According to the Timmons Model of Entrepreneurship the three critical factors of a successful venture are opportunities, teams, and resources. The successful entrepreneur is one that can balance these critical factors.
Jeffery Timmons of Babson College in Massachusetts developed the Timmons Model of Entrepreneurship as his doctorate thesis at Harvard University. Further research and case studies have since then enhanced this model as a guide for entrepreneurs to increase their chances of success.
The Timmons model bases itself on the entrepreneur. The entrepreneur searches for an opportunity, and on finding it, shapes the opportunity into a high-potential venture by drawing up a team and gathering the required resources to start a business that capitalizes on the opportunity. In the process of starting the business, the entrepreneur risks his or her career, personal cash flow and net worth. The model bases itself on the premise that the entrepreneur earns rewards in commensuration with the risk and effort involved in starting or financing the business.
The Opportunity Factor
The Timmons model of entrepreneurship states that entrepreneurship is opportunity driven, or that the market shapes the opportunity. A good idea is not necessarily a good business opportunity and the underlying market demand determines the potential of the idea. An idea becomes viable only when it remains anchored in products or services that create or add value to customers, and remains attractive, durable, and timely.
Unlike conventional entrepreneurship models that start with a business plan and identify an opportunity, the Timmons model starts with a market opportunity. The business plan and the financing receive secondary importance, and come only after identification of a viable opportunity. The model holds that a sound business opportunity would readily receive financing, and identification of the opportunity first makes the business plan failure-proof.
The Team Factor
Once the entrepreneur identifies an opportunity, he or she works to start a business by putting together the team and gathering the required resources. The size and nature of the opportunity determines the size and shape of the team.
The Timmons model places special importance on the team and considers a good team indispensable for success. A bad team can waste a great idea. Among all resources, only a good team can unlock a higher potential with any opportunity and manage the pressure related to growth.
The two major roles of the team, relative to the other critical factors are:
- Removing the ambiguity and uncertainty of the opportunity by applying creativity.
- Providing leadership to manage the available resources in the most effective manner by interacting with exogenous forces and the capital market context that keeps changing constantly.
The Timmons model holds the entrepreneur’s ability to conjure up a great team as a major factor of business success. Great teams, however, always remain scarce and the responsibility is on the entrepreneur to coach team members to excel.
The Resources Factor
The Timmons model discounts the popular notion than extensive resources reduce the risk of starting a venture and encourages bootstrapping or starting with the bare minimal requirements as a way to attain competitive advantages. The advantages of bootstrapping include:
- Drives down market cost
- Instills discipline and leanness in the organization
- Encourages creative resources to achieve more with the limited amount of money and other resources available
Some of the practical applications of bootstrapping include leasing instead of buying equipment, working out of a garage instead of rented space, and the like.
Like the formation of the team, the size and type of opportunity determine the level and extent of resources required. While good resources remain scarce, businesses with high potential opportunities and a good management team will have no problem attracting money and other resources.
The entrepreneur works to “minimize and control" rather than “maximize and own." The role of the entrepreneur in managing resources includes building a good resource base to draw from when required and drawing up a business plan through a “fit and balance" method that balances the available resources with the opportunity and the potential of the team.
A Reality Check
Many entrepreneurs try to have all resources in place before starting a new venture. The Timmons model of entrepreneurship discounts this notion and holds only three factors as crucial: a market driven opportunity, availability of a good team and adequate resources. These three critical factors of entrepreneurship remain interlinked, with any change in one factor having an impact on the other two.
The reality is that opportunity, team, and resources seldom match. The Timmons model considers the major role of the entrepreneur to effect a match of the three critical factors of entrepreneurship at the correct time. Success of the business venture depends on the ability of the entrepreneur to ensure balance by applying creativity and leadership, and by maintaining effective communications.