Ideas for a business venture that are viable commercially are very rare. The interested person or party needs to have a complete understanding of the sector that is chosen for the venture and for this prior knowledge is crucial. Cashing in on an idea for a business venture could go wrong in many ways and cause immense losses to the investors (Foss, Lyngsie & Zahra, 2013). Some of those are lack of insight of the investors in the selected business sector, poor objective evaluation, insufficient financial understanding, and poor management of human resources, incomplete understanding and upgradation of the technical requirements.
These problems are, however, scaled down to a form which can be dealt with, should the problem arise, by having prior knowledge while evaluating business opportunities. Having first-hand knowledge and work experience in the chosen field makes the people who are starting a business aware of the uniqueness of the chosen venture, the target markets where their product would best thrive, the expected growth rate and profitability, the regulatory and legal issues associated with the business, the cash flow and resource management (Gupta, Turban & Pareek, 2013).
The most crucial step in a business start-up is opportunity evaluation and a person with prior knowledge can best do so by identifying the opportunity and analysing it by employing the lateral and vertical thinking techniques, chalking out a business plan, arranging sufficient capital, having a clear organizational structure with proper definition of roles and responsibilities among the employees and managers and an attempt to meet the break-even point without failure (Wang & Bansal, 2012).
Legal Structures for New Ventures
New ventures often get got up in regulatory and legal issues. This problem arises not only because the firms are often unaware of such issues but also when the firms focus so eagerly on amassing profits that they indulge in unethical acts. These ethical dilemmas that the entrepreneurs face often makes them act either for the firm by indulging in cases like bribery, manipulating suppliers and price-fixing (Park & Steensma, 2012). In other cases, they act against the firm through cases of embezzlement, false appraisals and import of sub-standard products.
The Australian Institute of Criminology in the year 1992 defined such a situation as “Punishable acts that are committed by an individual in controlling positions which benefit the entrepreneur personally”. The Global Corruption Report ranks countries worldwide on a scale of 0-10 where zero is indicative of a highly corrupt nation and ten is clean.
Entrepreneurs need to be well aware of the impact that cases of corruption have on the brand image and consequently on company growth. They affect transaction costs which causes damage on the suppliers’ end and also diminishes the trust of the customers. Corruption in a new venture usually is a by-product of the political instability in the region. Steps to prevent this include prevention of counterfeiting, IP theft and piracy (Wang & Bansal, 2012). Patents, be it commercial, scientific or internet-related, should be in place. Trade secrets should not be exchanged openly and only trusted employees should have access to these. Copyright protection must be presented in a written and recorded form.
Foss, N. J., Lyngsie, J., & Zahra, S. A. (2013). The role of external knowledge sources and organizational design in the process of opportunity exploitation. Strategic Management Journal, 34(12), 1453-1471.
Gupta, V. K., Turban, D. B., & Pareek, A. (2013). Differences between men and women in opportunity evaluation as a function of gender stereotypes and stereotype activation. Entrepreneurship Theory and Practice, 37(4), 771-788.
Park, H. D., & Steensma, H. K. (2012). When does corporate venture capital add value for new ventures?. Strategic Management Journal, 33(1), 1-22.
Wang, T., & Bansal, P. (2012). Social responsibility in new ventures: profiting from a longâ€term orientation. Strategic Management Journal, 33(10), 1135-1153.