weeks, these teams then independently developed more than 100 ideas for new businesses aligned with the overall strategy. All teams scoped out MVPs and pitched their concepts to a newly created internal venture-capital (VC) board that included senior managers, external venture capitalists and technologists, sector experts, and strategic customers.

The VC board then provided initial funding to ten concepts that covered a wide range of applications, including IoT devices, process automation, data platforms, and resourcing marketplaces. Key decision criteria were resources required, path to scale, time to impact, expected overall P&L impact, and unique advantages of the parent company that could be leveraged to build the new businesses. Each initiative was assigned a delivery lead, an experienced business-building coach who helped employees to identify and de-risk the core assumptions first .

Over the course of the next six to ten weeks, these teams built out their MVPs to test core assumptions, such as market demand, required investment, and potential to scale. Those that were successful then approached the VC board and business-unit leadership for additional resources to scale the MVP. Within 16 months, the program to incubate the new businesses became self-funding.

Key success factors

  • Adopt a true VC mindset, and kill ideas without clear potential early on in order to cut losses and strengthen the organization’s focus and resources on concepts with high potential.
  • Include external experts on your VC board to increase objectivity and add important new perspectives.
  • Match venture teams with experienced delivery leads to provide crucial coaching and skill building to test and adapt quickly.

2. Scale-up factory

Frequently, an incumbent organization already has a strong pipeline of new-product and -business concepts that have been validated with first customers and partners. But because it lacks the specialized resources, talent, and expertise required to quickly and successfully scale an entirely new business, promising ideas wither.

A scale-up-factory approach can help address these issues. In this model, the parent sets up a fully owned “factory” that is exclusively dedicated to rapidly scaling promising concepts from the parent’s R&D pipeline into independent businesses. Typically, with this approach, the parent is the first and largest customer of the new businesses. In return, the factory’s new businesses can leverage the parent’s brand, reputation, and customer network. Importantly, providing employees with equity gives them “skin in the game” and helps attract and retain the best digital talent from start-ups and tech firms.

Despite a strong R&D pipeline, new ideas at a leading global energy player frequently did not reach sufficient scale to generate meaningful new revenue streams. To change this, the company used the scale-up-factory approach to address a key business goal: build and scale disruptive technologies and business models from the internal R&D into rapidly growing and revenue-generating businesses.

The new scale-up factory is located in a separate office and staffed with a dedicated team, most of whom were hired to meet the need for specialized skills and a “start-up mindset.” The new company is governed by its own leadership and a dedicated, internal board of directors, rather than by business-unit leaders. While senior group leaders dedicate significant time to strategic decision making and steering toward targets and milestones, they do not get involved in the scale-up factory’s day-to-day decision making.

After two years, the businesses developed by the scale-up factory have scaled to more than 100 employees and have already become a significant revenue-growth motor for the parent company.

  • A strong pipeline of “potential blockbuster” ideas within the parent company that have been validated and deemed commercially viable
  • Clear funding and governance to establish accountability for each project that has business-unit and factory representation, remove any ambiguity in approvals and funding (such as joint signatures between factory and business unit), and align up front on milestones for the release of further funding
  • Strong learning and pattern-recognition processes —the more scale-ups the factory executes, and the better team members become at collecting and codifying learnings, the more efficient the factory’s processes will become (a key insight from our latest research )

Why business building is the new priority for growth

Why business building is the new priority for growth

3. ‘clean slate’ business building.

In some cases, executives have identified a big, promising idea for a new business well beyond their organization’s core focus, such as leveraging a disruptive new technology or entering a new industry. In this case, a clean-slate approach works best, with the new business typically fully owned by the incumbent (or jointly owned with external investors) and all talent hired externally.

Similar to the scale-up factory, the new start-up enjoys organizational independence but has greater entrepreneurial latitude. Speed is more important than process perfection in areas such as HR, IT, and procurement. The new business develops its own tech stack, for example, and explores different business models, even working with traditional competitors. It has different compensation and hiring models than the parent company, as well as its own R&D and insights capability to aggressively test completely new markets. Incumbents that have been successful in driving growth via clean-slate business building often start to shift to adapting principles of the scale-up-factory approach described in the previous section.

“Acqui-hiring” talent (that is, hiring an entire team or acquiring a company to access its talent) can be used to turbocharge business builds in any of the three approaches outlined in this article, but it is particularly suitable for accelerating clean-slate builds when internal capabilities are limited. Acqui-hires provide incumbents with immediate access to a well-integrated team with relevant capabilities who can hit the ground running.

Acqui-hiring can work only if the new venture has a strong culture that can quickly and successfully integrate the acqui-hired team. Clear leadership communication and strong alignment of incentives—such as equity awards distributed to all members of the business-building team—are critical to bringing the new team on board and avoiding potential resentment from members from the incumbent organization.

Using a clean-slate approach enabled one of the world’s leading engineering companies to quickly build a highly innovative IoT platform to sell software through an app store. Initial testing had validated the concept, which also had strong support from top management. Given the need to move quickly and lacking the right talent internally, the company set up a new start-up with strong financial backing, a separate office several hundred miles away from parent-company headquarters, and a leadership team hired from leading technology players.

Senior executives from the parent organization narrowed down the catalog of more than 1,000 rules, regulations, and governance processes that new divisions were typically required to implement to only about 50 that were essential. To establish the new business’s neutrality, the company set up a new industry alliance and collaborated with external partners—some of them direct competitors of the parent company—from day one.

To further accelerate this process, the company decided against gradually hiring developers or retraining staff. Instead, it acqui-hired a full development team of more than 30 people from a major software producer. This approach enabled the building of a highly complex digital solution and a thriving ecosystem with dozens of partners at record speed: first sales were generated less than 15 months after the acqui-hire had been completed.

  • Strong focus on culture through strong investment in regular team-building activities that are crucial to integrate teams and unite them behind a common goal
  • Foundations for an ecosystem of partners built early on by engaging with external partners—even competitors—as soon as the new business is set up, so that the market perceives it as a neutral player; then build out a large-scale ecosystem over time
  • A start-up CEO fully committed to the new venture, through incentives (equity, bonus structure, and so on) that are fully tied to the start-up’s fortunes and do not include a “safety net” in the form of guaranteed continued employment with the parent

Business building is increasingly a core strategic pillar for companies operating in a digital world. Selecting the approach that is right for any given business, based on an understanding of the necessary trade-offs, conditions, and criteria for success, is one of the most important decisions incumbents need to make, as it can unlock the opportunity for rapid growth.

Ralf Dreischmeier is a senior partner in McKinsey’s London office; Philipp Hillenbrand is a partner in the Berlin office; Jerome Königsfeld is an associate partner in the Cologne office; and Ari Libarikian is a senior partner in the New York office, where  Lukas Salomon  is a consultant.

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Derisking corporate business launches: Five steps to overcome the most common pitfalls

Derisking corporate business launches: Five steps to overcome the most common pitfalls

Innovating from necessity: The business-building imperative in the current crisis

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Liquid Capital

Developing a business plan for your new venture

Do you have an idea to evolve your business or maybe even starting something brand new? Turning your vision into a reality requires developing a business plan. Here’s how to get started.

developing a business plan

Many people are waiting for all the stars to align before taking the next leap in their business or starting an entirely  new company. Because of that hesitation, they never get around to fulfilling their dreams. But by getting rolling on developing your business plan, you can turn your dream into a reality faster. 

In 2022, industries will continue to shift in new ways, and now may be the perfect time to take your project to the next level. To get started, it’s important to know what is involved in venturing into new territory or starting a business, and that’s where a business plan comes in. 

Why is developing a business plan so important?

A business plan is a formal document that provides the roadmap for your company. It can help you navigate through tough decisions and can help you manage any challenges that may come your way. It will also help you stay focused on your end goal as you grow your business. And if you are starting a completely new venture, it’s essential to have one in place before applying for funding or securing partners. 

To create a great business plan — whether for your startup, scaling business or mature enterprise — you’ll want to start with these steps:

Step One: Define your business goals

The first step in creating your business plan is determining the direction of your business (if you’re evolving into new territory) or what kind of company you want to start — along with your overall goals. For example, will you run a physical store, or do you prefer an online business? Do you want to sell a specific product or focus on services? Maybe you already have a hobby that you want to turn into a business, or you have an idea of an innovation you can bring to the market?

Once you define your ultimate goals, you’ll be able to start thinking about how you want to achieve those goals.

Step Two: Evaluate your business skills and knowledge

Many new business owners find it helpful to take classes in business to better grasp the intricacies of running a business. Online universities offer convenient solutions for those seeking to learn more about leadership, strategy, operations and general management.

If there are some areas of running a business that you aren’t well-versed in, you’ll want to leverage outside help or software that fills in the gaps. For example, if you’ve never managed payroll, software or apps can help. Many of these services provide same-day direct deposit, automation for payroll and payroll taxes, and time tracking.

Tired of waiting 90 days for payment? Try this instead.

Step Three: Define the structure of your business

Next, you’ll want to clearly define the best business structure for your venture. Incorporating rather than operating as a sole proprietorship does have its benefits. For example, if you form an LLC, you could be eligible for certain tax incentives, tax credits and business incentives. 

You will need a clear idea of what products you will sell at the time of the company launch and how your offering will evolve with time to keep up with industry trends and client demands. You will also need to know if you will be selling directly to consumers, acting as a wholesaler, or offering a B2B service for other businesses.

Step Four: Get your financials in order

An important part of creating a business plan is planning out the financing aspect. What cost structure will allow you to create your product or service and have it reach your final consumer? This would include all the physical production costs, supply chain, marketing, and personnel costs for your company structure.

Once you have all of the above information, you can bring it all together. Make financial projections of what your sales and profits would look like over the first few years and what startup costs and cash flow you need to finance to start the business.

Access to funding will be crucial in getting your venture up and running. Invoice factoring can help build working capital. 

Step Five: Research the market

The final step in creating a business plan is to research the competition . This will help you to avoid starting an unnecessary or unprofitable venture. Think of ways that make your company unique from other similar companies who are also competing for clients in this space. Answering the following questions will help guide your research:

  • What is different about your products and services that only you can provide?
  • Based on your product, costs, customer target, and competition, what would be the optimal price points for each of your products or services? 
  • How are you going to reach your consumers and let them know about your products? 

There are many resources online today that can help you establish a solid business plan. And once you have it on paper, you will see that it makes your vision come to life and gives you a base document that you can work with to approach investors or potential stakeholders in your business.

Up next:  Create a smart digital marketing plan on a budget

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a new venture's business plan is important

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1.1: Chapter 1 – Developing a Business Plan

  • Last updated
  • Save as PDF
  • Page ID 21274

  • Lee A. Swanson
  • University of Saskatchewan

Learning Objectives

After completing this chapter, you will be able to

  • Describe the purposes for business planning
  • Describe common business planning principles
  • Explain common business plan development guidelines and tools
  • List and explain the elements of the business plan development process
  • Explain the purposes of each element of the business plan development process
  • Explain how applying the business plan development process can aid in developing a business plan that will meet entrepreneurs’ goals

This chapter describes the purposes, principles, and the general concepts and tools for business planning, and the process for developing a business plan.

Purposes for Developing Business Plans

Business plans are developed for both internal and external purposes. Internally, entrepreneurs develop business plans to help put the pieces of their business together. Externally, the most common purpose is to raise capital.

Internal Purposes

As the road map for a business’s development, the business plan

  • Defines the vision for the company
  • Establishes the company’s strategy
  • Describes how the strategy will be implemented
  • Provides a framework for analysis of key issues
  • Provides a plan for the development of the business
  • Helps the entrepreneur develop and measure critical success factors
  • Helps the entrepreneur to be realistic and test theories

External Purposes

The business plan provides the most complete source of information for valuation of the business. Thus, it is often the main method of describing a company to external audiences such as potential sources for financing and key personnel being recruited. It should assist outside parties to understand the current status of the company, its opportunities, and its needs for resources such as capital and personnel.

Business Plan Development Principles

Hindle and Mainprize (2006) suggested that business plan writers must strive to effectively communicate their expectations about the nature of an uncertain future and to project credibility. The liabilities of newness make communicating the expected future of new ventures much more difficult than for existing businesses. Consequently, business plan writers should adhere to five specific communication principles .

First, business plans must be written to meet the expectations of targeted readers in terms of what they need to know to support the proposed business. They should also lay out the milestones that investors or other targeted readers need to know. Finally, writers must clearly outline the opportunity , the context within the proposed venture will operate (internal and external environment), and the business model (Hindle & Mainprize, 2006).

There are also five business plan credibility principles that writers should consider. Business plan writers should build and establish their credibility by highlighting important and relevant information about the venture team . Writers need to elaborate on the plans they outline in their document so that targeted readers have the information they need to assess the plan’s credibility. To build and establish credibility, they must integrate scenarios to show that the entrepreneur has made realistic assumptions and has effectively anticipated what the future holds for their proposed venture. Writers need to provide comprehensive and realistic financial links between all relevant components of the plan. Finally, they must outline the deal , or the value that targeted readers should expect to derive from their involvement with the venture (Hindle & Mainprize, 2006).

General Guidelines for Developing Business Plans

Many businesses must have a business plan to achieve their goals. Using a standard format helps the reader understand that the you have thought everything through, and that the returns justify the risk. The following are some basic guidelines for business plan development.

As You Write Your Business Plan

1. If appropriate, include nice, catchy, professional graphics on your title page to make it appealing to targeted readers, but don’t go overboard.

2. Bind your document so readers can go through it easily without it falling apart. You might use a three-ring binder, coil binding, or a similar method. Make sure the binding method you use does not obscure the information next to where it is bound.

3. Make certain all of your pages are ordered and numbered correctly.

4. The usual business plan convention is to number all major sections and subsections within your plan using the format as follows:

1. First main heading

1.1 First subheading under the first main heading

1.1.1. First sub-subheading under the first subheading

2. Second main heading

2.1 First subheading under the second main heading

Use the styles and references features in Word to automatically number and format your section titles and to generate your table of contents. Be sure that the last thing you do before printing your document is update your automatic numbering and automatically generated tables. If you fail to do this, your numbering may be incorrect.

5. Prior to submitting your plan, be 100% certain each of the following requirements are met:

  • Everything must be completely integrated. The written part must say exactly the same thing as the financial part.
  • All financial statements must be completely linked and valid. Make sure all of your balance sheets balance.
  • Everything must be correct. There should be NO spelling, grammar, sentence structure, referencing, or calculation errors.
  • Your document must be well organized and formatted. The layout you choose should make the document easy to read and comprehend. All of your diagrams, charts, statements, and other additions should be easy to find and be located in the parts of the plan best suited to them.
  • In some cases it can strengthen your business plan to show some information in both text and table or figure formats. You should avoid unnecessary repetition , however, as it is usually unnecessary—and even damaging—to state the same thing more than once.
  • You should include all the information necessary for readers to understand everything in your document.
  • The terms you use in your plan should be clear and consistent. For example, the following statement in a business plan would leave a reader completely confused: “There is a shortage of 100,000 units with competitors currently producing 25,000. We can help fill this huge gap in demand with our capacity to produce 5,000 units.”

Why is a business plan important? Five reasons why you need one

Table of Contents

1) Plan for viability and growth

2) setting milestones and objectives, 3) supporting critical decisions and avoiding mistakes, 4) securing investors and financing, 5) minimise risk, making informed business decisions.

Why is a business plan important? A business plan is like a roadmap: you can start driving without one, but you’ll be more likely to get lost on the way.

To save yourself driving in circles, prepare a business plan from day one. This will help you focus on the details of your venture and give you the chance to do important groundwork before you begin trading.  

Typically, a business plan will include detailed insights such as market analysis, competitor research, audience profiles, marketing goals, logistics and operations plans, cash flow information, and an overall strategy on how they will grow. 

This guide will demonstrate why a business plan is important, including:

  • Planning for viability and growth
  • Setting milestones and objectives
  • Supporting decision making and avoiding mistakes
  • Securing finance and investors
  • Minimising risk

If you have a business idea brewing or want to turn your passion, hobby, or side project into a full-time job, first do your research to understand if your business will be viable. A business plan can help you confirm that your business idea is sustainable in the current market.

To do this, carry out market research. Considering answers to the following questions will start to give you a more detailed picture of where your business belongs in the sector:

  • Who are your customers? 
  • What do you offer them? 
  • What problems are you solving for them?
  • Why would they buy from you over your competitors?
  • Who are your competitors? What are you doing differently? Are you cheaper?
  • Who dominates the industry? How can you improve on what is already out there?

Answering these questions will highlight gaps in the market that your business can occupy and give your company a better chance at survival long-term.

You may have in mind some future milestones that you would like to hit. In your business plan, it’s important to plot some top-level goals, then plan what objectives will get you there.

As an example, for an artisan craft business, one goal might be to sell 1,000 handmade products in the first year. Setting an objective such as ‘ Use social media advertising to drive half of the sales ’ will help you focus on the activity you need to achieve the goal. 

Or if you offer professional services, like marketing support or a financial advisor, you might want to grow your client base by 50%. In order to grow this number consistently, you must also keep your existing clients on board. Therefore, an objective might be to improve customer relations to retain clients for longer. Then you can begin to research strategies to support your overall business goals.

By checking in regularly on your business plan, you will be able to track your progress toward important growth milestones and change tactics as you learn more about your customers. By having your plan in writing, you are setting yourself up to grow at a faster rate than businesses that don’t create a business plan .

