business model and venture model

Investors typically find a business potential in the industry and create models that they can adopt to ensure the investment’s feasibility. In this situation, they adhere to both venture models and market models, which aid entrepreneurs in determining the tactics they should use to ensure that their business objectives are met. New investments are vulnerable to risk incidents, which require diligent monitoring by the team to prevent the loss of the business’s performance. The discovery of a business idea could pave the way for investors to find the team needed to launch the business. In this case, the group consists of both the employees, directors, and the managers. Resources and the capability to make use of the materials is an essential aspect in starting up the business. Therefore, there is the need for the investors to guarantee a steady supply of the raw materials. The startup of the firm is full of risks and the entrepreneurs need to have alternative sources of funds which they can use to bail out the business in case of financial problems. If the organisation adheres to these models, there is the probability that it will thrive in the competitive business environment thus ensuring the acquisition of profits by the investors.

Key words: venture model, business model, business goal, resources, business investors.

Venture Models and Business Model

Business model appears to be the fundamental aspect through which a business idea can succeed irrespective of how cold or viable it is. The start-up of a business must have a viable way of making a profit through its operations for sustainable management in the future investments. In most cases, the investors attempt to make use of the some of the business models and the venture plans to shape the business ideas. Business model refers to the interconnectivity which business forms to ensure that they succeed in the competitive business environment. There is the existence of different ventures, but they depend on the industry in which the firms operate. After the identification of the business venture, the investors have to come up with the business model which for sustainable investments in the future. The essay focuses on the profit business model and financing, team, and the requisition models of venturing.

New Team Venture Model

In this model, the new company focuses on ensuring that they acquire an efficient group of employees, founders, and advisors that help in improving the performance of the business. The company does not hire the employees in a single approach. However, as the new firm continues to accrue profits, it continues to engage both qualified and highly paid employees. In many times, the businesses focus on ensuring that they higher board of directors, advisors, and professionals who provide that they lead the new company in the right direction (Ensley et al. 2003, p. 330). In most cases, the businesses have a higher probability of failing in their operations. The management team remains responsible for the success or failure of the company due to the inability to track the records of performance of the business or the inability to adjust to the changing operations. For the success of an organisation, there is the need for the establishment of an active management that is capable of making viable decisions that favour the firm’s activities. The management team applies in both the sole entrepreneurial business as well as a company formed by the group of people.

The management team of a company brings various advantages to the business. For instance, the customers remain essential to the success of any business. The stakeholders of the new venture include the directors, employees, and the managers. The team members bring in diverse talents and resources to the firm thus ensuring that they serve the interests of the clients. For example, when various investors come together and decide to venture into a particular business, they pull their resources together thus creating capital for the company. Also, the team has a higher capability of ensuring managing the resources efficiently. In coming up with the business management team, the firm encourages diversification, and it is always in a position to create a viable social network (Hmieleski and Ensley 2007, p. 880). The people act as the ambassadors for the company’s products thus bringing many customers to the business. Customers emphasise the quality and the time in which they receive the commodities. The team can employ the qualified stakeholder for innovation thus improving the quality of products. Teamwork is an essential aspect of the performance of the business as the members of the group offer psychological support to their mates thus success in their activities.

If the investors come up with a strong management team, there will be a higher probability of making the right decisions thus drawing customers to the business. Though this venture model has the innovative capability required for the business operations, the plan has some adverse effects. For instance, the innovation and decision-making process may be slow thus depriving the company the opportunity to respond to any occurrence in the business efficiently. Additionally, the people in the industry may fail to get along thus leading to the emergence of conflict. For instance, the management team may decide to elect one of their members to become the CEO of the company. However, if some of the personal failing to win the offer may end up causing conflict which may affect the performance of the company negatively. Therefore, the team business venturing model requires careful monitoring for the investment to develop and sustain itself in the future (Amason et al. 2006, p. 128). However, a well-developed entrepreneurial team has the capability of overcoming the operation challenges resulting from activities. For example, there may be problems that arise from the markers which would want to disrupt the business performance. Alternatively, the business entrepreneurs tend to operate in a diversified environment where they offer different types of products. Under such circumstances, there shall be the need of the team workers to reduce the complexities resulting from diversification.

