New Venture Lab: Equipping Christian Entrepreneurs

There are many ways to think about what determines an entrepreneur’s success and I must admit that until recently I had not structured my thinking on this as much as I could have. As a venture investor, I’ve made the same mistake as most venture investors in going mostly by “gut feel” on whether or not the business opportunity seemed exciting and whether or not I felt the entrepreneur was the right guy to build the company. Of course venture investors always perform their due diligence on an opportunity, but the process is generally not very well defined and very seldom written out in terms of a detailed checklist.

Therefore, after reflecting on what really defines entrepreneurial success -- and there are many ways to think about what determines the success of a business venture, but in an effort to simplify the matter -- I would suggest the following formula: Entrepreneur + Business Model + Resources + God's Providence = Success. (See the graphic below and watch the video here.)

The Entrepreneur

Any business venture is highly dependent upon the gifts, character, vision, personality, skills, and experiences of the entrepreneur. It all begins with the entrepreneurial energy to launch a business, but the entrepreneur needs to prepare well across all fronts. No matter how much vision an entrepreneur has, he will struggle to land any customers if he is not skilled at sales and marketing. No matter how good the idea seems, he will be missing much of the industry context if he doesn't have any experience in the industry. I’ve seen many business plans presented by entrepreneurs that have no experience in their target industry. While they may be highly gifted entrepreneurs, they are missing much of the industry context if they don’t have any experience in the industry. Another way to consider this is as follows: the more new things the entrepreneur is experiencing while attempting to launch a new venture, the greater the risk and the higher the likelihood of failure.

I am reminded of the time when, fresh out of business school, I presented my plan of acquiring a small manufacturing company and running it as the CEO. I was excited to gain a meeting with a leading private equity investor as I needed several million dollars of capital for my plan to work. At the end of my short pitch, he had a few simple questions for me that completely took the wind out of my sails: Have you ever been a CEO before? Have you ever acquired a company before? Have you ever raised capital before? Have you ever worked in a small company context before? Have you ever worked in this target industry before? I had to sheepishly admit that the answer was no to every one of the questions. He clearly was not even remotely interested in investing in me and my plan. I limped out of the meeting licking my wounds, but much wiser for the experience. I clearly was attempting to do too many new things at once and I was clearly not a good fit with the plan I had developed.

The key focus for the entrepreneur should be to diligently prepare himself prior to launch. As we read in Proverbs 22:29: "Seest thou a man diligent in his business? he shall stand before kings; he shall not stand before mean men." But even a highly-gifted entrepreneur can fail miserably if he doesn't get the business model right.

The Business Model

An opportunity consists of several important components such as the target industry dynamics, as well as the financial, operational, product or service, and customer relationship characteristics. These key components have several sub-characteristics that have a deep impact on the potential for success. (Our Venture Analysis tool identifies 50 of what I consider the most important criteria to evaluate when launching or investing in a new venture or see the summary in the presentation Evaluating a Business Opportunity.) In terms of industry dynamics for example, there are at least ten extremely important factors to consider, one of which is the growth rate of the industry. As a rising tide lifts all boats, a business in a hyper-growth industry will have a much better opportunity of success compared to a business in an industry where competitors are battling it out for a shrinking pool of customers.

An entrepreneur that desires to invest his energies in the best possible opportunity available should carefully analyze a potential venture prior to putting his hand to the plow. Entrepreneurs that launch a venture will likely work extremely hard for at least several years -- if not their entire lifetime -- trying to build up their company for success. Given that, it is incumbent upon us as entrepreneurs to carefully analyze our opportunity prior to launching. We may as well invest our energies wisely as good stewards of our time. Otherwise we may look back with regret that we wasted our time. Hindsight can be so clear, but foresight can be greatly improved with the proper analysis.

The key theme for the business model should be to make wise decisions regarding your business planning. According to Proverbs 19:2, “Also, that the soul be without knowledge, it is not good; and he that hasteth with his feet sinneth." and according to Luke 14:28, "For which of you, intending to build a tower, sitteth not down first, and counteth the cost, whether he have sufficient to finish it?"

But the quality of the business venture alone does not tell the entire story. An entrepreneur needs access to the proper resources in order to build his business.

The Resources

The resources required for a particular venture may vary widely, but one should at least consider family, employees, partners and capital. For family ventures, one needs to consider the gifts, character, personalities, skills, and experiences of all of the family members that will be contributing to the venture’s success. For a business plan that calls on hiring employees, much will depend upon the employees -- and especially the management team -- that the entrepreneur hires. Additionally the partners the entrepreneur chooses are critical. These "partners" will include key business relationships such as vendors and suppliers, advisors, investors, etc. And finally, there's capital: the fuel that the business needs to run on to get started until it reaches breakeven. Many high-quality businesses never got the chance to succeed because they were not sufficiently capitalized.

The key concern for resources should be careful yoking with all of these "partners" that you will be working with on your venture, possibly for years to come. 2 Corinthians 6:14 warns us about this "Be ye not unequally yoked together with unbelievers: for what fellowship hath righteousness with unrighteousness? and what communion hath light with darkness?"

But even if the well-prepared entrepreneur was armed with the best business model in town and amassed a stunning arsenal of like-minded resources, let’s not forget that our sovereign God is also a key part of the success formula.

God’s Providence

Given everything else, it is still up to God to prosper the business venture. As any entrepreneur can attest, God has a way of sanctifying an entrepreneur through his business dealings with all the thorns and thistles that keep getting in the way. God in His providence can choose to challenge an entrepreneur, refine an entrepreneur or bless an entrepreneur.

We read in Deuteronomy 8:18 that it is God that gives us the ability for financial success: "But thou shalt remember the LORD thy God: for it is he that giveth thee power to get wealth, that he may establish his covenant which he sware unto thy fathers, as it is this day." We should also note that it is for God’s covenantal purposes that He may choose to bless us and not for our own comfort and ease. Even if God does bless us richly, we are still merely stewards of the resources He has put in our control.

The key commitment in terms of our relationship with God should be faithful living by staying grounded in the Word, constantly seeking God's will and living in a worshipful manner.

Can God choose to bless a business venture even though it is not an ideal opportunity and even though the entrepreneur is not a good fit with the opportunity? Absolutely. But God still calls us to excellence in all that we do, including our planning and preparation. As aptly put in the movie Facing the Giants: “do your best and leave the rest to God.”

After all, except the Lord build the business, they labor in vain that build it.