Your aims and objectives will keep you accountable when making decisions for your business. As you grow, you will encounter chances to invest back into the business. Consulting the long-term vision you set for yourself will help you separate the ‘needs’ from the ‘wants’. 

Including financial information such as cash flow and forecast reports in your business plan will make it easier to make informed decisions when it comes to major spending, growth or expansion. You will be able to know with confidence whether an idea aligns with what you have set out to achieve.

Consulting a detailed plan will also help you avoid common pitfalls of start-ups. You will have already done your research and spotted any gaps in your knowledge or strategy before it becomes an issue. Some mistakes that unprepared businesses make include:

  • Not enough demand for what you’re selling
  • Cash flow issues due to poor forecasting .
  • Too much competition in the marketplace, when you don’t have a marked difference to them.
  • Setting your price mark too high or too low for the industry.

Business plans are typically a requirement if you are looking to secure finance. Whether it comes from a bank, an outside venture capital firm, or a friend who wants to go into business with you. They will want to see the forecasts that prove your business is viable in the long run. 

Also, if you ever consider selling your business in the future, a business plan will be needed to pitch for a higher valuation.

Another exercise to include in your business plan is a SWOT analysis. This is a process of identifying Strengths, Weaknesses, Opportunities and Threats that face your business. By doing this activity you are reducing risk by highlighting areas that may need contingency plans, and a thorough SWOT analysis will allow you to plan in advance for potential difficulties.

With all the data you’ve pulled together on your market, operational plans, finances and sales projections, you will have reduced any potential risks that arise from being uninformed. In doing your research, you can spot potential issues before they arise in real life, and create contingency plans as a safety net. 

As the saying goes “if you fail to prepare, you prepare to fail”. Revisiting your business plan regularly will help you avoid as much risk as possible when you start trading. It will also keep your mind focused on the bigger picture instead of the daily trials and tribulations of running a  business.

Now that you are equipped with answers to ‘why is a business plan important’, you can start preparing a business plan to set your new venture up for success. 

When you’re starting a business, it’s important to keep on top of your financial admin from day one. Countingup offers a business current account and an app with built-in accounting software, that will save you time and money when it comes to your bookkeeping. Find out more here .

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  • 15.1 Launching Your Venture
  • Introduction
  • 1.1 Entrepreneurship Today
  • 1.2 Entrepreneurial Vision and Goals
  • 1.3 The Entrepreneurial Mindset
  • Review Questions
  • Discussion Questions
  • Case Questions
  • Suggested Resources
  • 2.1 Overview of the Entrepreneurial Journey
  • 2.2 The Process of Becoming an Entrepreneur
  • 2.3 Entrepreneurial Pathways
  • 2.4 Frameworks to Inform Your Entrepreneurial Path
  • 3.1 Ethical and Legal Issues in Entrepreneurship
  • 3.2 Corporate Social Responsibility and Social Entrepreneurship
  • 3.3 Developing a Workplace Culture of Ethical Excellence and Accountability
  • 4.1 Tools for Creativity and Innovation
  • 4.2 Creativity, Innovation, and Invention: How They Differ
  • 4.3 Developing Ideas, Innovations, and Inventions
  • 5.1 Entrepreneurial Opportunity
  • 5.2 Researching Potential Business Opportunities
  • 5.3 Competitive Analysis
  • 6.1 Problem Solving to Find Entrepreneurial Solutions
  • 6.2 Creative Problem-Solving Process
  • 6.3 Design Thinking
  • 6.4 Lean Processes
  • 7.1 Clarifying Your Vision, Mission, and Goals
  • 7.2 Sharing Your Entrepreneurial Story
  • 7.3 Developing Pitches for Various Audiences and Goals
  • 7.4 Protecting Your Idea and Polishing the Pitch through Feedback
  • 7.5 Reality Check: Contests and Competitions
  • 8.1 Entrepreneurial Marketing and the Marketing Mix
  • 8.2 Market Research, Market Opportunity Recognition, and Target Market
  • 8.3 Marketing Techniques and Tools for Entrepreneurs
  • 8.4 Entrepreneurial Branding
  • 8.5 Marketing Strategy and the Marketing Plan
  • 8.6 Sales and Customer Service
  • 9.1 Overview of Entrepreneurial Finance and Accounting Strategies
  • 9.2 Special Funding Strategies
  • 9.3 Accounting Basics for Entrepreneurs
  • 9.4 Developing Startup Financial Statements and Projections
  • 10.1 Launching the Imperfect Business: Lean Startup
  • 10.2 Why Early Failure Can Lead to Success Later
  • 10.3 The Challenging Truth about Business Ownership
  • 10.4 Managing, Following, and Adjusting the Initial Plan
  • 10.5 Growth: Signs, Pains, and Cautions
  • 11.1 Avoiding the “Field of Dreams” Approach
  • 11.2 Designing the Business Model
  • 11.3 Conducting a Feasibility Analysis
  • 11.4 The Business Plan
  • 12.1 Building and Connecting to Networks
  • 12.2 Building the Entrepreneurial Dream Team
  • 12.3 Designing a Startup Operational Plan
  • 13.1 Business Structures: Overview of Legal and Tax Considerations
  • 13.2 Corporations
  • 13.3 Partnerships and Joint Ventures
  • 13.4 Limited Liability Companies
  • 13.5 Sole Proprietorships
  • 13.6 Additional Considerations: Capital Acquisition, Business Domicile, and Technology
  • 13.7 Mitigating and Managing Risks
  • 14.1 Types of Resources
  • 14.2 Using the PEST Framework to Assess Resource Needs
  • 14.3 Managing Resources over the Venture Life Cycle
  • 15.2 Making Difficult Business Decisions in Response to Challenges
  • 15.3 Seeking Help or Support
  • 15.4 Now What? Serving as a Mentor, Consultant, or Champion
  • 15.5 Reflections: Documenting the Journey
  • A | Suggested Resources

Learning Objectives

By the end of this section, you will be able to:

  • Explain the importance of creating and discussing the vision statement
  • Determine the documents necessary for managing risks
  • Describe company culture and the purpose of a code of conduct
  • Summarize how to outline and schedule the operational steps of the launch

The big day has arrived. Your opportunity recognition process noted that your idea solves a significant problem or need, you double-checked that the target market is large enough for potential profitability, you have a method to reach this target market, you have a passion to start this company, and you found resources to support the start-up. Knowing that you analyzed and addressed these topics, you now need to consider some of the more sensitive topics regarding the agreements within your team. Many entrepreneurs overlook the issues discussed here or act on them in a generic manner instead of fitting them to the specific needs of the venture. This lack of due diligence can be detrimental to the success of the business. The advice presented here can help you avoid those same mistakes.

To protect the interests of all parties involved at launch, the team should develop several important documents, such as a founders’ agreement, nondisclosure and noncompete forms, and a code of conduct. Before these are drafted, the team should ensure the venture’s vision statement is agreed upon. (See Entrepreneurial Vision and Goals for a discussion around creating a vision statement.) The entrepreneurship team needs to be in complete agreement on the vision of the venture before they can successfully create the founders’ agreement. If some team members have an interest in creating a lifestyle business (a venture that provides an income that replaces other types of employment), while other team members want to harvest the venture with significant returns, there is a clash between these expectations. An angel investor will also have a strong opinion on the vision for the venture.

Founder’s Agreement, Nondisclosure Agreement, and Noncompete Agreement

Honest and open discussions between the entrepreneurial team members, including your angel investor if an angel investor is part of your initial funding, must take place before opening the venture. These frank discussions need to include a founders’ agreement as well as the identified vision for the venture. The founders’ agreement should describe how individual contributions are valued and fit into the compensation plan and should consider and answer these questions:

  • Will the entrepreneurial team members receive a monthly compensation?
  • Is there a vesting plan with defined timelines aligned with equity percentages?
  • What happens if a team member decides to leave the venture before an exit event? How will that team member be compensated, if at all?

Discussing the entrepreneurial team members’ expectations avoids the problem of an entrepreneurial team member expecting a large equity stake in the company for a short-term commitment to the venture, and other misguided expectations. Such problems can be avoided by addressing the following questions:

  • What activities and responsibilities are expected from each team member, and what is the process or action when individual overstep their authority?
  • Is there an evaluation period during which the team members discuss each other’s performance? If so, how is that discussion managed, and is there a formal process?
  • What happens if a team member fails to deliver on expected actions, or if an unexpected life event occurs?

The founders’ agreement should also outline contingency plans if the business does not continue. The following questions help define those next steps and need to be answered prior to opening the venture:

  • If the venture is unsuccessful, how will the dissolution of the venture be conducted?
  • What happens to the assets, and how are the liabilities paid?
  • How is the decision made to liquidate the venture?
  • What happens to the originally identified opportunity? Does a team member have access to that idea, but with a different team, or implemented using a different business model?

Once the venture opens, discussing these topics becomes more complicated because the entrepreneurial team is immersed in various start-up activities, and new information affects their thoughts on these issues. Along with these topics, the founders’ agreement should also state the legal form of ownership, division of ownership (this refers to the division of equity at either the next round of financing, or harvesting of the company), as well as the buyout, or buyback clause. (See Entrepreneurial Journey and Pathways for a discussion on the life cycle stages of a venture, including end stages of harvesting, transition, and reincarnation of the business.)

The buyback clause addresses the situations in which a team member exits the venture prior to the next financing round or harvesting due to internal disputes with team members, illness, death, or other circumstances, clearly stating compensation and profit distribution (with consideration of what is reinvested into the venture). Discussing these topics provides agreement between all team members about how to address these types of situations. The buyback clause should also include a dispute resolution process with agreement on how the dispute solution is implemented. Identifying exactly how these items are handled within the founders’ agreement prevents future conflicts and even legal disputes.

If the entrepreneurship team includes an angel investor, the angel investor typically has the final say in these questions. In the best possible scenario, the angel investor has experience creating a founders’ agreement and can provide valuable insights into working through this document. One common approach to creating this document, given the angel investor’s available time, is for the entrepreneurship team to discuss and agree on the final document, then have the angel investor review the document for final approval. Making Difficult Business Decisions in Response to Challenges will help in finalizing your founders’ agreement.

After completing the formal vision statement and the founders’ agreement, you might want to have an attorney evaluate the documents. This checkpoint can identify gaps or decisions that were not stated clearly. After receiving the examined documents back, the team should once again review the documents for agreement. If everyone is satisfied with the documents, each entrepreneurship team member should sign the document and receive a copy. If, later, the entrepreneurship team decides a change needs to be made to either the vision statement or the founders’ agreement, an addendum can be created, again with all parties agreeing to any changes.

Two other formal documents your team might want to consider include a nondisclosure agreement and a noncompete agreement. These documents can be applied to all employees, including the startup team, with consideration of extending to other contributors such as contractual personnel. A nondisclosure agreement agrees to refrain from disclosing information about the venture. Topics that might be included in this document include trade secrets, key accounts, or any other information of high value to the venture or potentially useful to a competitor. A noncompete agreement states that the person signing the agreement will not work for a competing organization while working for the venture, and generally for a set length of time after leaving the venture. Often, this time period is one year, but it can be longer depending on the know-how or intellectual property the exiting team member has.

Company Culture and Code of Conduct

In conjunction with these formal documents, the founding team should determine the culture they would like to build for their venture. Ideally, the organization’s company culture is made up of the behaviors and beliefs that support the success of the organization. For example, when you walk into a business, is there a bustle of noise and activity, or is the business calm and restrained? This impression results from the organization’s culture. We could compare the difference between walking into a high-end jewelry store and walking into a fast food restaurant. Both businesses have distinctly different cultures. If the venture is highly dynamic with fast-paced decisions and constant change, then the culture should support this type of venture. Perhaps the team wants to create a work hard, play hard culture. In that case, standards that support ad hoc team creation for impromptu discussions should be encouraged, rather than setting up a bureaucratic culture that requires approval of all meetings and deliberation of decisions prior to action. Many tech companies support a work hard, play hard culture. This culture is reinforced with open office spaces that provide opportunities to collaborate with colleagues. Or perhaps ping pong tables and kitchens are provided to encourage interaction. Even the hours of operation contribute to culture creation by either encouraging employees to set their own hours or restricting work hours through regulated entry. In contrast, a more bureaucratically structured environment may fit a venture whose success relies upon compliance with external regulations and the use of highly sensitive or private information. An example of a bureaucratic culture aligns with many financial institutions. The culture within a bank conveys security of our deposited funds; we want a bank to have processes and systems in place that reinforce that we can trust the bank with our finances.

The culture-defining process should include the entrepreneurship team’s creation of a code of conduct . Some organizations develop a code of conduct that includes guiding principles, while other organizations create detailed descriptions of what is acceptable and what isn’t acceptable. Your venture’s code of conduct should fit with your venture’s vision, the culture desired, and the entrepreneurship team’s values. Codes of conduct should be created as documents that include a sensitivity to people within the company as well as the greater community. A code of conduct addresses the values that the organization supports, as well as ethical considerations. The purpose of a code of conduct is to help guide employee actions to align with the desired behavior. Including uniquely specific examples that align with the specific venture, can further communicate the desired behaviors. There are many varieties of codes of conduct; the main point is to create a code that supports the values and behaviors that you want to advance throughout your organization. Figure 15.2 and Figure 15.3 show two approaches to developing a code of conduct that fits the company’s culture and vision. The first example might be used by an advocacy-based venture that desires a principle-based approach to guiding employee behaviors through a code of conduct that provides general guidelines, rather than a more rule-based approach as presented in the second example. These two examples highlight the importance of creating a code of conduct that fits the beliefs and culture that you want to encourage within your venture.

Earlier, we discussed the importance of the lead entrepreneur taking the initiative to discover the investor’s business knowledge and learning about the investor’s previous experience in funding an entrepreneurial venture. The code of conduct is another area that entrepreneurial teams frequently skip over by accepting a generic code of conduct rather than recognizing that there are a multitude of topics, phrases, and principles that should be uniquely designed to fit the venture. These two examples demonstrate the vastly different topics addressed within a code of conduct as evidence for why your code of conduct must fit your intentions for how you will conduct business and support the success of your venture.

These preparatory documents should be personalized to align with the entrepreneurial team and desired behaviors that support the success of the venture. Although standard language and forms addressing these topics are available online, these generic models aren’t intended to meet your unique venture’s needs or the entrepreneurial team’s needs. Taking the time to discuss and prepare these documents pays off in well-crafted documents and aligns the entrepreneurship teams’ vision, goals, and dreams for their venture.

Are You Ready?

Google ’s code of conduct.

Review Google’s code of conduct as you think about developing your own code of conduct. What do you like about Google’s code of conduct? What would you change? How does this example help you in creating a code of conduct for your venture?

Operational Steps to Launch

The next action is outlining the operational steps in the venture creation process. A good approach is to create a chart that identifies how you should proceed. The goal in creating this chart is to recognize what actions need to be taken first. For example, if you need a convection oven for your business, what is the timeline between ordering and receiving the oven? If you need ten employees to manually prepare and package your product, how long will it take to interview and hire each person? According to Glassdoor, the hiring process took 23 days in 2014 and appears to be lengthening in time as organizations become more aware of the importance of hiring the right person. 2 What about training? Will your employees need training on your product or processes before starting the venture? These necessary outcomes need to be identified and then tracked backwards from the desired start date to include the preparatory actions that support the success of the business. You’ve probably heard the phrase that timing is everything. Not only do entrepreneurs need to be concerned about finding the right time to start the venture, they also need the right timing to orchestrate the start-up of the venture.

Below is a sample Gantt chart , a method to track a list of tasks or activities aligned with time intervals. You can use this tool to help identify and schedule the operational steps that need to be completed to launch the venture. One approach to creating a Gantt chart is for each team member to independently create a list of operational activities or tasks required to start the venture that fall under their area of involvement. Then the team can create a master list of activities to discuss: This helps clarify who is contributing to or owning each task. Next, have all team members create their own Gantt chart based on their task list: That is, the time required for each task should be spelled out, including steps that must happen sequentially (when one task cannot be started until another step is complete). Once again, bring all team members together to create one master Gantt chart. This will help ensure that dependencies from member to member are accounted for in the planning. These contingencies and dependencies need to be identified and accommodated for in the master schedule. For example, in Figure 15.4 , we see that Mike Smith cannot perform system testing until Sam Watson has developed the system modules, and in turn, that task can’t be done until Mike Smith has documented the current systems. After completing the chart, agree on assignments of responsibility to follow through on the activities, based on the timelines from the Gantt chart.

See the Suggested Resources for more information on how to use a Gantt chart to assist in tracking the actions needed to support the start-up of your venture and to organize each action based on your necessary timelines. You might want to reach out to other sources to find examples of how other entrepreneurs worked through their operational start-up steps.

Link to Learning

This TED Talk features Paul Tasner sharing how he found himself changing his career at the age of 66, reinforcing the idea that the world of entrepreneurship is open to all people regardless of age, race, background, health, or geographic location. In this presentation, he references a variety of activities he needed to experience in order to understand the process of starting his venture. Regardless of what we learned in our past experiences, launching a new venture includes new experiences and decisions.

After watching this video, do you have some ideas regarding starting a new venture around the idea of senior entrepreneurs? How could you support this group or build a network that creates a community of support for this large population?

