The key factors in the Timmons model are the entrepreneur and the founding team, the opportunity, and the resources that are mustered to start the new organization. Put simplistically, the Timmons model is normative. The key ingredient is the entrepreneur. If the entrepreneur has the right stuff, he or she will deliberately search for an opportunity, and upon finding it, shape it so that is has the potential to be a commercial success, or what Timmons calls a high-potential venture. The entrepreneur then gathers the resources that are necessary to start a business to capitalize on his or her opportunity.
Despite the variety of businesses, entrepreneurs, geographies and technologies, Timmons identify central themes or driving forces that dominate this dynamic entrepreneurial process:
>It is opportunity driven
>It is driven by a lead entrepreneur and an entrepreneurial team
>It is resource stingy and creative
>It depends on the fit and balance among these
>It is integrated and holistic
These are controllable components of the entrepreneurial process that can be assessed, influenced and altered. Founders and investors focus on these forces during careful due-diligence processes to analyze the risk and determine what chances can be made to improve a venture’s chance of success.
The Entrepreneurial Process
The process of starting a new venture is embodied in the entrepreneurial process, which involves more than just problem solving in a typical management position. An entrepreneur must find, evaluate, and develop an opportunity by overcoming the forces that resist the creation of something new. The process has four distinct phases: (1) identification and evaluation of the opportunity, (2) development of the business plan, (3) determination of the required resources, and (4) management of the resulting enterprise. Although these phases proceed progressively, no one stage is dealt with in isolation or is totally completed before work on other phases occurs. For example, to successfully identify and evaluate an opportunity (phase 1), an entrepreneur must have in mind the type of business desired.
Identify and Evaluate the Opportunity
Opportunity identification and evaluation is a very difficult task. Most good business opportunities do not suddenly appear, but rather result from an entrepreneur’s alertness to possibilities, or in some case, the establishment of mechanisms that identify potential opportunities. For example, one entrepreneur asks at every cocktail party whether anyone is using a product that does not adequately fulfill its intended purpose. This person is constantly looking for a need and an opportunity to create a better product. Another entrepreneur always monitors the play habits and toys of her nieces and nephews. This is her way of looking for any unique toy product niche for a new venture.
Developing a Business Plan
A good business plan must be developed in order to exploit the defined opportunity. This is a very time-consuming phase of the entrepreneurial process. An entrepreneur usually has not prepared a business plan before and does not have the resources available to do a good job. A good business plan is essential to developing the opportunity and determining the resources required, obtaining those resources, and successfully managing the resulting venture.
Determine the Resources Required
The resources needed for addressing the opportunity must also be determined. This process starts with an appraisal of the entrepreneur’s present resources. Any resources that are critical need to be differentiated from those that are just helpful. Care must be taken not to underestimate the amount of variety of resources needed. The downside risks associated with insufficient or inappropriate resources should also be assessed. Acquiring the needed resources in a timely manner while giving up as little control as possible is the next step in the entrepreneurial process. An entrepreneur should strive to maintain as large an ownership position as possible, particularly in the start-up stage. By understanding resource supplier needs, the entrepreneur can structure a deal that enables the resources to be acquired at the lowest possible cost and the least loss of control.
Manage the Enterprise
After resources are acquired, the entrepreneur must use them to implement the business plan. The operational problems of the growing enterprise must also be examined. This involves implementing a management style and structure, as well as determining the key variables for success. A control system must be established, so that any problem areas can be quickly identified and resolved. Some entrepreneurs have difficulty managing and growing the venture they created.