Process

• The driving force behind the creation of new businesses is identifying a market need. Entrepreneurs are adept at finding a problem that individuals or business are seeking a solution for. The problem could be a small one such as wanting to find a good cup of coffee on the way to work, or it could be a more significant need such as finding ways to diagnose cancer earlier. The creative force behind new businesses is discovering new and better ways to solve a problem than the solutions other businesses are offering in the marketplace. It is this powerful union of customer need with the ideal solution that causes newly created businesses to eventually become winners.
  
  

Benefits

• The creation of new businesses provides consumers with more choices in goods and services. One of the first things immigrants from less economically developed countries notice is the incredible variety of goods and services Americans have available to them -- and take for granted. Competition for customers among a number of companies often results in consumers enjoying lower prices. As more businesses enter a market, this competition forces all of the companies to continually find ways of better serving their customers and ways to operate more efficiently. New businesses are also significant job-creating engines for the economy as a whole, generating new and permanent employment opportunities.
  
  

Environment for New Business Creation

• The general economic environment can be favorable or hostile to new business creation. A robust economy where consumer confidence is high means people are more likely to spend freely compared to recessionary conditions when people are fearful of the future and tend to cut back on spending. New businesses seek to hire talented people with prior business success. Having a well trained, highly skilled pool of talent available in the market is a favorable factor for business creation there. New businesses require capital. Areas of the country, cities that have an active venture capital community, such as San Francisco and Boston, encourage local entrepreneurial development.
  
  

Difficulties

• Many companies fail because they run out of funding before they are able to build a large enough customer base to reach positive cash flow. Newly created businesses may not succeed because they underestimated the strength of the existing businesses they compete against in the market. Their competitors may already have a loyal customer base, or have won over the majority of the total potential market, leaving little room for new companies to grow. Entrepreneurs also sometimes misjudge what customers presently need and are willing to pay for. The market they enter may be smaller than they estimated, making it much more difficult to find enough customers for the business to be profitable.