Launch Considerations

Sage advice in launching the new venture is to quickly recognize when you don’t have the answer or information to make the best decisions. In the early stage of launching the venture, the level of uncertainty is high, as is the need for agility and spontaneity. Even identifying the actual moment when the venture becomes a new venture can be difficult to determine. Should the venture be recognized as a new venture after receiving the necessary licenses or tax identification number, or when the first sale occurs, or when funds are first invested, or by some other method?

It is also important to keep in mind the end goal of the venture, often referred to as "begin with the end in mind." For example, many highly successful ventures never earn a dollar in sales. Depending on the entrepreneurial team’s vision and the business model selected, the venture could be highly valuable from a harvest, or sale of the venture, perspective. Frequently, this decision is dictated by the angel investor. These people frequently started their own venture, harvested the venture, and as a result have funds available to invest in other new ventures. In most cases, the angel investor expects to cash out of the venture at some point in the future. These are investors who are not interested in holding a long-term equity position but rather expect to grow the venture into a position where another company buys out the venture. This buyout is also known as the harvesting of the venture and the point at which the angel investor receives a percentage of the harvested dollar sale to cover the equity stake in the new venture. Because of this pattern, entrepreneurs are often advised to “begin with the end in mind” when launching a new venture. If the goal is to sell the venture to another company, we want to identify that company before launching the venture. Of course, at this point, this is only a desire or hope, as you cannot require or expect another company to have an interest in your new venture. But you can design the new venture to align with this end goal by making decisions that support this end goal.

Consider the example of YouTube , a startup with zero dollars in sales but with a harvest price of $1.65 billion in stock from Google . The startup team, former PayPal colleagues, understood that the technology was being developed for video searching and recognized that creating a platform to house video-sharing would be desired by companies such as Google at some point in the future. Consider the tight timeline between 2005 when YouTube began supporting video sharing, and the harvest of YouTube to Google in 2006, 21 months later. This example clearly points to the importance of beginning with the end in mind.

Entrepreneur In Action

A new greeting card concept.

Is there a connection between ship architecture and greeting cards? Most people would quickly say there isn’t any connection between these two disparate ideas. However, Wombi Rose and John Wise studied ship architecture, with Wise moving on to a boat-building start-up in Louisiana when they reconnected and decided to start a new venture. While traveling in Vietnam, the two ship architects came across the paper-cutting process of kirigami, similar to origami, but rather than folding paper, the paper is cut. The two engineers realized that the same design software used in building ships could also be used in creating these three-dimensional paper objects. Despite the declining greeting card industry’s sales, these two entrepreneurs decided to enter the greeting card industry with a new approach to greeting cards. Pop-up kirigami art folds flat until the envelope opens, and a kirigami object pops up. Lovepop , the name of their greeting card line, has grown to 30 employees and $6.7 million in revenue. 3

What evidence is there that Rose and Wise followed the concept of “begin with the end in mind”? If Rose and Wise followed this advice, and you were a part of this team, at what point would you begin seeking a buyer for this company? What milestones might you select for harvesting the company? Consider what actions you would accomplish to increase the sale amount to the maximum amount.

Launching your venture is a unique experience for every entrepreneurial team and for every venture. These novel situations and uncertainties create both challenges and new learning opportunities. Accepting that a multitude of possibilities exists and recognizing the importance of researching and discussing actions are valuable to the success of the team. Angel investors hold a wealth of knowledge, and with an equity stake in the venture, these investors should be included in all discussions. If you have an angel investor on your team, you have an added advantage to tap into the expertise available to support the venture. In conjunction with a well-aligned angel investor, conducting research to explore decisions will improve your venture’s success. Although these decisions might seem difficult, the next section addresses how to approach difficult decisions and the role emotional connections for the venture and its team play in those decisions.

  • 1 Some language adapted from the U.S. Department of State Sexual Harassment Policy: https://www.state.gov/s/ocr/c14800.htm.
  • 2 Glassdoor Team. “How Long Should the Interview Process Take?” June 18, 2015. https://www.glassdoor.com/blog/long-interview-process/
  • 3 Stephanie Schomer. “This Hot Greeting Card Company Uses 3-D Design and Origami to Beat Hallmark. Inc . June, 2017. https://www.inc.com/magazine/201706/stephanie-schomer/lovepop-greeting-card-design-awards-2017.html

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  • Authors: Michael Laverty, Chris Littel
  • Publisher/website: OpenStax
  • Book title: Entrepreneurship
  • Publication date: Jan 16, 2020
  • Location: Houston, Texas
  • Book URL: https://openstax.org/books/entrepreneurship/pages/1-introduction
  • Section URL: https://openstax.org/books/entrepreneurship/pages/15-1-launching-your-venture

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Developing a Business Plan

Developing a Business Plan

An important task in starting a new venture is to develop a business plan. As the phrase suggests, a business plan is a "road map" to guide the future of the business or venture. The elements of the business plan will impact the daily decisions of the business and provide direction for expansion, diversification, and future evaluation of the business.

This publication will assist in drafting your own business plan. It includes a discussion of the makeup of the plan and the information needed to develop a business plan. Business plans are traditionally developed and written by the owner with input from family members and the members of the business team. Business plans are "living" documents that should be reviewed and updated every year or if an opportunity for change presents itself. Reviews reinforce the thoughts and plans of the owner and the business and are a key item in the evaluation process. For an established venture, evaluation determines if the business is in need of change or if it is meeting the expectations of the owners.

Using the Proper Format

The format and appearance of the plan should be as professional as possible to portray your business in a positive manner. When dealing with a lender or possible investor, the plan will be reviewed for accuracy and suggestions for changes to the plan may be offered. The decision to recommend a loan for approval will be largely based on your business plan. Often loan officers will not know a great deal about the proposed venture, but they will know the correct structure of a business plan.

Investors will make their decision based on the plan and the integrity of the owner. For this reason, it is necessary to use a professional format. After loan officers complete their evaluations, the loan committee will further review the business plan and make a decision. The committee members often spend limited time reviewing the document, focusing on the message of the executive summary and financial statements to make their determination. They will refer to other sections of the plan for details and clarification. Because of this, these portions need to be the strongest parts of the plan and based on sound in-depth research and analysis.

Sections of the Business Plan

A business plan should be structured like a book with the title or cover page, followed by a table of contents. Following these two pages, the body of the plan normally appears in this order: executive summary, business mission statement, goals and objectives, background information, organizational matters, marketing plan, and financial plan.

Executive Summary

The executive summary is placed at the front of the business plan, but it should be the last part written. The summary should identify the type of business and describe the proposed business, or changes to the existing business. Research findings and recommendations should be summarized concisely to provide the reader with the information required to make any decisions. The summary outlines the direction and future plans or goals of the business, as well as the methods that will be used to achieve these goals. The summary should include adequate background information to support these recommendations.

The final financial analysis and the assumptions used are also a part of the executive summary. The analysis should show how proposed changes will ensure the sustainability of the current or proposed business. All challenges facing the existing business or proposed venture should be discussed in this section. Identifying such challenges shows the reader that all possibilities have been explored and taken into account during the research process.

Overview, Mission, and Goals and Objectives

This section has three separate portions. It begins with a brief overview that includes a general description of the existing or planned business. The overview is followed by the mission statement of the business. You should try to limit the mission statement to three sentences if possible and include only the key ideas about why the business exists. An example of a mission statement for a produce farm might be: The mission of XYZ Produce is to provide fresh, healthy produce to our customers, and to provide a safe, friendly working environment for our employees. If you have more than three sentences, you should be as concise as possible.

The final portion sets the business's goals and objectives. There are at least two schools of thought about goals and objectives. Goals and objectives should show the reader what the business wishes to accomplish, and the steps needed to obtain the desired results. Conducting a SWOT analysis will assist your team when developing goals and objectives. SWOT in an acronym for Strengths, Weaknesses, Opportunities, and Threats and is covered more in-depth later in the publication. You may want to include marketing topics in the SWOT or conduct two SWOT analyses, one for the entire business and one for the marketing plan.

Goals should follow the acronym DRIVE, which stands for D irectional, R easonable, I nspiring, V isible, and E ventual. The definitions of DRIVE are:

  • Directional: It should guide you to follow your vision.
  • Reasonable: You should be able to reach the goal, and it should be related to your business.
  • Inspiring: Make sure the goal is positive but should challenge the business to grow into the goal.
  • Visible: You and your employees should be able to easily recognize the goal. Goals should be posted where everyone sees them every day.
  • Eventual: The goals should focus on the future and be structured to provide motivation to all to strive towards the goals.

Objectives should follow the acronym SMART, which stands for S pecific, M easurable, A ttainable, R ewarding, and T imed. Objectives are the building blocks to achieve the goals and stand for:

  • Specific: Each objective should focus on one building block to reach the goal.
  • Measurable: You should be able to determine if your progress is going in the right direction.
  • Attainable: You should be able to complete the objective with an appropriate amount of work.
  • Rewarding: Reaching the objective should be something to celebrate and provide positive reinforcement to the business.
  • Timed: You must have a deadline for the objective to be achieved. You do not want to have the objectives linger for too long. Not reaching the objectives delays reaching the goals. Not achieving goals is detrimental to the morale of the business.

Goals and objectives should follow these formats to allow for evaluation of the entire process and provide valuable feedback along the way. The business owner should continually evaluate the outcomes of decisions and practices to determine if the goals or objectives are being met and make modifications when needed.

Background Information

Background information should come from the research conducted during the writing process. This portion should include information regarding the history of the industry, the current state of the industry, and information from reputable sources concerning the future of the industry.

This portion of the business plan requires the most investment of time by the writer, with information gathered from multiple sources to prevent bias or undue optimism. The writer should take all aspects of the industry (past, present, and future) and business into account. If there are concerns or questions about the viability of the industry or business, these must be addressed. In writing this portion of the plan, information may be obtained from your local public library, periodicals, industry personnel, trusted sources on the Internet, and publications such as the Penn State Extension Agricultural Alternatives series . Industry periodicals are another excellent source of up-to-date information. The more varied the sources, the better the evaluation of the industry and the business, and the greater the opportunity to have a viable plan.

The business owner must first choose an appropriate legal structure for the business. The business structure will have an impact on the future, including potential expansion and exit from the business. If the proper legal structure is not chosen, the business may be negatively impacted down the road. Only after the decision is made about the type of business can the detailed planning begin.

Organizational Matters

This section of the plan describes the current or planned business structure, the management team, and risk-management strategies. There are several forms of business structure to choose from, including sole proprietorship, partnership, corporations (subchapter S or subchapter C), cooperative, and limited liability corporation or partnership (LLC or LLP). These business structures are discussed in Agricultural Alternatives: Starting or Diversifying an Agricultural Business .

The type of business structure is an important decision and often requires the advice of an attorney (and an accountant). The business structure should fit the management skills and style(s) of the owner(s) and take into account the risk management needs (both liability and financial) of the business. For example, if there is more than one owner (or multiple investors), a sole proprietorship is not an option because more than one person has invested time and/or money into the business. In this case a partnership, cooperative, corporation, LLC, or LLP would be the proper choice.

Another consideration for the type of business structure is the transfer of the business to the next generation or the dissolution of the business. There are benefits and drawbacks for each type of structure covering the transition of ownership. If the business has a high exposure to risk or liability, then an LLC might be preferred over a partnership or sole proprietorship.

If the business is not a sole proprietorship, the management team should be described in the business plan. The management team should consist of all parties involved in the decisions and activities of the business. The strengths and backgrounds of the management team members should be discussed to highlight the positive aspects of the team. Even if the business is a sole proprietorship, usually more than one person (often a spouse, child, relative, or other trusted person) will have input into the decisions, and so should be included as team members.

Regardless of the business structure, all businesses should also have an external management support team. This external management support team should consist of the business's lawyer, accountant, insurance agent or broker, and possibly a mentor. These external members are an integral part of the management team. Many large businesses have these experts on staff or on retainer. For small businesses, the external management team replaces full-time experts; the business owner(s) should consult with this external team on a regular basis (at least once a year) to determine if the business is complying with all rules and regulations. Listing the management team in the business plan allows the reader to know that the business owner has developed a network of experts to provide advice.

The risk-management portion of the business plan provides a description of how the business will handle unexpected or unusual events. For example, if the business engages in agricultural production, will the business purchase crop insurance? Does the business have adequate liability insurance? Is the business diversified to protect against the unexpected, rather than "putting all its eggs in one basket"? If the business has employees, does the business carry adequate workers' compensation insurance? All of these questions should be answered in the risk-management portion of the business plan. More information on how liability can affect your business and on the use of insurance as a risk-management tool can be found in Agricultural Alternatives: Agricultural Business Insurance and Agricultural Alternatives: Understanding Agricultural Liability . The business structure will also determine a portion of the risk-management strategy because the way that a business is structured carries varying levels of risk to the owner and/or owners. All opportunities carry a degree of risk that must be evaluated, and mitigation strategies should be included in this portion of the plan.

Marketing Plan

Every purchase decision that a consumer makes is influenced by the marketing strategy or plan of the company selling the product or service. Products are usually purchased based on consumer preferences, including brand name, price, and perceived quality attributes. Consumer preferences develop (and change) over time and an effective marketing plan takes these preferences into account. This makes the marketing plan an important part of the overall business plan.

In order to be viable, the marketing plan must coincide with the production activities. The marketing plan must address consumer desires and needs. For example, if a perishable or seasonal crop (such as strawberries) will be produced, the marketing plan should not include sales of locally grown berries in January if the business is in northeastern United States. If the business plans to purchase berries in the off-season from other sources to market, this information needs to be included. In this way, the marketing plan must fit the production capabilities (or the capability to obtain products from other sources).

A complete marketing plan should identify target customers, including where they live, work, and purchase the product or service you are providing. This portion of the plan contains a description of the characteristics and advantages of your product or service. Identifying a "niche" market will be of great value to your business.

Products may be sold directly to the consumer (retail) or through another business (wholesale) or a combination of both. Whichever marketing avenue you choose, if you are starting a new enterprise or expanding an existing one, you will need to decide if the market can bear more of what you plan to produce. Your industry research will assist in this determination. The plan must also address the challenges of the proposed marketing strategy.

Other variables to consider are sales location, market location, promotion, advertising, pricing, staffing, and the costs associated with all of these. All of these aspects of the marketing plan will take time to develop and should not be taken lightly. Further discussion on marketing fruits and vegetables can be found in Agricultural Alternatives: Fruit and Vegetable Marketing for Small-Scale and Part-Time Growers .

SWOT Analysis

An adequate way of determining the answers to business and marketing issues is to conduct a SWOT analysis. The acronym SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Strengths represent internal attributes and may include aspects like previous experience in the business. Experience in sales or marketing would be an area of strength for a retail farm market. Weaknesses are also internal and may include aspects such as the time, cost, and effort needed to introduce a new product or service to the marketplace.

Opportunities are external aspects that will help your business to take off and be sustained. If no one is offering identical products or services in your immediate area, you may have the opportunity to capture the market. Threats are external and may include aspects like other businesses offering the same product in close proximity to your business or government regulations impacting business practices and cost.

Financial Plan

The financial plan and assumptions are crucial to the success of the business and should be included in the business plan. One of the foremost reasons new businesses fail is because they do not have enough start-up capital to cover all expenses to make a profit. The scope of your business will be determined by the financial resources you can acquire. Because of this, you will need to develop a financial plan and create the supporting documents to substantiate it.

The financial plan has its basis in historical data (if you are an existing business) or from projections (for a proposed business). The first issue to address is recordkeeping. You should indicate who will keep the necessary records and how these records will be used. Internal controls, such as who will sign checks and handle any funds, should also be addressed. A good rule to follow for businesses that are not sole proprietorships is having at least two people sign all checks.

The next portion of the financial plan should detail where funding will come from. This includes if (and when) the business will need additional capital, how much capital will be needed, and how these funds will be obtained. If start-up capital is needed, this information should be included in this portion. Personal contributions should be included, along with other funding sources. The amount of money and repayment terms should be listed. One common mistake affecting many new businesses is under-funding at start-up. Many start-up businesses do not evaluate all areas of expense and underestimate the amount of capital needed to see a new business through the development stages (including personal living expenses, if off-farm income is not available).

Typically, a balance sheet, income statement, cash flow statement, and partial budget or enterprise budgets are included in a business plan. More information on agricultural budgets can be found in Agricultural Alternatives: Budgeting for Agricultural Decision Making . These documents will display the financial information in a form that lending institutions are used to seeing. If these are not prepared by an accountant, having one review them will ensure that the proper format has been used.

Financial projections should be completed for at least two years and, ideally, for five years. In agricultural businesses, five-year projections are sometimes difficult to make because of variability in prices, weather, and other aspects affecting production. One way to illustrate these risks is to develop several projection scenarios covering a range of production assumptions. This attention to detail will often result in a positive experience with lenders because they realize that the plan covers several possible circumstances and provides insight into how the business plans to manage risk. More information on financing agricultural businesses can be found in the publication Agricultural Alternatives: Financing Small-Scale and Part-Time Farms .

Financial Statements

To keep personal assets and liabilities separate from business assets and liabilities, it is beneficial to create both business and personal financial statements. A lender will need to see both, but the separation will show how the business will support the family or how the off-farm income will support the business.