Resources and Capability Model

The implementation of the business idea requires the collection of resources needed for the operation of the business. Before the start of the venture, the entrepreneur focuses on securing the scarce resources from the competitive business environment. The process has to follow three essential steps required for the development of the funds. For instance, there is the need for the establishment of the resource base then credibility and legitimacy follows. In this case, the resources include both the human, physical, financial, social, technological, and the organisational resources. The setting of the resource base helps the company to identify the resource avenue through which the business can create legitimacy (Dollinger 2008, p. 175). For the industry to achieve this objective there is the need for the establishment of the secure working team which emphasises credibility. The investors need to come up with resources required for the creation of goods and services. All the assets, capabilities, and organisations expect the business to coordinate all the assets thus creating the company. Regarding the resources, the firm uses resources that are both direct owners and external resources. From the internal resources, the business uses the skills, knowledge, and experience of the workers. The management of the resources requires the company to make use of the employees’ capacity in managing the funds. In the setting of the business strategy, the companies expect to apply the resources and capabilities to create comparative advantage. Through the application of the resources and the capacities, the company can focus on building long-term goals thus acting as the guidance for their operations. If the firm fails to identify the required resources, there is the likelihood that there will be delays in the firm’s production. In most cases, the firm uses such strategies to ensure that they create an avenue through which they receive a continuous flood of revenue from its sales. The combination of the theory and the creation of strong customer reputation remains an essential aspect of the business operation.

The problem of delay is solved through the establishment of readily available resources. The resources and capacity models are not static, but they are subject to changes depending on the resources available for the firm. The resources of the organisation include both the tangible and intangible resources. In the case of substantial resources, the business focuses accruing the financial and other physical assets required for the business operation. In most cases, the company usually uses monetary consideration to value the visible and tangible resources. Through the estimation of the company’s resources, the management team comes up with the objectives and the mechanisms they can apply to achieve the organisational goals. However, the firm needs to incorporate both the tangible and intangible resources for the achievement of better resources. The intangible resources encompass the communication and the knowledge of the company’s team. The acquiring of such benefits is a bit difficult for the organisation, but they focus on ensuring that they focus on hiring employees possessing these talents. Effective communication is essential in the management of employees as it avoids the complications that can occur in the organisation due to misunderstandings. Therefore, it is undeniable that the business that focuses on the physical and tangible resources is always in a position to achieve the intangible resources (Ireland et al. 2003, p. 970). The company must ensure that they hire innovative and qualified workers who play the essential role of coming up with the intangible sources. Through the application of the resources and the capacity, venture model ensures that the business is in a position to create adequate intangible resources.

Though the resource capability model emphasises on the need of the cultural, social, and technological sources in the business, it is undeniable that the theory is subject to criticisms. For instance, the argument that a company can create comparative advantage from the creation is resources have some limitations. For example, the case that an organisation can achieve a relative benefit from the possession of resources ignores the industry analysis in coming up with the suggestion. Instead of explaining how the firm can ensure that they acquire resources better than those of their competitors, they assume that there exist imperfections among the factors of production. This assumption indicates that even if the companies produce similar goods and services, the resources are different and the company can enjoy an advantage over the competing business. However, workers working in a particular group can easily cope with the functioning of the competing firm. Additionally, the theory connects the success of a specific company to the intangible measures. However, there is the lack of defined action which the organisations can apply in measuring the value of the intangible resources in the company.

Financing Venture Model

Whenever an entrepreneur comes up with a business idea and focuses on ensuring its viability, there is always the need and application of external sources. Under such circumstances, there is still the need for the organisation to identify external resources for use in the group. The new ventures are always exposed to higher risks, and this creates the need for the businesses to establish external sources of funds which can bail out the investors in case of financial problems. At the beginning of implementing a business idea, the team begins by identifying the vision of the business, the business model and then the strategy for achieving its objectives (Stam and Elfring 2008, p. 110). The implementation of such resources requires the business to come up with necessary funds in its operations. The starting capital is always available for the company to start up the business. However, after the end of the seed stage, the market enters the growth stage where it experiences various benefits and risks. For instance, the company has to incur costs in advertisements, branding, and the packaging of the commodities. Additionally, the investors need to have adequate time funds in engaging in research projects where they attempt to create new ideas for application in their operation process. The nature of the new venture calls for the need of the financial models to come up with diverse sources of funds. The external sources of money act as a way of ensuring that the organisation will acquire money in case of experiencing any risk such as getting unexpected results from a business research. The start-ups usually have a higher probability of getting into financial problems because the level of the firm does not have access to other sources of income. For example, the company cannot engage in the sale of shares in the stock exchange market as they are less liquid. Additionally, the investor lacks the networks with other entrepreneurs thus information asymmetry in the industry. If this happens, there is the likelihood that the business will be inadequate information that may sensitise the investors of the occurrence of any risk.

