Business ideas vs opportunities

BUSINESS IDEAS

VERSUS

BUSINESS OPPORTUNITIES

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LESSON OBJECTIVES

On completion of this lesson students should be able to:

Differentiate between business ideas and opportunities

Identify sources for business ideas Examine the parameters used to

screen business ideas

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LESSON OBJECTIVES

Analyze the macro/micro screening methodology

Conduct a SWOT analysis of a business opportunity

Explain the reasons why a new business often fails

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WHAT IS A BUSINESS IDEA?

Mental impression Vague belief Fancy Whim Notion Not necessarily workable

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SOURCES FOR IDEAS

Work experience (major source) Hobby/vocational interest Copy existing ideas Brainstorming

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SOURCES FOR IDEAS

Systematic search/careful planning Agencies & institutions Yellow pages Trade journals Trade directories Net-working

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SOURCES FOR IDEAS

Societal anomalies (e.g. exam failure rates, high crime rate)

Trends & social practices (health, fitness, technologyetc.)

Unfilled niches (demand greater than supply)

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WHAT IS A BUSINESS OPPORTUNITY?

Viable business idea Workable idea Innovation & creativity Limited competition

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WHAT IS A BUSINESS OPPORTUNITY?

High & consistent product demand Value-added products/services Positive industry analysis/trends

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NEW VENTURE ASSESSMENT

CRITICAL FACTORS1. PERSONAL CHARACTERISTICS OF

THE ENTREPRENEUR

2. THE BUSINESS ENVIRONMENT

3. THE VENTURE ITSELF

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PERSONAL CHARACTERISTICS OF THE ENTREPRENEUR

Need for self-achievement Need for independence Risk-taking propensity Work experience/knowledge

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PERSONAL CHARACTERISTICS OF THE ENTREPRENEUR

Managerial competencies Wealth expectations Determination & commitment Passion/drive

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THE BUSINESS ENVIRONMENT Government support Level of bureaucracy Ease of entry Level of competition CSM

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THE BUSINESS ENVIRONMENT Globalization/Liberalization Barriers to entry Life-styles & social trends Credit availability Availability of support services

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SCREENING THE IDEA

THE VENTURE ITSELFa – Basic feasibility Can the product/service work? Is it legal? What share of the market can the

company capture? By when? What are the sales targets?

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SCREENING THE IDEA

THE VENTURE ITSELFa – Basic feasibility What are expenses likely to be? Can

they be met comfortably? What are the profit expectations?

Are they attainable? What are the growth prospects?

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SCREENING THE IDEA

THE VENTURE ITSELFb – Competitive Advantages What specific competitive

advantages will the product/service offer?

Can these competitive advantages be sustained?

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SCREENING THE IDEA

THE VENTURE ITSELFb – Competitive Advantages How are competitors likely to

respond? Competitive advantages of existing

firms?

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SCREENING THE IDEA

THE VENTURE ITSELFc – Potential Customers Who are your customers? How many customers are there? What are their preferences, tastes

and buying habits?

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SCREENING THE IDEA

THE VENTURE ITSELFc – Potential Customers How much will they buy and how

often? Where are these customers located

and how will they be serviced?

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SCREENING THE IDEA

THE VENTURE ITSELFd – Marketing of the Goods &

Services Who will perform the selling

functions? Promotion strategies?

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SCREENING THE IDEA

THE VENTURE ITSELFd – Marketing of the Goods &

Services How will your prices compare with

those of the competition? What distribution channels will be

used and how effective will these be?

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SCREENING THE IDEA

THE VENTURE ITSELFe – Production of the Goods &

Services Will the company buy &/or make

what it sells? Are sources of supplies available? Are they available at reasonable

prices?

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SCREENING THE IDEA

THE VENTURE ITSELFe– Production of the Goods &

Services Are the needed

machinery/equipment readily available?

How will quality be controlled? How will waste, pilfering, spoilage

be controlled?

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SCREENING THE IDEA

THE VENTURE ITSELFf – Staffing Decisions Who will be hired? By when? How will they be found and recruited? How will they be compensated? What labour laws will be applicable to

these employees

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SCREENING THE IDEA

THE VENTURE ITSELFf – Financing the venture How much will be needed to start

the venture? How much equity is available? How much debt will be required? Where can loans be accessed?

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WHY NEW VENTURES FAIL

1. PRODUCT/MARKET ISSUES

2. FINANCIAL DIFFICULTIES

3. MANAGERIAL PROBLEMS

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PRODUCT/MARKET ISSUES Lack of objectivity about the product - too in love with the idea Insufficient market research-product

life cycle considerations often ignored Poor timing – pre-mature entry, or

late entry into marketplace

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PRODUCT/MARKET ISSUES Lack of uniqueness – little or no

product differentiation vis a vis the competition

Unclear business definition/mission – waste of time & resources

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PRODUCT/MARKET ISSUES Inappropriate distribution strategy Over-reliance on one customer Insufficient knowledge of buying

habits of customers

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FINANCIAL DIFFICULTIES Initial under-capitalization Assuming debt too early - debt

service problems

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FINANCIAL DIFFICULTIES Poor estimate of costs and initial

working capital requirements Unrealistic sales projections-

seasonality often ignored

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MANAGERIAL PROBLEMS Poor recruitment and selection of

staff Weak management team -poor

guidance Poor staff relationships -weak

team approach

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MANAGERIAL PROBLEMS Productive time spent in conflict

management High staff turn-over

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END OF PRESENTATION