Entrepreneurship, Second Edition

2.3. Determining Resource Needs and Acquiring Resources

In order to determine the amount of capital that a company needs to get started, an entrepreneur should first assess what resources are crucial for the company's success in the marketplace. Some resources are more critical than others. What does the company expect to do better than any of its competitors? That is where it should put a disproportionate share of its very scarce resources. If the company is making a new high-tech product, technological know-how will be vital, and the most important resource will be engineers and the designs they produce. Therefore, the company must concentrate on recruiting and keeping excellent engineers and on safeguarding the intellectual property they produce, such as engineering designs and patents. If the company is doing retail selling, the critical factor will most likely be location. Choosing the wrong initial location for a retail store just because the rent is cheap can be a fatal mistake because it's unlikely there will be enough resources to relocate.

When Southwest Airlines started up in 1971, its strategy was to provide frequent, on-time service at a competitive price between Dallas, Houston, Austin, and San Antonio. To meet its objectives, Southwest needed planes that it could operate reliably at a low cost. It was able to purchase four brand-new Boeing 737s—very efficient planes for shorter routes—for only $4 million each because the recession had hit the airlines particularly ...