Launching from the initial stage as there are

Launching
a new start-up business is a complex, chaotic and rarely linear process. It
starts when a person or a group of people decide to devote their time and
resources to the formation of a new business. However just intent to start
business is not enough to make things happen. Start-up business faces a lot of
challenges from the initial stage as there are a lot of uncertainty of outcomes
in the market and a lot of unknows. Consequently, the process of launching and
setting up a new start-up business is challenged with several types of risks
such as financial, product, market, management/team, and customer.

According
to Allen (2016), in order to minimize financial risks, two questions should be
analyzed and answered, first whether the start-up business is financially
feasible or saying in other words if the capital requirements of start-up
business are appropriate. Second, the start-up business should make
profitability analysis and define if it is worth to make efforts in
establishing firm. It is essential that the financial figures are in line with
the goals that the company sets and that the goals are realistic and
achievable. When all the aspects of start-up business are considered in
conformance, “the business plan with a full set of financial statements can be
developed. That process will further reduce the uncertainty inherent in the
start-up business” (Allen 2016, p. 22). Therefore, a start-up business should
have a well-defined financial plan to ensure that the appropriate amount of the
capital is allocated

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

Another
risk associated with the launching of a start-up business is the product risk
that is related to an aspect that start-up may not succeed in creating the
product that it intends to generate. It happens because some start-ups are in
difficulty of making explanations about its product. They fail to explain what
problems does their product solve and why it is worth to invest in this
product. If start-up business fails to address the following issues, it will
fail in addressing the market as customers would not be likely paying attention
to this product. Thus, for minimizing this risk, start-ups should focus on the problems
of customers and fill the gap. Osterwalder, et. al (2014) in the book “Value
Proposition Design”, defined that value proposition is
obligatory for those creating a new venture. The value proposition enables to
outline key issues for understanding and finding customers’ problems and
getting possible solutions.

Moreover,
before launching the business, it is essential to assess the market. Entering
unfamiliar market can present challenges for the start-up business. Therefore,
new ventures should be actively involved in the market for finding out
opportunities in the market. According to Byers (2015) market research is used for
gathering information and defining opportunities in the market. It is “critical to the new venture team: without is, a new venture
may launch a product only to find out that the customer does not value it” (Byers
et al. 2015, p. 31). Market research is essential
for business start-ups, as “it helps to understand better its customers,
evaluate trends in the market, find out about the demand of a product and know
about competition in the market. Moreover, it helps to define future
possibilities and considers strategic road mapping route” (individual journal,
30/11/2017). There are two types of market research: primary and secondary data
collection. The primary (first-hand data) that can be either qualitative or
quantitative and which deals with conducting face-to-face interviews, surveys,
and focus groups. The secondary (published data) is done by conducting research
reports, industry research, competitors’ websites, or other ways of
observation. The primary research, mainly face-to-face interview, is effective
for start-ups as it creates early evidence of validation, helps to find out
about the potential market and to identify customer’s needs, solutions and
buyer personas.

Another
risk associated with new venture creation is management/team risk. It is
associated with the fact that start-up can fail to meet its objectives due to
poor teamwork or because the team is composed of people that do not have
appropriate skills or knowledge. Therefore, it is crucial for a start-up
business to have a good team as only with the help of good team it will be
possible to overcome or minimize risks. 
Good teamwork is essential in finding out ideas for new product
development and in bringing ideas into the market.

Moreover,
the process of setting a new start-up is associated with the risk of customers,
mainly uncertainty of customer’s needs, problems and values. As the start-up
business operates in an uncertain environment, where the company does not know
its customers and have ambiguous views on what their product should look like,
it gets harder for them to forecast the future success.  According to Reis (2011) usually the start-ups do not have
long, stable operating history and the environment they operate is uncertain,
consequently, it is vital for start-ups to meet the needs and values of the
customers. Before starting the business, ventures should focus on acknowledging
what is essential to customers and afterward process to build “minimum viable
product”. According to Onyemah (2013), companies should figure out if there is
demand for their initial product offerings and afterward immediately start
selling the product not waiting until the product is perfect. Subsequently, on the
way of company development, additional features of the product could be added.

To
sum up, the abovementioned analyze of the different type of risks shows that
there are a lot of challenges when starting the business and entrepreneurs
should try to reduce the level of risk if it is not possible to eliminate it.
Moreover, company’s disposition to risk growths as the venture become larger and
due to high risks associated with new venture creation, a lot of entrepreneurs
prefer to give up and to drop out at an initial stage before the start-up
business is transformed to an already well-established firm. Therefore “understanding
where the risk lies enables entrepreneurs to respond effectively through
process improvement strategies and buffer strategies” (Allen 2016, p.439).

Recently
radically new approach has been emerged and obtained the great importance. This
approach is called “lean start-up” and it makes the process of starting a business
less risky. “It favors
experimentation over elaborate planning, customer feedback over intuition, and
iterative design over traditional “big design up front” development” (Blank 2013). According to Reis (2011), lean start-up represents a new approach to
creating a continuous innovation. The lean start-up has pushed the traditional approach
of launching a new venture and has the advantage over it as lean start-up
approach first validates the market in order to see if the business is
profitable, thus the risks are minimized. Validating the market is essential as
start-ups do not have long, stable operating history or a relatively static
environment. Moreover, the traditional approach uses the business plan composed
of many pages, that takes a lot of time and effort therefore in order not to
waste time and have less paperwork, lean suggests to make a roadmap instead of
using a business plan.

In addition, in the lean start-up framework “designers and
entrepreneurs often rely on Persona to imagine user-centered, undreamed of
concepts that they subsequently test and improve through short iterations and
continuous customer involvement” (Buisine, et. al. 2016). Outlining the buying persona also
enables to minimize risks when starting a business as it helps to identify the
needs of customers and address the product accordingly. “Personas put a face on the user—a memorable, engaging, and
actionable image that serves as a design target.” (Jascko 2012, pp.1056). It is
some character that represents the segment of the population and is described
in terms of needs, goals, and tasks” (individual journal, 30/10/2017). Identifying
buying personas for my group project work was crucial as it helped to become
more user-focused and enabled our team to put ourselves in customer’ shoes.
Moreover, having preliminary identified the buying personas enabled us to
understand the customer, its demands and plan further steps in developing the business
idea.

The lean start-up process uses the principles such as
building business model canvas for outlining hypothesis, “get out of the
building” approach that is called customer development that is used to assess
hypothesis and agile development, that belongs to process where minimum viable
product is created by start-up business and where there is abolished the excess
time and the product is built in short cycles. When launching a new venture,
the business model canvas is effectively used in the lean start-up in
preference to an old method of creating of business plan model. Business
model canvas is composed of nine building blocks: customer segment, value
proposition, channels, customer relationship, revenue streams, key resources,
key activities, key partnership, cost structures. These blocks define various
groups of people or organizations that the business aims to reach and serve.
This business model looks at nine building blocks of the business at one page,
that makes the process more efficient. According to Osterwalder and Pigneur
(2010) “A business model describes the rationale of how an organization
creates, delivers, and captures value”. It is a diagram of how business creates
value for customers and itself. “Business model canvas is used to easily
describe the model of business and to create new strategic alternatives” (individual journal, 03/12/2017).

Consequently,
validating market, outlining buying personas and building accurate business
model can reduce uncertainty for a start-up business and boost business in tough
situations. Lean approach rather than traditional methods can help start-up
businesses to launch products quicker and cheaper. Moreover, it enables to
deliver products according to the needs of customers. Therefore, lean start up
makes the process of launching a new venture a smooth and less risky process.