Cash Flow Statement

A cash flow statement is the predicted flow of cash into and out of a business over a year. Cash flow statements are prepared by showing the total amounts predicted for each item of income or expense. This total is then broken down by month to show when surpluses and shortfalls in cash will occur. In this way, the cash flow statement can be used to predict when additional cash is needed and when the business will have a surplus to pay back any debt. This monthly prediction allows the owner(s) to better evaluate the cash needs of the business, taking out applicable loans and repaying outstanding debts. The cash flow statement often uses the same categories as the income statement plus additional categories to cover debt payments and borrowing.

After these financial statements are completed, the business plan writer will have an accurate picture of how the business has performed and can project how the business will perform in the coming year(s). With such information, the owner—and any readers of the business plan—will be able to evaluate the viability of the business and will have an accurate understanding of actions and activities that will contribute to its sustainability. This understanding will enable them to make better informed decisions regarding loans or investments in the business.

Income Statement

The income statement is a summary of the income (revenue) and expenses for a given accounting cycle. If the balance sheet is a "snapshot" of the financial health of the business, the income statement is a "motion picture" of the financial health of the business over a specific time period. An income statement is constructed by listing the income (or revenue) at the top of the page and the expenses (and the resulting profit or loss) at the bottom of the page.

Revenue is any income realized by the sale of crops or livestock, government payments, and any other income the business may have (including such items as fuel tax refunds, patronage dividends, and custom work). Other items impacting revenues are changes in inventory and accounts receivable between the start of the time period and the end—even if these changes are negative.

Expenses include any expense the business has incurred from the production of the products sold. Examples of expenses include feed, fertilizer, pesticides, fuel, labor, maintenance, repairs, insurance, taxes, utilities, and any changes in accounts payable. Depreciation, which is the calculated wear and tear on assets (excluding land), is included as an expense for accounting purposes. Interest is considered an expense, but any principal payments related to loans are not an expense. Repayment of principal is recorded on the balance sheet under "Loans Payable."

As the income statement is created, the desired outcome is to have more income than expenses, so the income statement shows a profit. If not, the final number is shown in parentheses (signifying a negative number). Another name for this financial record is a Profit and Loss Statement. Income statements are one way to clearly show how the farm is making progress from one year to the next and may show a much more optimistic view of sustainability than can be seen by looking at a single year's balance sheet.

Balance Sheet

A balance sheet is a snapshot of a business’s assets, liabilities, and owner’s equity at a specific point in time. A balance sheet can be prepared at any time, but is usually done at the end of the fiscal year (for many businesses, this is the end of the calendar year). Evaluating the business by using the balance sheet requires several years of balance sheets to tell the true story of the business’s progress over time. A balance sheet is typically constructed by listing assets on the left and liabilities and owner’s equity on the right. The difference between the assets and liabilities of the business is called the "owner's equity" and provides an estimate of how much of the business is owned outright.

Assets are anything owned by, or owed to, the business. These include cash (and checking account balances), accounts receivable (money owed to the business), inventory (any crops or supplies that the business has stored on farm), land, equipment, and buildings. This may also include machinery, breeding stock, small-fruit bushes or canes, and fruit trees. Sometimes assets are listed as current (those easily converted to cash) and fixed (those that are required for the business to continue). Assets are basically anything of value to the business. Some valuations of assets are not easily determined for items such as breeding stock, small-fruit bushes or canes, and fruit trees and may require the use of a certified appraiser familiar with the items.

Balance sheets may use a market-basis or a cost-basis to calculate the value of assets. A market-basis balance sheet better reflects the current economic conditions because it relies on current or market value for the assets, rather than what those assets originally cost. Market values are more difficult to obtain because of the difficulty in finding accurate current prices of assets and often results in the inflation of the value of assets. Cost-basis balance sheets are more conservative because the values are often from prior years. For example, a cost-basis balance sheet would use the original purchase price of land, rather than what selling that land would bring today. Because purchase records are easily obtained, constructing a cost-basis balance sheet is easier. Depreciable assets such as buildings, tractors, and equipment are listed on the cost-basis balance sheet at purchase price less accumulated depreciation. Most accountants use the cost-basis balance sheet method. Whether you choose to use market-basis or cost-basis, it is critical that you remain consistent over the years to allow for accurate comparison.

Liabilities are what the business owes on the date the balance sheet is prepared. Liabilities include both current liabilities (accounts payable, any account the business has with a supplier, short-term notes, operating loans, and the current portion of long-term debt), which are payable within the current year, and noncurrent liabilities (mortgages and loans with a term that extends over one year).

Owner's equity is what remains after all liabilities have been subtracted from all assets. It represents money that the owner(s) have invested in the business, profits that are retained in the business, and changes caused by fluctuating market values (on a market-basis balance sheet). Owner’s equity will be affected whenever there are changes in capital contributed to the business or retained earnings, so if your practice is to use all earnings as your "paycheck," rather than reinvesting them in the business, your owner's equity will be impacted. On the balance sheet, owner’s equity plus liabilities equals assets. Or stated another way, all of the assets less the amount owed (liabilities) equals the owner’s equity (sometimes referred to as "net worth"). Owner's equity provides the "balance" in a balance sheet.

Putting It All Together

After the mission, background information, organization, and marketing and financial plans are complete, an executive summary can then be prepared. Armed with the research results and information in the other sections, the business will come alive through this section. Research results can be included in an appendix if desired. The next step is to share this plan with others whose opinions you respect. Have them ask you the hard questions—make you defend an opinion you have expressed or challenge you to describe what you plan to do in more detail. Often, people are hesitant to share what they have written with their families or friends because they fear the plan will not be taken seriously. However, it is much better to receive constructive criticism from family and friends (and gain the opportunity to strengthen your plan) than it is to take it immediately to the lender, only to have any problems pointed out and receive a rejection.

Once all parts of the business plan have been written, you will have a document that will enable you to analyze your business and determine which, if any, changes need to be made. Changes on paper take time and effort but are not as expensive as changing a business practice only to find that the chosen method is not viable. For a proposed venture, if the written plan points to the business not being viable, large sums of money have not been invested and possibly lost. In short, challenges are better faced on paper than with investment capital.

Remember, a business plan is a "road map" that will guide the future of the business. The best business plan is a document in continual change, reacting to the influence of the outside world on the business. Having the basis of a written plan will give you the confidence to consider changes in the business to remain competitive. Once the plan is in place, the business will have a better chance of future success.

For More Information

Publications.

Abrams, R. The Successful Business Plan: Secrets and Strategies (Successful Business Plan Secrets and Strategies) . Palo Alto, Calif.: Planning Shop, 2014.

Becker, J. C., L. F. Kime, J. K. Harper, and R. Pifer. Agricultural Alternatives: Understanding Agricultural Liability . University Park: Penn State Extension, 2011.

Dethomas, A., and L. and S. Derammelaere. Writing a Convincing Business Plan (Barron's Business Library) . Hauppauge, N.Y.: Barron's Educational Series. 2015.

Dunn, J., J. K. Harper, and L. F. Kime. Agricultural Alternatives: Fruit and Vegetable Marketing for Small-scale and Part-time Growers . University Park: Penn State Extension, 2009.

Grant, W. How to Write a Winning Business Plan: A Step-by-Step Guide for Startup Entrepreneurs to Build a Solid Foundation, Attract Investors and Achieve Success with a Bulletproof Business Plan (Business 101). Independently published. 2020.

Harper, J. K., S. Cornelisse, L. F. Kime, and J. Hyde. Agricultural Alternatives: Budgeting for Agricultural Decision Making . University Park: Penn State Extension, 2019.

Kime, L. F., J. A. Adamik, E. E. Gantz, and J. K. Harper. Agricultural Alternatives: Agricultural Business Insurance . University Park: Penn State Extension, 2019.

Kime, L. F., S. Cornelisse, and J. K. Harper. Agricultural Alternatives: Starting or Diversifying an Agricultural Business . University Park: Penn State Extension, 2018.

Lesonsky, R. Start Your Own Business Fifth Edition: The Only Start-Up Book You'll Ever Need.  Irvine, Calif.: Entrepreneur Media Inc., 2010.

Shelton, H. The Secrets to Writing a Successful Business Plan: A Pro Shares a Step-by-Step Guide to Creating a Plan That Gets Results. Rockville, Md.: Summit Valley Press, 2017.

Stokes, J. S., G. D. Hanson, J. K. Harper, and L. F. Kime.  Agricultural Alternatives: Financing Small-scale and Part-time Farms . University Park: Penn State Extension, 2005.

Online Course

Starting a Farm: Business Planning  

Periodicals

  • American Agriculturist Magazine Farm Progress Companies Inc. 5482 Wilshire Blvd, Suite 260 Los Angeles, CA 90036
  • Businessweek Magazine
  • Fortune Magazine
  • Kiplinger's Personal Finance
  • Money Magazine
  • BizPlanit - Virtual Business Plan
  • PA Business One-Stop Shop
  • Small Business Administration
  • SCORE—volunteer business assistance
  • The Pennsylvania Department of Revenue Starting a Business in Pennsylvania—A Guide to Pennsylvania Taxes
  • The Pennsylvania State University Agricultural Alternative Tools
  • The Pennsylvania State University Conducting a SWOT Analysis
  • The Pennsylvania State University Happy Valley Launch Box

Prepared by Lynn F. Kime, senior extension associate; Linda Falcone, extension educator in Wyoming County, Jayson K. Harper, professor of agricultural economics; and Winifred W. McGee, retired extension educator in Dauphin County

Additional financial support for this publication was provided by the Risk Management Agency of the United States Department of Agriculture and the Pennsylvania Department of Agriculture.

This publication was developed by the Small-scale and Part-time Farming Project at Penn State with support from the U.S. Department of Agriculture-Extension Service.

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Milestones for Successful Venture Planning

  • Zenas Block
  • Ian C. MacMillan

Entrepreneurs draw up business plans for new ventures to make various marketing, pricing, financial, and other projections. More often than not, though, their estimates bear little relationship to reality. These authors argue that planning for new enterprises differs fundamentally from planning for existing companies, given the inherent instability of start-ups. How can managers launching new […]

Starting a new business is essentially an experiment. Implicit in the experiment are a number of hypotheses (commonly called assumptions) that can be tested only by experience. The entrepreneur launches the enterprise and works to establish it while simultaneously validating or invalidating the assumptions. Because some will be dead wrong and others partially wrong, an important goal of the business plan must be to continually produce and build on new knowledge. Managers must justify moving to each new stage or milestone in the plan on the basis of information learned in the previous stage.

a new venture's business plan is important

  • ZB Zenas Block and
  • IM Ian C. Macmillan is the Dhirubhai Ambani Professor of Innovation and Entrepreneurship at the University of Pennsylvania’s Wharton School.

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Book cover

Entrepreneurial Strategy pp 73–99 Cite as

Managing New Ventures

  • Dean A. Shepherd 3 &
  • Holger Patzelt 4  
  • Open Access
  • First Online: 20 July 2021

6242 Accesses

The creation of new ventures and growing them into well-established organizations is the key purpose of managing new ventures. This chapter explains the 10 most essential subtopics for managing new ventures (Shepherd et al. in Journal of Management 47:11–42, 2021): (1) lead founder, (2) founding team, (3) social relationships, (4) cognitions, (5) emergent organizing, (6) new venture strategy, (7) organizational emergence, (8) new venture legitimacy, (9) founder exit, and (10) entrepreneurial environment. This chapter ties these “managing” subtopics into the three major stages of the entrepreneurial process—co-creating, organizing, and performing. The framework provides a cohesive story of managing new ventures.

This chapter is based on Shepherd et al. ( 2021 ). The assertions that we make in this chapter are justified, cited, and referenced in Shepherd et al. ( 2021 ).

Download chapter PDF

Once an entrepreneur forms an opportunity belief (Chapter 1 ), the entrepreneur can exploit the potential opportunity through an existing organization or create a new organization. In this chapter (and the book more generally), we are focused on new venture creation. New venture creation is important. New ventures (1) are the source of most new jobs generated in an economy; (2) create new industries and markets; (3) develop and introduce innovative products and services; and (4) provide new solutions to economic, social, and environmental problems. However, most management research has assumed a well-established organization as the starting point of their theorizing. This management research has focused on explaining differences among organizations regarding various attributes, forms, and outcomes. Research on new venture creation and management to produce well-established organizations has increased our understanding of the antecedents of many assumptions prevalent in extant management research.

However, current research does not provide an accumulated body of knowledge to connect the creation of new ventures to their development into well-established organizations. Therefore, this chapter builds on a review paper on starting a new organization, which organizes the information on this process provided by extant research into an overarching framework (Shepherd et al., 2021 ). In conducting a systematic review of the literature, Shepherd et al. ( 2021 ) inductively categorized papers primarily on the topic of new ventures into 10 categories: (1) lead founder, (2) founding team, (3) social relationships, (4) cognitions, (5) emergent organizing, (6) new venture strategy, (7) organizational emergence, (8) new venture legitimacy, (9) founder exit, and (10) entrepreneurial environment. We present these categories as an overarching framework in Fig.  5.1 .

As illustrated in Fig.  4.1 , the major stages of the overarching framework are (1) co-creating a startup, (2) organizing a startup, and (3) performing a startup. The co-creating stage is typically initiated by a lead entrepreneur forming a founding team. The lead entrepreneur and the entrepreneurial team use social relationships and cognitions to co-construct the new venture’s potential opportunity with its community of inquiry (see Chapters 2 and 3 ). The community of inquiry is an informal body of (potential) stakeholders with a shared interest in the new venture’s potential opportunity. The organizing stage involves the new venture establishing operations as well as formulating and enacting a strategy. In this stage, the entrepreneur attempts to establish processes and systems that can facilitate legitimacy, organizational emergence, and founder exit. The performing stage builds on the previous stages to generate outcomes. These new venture outcomes feed back into the other stages of the model. All stages of the new venture–management process are influenced by and influence the external environment.

figure 1

(Adapted from Shepherd et al., 2021 )

Illustration of prior and proposed research on starting a new venture

Co-creating a Startup Venture

Lead founder and starting a new venture.

A founder is a person who creates a new venture—that is, brings into existence a new organization. Even in a new venture created by a team, individual founder attributes are important for explaining new venture creation. The lead founder is the founding team member most responsible for managing the startup process (if there is only one person, he or she is solely responsible for the early stages of new venture creation; there is also the possibility of two or more lead entrepreneurs in a venture). Founders differ in their experience, employment positions before new venture creation, entrepreneurial imaginativeness , motivation, emotional responses, and enduring characteristics. These differences among founders influence new venture creation.

First, founders vary in their experience, which impacts the startup process. Specifically, a founder with managerial experience —a founder who previously operated a business—has an advantage in new venture creation, especially in pursuing opportunities in highly dynamic external environments. In contrast, a founder with industry experience—a founder who previously worked in the same industry as his or her new venture—has an advantage in pursuing opportunities in less dynamic external environments. Entrepreneurial experience—when a founder has previously founded one or several ventures—is important in contexts where entrepreneurs need to make quick decisions to commit their ventures to action. More generally, new ventures created by founders with more entrepreneurial experience perform better than those created by founders with less entrepreneurial experience. Interestingly, prior entrepreneurial experience benefits new ventures regardless of whether that experience was a success or a failure.

However, a founder’s experience is not always a blessing for his or her new venture. For example, a founder’s experience with a particular product market, geographic market, or resource can focus his or her attention on those domains, causing cognitive or attentional blindness to other opportunities and threats sourced beyond those domains (see Chapter 1 ). Similarly, while individuals returning from another country to their home country to start a business have different experience from those who have never left their home country, entrepreneurs with this experience abroad tend to complete the first stage of the entrepreneurial process more slowly. That is, those with experience abroad advance from conceptualizing a potential idea to launching a new venture more slowly than individuals without such experience (Qin et al., 2017 ).

Second, employees can create new ventures. Employee entrepreneurship involves “the intra-industry founding of a new venture by an individual who previously worked for an incumbent firm [a firm in the same industry as the new venture]” (Ganco, 2013 , p. 666). A new venture can benefit from employee entrepreneurship when there is considerable overlap between the knowledge its founder acquired from his or her previous employer and the new venture’s knowledge domain. It seems that the greater the overlap, the more knowledge the entrepreneur can transfer to the new venture. For example, the entrepreneur may transfer effective routines and draw on knowledge gained at his or her previous employer to recognize subsequent potential opportunities. However, although it seems that star performers would leave their jobs to found new ventures as a means to make the most of their human capital, it is not so simple. The creation of a new venture by a star performer depends on the star’s compensation at work. High-earning individuals are less likely to leave their jobs than low earners. Still, they are more likely to leave when their employers have low compensation-dispersion systems. If they leave their current jobs, these star performers are more likely to start a new venture, whereas non–star workers are more likely to seek employment elsewhere (Campbell et al., 2012 ; Carnahan et al., 2012 ). Furthermore, those leaving employment are more likely to start a new venture than seek employment elsewhere when they have more complex knowledge (Ganco, 2013 ). Knowledge is complex when there are many interdependencies between its components.

Third, people with entrepreneurial imaginativeness are more likely to create a new venture. Entrepreneurial imaginativeness refers to “a cognitive skill that combines the ability of imagination with the knowledge needed to stimulate various task-related scenarios in entrepreneurship” (Kier & McMullen, 2018 , p. 2266). This cognitive skill is useful in new venture creation because it stimulates the creativity necessary to identify or construct potential opportunities. Potential opportunities can then be tested and refined as the basis for a new venture (see Chapters 2 and 3 ). Some of the knowledge needed to create various entrepreneurial-imaginativeness scenarios likely comes from the managerial, industry, entrepreneurial, and employment experience detailed above.

