INDUSTRY AND MARKET ISSUES (PART 4)
MANAGEMENT TEAM ISSUES
Entrepreneurial Team
Attractive opportunities have existing teams that are strong and contain industry superstars. The team has proven profit and loss experience in the same technology, market, and service area, and members have complementary and compatible skills. An unattractive opportunity does not have such a team in place or has no team
Industry and Technical Experience.
A management track record of significant accomplishment in the industry, with the technology, and in the market area, with a proven profit and lots off achievements where the venture will compete is highly desirable. A top-notch management team can become the most important strategic competitive advantage in an industry.
Trust and integrity are the oil and glue that make economic interdependence possible. Having an unquestioned reputation in this regard is a major long-term advantage for entrepreneurs and should be sought in all personnel and bakers. A shady past or record of questionable integrity is for B team players only.
Intellectual Honesty
There is a fundamental issue of whether the founders know what they do and do not know, as well as whether they know what to do about shortcomings or gaps in the team and the enterprise.
Fatal-Flaw Issues
Basically, attractive ventures have no fatal flaws; an opportunity is rendered unattractive if it suffers from one or more fatal flaws. Usually, these relate to one of the above criteria, and examples abound of markets that are too small, that have overpowering competition, where the cost of entry is too high, where an entrant is unable to produce at competitive price, and so on.
PERSONAL CRITERIA
Goals and Fit
Is there a good match between the requirements of business and what the founders want out of it? Dorothy Stevenson pinpointed the crux of it with this powerful insight: “Success is getting what you want. Happiness is wanting what you get.”
Upside/Downside Issues
An attractive opportunity does not have excessive downside risk. The upside and the downside of pursuing an opportunity are not linear, nor are they on the same continuum. The upside is easy, and it has been said that success has a thousand sires. The downside is another matter; it has also been said that failure is an orphan. An entrepreneur needs to be able to absorb the financial downside in such a way that he or she can rebound without becoming indentured to debt obligations.
If an entrepreneur’s financial exposure in launching the venture is greater than his or her net worth – the resources he or she can reasonably draw upon, and his or her alternative disposable earnings stream if it does not work out – the deal may be too big. While today’s bankruptcy laws are generous, the psychological burdens of living through such an ordeal are infinitely more painful than the financial consequences. An existing business needs to consider if a failure will be too demeaning to the firm’s reputation and future credibility, aside from the obvious financial consequences.
Opportunity Cost
In pursuing any venture opportunity, there are also opportunity costs. An entrepreneur who is skilled enough to grow a successful, multi-million dollar venture has talents that are highly valued by medium- to large-size firms as well. While accessing benefits that may accrue in pursuing an opportunity, an entrepreneur needs to heed other alternatives, including potential “golden handcuffs,” and account honestly or any cut in salary that may be involved in pursuing a certain opportunity.
Further pursuing an opportunity can shape an entrepreneur in ways that are hard to imagine. An entrepreneur will probably have time to execute between two and four multi-million naira ventures between ages of 25 and 50. Each of these experiences will position him or her, for better or for worse, for the next opportunity. Since an entrepreneur in the early years needs to gain relevant management experience and since building a venture (either one that works or one that does not) takes more time than is commonly believed, it is important to consider alternatives while assessing an opportunity.
Desirability
A good opportunity is not only attractive but also desirable (i.e., good opportunity fits). An intensely personal criterion would be the desire for a certain lifestyle. This desire may preclude pursuing certain opportunities that may be excellent for someone else. The founder of a major high-technology venture in Lagos area was asked why he located the headquarters of his firm in downtown Port-Harcourt, while other such firms were located either in Lagos or Abuja. His reply was that he wanted to live in Port-Harcourt because he loved the city and wanted to be able to walk to work. He said. “The rest did not matter.”
Risk/Reward Tolerance
Successful entrepreneurs take calculated risks to avoid risks they do not need to take. This is not to suggest that all entrepreneurs are gamblers or have the same risk tolerance; some are quite conservative while others actually seem to get a kick out of the inherent danger and thrill in higher risk and higher stake games. The real issue is fit ─ recognizing that gamblers and overly risk – averse entrepreneurs are unlikely to sustain any long-term successes.
Stress Tolerance
Another important dimension of the fit concept is the stressful requirements of a fast-growth high-stakes venture. As it is often said. “If you can’t stand the heat, get out of the kitchen.”
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