The finance model focuses on suggesting the possible external sources of finance to reduce the effects of the risks that may occur from the business operations. For example, the investor can make use of the previously saved savings from the personal account to finance some of its activities. In most cases, the investors usually set aside the capital and leave some amount for bailing out the business in case of financial risks. Alternatively, the entrepreneur can create a social network through which they accrue funds from the family and friends. Under such circumstances, the relatives will give financial support in case the business incurs some losses. Under such circumstances, the investors will have minimal pressure from the competitors thus ensuring the viability of the organisation (Ireland et al. 2003, p. 965). Also, crowdfunding helps the investors in pulling the resources together which reduces the risks that would occur to the organisation. This strategy brings the small resources from the different members together thus ensuring that the business has broad access to money required for the group. The investors who come together act as the ambassadors of the firm’s goods and use. They collect the information from customers and provide feedback thus providing the possible solutions to the problems affecting the organisation. Through this process, there is the creation of company’s reputation which ensures that the team is in position to make large volumes of sales thus bringing in revenue to the firm.

If the department follows the finance model strictly, there is the guarantee that the customers will enjoy the products at a reasonable price thus developing trust with the company. Despite the suggestions that the financial model offers in the attempt of reducing the risks that new investors bring into the business, it is also subject to criticisms. For example, the issue of crowd funding may produce adverse effects on the company. For example, there will be the need for applying a particular procedure in deciding the amount of money required in the company. Additionally, the suggestion that the investors should involve the family members in their business ignores the relevance of the professionals in the business functioning. Under such circumstances, the investors only rely heavily on the family sources of advice thus making it difficult for them to get the skills required in business operations. If this happens, the mixing of business activities may end up creating many problems for the organisation.

Business Profit Model

The venture models focus on ensuring that the firm creates the avenues through which the company can provide viability in its operations. In most cases, it involves the establishment of resources that determine the functioning of the business. In the case of venturing model, the models ensure that they address both the tangible and intangible resources. After the setting of the venturing models, there is the need for the team to come up with business models needed in operation. They ensure that the functioning of the business remains in line with the expected goals of the organisation. For instance, the managers can come with a profit model that ensures that the company accrues the benefits of their investments. The profit model operates under different components which provide the success of the business. For instance, the motive of any company is to ensure that they make profits. The first element becomes the profit margin element. The organisations should focus on providing that the gap between the revenues and the costs is broad enough to ensure the business accrues some benefits. The total cost includes all the types of expenses that the company experiences in acquiring the raw materials and catering for all the kinds of production factors.

Additionally, the rate of stock turnover is essential in measuring the performance of the business. The turnover considers the total revenue that the company receives from its sales. The fraction is obtained by taking the total income and dividing with the overall costs. If the turnover of a company decreases, the rate of equity decreases and there is the possibility that there will be reduced profits. The higher the revenues, the higher the turnover thus increased profits. In measuring the advantages that the business obtains from its activities, the firms should consider the leverage. In this component, the focus is on ensuring that the company measures the debt-equity ratio. The primary objective of this element is to provide that the business measures relative debt that they can apply in their organisation. The implementation of this component in the marketing enables the team to step the mortgages and other liabilities they can pay thus avoiding cases of bad debt.

The entrepreneurs who venture into new businesses need to come up with venture and business models that ensure the viability of the company. For instance, the process should start by the creation of a team that coordinates the activities of the business. The stakeholders include the employees, board of directors, and the entrepreneurs. The firm can develop competitive advantage from the creation of both intangible and tangible resources. The visible and tangible resources include the social, physical, and technological resources. However, the invisible resources depend heavily on the visible resources especially those that require the employees’ innovative capability. The resource and team creation steps ensure to make the company incur expenses that the business needs to recover through the establishment of the revenues. Thirdly, the company focuses on the financial model which requires the market to set alternative sources of funds that can help avoid the risks of loss. The finance venture model focuses on the creation of external sources of money such family friends and personal savings. Investors measure the performance of the business through the measurement of the profits. Therefore, the business profit model appears to be crucial in measuring the achievements of the organisation.

References

Amason, A.C., Shrader, R.C. and Tompson, G.H., 2006. Newness and novelty: Relating top management team composition to new venture performance. Journal of Business Venturing, 21(1), pp.125-148.

Dollinger, M.J., 2008. Entrepreneurship: Strategies and resources. Marsh Publications. 171-176

Ensley, M.D., Pearson, A. and Pearce, C.L., 2003. Top management team process, shared leadership, and new venture performance: A theoretical model and research agenda. Human Resource Management Review, 13(2), pp.329-346.

Hmieleski, K.M. and Ensley, M.D., 2007. A contextual examination of new venture performance: entrepreneur leadership behavior, top management team heterogeneity, and environmental dynamism. Journal of Organizational Behavior, 28(7), pp.865-889.

Ireland, R.D., Hitt, M.A. and Sirmon, D.G., 2003. A model of strategic entrepreneurship: The construct and its dimensions. Journal of management, 29(6), pp.963-989.

Stam, W. and Elfring, T., 2008. Entrepreneurial orientation and new venture performance: The moderating role of intra-and extra industry social capital. Academy of Management Journal,51(1), pp.97-111.