Fourth, an individual needs to be motivated to create a new venture. This motivation for new venture creation can be manifest in a founder ’s identity and passion. Founders with a higher entrepreneurial identity aspiration—“a possible but unrealized future entrepreneurial self”—engage in more nascent entrepreneurial behaviors, particularly founders who have prior startup experience compared to those who lack such experience (Farmer et al., 2011 , p. 246). There are three ideal types of entrepreneurial social identity, which help explain those who create new ventures (Fauchart & Gruber, 2011 ):

(a) The Darwinian identity reflects founders who consider themselves unique, put their self-interest at the core of the new venture, pursue private goals, and use a conventional business logic to run the new venture; (b) the Communitarian identity reflects founders who focus their actions based on a proximal social group and have a community-driven logic; and (c) the Missionary identity reflects founders who have a highly inclusive notion of stakeholders, focus on the society-at-large, and have a mission-driven logic. (Shepherd et al., 2021 , pp. 15–16)

Founders can also have passion that motivates new venture creation . Entrepreneurial passion is an “intense positive inclination towards entrepreneurial activities salient to an individual’s identity.... Passion [is not conceptualized] as a trait but rather as an affective and motivational phenomenon that an entrepreneur experiences when engaging in identity relevant activities” (Murnieks et al., 2016 , p. 470). This passion motivates an individual to perform new venture–creation tasks. Indeed, entrepreneurial passion can increase an individual’s entrepreneurial self-efficacy, strengthening his or her intention to start a new venture.

Fifth, positive affect can positively influence an individual to new venture creation. Specifically, positive dispositional affect facilitates creativity, and creativity generates innovative activities useful in the new venture–creation process. The positive relationships between positive affect and creativity and between creativity and innovation radicalness are strengthened in more dynamic environments (Baron & Tang, 2011 ). Positive dispositional affect refers to a founder’s general tendency to experience positive emotions, such as enthusiasm and excitement. Dispositional affect is different from state affect; state affect is influenced by current conditions. Dispositional affect is relatively stable across time, contexts, and situations. However, a founder’s positive dispositional affect may not always lead to positive venture outcomes. For example, one study proposed that while increases in positive dispositional affect improve entrepreneurs’ opportunity recognition, opportunity evaluation, and entrepreneurial decision making, they only do so to a certain point, after which further increases in positive dispositional affect may hamper performance on these activities (Baron et al., 2012 ).

Finally, individuals’ personalities influence who starts up a new venture. Specifically, the positive psychological traits of hope , optimism, and resilience are positively associated with founders’ transformational leadership, which in turn facilitates new venture performance. The positive psychological trait of hope refers to the belief that one has a path to a desired outcome and believes one has the agency to progress down that path . Optimism refers to a generalized belief that positive outcomes will materialize . Resilience refers to maintaining positive functioning while facing adverse events. These positive psychological traits can lead to transformational leadership , which can in turn enhance new venture performance through the following mechanisms: (1) idealized influence , or when a founder provides an example that followers try to emulate; (2) inspirational motivation , or when a founder provides a clear vision of a positive future that motivates followers; (3) intellectual stimulation , or when a founder helps followers make the most of their potential; and (4) individualized consideration , or when a founder supports followers’ needs for personal growth (Peterson et al., 2009 ). Bundling founders’ personalities with their resources and the environment helps explain the new venture–creation process. For example, founders’ tendencies to value “change, the new, and the different” (i.e., novelty) can enhance new venture performance, especially for ventures that are younger and smaller (Ling et al., 2007 , p. 679).

Founding Team and Starting a New Venture

A founding team is a collective that creates a new venture. Founding teams differ in their experience, diversity, presence of prior shared experience, and structural form, which impact new venture management.

First, founding teams differ in the level and nature of their experience. Founding teams’ experience can influence new venture performance. For example, for newly created venture capital firms, founding teams that are more experienced in venture capital, senior management, and consulting are more successful than their more inexperienced counterparts (Walske & Zacharakis, 2009 ). Moreover, in assessing new venture teams, senior venture capitalists emphasize, in order of importance, teams’ industry experience, management education, and leadership experience (Franke et al., 2006 ). Indeed, founding teams’ entrepreneurial and management experience are important because they enable these teams to identify more opportunities. Additionally, teams with greater competence in financial management —namely, skills, experience, and ability to manage monetary constraints—are better able to create and grow new ventures. Furthermore, new venture teams with greater technological experience make the most of their diverse industry-experience and external sources of knowledge to identify a greater variety of potential opportunities.

Second, founding teams’ diversity facilitates new venture creation. For example, teams diverse in educational backgrounds benefit new ventures. Indeed, venture capitalists value educational heterogeneity, with the proviso that at least one of the members on a team has an education in management. Despite the importance of diversity within founding teams, it appears that founders’ biased decision making (e.g., overoptimism and self-serving attributions) leads them to choose cofounders similar to themselves, thus creating relatively homogenous founding teams. However, we also note that more diversity in founding teams might not always benefit new ventures. For example, the dispersion of a founding team’s cognitive ability has an inverted U-shaped relationship with startup performance. That is, teams with members of both high and low ability outperform teams in which all members have low ability or all members have high ability because some entrepreneurial tasks require high ability (e.g., opportunity recognition and problem solving) while other tasks are better performed by lower-ability team members (e.g., execution-oriented tasks) (Hoogendoorn et al., 2017 ). While diversity enhances performance in competitive contexts, it does not appear to do so in cooperative contexts or in pursuit of innovation strategies. In contexts that reward cooperation and innovation, technically focused management teams perform better than functionally diverse teams (Eesley et al., 2014 ).

Finally, founding team members with prior shared experience can manage more of the challenges in new ventures. Teams in which some of the members have previously worked together in the same company have shared knowledge. This shared knowledge promotes a shared understanding that facilitates implementation speed and enhances new venture performance. However, this benefit from prior shared experience within a founding team is diminished when that shared experience is for a task or industry different from those of the new venture. Moreover, the benefits of teams’ prior shared experience diminish over time as founding teams begin to generate their own shared experience in their current new ventures. Relatedly, founding teams with shared prior experience can create more internally consistent human-resource value systems for their new ventures that facilitate shared collective perceptions, attitudes, and behaviors among new venture members. Founding teams with prior shared experience are also more likely to pursue exploration strategies. At the same time, those with members who have worked in diverse companies are more likely to engage in explorative activities. However, research has also shown that teams with prior shared experience and heterogeneous experience show the highest growth (Beckman, 2006 ).

One potential mechanism underlying the benefits of a team’s prior shared experience is a transactive memory system. A transactive memory system is a shared understanding of which team members have specific expertise that the team can call on when needed—that is, knowing “who knows what” (Zheng, 2012 ). A founding team’s transactive memory system can enhance new venture performance, especially when there is task similarity , task relatedness related, and intrateam trust . A founding team’s transactive memory system can also lead the new venture to develop an entrepreneurial orientation. Entrepreneurial orientation refers to a new venture’s strategic orientation involving the propensity to be innovative, risk taking, and proactive. The trust between founding team members, the organizational structure’s organic nature, and the environment’s dynamism magnify the positive relationship between a founding team’s transactive memory system and the respective venture’s entrepreneurial orientation.

Social Relationships and Starting a New Venture

A social relationship is a positive interpersonal relationship between two or more people. Social relationships are reflected in (1) a founder’s social network, (2) a founder’s social capital, (3) a founder’s use of his or her network to access intangible resources, and (4) a new venture’s interpersonal interactions.

First, founders’ relationships are embedded in social networks, which vary across founders and founding teams. Founders’ networks involve referrers— individuals or organizations that connect entrepreneurs to potential resource providers. Potential resource providers are the owners of resources that new ventures need. Specifically, a venture is more likely to obtain the resources it needs when (1) there is a strong relationship between the referrer and the resource owner, especially when there is a strong relationship between the founder and the referrer, and (2) both the referrer and the resource owner have considerable prior knowledge of the venture’s technology or product. Interestingly, the resource owner’s prior knowledge of the venture’s technology or product compensates for weak relationships between the founder and the referrer and between the referrer and the resource owner—the relationship facilitates action.

It is possible to consider entrepreneurial networking as more than just a facilitator of entrepreneurial action. Specifically, entrepreneurial networking is intentional behavior under high uncertainty. It includes assessing the use of one’s existing network of relationships, negotiating precommitments with stakeholders, and continually changing the set of relationships supporting the focal venture. Although it would seem that the larger a founder’s network, the better it is for his or her venture, there are diminishing returns to accessing funding, information, and business contacts from increases in network size. Over and above a network’s size, relationship quality, trust, and commitment help a new venture access resources under favorable terms. Indeed, both the size of a social network and the strength of the relationship between founders and potential funders relate positively to progress in new venture creation. Also, founders’ networks that are heterogeneous and high in status generate benefits for their new ventures. A heterogeneous network is a set of relationships that provides a new venture access to diverse information and varied resources. A high-status network is a set of relationships that signals a new venture’s quality to others.

Second, new ventures can benefit from their founders’ social capital. This social capital can have a variety of sources. Social capital refers to the goodwill created through social relationships, and some founders have more social capital than other founders. For example, founders who are returning migrants or have experience with multinational enterprises typically have higher social capital than founders without such global-market experience. Moreover, entrepreneurs have higher social capital with their families than with other groups and individuals. Therefore, family involvement in the governance of early-stage new ventures is associated with a higher probability of raising debt funding and with increasing the amount of funding founders can obtain. However, founders often seek initial funding from their families rather than from other investors when they anticipate low family interference in their businesses. This funding strategy shows that there are benefits (e.g., easier access to capital) and costs (e.g., potential interference) that arise from relying on family relationships when creating a new venture. Indeed, when entrepreneurs involve their families to gain financial capital, the scope of their startup activities is narrowed. In contrast, when entrepreneurs involve their families to access social capital, the scope of their startup activities is broadened, and even more so when their families are highly cohesive (Edelman et al., 2016 ).

Third, founders’ social relationships can provide new ventures intangible resources. Close relationships can provide founders entrepreneurial inspiration, thereby enhancing new ventures’ chances of survival. This benefit of founders’ entrepreneurial inspiration is magnified for those who take over an existing business, invest considerable time in their ventures, and/or have low entrepreneurship experience. Social relationships can also be a source of guidance as founders often use outsiders’ assistance when starting their ventures. This guidance increases long-term growth to a point, after which more guided preparation reduces long-term growth. A similar form of guidance is when venture advocates help founders. Venture advocates are local potential stakeholders who assist founders in their new ventures’ developmental stages, facilitating new ventures’ launch and increasing their survival chances.

Finally, boards of directors can generate benefits for new ventures. Specifically, a new venture can establish a diverse alliance portfolio more quickly when its board of directors is heterogeneous (i.e., directors’ backgrounds and networks are diverse), multiplex (i.e., directors have multiple types of relationships), and symmetrical (i.e., there is an even distribution of influence within the board of directors) (Beckman et al., 2014 ). Moreover, a new venture can benefit from its board of directors expanding the founding team ’s network. This enhanced network of the board and founding team can generate relational pluralism. Relational pluralism refers to a new venture’s reliance on others to derive meaning and the impetus for action. However, when central investors dominate a board, the benefits of board members’ social relationships for the focal new venture are undermined.

Cognitions and Starting a New Venture

Founders’ cognitions are the mental processes underlying the co-construction of potential opportunities to start and manage a new venture. Founders’ cognitions can be driven by their enduring characteristics and by their current situation. In turn, these cognitions can lead to biased decision making, enhanced identification of potential opportunities, and increased intentions to engage in entrepreneurial action.

First, founders’ enduring characteristics drive their cognitions about their new ventures. One enduring characteristic of founders is the intelligence critical for new venture success, called successful intelligence . When combined with entrepreneurial self-efficacy, successful intelligence can lead to quick decisions and actions that promote new venture performance. This intelligence for new venture progress involves three different types of intelligence: (1) practical intelligence relates to founders’ skills, dispositions, and tacit knowledge and the application of them to solve everyday problems; (2) analytical intelligence is founders’ capacity to learn quickly, remember, and retrieve information; and (3) creative intelligence is reflected in founders’ generation of high-quality novel ideas to meet current needs (Baum & Bird, 2010 ).

Cognitive style is another enduring attribute of founders that influences their cognitions about their new ventures. Cognitive style is a “higher-order heuristic that individuals employ when they approach, frame and solve problems” (Brigham et al., 2007 , p. 31). People with different cognitive styles are better suited for different entrepreneurial tasks. Founders with a more intuitive cognitive style are more likely to observe signals and process information synthetically and holistically. These intuitive entrepreneurs report high confidence in identifying and recognizing opportunities. In contrast, founders with an analytical cognitive style process information in a more linear and sequential way. Those with an analytical cognitive style have greater confidence in assessing, evaluating, planning, and marshaling a new venture’s resources (Kickul et al., 2009 ).

Second, founders’ thinking about the future to plan the next steps for the new venture can enhance venture performance. Founders who engage in formal business planning facilitate entrepreneurial judgment because doing so helps founders (1) be more selective in their decision making to focus on a smaller set of new venture–success factors, (2) become more decisive to quickly make venturing decisions, and (3) have a greater conviction in their entrepreneurial judgment.

Third, founders’ cognitions can lead to biased decision making. Specifically, new venture managers who are founders are likely to be more overconfident than non-founder new venture managers. Overconfidence refers to an individual’s overestimation of his or her ability to deliver positive outcomes and is often based on this individual not knowing what he or she does not know. Founders’ overconfidence can be detrimental to new venture progress. Founders are also often overly optimistic when forecasting their ventures’ survival chances. While confidence in one’s capabilities to successfully perform entrepreneurial tasks helps explain who creates new ventures, it can also lead to ventures’ downfall.

Founders can also escalate commitment (through additional investments of money, time, and other resources) to a venture on a failing course of action, which is a biased decision. For example, while fear leads founding teams to quit their failing ventures, hope drives founding teams to escalate their commitment to such ventures. Interestingly, when founders feel both hope and fear, hope seems to “trump” fear, leading founding teams to escalate commitment to failing ventures. Escalating commitment to a failing venture can make failure more costly for the founder (and other stakeholders) than it needs to be.

Fourth, identification of potential opportunities is a key application of entrepreneurial cognitions. Without a perception of an opportunity, an individual is unlikely to start a new venture regardless of the external environment’s objective attractiveness. Perceptions of opportunities involve the following stages (of a structuration process): (1) opportunity emergence, in which an opportunity forms through the interaction of an entrepreneur and a community of inquiry (see Chapter 2 ); (2) opportunity objectification, in which the entrepreneur begins to see the opportunity idea as an entity outside his or her mind; (3) opportunity enactment, in which a new venture is established, such as when a new venture emerges to deliver its first product or service; and (4) opportunity abandonment, in which the entrepreneur decides to terminate the potential opportunity.

This structuration approach to a potential opportunity depends on others’ inputs into the new venture process (see Chapter 2 ). Who those others are likely impacts the cognitive process. For example, socially isolated founders tend to perceive potential opportunities more abstractly. When founders perceive potential opportunities more abstractly, they are less likely to create a new venture. Of course, founders perceive not only opportunities but also threats to their new ventures. Threats can cause stress, leading founders to engage in avoidance or active coping. Avoidance coping involves temporarily withdrawing from a situation appraised as threatening. Active coping involves directly addressing a threat through problem solving. Avoidance coping by itself or with active coping can help founders improve their psychological well-being (Uy et al., 2013 ).

Finally, individuals’ cognitions can involve the intention to start a new venture. An entrepreneurial intention involves an individual’s commitment to new venture–creation activities, which drives his or her investments of time, effort, and other resources into startup activities. Founders’ attitudes toward new venture creation drive their entrepreneurial intentions. These attitudes are perceptions of the desirability of taking action, the perceived feasibility of successfully undertaking the action, and subjective norms (i.e., the opinions of important social others about the focal action).

Individuals use their attitudes to interpret information about the environment to determine their entrepreneurial intentions. For example, attending an entrepreneurship program raises science and engineering students’ intentions to start a new venture (Souitaris et al., 2007 ). Additionally, as founders perceive greater market heterogeneity, their entrepreneurial intentions strengthen because broader and more diverse markets provide potential opportunities for those who have a strong entrepreneurial orientation toward creating value. Indeed, founders’ belief that they will achieve new venture success increases for those with a strong motivation to start a new venture, which is reinforced by decision-making expertise. While founders’ motivation for starting a new venture can lead to new venture success, prosocial motivation appears to slow venture emergence through obstructing the assembly of critical resources, delaying the new venture’s first sale, and making it more difficult to raise equity funding, and so on. Prosocial motivation is the desire to expend effort and other resources to pursue potential opportunities to help others.

Organizing the Startup of a New Venture

Emergent organizing.

Emergent organizing involves developing processes for engaging in activities and making connections to enhance ventures’ operational reliability and effectiveness. Emergent organizing involves improvisation and engagement as well as different organizing modes, and it reflects founders’ decision-making logic.

