Assessing Business Start-ups

• the objectives that entrepreneurs may pursue when establishing businesses
•  how to assess the strengths and weaknesses of a business plan
• the reasons why business start ups can be risky
• the major reasons why start up businesses fail.

• To be your own boss (29%)
• Develop a hobby (15.3%)
• To make money (14.5%)
• Saw a gap in the market (11.9%)
• Career development (11.5%)
• Hard to find a job (10%)
• Family Tradition (5.4%)
• Other (2.4%)

It is possible to judge the success of a business start up against its objectives.

Possible objectives include:

• to have greater control over your life
• to develop an idea
• to maximise profits
• to benefit the community

• Where do you want to be in the future, what is your goal?
• What are your objectives - how will you measure that you achieve your goal?

The most effective business objectives meet the following criteria:

• S - Specific
• M - Measurable
• A - Agreed
• R - Realistic
• T - Time-based

• Is there a demand for this product?  This is probably the most fundamental issue in assessing a business plan.
• What is the competition?  How powerful is it?
• Has the business planned its cash flow management?   For most new businesses cash flow is a critical issue.
• What is the experience of the entrepreneur? Successful entrepreneurs have learned much from previous and unsuccessful attempts at starting a business.
• Will it make a profit?  Although not all businesses set out with the objective of making a profit, this is an important objective for most enterprises.   

Lack of Business and Management Skills

• Sales
• Procurement
• Finance
• Marketing
• Administration
• HR Management
• Distribution
• Legislation
• Production
• IT

Finance

• May be limited knowledge to forecast accurately.
• Raising the capital is hard.
• Cash flow problems can easily occur.

Marketing

• Inaccurate research can lead to misleading information
• Consumer inertia
• Small marketing budgets

• Poor management. Many analysts believe this is the prime reason for the failure of a business.
• Financial problems. These include failure to pay taxes, overspending or cash flow mismanagement.
• Lack of demand. A start up business might find that its sales are substantially lower than it had forecast.
• External shocks. Small and newly established businesses are particularly vulnerable to unexpected external events such as dramatic rises in oil prices.