First, founders engage in actions to create new ventures, such as improvisation . Improvisation involves the fusion of design (e.g., planning) and novel action and may provide the initial inspiration for a new venture. One study found that founders’ improvisational behaviors enhance new venture performance for those with high entrepreneurial self-efficacy but dampen new venture performance for those with low entrepreneurial self-efficacy. Over and above improvisation, there are other important activities involved in the startup process focused on four key business functions: (1) human relations, (2) marketing (including sales and public relations), (3) administration, and (4) environmental monitoring. One study found that founders allocate a significant amount of their time to exchanging information and opinions (36 percent of their work time) and engaging in more analytical and conceptual work (26 percent of their work time) (Mueller et al., 2012 ).

Second, different modes of organizing facilitate organizational emergence. There are three general modes of organizing: (1) vision for identifying potential opportunities, (2) strategic organizing for making major decisions, and (3) tactical organizing for implementing behaviors. Interestingly, an emergence event is initiated by a change in tactical organizing, which stimulates strategic organizing and generates a shift in vision (Lichtenstein et al., 2006 ).

Finally, founders’ logic can influence organizational emergence. Specifically, expert founders appear to use an effectual logic. There are four primary principles of an effectual logic: (1) The affordable loss principle highlights how entrepreneurs evaluate opportunity pursuit based on how much they can afford to lose by taking this entrepreneurial action. (2) The alliance principle highlights how founders enter into strategic alliances to gain new stakeholders’ precommitments. (3) The contingency principle highlights how founders remain open to unexpected events and exploit them as an opportunity. (4) The control principle highlights how founders take stock of what they have and create possible ends from these known means (Sarasvathy, 2001 ). These effectuation principles represent founders’ responses to the recognition that while there is environmental uncertainty, they control their new ventures’ ability to respond to external changes. Founders are more likely to use the principles of an effectual logic when they come from a career that involved investing and when they are experts than when they have less investing experience and are novices.

Moreover, effectuation involves taking action to secure the precommitments of potential stakeholders. These stakeholder commitments provide new ventures with resources and legitimacy. To gain the precommitments of stakeholders, founders can use boundary objects (see Chapter 3 ). Boundary objects are material artifacts that symbolize a founder ’s beliefs and values (e.g., an engineering drawing or a project timeline) and the basis for shared practice between the founder and his or her community of inquiry (Chapter 3 ). Boundary objects help founders connect loosely coupled potential stakeholders across multiple domains for their new ventures’ benefit. Therefore, founders’ creation and use of boundary objects to share, frame, and interact with potential stakeholders are critical for new venture emergence.

Crafting a New Venture Strategy

New venture strategy refers to the formulation, decision, and enactment of a particular vision and position within the competitive landscape. A new venture strategy is reflected in a venture’s business model , which describes the envisioned venture and its functioning to achieve its goals. A new venture strategy involves planning, diversification, entry mode, and innovativeness.

First, planning impacts the success of starting up of new ventures. Completing a formal plan improves new venture performance in terms of early-stage profitability, employment growth, and survival (when the plan is formed before the focal venture engages with potential stakeholders and conducts other organizing activities). Founders who are better educated and oriented toward growth, innovation, and external finance are more likely to plan. The benefits of different types of planning depend on the nature of a new venture’s external environment. Specifically, in highly dynamic environments, new ventures benefit from planning that is selective and quick. In contrast, in less dynamic environments, new ventures benefit from taking more time to complete the planning task.

Also, not all plans are formal. For example, founders’ use of action plans magnifies the impact of entrepreneurial-goal intentions (i.e., what founders intend for their new ventures) on venture creation (Gielnik et al., 2014 ). Action plans are mental maps of the steps needed to move from the current situation to the desired goal. These action plans can dampen the negative impact of unfounded imagined futures on venture creation by compensating for the motivational drain of such positive fantasies.

Second, diversification can affect new venture survival and efficiency. For example, one study found that the diversification of nonprofit new ventures through a broad scope of products and services within and across industries (Tanriverdi & Lee, 2008 ) increases these ventures’ chances of survival. However, these increased survival chances can come at the cost of lower organizational efficiency.

Third, a founder can pursue subsequent opportunities via one of two entry modes—within his or her existing venture (de alio venture) or with a new venture (de novo venture). Both de alio and de novo ventures represent entrepreneurial action, but only the latter leads to a new independent venture. Habitual founders —founders with prior startup experience—are more likely to create a new independent venture to pursue new opportunities. In contrast, novice founders , or founders with no prior startup experience, are more likely to pursue potential opportunities within their existing ventures. Portfolio entrepreneurs are founders who concurrently pursue two or more opportunities. Founders who are more educated, have more relationships with government support agencies, more frequently use their business networks, and have prior startup experience are more likely to become portfolio entrepreneurs. Founders who are more educated, younger, have greater risk-taking prosperity, and are more inventive are more likely to enter a new market by starting an independent venture (than by acquiring an existing firm).

Finally, a new venture strategy can promote innovativeness, thereby impacting new venture performance. The nature of the relationship between a new venture strategy, innovation, and performance is not initially obvious. On the one hand, we would expect a new venture’s innovativeness to generate benefits for the venture, such as market power, cost efficiency, and capabilities like absorptive capacity. On the other hand, a new venture’s innovativeness increases the liabilities associated with newness, which increase its chances of failure. Indeed, in a study of Finnish startups, innovativeness reduced new ventures’ survival chances, and founders’ preferences for risk magnified this negative relationship (Hyytinen et al., 2015 ).

Furthermore, new ventures can tap into external knowledge as a source of innovation. Indeed, open innovation is about “harnessing knowledge flows across firm boundaries” (Greul et al., 2018 , p. 392). New ventures can benefit from open innovation by using such knowledge flows to build their capabilities. Still, they need to recognize that there are risks associated with such openness to the crowd. Interestingly, user entrepreneurs are more likely to allow knowledge flows outside of their ventures without being compensated for this knowledge. User entrepreneurs have personal experience and derive personal benefits from using the products or services that their new ventures offer. Some individuals who create a new venture are called accidental entrepreneurs. Accidental entrepreneurs happen upon an idea for a new venture due to their personal use of a product or service. Like user entrepreneurs, accidental entrepreneurs are more likely to allow knowledge to flow outside their new ventures to others without collecting revenues.

Facilitating Organizational Emergence

Organizational emergence refers to progress in the steps toward creating a new organization. Organizational emergence arises from the completion of new venture–creation activities. A new venture emerges along with four properties: (1) intentionality, which is the founder’s purposeful investment of resources for creating a new venture; (2) resources, which combine as the building blocks of an organization; (3) boundary, which creates a formalized space for the new venture that separates it from other entities; and (4) exchange, which involves exchanging information and other resources across the emerging new venture’s boundary (Katz & Gartner, 1988 ). By engaging in activities that facilitate these emergence properties, founders can establish new ventures with capabilities and stakeholder support to deal with the ventures’ liabilities of newness. Counterintuitively, one study found that founders who were able to quickly perform new venture–creation activities were more likely to terminate the pursuit of their potential opportunities (Brush et al., 2008 ).

Promoting New Venture Legitimacy

New ventures suffer from the liabilities of newness. Founders need to establish legitimacy for their new ventures to enhance new venture performance. New venture legitimacy refers to audiences’ assessments that a new venture and its actions are desirable, acceptable, and appropriate. Founders attempt to achieve legitimacy for their new ventures by seeking endorsement, promoting legitimacy, and securing human and financial capital.

First, founders often seek some form of endorsement to increase new venture legitimacy. Potential stakeholders are typically uncertain about a new venture. Founders can reduce potential stakeholders’ uncertainty over their new ventures by signaling the ventures’ quality and credibility to external audiences. For example, founders can build new venture legitimacy by highlighting their experience. The benefits of experience in establishing new venture legitimacy are magnified when a new venture can gain third-party endorsements and third-party affiliations. Indeed, one study found that positive signals—namely, having a founder with managerial experience, having at least one product in the market, and operating from a commercial property—are more impactful for raising external funding when a new venture affiliates with an incubator (Plummer et al., 2016 ).

Similarly, new ventures can establish legitimacy through several mechanisms: (1) identity mechanisms affect how a venture is portrayed to others to enhance its legitimacy, (2) associative mechanisms establish legitimacy through communicating a new venture’s link to other entities, and (3) organizational mechanisms communicate a new venture’s attributes and achievements (Fisher et al., 2017 ). For example, these mechanisms can lead to certification. Certification occurs when an authoritative or high-status entity formally acknowledges that a new venture has met current standards. This certification can help the founder transition the new venture from a plan to an operational venture, particularly in low-legitimacy sectors.

Second, as implied above, founders can influence new venture legitimacy. Founders seek legitimacy for their new ventures by (1) establishing what matters to them based on their values and beliefs, (2) focusing attention on what matters to their audiences, and (3) finding a balance between what matters to them and what matters to their new ventures’ potential stakeholders. Therefore, founders need to reflect on themselves and their potential stakeholders to engage in legitimacy work targeted at their audiences’ expectations but only in a way in which the founders do not feel like they have overly compromised their values and beliefs.

Also, (potential) stakeholders judge a new venture more favorably when it communicates a legitimately distinctive identity. New ventures communicate their identities through legitimizing claims (i.e., aligning ventures with institutional rules and expectations) and distinctiveness claims (i.e., meaningfully distancing ventures from institutional rules and expectations). The appropriate balance of legitimizing and distinctiveness claims depends on the environment. For example, when entering a new market, founders’ are likely to emphasize distinctiveness from established markets. In contrast, when new ventures need legitimacy (more than distinctiveness), founders are likely to highlight their credentials (including their education, experience, and status) to signal to potential stakeholders that their new ventures align with norms and stakeholder expectations. Founders can also increase audiences’ positive evaluations of their new ventures by engaging in impression management to communicate certain aspects of their new ventures to (potential) stakeholders and disguise others. However, some efforts to establish legitimacy may break moral codes, such as when founders tell legitimacy lies. Founders tell legitimacy lies when they intentionally misrepresent the facts about their new ventures to deceive (potential) stakeholders.

Third, legitimacy can impact access to human capital, which is of critical importance to new ventures. New ventures can attract potential employees by finding the right balance between distinctive-employment claims (e.g., a highly innovative work environment) and new venture-legitimacy claims. In a study of job seekers, founders’ claims about their new ventures’ distinctiveness were more important than claims about these ventures’ legitimacy in attracting employees to work for new ventures (Moser et al., 2017 ). More specifically, this study showed that highly innovative employees are attracted to new ventures that have a distinct ideology —committed to a cause—and new ventures with highly legitimate founders (i.e., founders who were educated at a prestigious university and had professional experience at a renowned firm) (Moser et al., 2017 ).

Finally, establishing new venture legitimacy involves a process over time. This process is dynamic and entails a new venture’s status and reputation. Reputation is an economic concept reflecting past performance that signals quality and merit. Status is a sociological concept of social rank that signals privilege. A new venture can build its status through its reputation (more so for older firms and through big hits [e.g., a blockbuster initial public offering for venture capital firms]) (Pollock et al., 2015 ). Moreover, a new venture’s current status can influence its future status (in a path-dependent or imprinting way) but less so the older the venture. Similarly, a new venture’s first partner’s reputation has an immediate and ongoing impact on the venture’s status. A critical element of establishing a new venture’s legitimacy is enrolling stakeholders to commit resources to the new venture. Stakeholder enrollment is the process by which founders (and new ventures) develop and strengthen their psychological bonds with (potential) stakeholders.

Founder Exit

Founder exit refers to when an individual involved in creating a venture leaves the role of owner/manager of that venture. Founders have different exit strategies and modes of exit.

First, there is heterogeneity in the likelihood of founder exit. Founder exit is more likely to occur in older and larger ventures. As ventures age and grow, their tasks shift from more entrepreneurial tasks to more managerial tasks. Given this shift in the nature of new venture tasks, replacing a founder with a professional manager can benefit a venture. Some founder exits are forced upon founders by investors/owners. Founders are less likely to be forced to exit their ventures when they had success at their previous firms, had prior relationships with the other founding team members (i.e., before starting their ventures), and have prior startup experience. High environmental uncertainty magnifies these founder-persistence effects.

Counterintuitively, there is a founders’ dilemma in which founders who are most successful in growing their new ventures are those who are most likely to be replaced by stockholders. This dilemma is explained by the fact that success in growing a new venture increases the venture’s reliance on external funding. These equity investors acquire greater ownership in the venture and use this control to replace the founder with a professional manager. Generally, founder-CEOs are more likely to be replaced when their ventures perform either among the worst or the best in their respective industries. Therefore, the mismatch between the focal business’s quality and its founder’s ability drives founder displacement. Interestingly, while ventures that replace their founder-CEOs are more likely to fail, those that survive grow faster and have more positive investor reactions at their initial public offerings. Indeed, when investors replace founders with professional managers, venture performance typically increases.

Second, founders may choose to exit their ventures voluntarily. Founders may voluntarily exit their ventures for several reasons. For example, founders may voluntarily exit to avoid racking up additional personal losses (i.e., overcome the bias that causes founders to be reluctant to exit their ventures despite a losing course of action). Founders also voluntarily exit their ventures when they become frustrated by losing control over their ventures’ direction. Therefore, founder exit can be full (exit management and ownership) or partial (exit management or ownership). For example, some founders may have a harvest strategy whereby they voluntarily exit their ventures to “pull money” out of their ventures based on the value they have created.

Starting New Ventures in Different Environments

A new venture’s external environment is the context beyond the boundaries of the emergent venture. The external environment can impact a new venture through its imprinting effect. This imprinting effect differs depending on the specific environmental dimensions and the government influences of the environmental context.

First, the external environment can imprint new ventures. Imprinting explains how founders and ventures develop characteristics based on venture creation that persist despite environmental changes. Founders can be imprinted by their (1) families and friends to pursue multiple unrelated ventures, (2) hobbies to focus on user communities to make product or service improvements without a primary focus on financial rewards, or (3) prior work experience to focus on markets and industries expected to be important (see Chapter 1 ). Moreover, the initial mode of organizing can have a persistent impact on a new venture. For example, founders who initially engage in organizational knowledge brokering —effectively transferring knowledge from one technical field to innovate in another technical field—can enhance the benefits of search for new venture performance (Hsu & Lim, 2013 ). The masculinity or femininity of the industry in which a founder creates a new venture can also imprint on the new venture. For example, new ventures based on female-identity claims in a male-dominated industry can face the liability of differentiation (Micelotta et al., 2018 ). The liability of differentiation is the disadvantage of a new venture offering a gender identity different from the gender of competitors and the focal industry.

Second, the different dimensions of the environment can have different influences on new venture creation and performance. New ventures are more innovative in more competitive and munificent environments and in environments that are less manufacturing intensive and with a smaller market size. New digital technologies can also influence new venture creation through several enabling mechanisms that impact the new venture–creation process. Differences in the external environment can also occur across countries. For example, the benefits of founders’ resources for starting a new venture are magnified in countries that have a more entrepreneurially oriented financial system, a more established educational system, and a culture that is more trusting but less hierarchal and less communal (De Clercq et al., 2013 ). A country’s culture is less hierarchical when its citizens lack a strong desire for the power-structure status quo and is less communal when its citizens perceive themselves as autonomous.

Finally, the government can influence a new venture’s context. One study in Israel found that government subsidies for research and development seemed to stimulate external investment, foster innovation, and improve the likelihood of new firm survival (Conti, 2018 ). Another form of subsidy is the government providing advice, education, and other information to founders and their new ventures. While governments can provide an environment in which founders and their new ventures can benefit, governments can also “throw sand in the wheels of efficiency.” For example, to access resources and services from governments, founders may feel obliged to pay bribes to government officials to receive those resources or services promptly. The payment of these bribes is an illegal activity. A study in China found that nascent entrepreneurs are more likely to offer bribes to government officials when the local economic conditions are declining, especially entrepreneurs who see themselves as underdogs (Baron et al., 2018 ). An underdog identity refers to founders’ beliefs that members of society perceive them as low in social status and that it is difficult to change society’s perception of them.

New venture creation—namely, the phenomenon of starting a new organization—is at the core of the field of entrepreneurship and is also informative to the broader field of management. The literature on new venture creation has rapidly evolved in the past two decades. Hence, in this chapter, we described how entrepreneurs move through the stages of co-creating , organizing, and performing startups. The summarizing model in Fig.  5.1 suggests the following:

During the co-creating stage, the cognitions and social relationships of lead founders or founding teams shape how they acquire stakeholders and build communities of inquiry to start exploiting new business opportunities.

During the organizing stage, lead founders or founding teams develop processes for engaging in activities and improving operational effectiveness. They craft strategies and develop their ventures’ business models.

During the performing stage, lead founders or founding teams execute on their ventures’ strategies to scale the ventures, which includes enhancing the ventures’ legitimacy and, potentially, replacing founders.

Ventures’ external environment shapes the processes of co-creating , organizing, and performing through imprinting lead founders or founding teams and setting the boundaries, including industry characteristics, access to resources, and institutional frameworks.

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Dean A. Shepherd

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Shepherd, D.A., Patzelt, H. (2021). Managing New Ventures. In: Entrepreneurial Strategy. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-78935-0_4

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What is a Business Venture? With Examples + How to Start

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Are you looking to become a business owner ? Have you wondered what a business venture is and how to create one? Do you have a small amount of money and don’t know how to start?

Starting a business may seem intimidating , but it can be incredibly rewarding with the right knowledge and strategy. With a successful business venture , the sky is truly the limit with regard to earning potential.

Motivations for starting a business

If you’re ready to begin your entrepreneurial journey and start a business, I’m here to provide you with the necessary information and inspiration needed for success .

This blog post will define a business venture and examine some successful examples of what you can sell and how to grow fast. I’ll also provide some advice about how to find a profitable business venture. So read on for all the information you need!

What is a Business Venture?

A business venture is a project or undertaking where entrepreneurs create, organize, and manage their companies. Usually, this involves seeking an opportunity to develop and market a product or service in exchange for money. It can include opening a restaurant or launching a clothing line.

Most business ventures are frequently referred to as small businesses since they usually start with an idea and quite limited finances. They are typically supported by one or more angel investors who have faith in this business concept.

Amount of Capital needed to start a business

Any new business venture often starts from an existing gap in the market . It could be a demand for a product that consumers require or simply because of the lack of services available to them. No matter what business you are launching, you must have an idea to provide customers with a specific value.

How to Find a Profitable Business Venture

When looking for a business venture, it is important to look for an opportunity you can capitalize on . Your venture should have the potential to create a profit within a reasonable amount of time to stay in business.

Survival rates for small Businesses

There are many different business ideas to make money ! However, to make a better choice, answer the following three questions:

Question 1: Can I craft a convincing offer that people happily pay money for?

The first question to ask yourself when considering creating a successful small business venture is whether you can craft an offer that people will be willing to pay for . You need to provide something of value, a good business idea that customers feel they need, want, and are happy to pay for.

Think about what kind of product or service your potential customers would benefit from. The key is to make sure the offer solves a problem or fills people’s needs and provides them with something they would be willing to pay for.

So, priority number one is straightforward – identify what your potential customers desire and provide them with exactly that. Additionally, make sure you’re appropriately targeting the right individuals at a time when they will be most inclined to purchase.

Question 2: Can I systematically attract leads at low costs?

Once you’ve identified a great product or service, the next step is to focus on attracting potential customers . When it comes to marketing, it’s quite important to focus your efforts on tactics that will cost you as little money as possible.

It could mean taking advantage of organic social media posts, creating content (such as blog posts or videos) that can be shared and liked, or setting up partnerships with influencers who already have a significant and loyal following.

Traffic Sources

One of the most cost-effective strategies for attracting leads is email marketing . Email newsletters are an excellent way to reach out to potential customers and ensure that your offer is always in front of them.

You can also create targeted ads on different social media platforms such as Facebook, Twitter, and LinkedIn to reach out to people likely interested in your services or products. Ad campaigns like this can be especially useful if you want to sell products and services quicker and without much hassle.

It’s also worth considering offering a discount or giveaway to customers to entice them to make a purchase.

Question 3: Can I convert those leads into customers with relatively low CAC relative to CLV?

It’s not enough to attract leads – the key is to convert them into customers. It means that your offer must be compelling and attractive enough for potential customers to actually purchase it.

To ensure you’re getting a good return on investment, focus on calculating your customer acquisition cost (CAC) relative to your customer lifetime value (CLV) . The CAC is how much you spend to acquire a customer, while the CLV considers all revenue generated from that customer over time.

Customer acquisition cost

To discover your CAC , divide your marketing costs by the number of customers acquired in a given period.

Custome Lifetime Value

The CLV is calculated by taking the average purchase value multiplied by the number of purchases made over a given time frame.

All businesses should strive for a CLV to CAC ratio of 3:1 for each marketing segment. If you spend too generously (for example, 1:1), it can be unprofitable as customers won't cover the cost of acquisition. On the other hand, if you under-invest in customer acquisition and set your bid cap low, then it could mean missing out on profitable customers who have an above-average cost per acquisition.

By taking the time to answer these three key questions, you will be able to determine whether your venture has the potential to create a profitable and sustainable business. The key is to make sure that you are providing something of value that customers feel they need, want, and are happy to pay for!

23 Profitable Business Venture Examples to Inspire You

If you’re looking for some inspiration and ideas, here are 23 profitable business ventures you can consider:

  • Bird Tricks – Bird Tricks is an online business that specializes in providing online pet bird training classes. They use various marketing channels, such as YouTube and Instagram, to attract customers.
  • Learning Herbs – Learning Herbs is an online herbalism education business. They earn financial gain via classes, webinars, and digital products to help people learn about herbs and their uses.
  • Management Consulted – A great enterprise that provides management consulting to organizations, as well as individual and group training sessions. They attract customers using webinars, blog posts, and social media campaigns.
  • Bonsai Empire – A community-based business that specializes in bonsai trees and care for them. They achieve profits through digital products, such as e-books, videos, and tutorials.
  • The Online Dog Trainer – This business venture is based on providing online dog training services. They use YouTube advertising and targeted marketing campaigns to attract customers.
  • Make a Living Writing – A practical venture that focuses on helping you become a successful freelance writer. They generate profits through digital products such as e-books and online courses.
  • Goins, Writer – Need some inspiration? Goins, Writer, is a great business venture that focuses on helping people become successful writers. They use social media and blogging to reach out to the audience and profit from selling e-books, workshops, and courses.
  • How to Program with Java – A highly successful business enterprise that specializes in teaching Java programming. They attract potential customers with YouTube video tutorials and online courses.
  • Donald Robertson – Want to learn how to apply ancient philosophy to everyday life? This business venture is perfect for you. It provides online courses and sells books on Philosophy.
  • Study Hacks – This start-up enterprise helps students become more productive and efficient in their studies. They use blogging and Youtube to reach out to the audience while generating profits through digital products such as e-books and courses.
  • TaskRabbit – A great business venture that connects customers with skilled taskers who can take care of any task. They promote via Google Ads and generate profits through commission on each job completed via the website or app.
  • Wealthy Affiliate – Ready to create a flourishing digital business centered around your passions and hobbies? Look no further than this all-inclusive platform, designed to help you reach success with ease! They generate profits through subscriptions and membership.
  • AuditionHacker – A business venture designed to help aspiring musicians. They offer online courses and one-on-one coaching, helping musicians improve their performing skills.
  • GooseChase – Looking to add something unique to your business? GooseChase is a perfect choice! This venture provides customers with mobile-based scavenger hunts that can be used for different events and settings. They generate profits through commission fees.
  • Edx – A great business venture that specializes in online education. They provide online classes and certifications and generate profits through enrollments and subscriptions.
  • Skillshare – Another great business venture that specializes in online learning. They use targeted ads and offer an annual subscription to generate profits.
  • The Salon Business – This business venture focuses on helping salon owners manage their businesses. They use various marketing tactics, such as webinars and social media campaigns, to attract customers.
  • La Vie En Code – Need to learn a programming language? This business venture offers online coding courses, and they generate profits through enrollments.
  • Make Fabulous Cakes – Want to make a name in the cake decoration industry? This business venture provides support in online tutorials on cake decoration. They attract their customers through YouTube videos and generate profits through e-books, online courses, and digital products.
  • WODprep – A great network that focuses on helping CrossFit athletes become more efficient and effective. Through subscription fees, online courses, and digital products, they are able to generate substantial profits.
  • WoodSkills – Want to learn woodworking? This business venture offers online tutorials and e-books on the subject. They generate profits through their online courses and subscriptions.
  • The Ultimate Disneyworld Savings Guide – A business venture geared towards helping customers save money when visiting Disneyworld. They use targeted ads and e-books to reach their audience and increase profits.
  • Hardcore Music Studio – Looking to learn how to create a professional music studio? This business venture specializes in teaching aspiring producers and musicians the fundamentals of music production. They generate profits through online courses and digital products.

Here are just some of the many profitable business ventures out there. With the right strategy, any venture can become successful! The key is to identify your target audience, understand their needs, and develop a product or service that meets those needs!

Business Venture vs Startup

Stratup Company

Small businesses and startups have a lot of commonalities , but there are also some key differences between them. Small business ventures typically involve one or two people taking risks to generate income from an idea or product. This type of venture usually requires less capital investment , and the goal is often to create a steady stream of revenue that can sustain the business.

On the other hand, startups are typically larger undertakings involving a team of people and more substantial capital investment . The goal of a startup is to create something new or disruptive that will quickly scale up to generate large profits. Startups tend to focus on growth rather than stability and often exploit technology to reach their goals.

Another key difference between small business ventures and startups is the level of risk involved. Small businesses tend to involve less risk , as there is typically less capital investment and a steady revenue stream.

Startups , however, involve much more risk due to their focus on rapid growth and disruptive technology. As a result, the potential rewards from successful startups can be much higher than those of small business ventures. Still, the risk of failure is also greater.

Finally, small businesses and startups take different marketing approaches. Small business owners typically focus on established tactics such as direct mail, print advertising, and word-of-mouth referrals .

Startups often rely more heavily on digital marketing methods such as search engine optimization, social media marketing, and content marketing.

Overall, small business ventures and startups have different goals and approaches regarding risk, capital investment, and marketing. While both types of businesses can be successful, understanding their differences is key to setting realistic expectations for success.

Bottom Line

A business venture is a great way to start and grow a successful business. However, creating a new company requires writing a careful business plan , understanding the target audience , and developing services or products that meet their particular purpose.

Having an idea of which type of venture is right for you, be it a business venture or a startup, can help you make the proper decision and maximize your chances of success.

Consider the amount of risk you’re willing to take on and how quickly you want to make money. With the right strategy, any venture can be successful! Good luck!

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Anastasia has been a professional blogger and researcher since 2014. She loves to perform in-depth software reviews to help software buyers make informed decisions when choosing project management software, CRM tools, website builders, and everything around growing a startup business.

Anastasia worked in management consulting and tech startups, so she has lots of experience in helping professionals choosing the right business software.

a new venture's business plan is important

Why are Business Plans Important?

Creating Business Plan

A business plan is basically putting every vital aspect of your business in written form. You take your goals, vision, competitor information, market value, business strategies, and marketing ideas and put them into a well-organized document.

So now that you understand what a business plan is, it is time to review why it is so important.

Importance of Creating Business Plans

Business plans are not just created on a whim. They have a purpose.

The most significant purpose of a business plan is to guide a venture. Running a business is nothing but making decisions and putting out fires. So, when you’re deep in the storm of business decisions, a business plan acts as a lighthouse for your ship.

Some critical contributions of a business plan in your business are:

Managing Critical Decisions

Managing a venture is consuming in every sense of the word. You don’t always have sufficient time to run a cost-benefit analysis of every decision you need to make. In these situations, creating a business plan is helpful.

If you have a business plan, you will already have a general notion of what is best for your business. And voila! Decision taken and problem solved.

Smoothing Out the Creases

Starting a business is rocky terrain. You have to do a lot of research and figure out the answers to a lot of questions. Often, we are so immersed in the process of collecting information that we forget to make sense of it.

That’s where a business plan works out the creases. A big part, arguably the biggest, of a business plan is to assign meaning to our data. It helps us visualize out the flow of things and fix gaps in our ideas and plans.

Preventing Catastrophes

Do you know that half of the small businesses fail to make it to the 5-year mark ? Most businesses crash and burn before they can even take off. That’s because they fail to answer simple questions like:

  • What is their market share?
  • Where will their money come from?
  • Is the starting team tough enough to handle the initial growing pains?
  • What is the competition, and is their idea bringing something novel and valuable to the table?
  • What will they charge for their products and/or services?

Not being able to figure out even these basic details makes your business vulnerable from the start. But creating business plans ensures that all these details and more is figured out at the beginning.

Fine Tuning Goals and Objectives

Business plans give rhyme and reason to your objectives. Without any big picture understanding from business plans, all benchmarks are arbitrary. They often don’t ontribute much to the success of a business. So, business plans help run your business like a well-oiled machine.

Other than these main contributions, business plans also help to:

  • Get Funding from Investors
  • Understand the Market and its Complications better
  • Convey important goals to all teams
  • Guide future service providers
  • Reduce the risk of failure

Where Can You Get a Business Plan?

The right question is Who Can Write Your Business Plan? And depending on your preference, you have a few options:

  • Write it yourself
  • Assign an employee
  • Hire Someone

Out of these options, hiring someone like OGScapital is the soundest option. Creating business plans is no easy task. It consumes time and effort. So, you should focus on what’s important to you and leave the research work to the experts.

Why Should You Go with OGScapital?

OGScapital is just one option in a sea of business plan developers. But it comes out at the top because of its services that have spanned over years and businesses alike.

With OGScapital, you get a lot of refined benefits. Some of these are:

Result-Driven Approach

The main goal of OGScapital has always been to support small and medium businesses and help in their growth. All of their work is driven by a result-oriented approach. With OGScapital, you don’t have to worry about compliance with the investor or bank requirements. OGScapital does that and a lot more.

Strategic Guidance

OGScapital has been helping businesses in more than 42 industries year in -year out. Whatever your niche may be, social media, commerce, finance, health, energy, or any other, OGScapital will provide you with professional inputs.

The experts at OGScapital give you more in-depth knowledge about the market. And they also highlight problems and positive aspects of your ideas.

Team of Seasoned Professionals

Expert teams at OGScapital have helped enterprises in over 30 countries for more than 15 years. They hire their analysts and workers from the top 10 schools. And these professionals can, in turn, provide you insight worth years of experience with investment backs, consultation firms, and Fortune 1000 clients.

A Huge Network

OGScapital isn’t just involved in creating your business plans. It is committed to offering you every chance of success. It connects you with many other new venture starters and investors in every industry you can imagine.

Creating Business Plan

How Can You Get in Touch with OGScapital?

When you hire OGScapital, you will go through a few general steps in the business plan development process. And first of these steps is contacting OGScapital.

Contact OGScapital

You can get in touch with OGScapital by filling out a brief order form on their website.

Initial Proposal

After getting your request, OGScapital will use the information provided by you to create a custom team for you. They will then send you a proposal with the team information, timing requirements, and proposed approach.

Further Info

During the process, OGScapital will communicate progress and ask necessary queries.

After the decided period, you will receive a draft of the business plan from OGScapital. You can ask for changes in this step.

Once the plan is to your satisfaction, OGScapital will send you a final copy.

So, why wait? Get in touch with OGScapital today!

a new venture's business plan is important

  • MCQ / Quiz QA

Entrepreneurial Development MCQ Questions and Answers Part – 1

Entrepreneurial Development MCQ Questions and Answers Part – 2

Entrepreneurial Development MCQ Questions and Answers Part – 3

1. An individual who initiates, creates and manages a new business can be called _____________. A. A leader B. A manager C. An entrepreneur D. A professional ANSWER: C 2. Trademarks relate to _______. A. Practice and knowledge acquired through experience B. The protection of proprietary information of commercial value C. The right to reproduce ones own original work D. Brand identity ANSWER: D 3. Which could provide an individual with the motivation to start a new business venture? A. The financial rewards. B. A desire to be independent. C. Risk-taking D. All the above. ANSWER: D 4. Which of the following factors would not be included in a PESTLE analysis? A. Government re-cycling policy. B. Proposed reduction in interest rates. C. Competitor activity. D. Demographic changes. ANSWER: C 5. Which industrial sector tends to naturally promote small-scale businesses and Entrepreneurship, and generally has lower barriers to market entry? A. Service. B. Manufacturing. C. Distribution. D. Agriculture. ANSWER: A 6. Why are small businesses important to a country’s economy? A. They give an outlet for entrepreneurs. B. They can provide specialist support to larger companies. C. They can be innovators of new products. D. All the above. ANSWER: D 7. A business arrangement where one party allows another party to use a business name and sell its products or services is known as__________. A. A cooperative. B. A franchise. C. An owner-manager business. D. A limited company. ANSWER: B 8. Which of the following is the reason for business failure __________. A. Lack of market research. B. Poor financial control. C. Poor management. D. All the above. ANSWER: D 9. The use of informal networks by entrepreneurs to gather information is known as _______. A. Secondary research. B. Entrepreneurial networking. C. Informal parameters. D. Marketing ANSWER: B 10. Good sources of information for an entrepreneur about competitors can be obtained from_________. A. Websites. B. Product information leaflets. C. Company reports and published accounts. D. All the above. ANSWER: D 11. A new venture’s business plan is important because ______. A. It helps to persuade others to commit funding to the venture. B. Can help demonstrate the viability of the venture. C. Provides a guide for business activities by defining objectives. D. All the above. ANSWER: D 12. Primary data is________. A. the most important data. B. the data that is collected first. C. new data specifically collected for a project. D. data that is collected second. ANSWER: C 13. Innovation can best be defined as_______. A. the generation of new ideas. B. the evolution of new ideas. C. the opposite of creativity. D. the successful exploitation of new ideas. ANSWER: D 14. Which of these statements best describes the context for entrepreneurship? A. Entrepreneurship takes place in small businesses. B. Entrepreneurship takes place in large businesses. C. Entrepreneurship takes place in a wide variety of contexts. D. Entrepreneurship does not take place in social enterprises. ANSWER: C 15. Entrepreneurs are motivated by _________. A. money. B. personal values. C. pull influences. D. All the above. ANSWER: D 16. Which of the following are described as one of the Big Five personality traits? A. tolerance of others. B. need for achievement. C. propensity to leadership. D. locus of control. ANSWER: B 17. Which of the following is least likely to influence the timing of new business births? A. Government policies. B. Profitability. C. Consumer expenditure. D. Weather conditions. ANSWER: D 18. Which of the following statements is false? A. Market segmentation is a useful process for small businesses to undertake. B. Selling is essentially a matching process. C. A benefit is the value of a product feature to a customer. D. It is a good idea for small businesses to compete solely on price. ANSWER: D 19. The purpose of all good small business strategy is__________. A. to increase turnover. B. to increase profitability. C. to achieve competitive advantage. D. to achieve stated objectives. ANSWER: D 20. Which of the following is a recognized disadvantage of setting up as a start-up as compared with other routes to market entry? A. less satisfaction of the owners. B. less help from various agencies. C. there are more funds required. D. there is a high failure rate. ANSWER: D 21. Someone legally appointed to resolve the financial difficulties of an insolvent firm is called____________. A. an administrator. B. a predator. C. an auditor. D. a turnaround consultant. ANSWER: A 22. Goods or services reach the market place through ________. A. marketing channels. B. multilevel pyramids. C. monopolies. D. multiplication. ANSWER: A 23. To provide financial assistance to entrepreneurs the government has set up a number of___________. A. financial advisors. B. financial intermediaries. C. Industrial estates. D. financial institutions. ANSWER: D 24. State Industrial corporations engage in the development of__________. A. industrial estates. B. institutional estates. C. individual investors. D. agricultural entrepreneurs. ANSWER: A 25. ________ is the first development bank of the country. A. ICICI. B. IDBI. C. SFC. D. IFCI. ANSWER: D 26. IFCI stands for____________. A. Industrial finance corporation of India. B. Institutional finance corporation of India. C. Industrial funding corporation of India. D. Indian finance corporation and institution. ANSWER: A 27. IFCI has been converted into a________. A. joint-stock company. B. co-operative society. C. partnership firm. D. sole proprietorship. ANSWER: A 28. SIDBI was set up as a subsidiary of_________. A. IDBI. B. IFCI. C. ICICI. D. SFC. ANSWER: A 29. Which of the following is a function of SIDBI? A. Extension of seed capital. B. Discounting of bills. C. Providing factoring services. D. All of the above. ANSWER: D 30. SFC is prohibited from granting financial assistance to any company whose aggregate paid-up capital exceed__________. A. 1 crore. B. 1.5 crores. C. 2 crores. D. 2.5 crores. ANSWER: A 31. SIPCOT’s financial assistance is in the form of __________. A. term loan. B. seed capital scheme. C. underwriting the capital issues. D. All of the above. ANSWER: D 32. The business development department of SIPCOT guides entrepreneurs in ______. A. applying for licences. B. approval on collaboration. C. allocation of scarce raw materials. D. All the above. ANSWER: D 33. TIIC is sponsored by the_________. A. Government of Karnataka. B. Government of Andhra Pradesh. C. Government of Kerala. D. Government of Tamil Nadu. ANSWER: D 34. In backward areas, term loans for expansion or setting up a new unit are available at __________ . A. concessional terms. B. differential terms. C. standard terms. D. specific terms. ANSWER: A 35. A commercial banker would prefer a ____________ debt-equity ratio over the years as it indicates financial strength of a unit. A. Declining. B. Increasing. C. Stable. D. Fluctuating. ANSWER: A 36. EDPs course contents contains ___________. A. General introduction to entrepreneurs. B. Motivation training. C. Managerial skills. D. All the above. ANSWER: D 37. Entrepreneurial Guidance Bureau(EGB) was set up by____________. A. SISI. B. SIPCOT. C. IIC. D. SIDCO. ANSWER: C 38. _____________ can be defined as a specifically evolved work plan to achieve a specific objective within a specific period of time A. Idea generation. B. Opportunity Scanning. C. Project. D. Strategy. ANSWER: C 39. Large investment is made in fixed assets, the project will be termed as __________. A. Capital Intensive. B. Labour Intensive. C. Product Intensive. D. Market Intensive. ANSWER: A 40. PERT stands for __________. A. Programme Evaluation and Research Techniques. B. Project Evaluation and Review Techniques. C. Programme Evaluation and Review Techniques. D. Project Evaluation and Research Techniques. ANSWER: C 41. _____________ is used to accomplish the project economically in the minimum available time with limited resources A. Project Scheduling. B. Network Analysis. C. Budget Analysis. D. Critical Planning. ANSWER: A 42. ______________ is a form of financing especially for funding high technology, high risk and perceived high reward projects A. Fixed capital. B. Current capital. C. Seed capital. D. Venture capital. ANSWER: D 43. In _________, machines and equipments are arranged in the order or sequence in which they are to be used for manufacturing the product A. Factory Layout. B. Product Layout. C. Process Layout. D. Combined Layout. ANSWER: B 44. The term ___________ denotes bonus or financial aid which is given by a government to an industry to help it compete with other units A. Incentive. B. Subsidy. C. Bounty. D. Concession. ANSWER: C 45. The granting of cash subsidy on the capital investment is called __________. A. Concessional finance. B. Quantum of Subsidy. C. Interest Subsidy. D. Central Investment Subsidy. ANSWER: D 46. New Small Scale industries are exempted from the payment of income tax under section 80J is called __________ A. Development Rebate.. B. Investment Allowance. C. Rehabilitation Allowance. D. Tax Holiday ANSWER: B 47. __________ is primarily concerned with the identification of the project demand potential and the selection of the optimal technology. A. Techno-economic analysis. B. Feasibility analysis. C. Input analysis. D. Financial analysis. ANSWER: A 48. _____________ refers to some action which is a time consuming effort necessary to complete a specific event. A. A Network. B. An Activity. C. An Event. D. A Node. ANSWER: B 49. _____________ is a graphical representation of the various activity and event relating to a project. A. Network analysis. B. Scheduling technique. C. Logical Model. D. Network Diagram ANSWER: D 50. Activities which must be finished before a given event can occur are termed as _________. A. Preceeding Activities. B. Succeeding Activities C. Concurrent Activities D. Dummy Activities. ANSWER: A

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Quiz questions and answers – 40, quiz questions and answers – 39, quiz questions and answers – 38.

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Quiz Questions and Answers – 30

Translation studies mcq questions and answers part – 2.

Entrepreneurship Management

41. An individual who initiates, creates and manages a new business can be called ______________.

  • A professional
  • An entrepreneur

42. Intellectual Property laws can protect ______________.

  • Trademarks.
  • All the above.

43. A new venture's business plan is important because ______________.

  • It helps to persuade others to commit funding to the venture.
  • Can help demonstrate the viability of the venture.
  • Provides a guide for business activities by defining objectives.

44. Which of the following are described as one of the Big Five personality traits?

  • tolerance of others.
  • need for achievement.
  • propensity to leadership.
  • locus of control.

45. Someone legally appointed to resolve the financial difficulties of an insolvent firm is called ______________.

  • an administrator.
  • a predator.
  • an auditor.
  • a turnaround consultant.

46. IFCI stands for ______________.

  • Industrial finance corporation of India.
  • Institutional finance corporation of India.
  • Industrial funding corporation of India.
  • Indian finance corporation and institution.

47. SIPCOT's financial assistance is in the form of ______________.

  • seed capital scheme.
  • underwriting the capital issues.
  • All of the above.

48. EDPs course contents contains ______________.

  • General introduction to entrepreneurs.
  • Motivation training.
  • Managerial skills.

49. ______________ is a form of financing especially for funding high technology, high risk and perceived high reward projects

  • Fixed capital.
  • Current capital.
  • Seed capital.
  • Venture capital.

50. ______________ is primarily concerned with the identification of the project demand potential and the selection of the optimal technology.

  • Techno-economic analysis.
  • Feasibility analysis.
  • Input analysis.
  • Financial analysis.

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This Monzo cofounder is set to launch a new startup with Index and General Catalyst in talks to invest, sources say

  • Monzo cofounder Jonas Templestein is in talks to raise funds for a new startup, sources told BI.
  • Templestein, who spent almost nine years at the fintech unicorn, departed in December.
  • Top investors such as Index and General Catalyst are among those in discussions to back the startup.

A cofounder of British fintech unicorn Monzo is set to raise funds from a smattering of high-profile investors for a new venture, Business Insider understands.

Jonas Templestein, who spent almost nine years at Monzo, was the last of its founders to leave the bank when he departed in December.

Now, he's primed to raise around $5-6 million at a $50 million valuation cap for a new startup, two sources said. The round is not yet finalized and the figures involved are subject to change.

The venture is raising funding via a simple agreement for future equity (SAFE), a fundraising vehicle popularized by Y Combinator as an alternative to a convertible note.

Rather than a conventional equity investment, investors commit a certain amount of funding, like a form of warrant, and in return, receive stock in the company at a future date.

On Friday, February 9, Templestein incorporated a business called Nustom on Companies House alongside Oliver Beattie, formerly VP of architecture at Monzo.

Index Ventures, General Catalyst, and Accel are all set to back the new business, two sources familiar with proceedings said. Y Combinator partner and former Monzo CEO Tom Blomfield, Anthropic founder Tom Brown, and OpenAI are also set to invest in the deal, one source said.

The company could yet raise more funding at a higher valuation cap, one source familiar with the deal said.

Little is known about the new company as yet, but one source said it will use AI models to create simpler web applications for specific purposes, using less code than regular software development products.

Neither Templestein nor Beattie responded to a request for comment from BI. Index, Accel, and General Catalyst declined to comment. Blomfield and OpenAI did not respond when contacted by BI.

Monzo was founded in 2015 with Templestein among its five original cofounders. In a blog post announcing his departure from the company, he indicated he was stepping away from the business in order to spend more time with his family, spending time on toy projects, and coding.

High-quality entrepreneurs coming out of successful tech startups in Europe have been strongly backed by the continent's VC ecosystem in recent years. Part of this has been a push from investors into the early stage , amid a ghost town of growth funding in recent years , and a sign of confidence in serial founders.

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Skyshowtime ceo on “megahit” ‘yellowstone,’ ad plan and how the rules of tv “still apply”.

The European streaming joint venture of Comcast and Paramount is not cutting back because "the U.S. narrative is not our narrative," highlights Monty Sarhan who also answers questions about recent distribution deals and that Paramount deal chatter.

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SkyShowtime CEO Monty Sarhan

European streamer SkyShowtime just unveiled the addition of an advertising tier in late April. The Standard with Ads plan will roll out across all of the more than 20 markets served by the joint venture of Comcast and Paramount Global.

The news of the ad tier comes around a year after the streamer finished its launches across its European markets at the end of February 2023.

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In a conversation with The Hollywood Reporter , Sarhan discussed SkyShowtime’s first full year, its original content strategy, recent distribution deals and, of course, the decision to debut an ad tier and what it means for the streamer.

SkyShowtime just unveiled that it will launch an advertising tier, a cheaper ad-supported service plan in April. How does that fit into your business strategy and mix?

It is a new exciting chapter for SkyShowtime. We’re going to be launching a new ad-supported plan on April 23. So SkyShowtime will offer two plans to consumers, one that has ads, and we will continue offering our current plan without ads. For us, it’s a big moment, because when we first launched 18 months ago, we did so with a focus on the consumer. We wanted to make sure that SkyShowtime stood for value, and we still stand for value. That’s really what this new ad plan is all about. Our vision is to provide great entertainment at a great price. That’s our value proposition.

In the early days of streaming, there was a belief that advertising would put off consumers because they were too much like traditional TV. Now, many streamers have launched ad tiers. What do you see in terms of consumers’ appetite for ad tiers in your European markets?

We talk a lot about value. I don’t hear other streamers talking a lot about value. And our launch of the ad tier is a commitment to that. We’re doing something that no one else has done: we’re launching an ad plan across all of our 22 markets. That’s something that neither Max, Netflix or Disney+ are doing. We’re doing something that’s not been done and something that our competitors are not doing.

You mentioned value and the competition. With the ad tier launch, the price for your plan without ads will go up. Is the ad tier offering a way to reduce the impact that has on subscribers? And how do you feel about SkyShowtime’s pricing in the broader market?

We launched 18 months ago at a price that was cheaper than Netflix, cheaper than Max, cheaper than Disney+. So we were priced below all of the other major streaming services. We did that intentionally. And when we thought about the rising content costs, the investment that we’re making in local originals, which is only increasing, clearly, there was a need to look at the pricing for our standard plan. But we also want to continue leading on value. So we wanted to give consumers an option that was at a lower cost.

Do you have any forecasts for what percentage of people will have the ad tier versus the non-ad tier a year from now?

We’re excited to see what the consumer response is going to be. There are going to be consumers in the marketplace who want to come and experience ads and pay a lower price. And there are going to be consumers that are going to still want that premium experience. We haven’t shared any projections for how that breakdown is going to be, but we’re very excited about giving consumers more choice. And we believe that there’s going to be great demand for both plans.

We have a really strong content proposition. We’re the proud and exclusive home for the Yellowstone universe. In our markets, we are the only place to watch all five seasons of this megahit. And we’re the only home for [ Yellowstone spin-offs] 1883 and 1923 . So at Sky Showtime, we’ve dubbed 2024 to be the year of Yellowstone . [We also have] all these big global shows like Halo and Pokerface , both of which are returning for season 2, Yellowjackets is coming back, we have The Tattooist of Auschwitz that’s very moving. So it’s a lot of great content for consumers for a great headline price.

You have never broken out subscriber figures. Any insight you can share on that? And do I understand you right that the ad tier is also a way for SkyShowtime to expand its addressable market?

Absolutely. We believe in reaching all segments of the market, especially because many of our markets are price-sensitive. Even in markets that aren’t price-sensitive, consumers feel that the cost of streaming has gone up. And so at a time when people may be hesitant to subscribe to new services or feel that streamers keep increasing prices, we’re sending a message that we hear you, we care, and here’s an amazing service at an amazing price – here’s great content, great entertainment at a great price. We do think it increases the total addressable market for us in our markets, that we are bringing more people to SkyShowtime by giving them more options.

We don’t release subscriber numbers, but 2023 was a big year for us. It was still a launch year, we launched in some of our biggest markets, including Poland and Spain. We’re live and operational across all of our markets. We saw such a great response to our launch and have just continued to grow. We are still very much in growth mode. We’re continuing to scale in our markets. And these are markets where streaming is only growing.

SkyShowtime is also serving up local content, including original programming, offering 10 originals last year, in addition to all the Hollywood titles. What can you tell us about your local and original content strategy and how much of an opportunity that is?

Local content is incredibly important. It’s part of our value proposition. We are a European streaming service.

In September , we had Kai Finke join us from Netflix as our chief content officer. He’s been ramping up both acquisitions and putting things into development. Original programming is an important part of our overall content strategy, and we will continue to invest in local content, both catalog content as well as originals in our key markets.

We’ve already announced some originals for 2024. There are more on the way. We have announced Veronika , which is coming in March and is a Nordics original [starring Alexandra Rapaport as a police officer and mother of two in a small town who struggles with her complicated family life and a secret pill addiction]. We also have Los Enviados (The Envoys) season 2, a Spanish-language original, which just premiered that’s doing exceptionally well. And there’s more on the way.

SkyShowtime has in recent months struck several partnerships with distributors, increasing its reach. What’s your distribution strategy now that your direct-to-consumer service has been available in all your markets for at least a year?

You’ve seen other streamers adjust their strategy, but partnerships were part of our strategy from day one. We’ve always said we want to be the best streaming partner in the b2b space. And we’ve delivered on that. Our partners are really happy with our content. And there’s more on tap, we are in advanced negotiations with several distributors in multiple territories right now.

A lot of other streamers have been reducing spending and become more selective about originals. Why are things different for SkyShowtime?

In an age where other streamers are cutting back on content, we benefit from being a joint venture, we have the combined content pipeline of two of the biggest entertainment companies in the world. And that positions us well for success, it positions us well versus our competitors. And it’s why we continue to provide great value to consumers. That’s why we’re able to say that we have nearly 50 percent of Hollywood box office, we have Oppenheimer coming just in a few weeks, we have Dungeons & Dragons: Honor Among Thieves , Mission: Impossible – Dead Reckoning , The  Super Mario Bros . Movie all of those big global shows that come to us. So being a joint venture is a huge advantage. It’s one of our superpowers.

There has been all this chatter about whether Paramount Global, one of the joint venture partners behind SkyShowtime, could be sold or do some kind of other deal, possibly even with Comcast. Does that in any way affect the work of SkyShowtime at this stage?

I can’t comment on anything going on with our shareholders. All I’ll say is this: we remain focused on super-serving consumers in our markets. We’re focused on that every single day. How can we provide more value at a great price to our consumers? How can we deliver more great content to all of our existing members. We’ve got this great combined content pipeline that’s coming to us for years to come, and we’re making big investments in local programming. So that’s what we’re focused on. We feel really good about the future.

Anything that has happened or popped in recent months that has particularly surprised you and your team?

Yellowstone , Yellowstone , Yellowstone . That is a mega-hit. It has surprised us and surpassed all of our expectations. We started seeing it really overperform starting late last year. We’ve invested more money to market SkyShowtime to expand the audience, to bring more people in to watch Yellowstone and to experience the Yellowstone universe because this is exclusive to us. All five seasons are only on SkyShowtime, and we’re the home for [spin-offs] 1883 and 1923 with Harrison Ford and Helen Mirren.

We have the biggest show in the world today on Sky Showtime. It’s really unique. It’s really special. And it has been a very pleasant surprise for us and for viewers who come in and experience the show. They’re really drawn to it. There’s independent research from Parrot Analytics that shows that the demand for this show is off the charts. It’s got 15 times greater demand than the average television series in markets like Spain, Poland and Sweden. We’re extremely proud to be the home of that show and we’re happy that our members are loving it so much.

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