Recognizing Opportunity.ppt

RECOGNIZING OPPORTUNITY
Chapter 3

BEGIN THE ENTREPRENEUR PROCESS
1. Take the steps to recognize an
opportunity:
1. Study current trends
2. What are the current trends today?
2. Develop a business concept
3. Test it with potential customers
4. Create a business to execute that
concept

CURRENT ENTREPRENEURIAL TRENDS
 Internet Businesses:
 has transformed the way business is conducted
 Most traditional companies have added online
component
 Millions of online businesses
 Service Businesses:
 Dominate modern American economy
 Intangible things that are done for us to enhance
our lives.
 Insurance, tourism, banking, and education

 Home-Based Businesses:
 Growing rapidly and now represent about 53% of all
small businesses
 Using available and inexpensive online tools is has
an image that is just as professional as large corp.
 Consultants, sales representatives, tradespeople,
writers, graphic designers, and Web developers.
 Even companies that produce products if
manufacturing and distribution is outsourced

 Green Businesses:
 Largest opportunity of the 21st century
 SUSTAINABILITY – venture seeks to achieve
economic, environmental, and social goals without
compromising the ability of future generations to
meet their own needs
 Food quality, energy resources, pollution, and human
rights
 General Electric and Wal-Mart have adjusted their
business practices to try to promote sustainability

 Social Entrepreneurship
 Identify social needs, such as finding
employment for wounded veterans, combating
pollution, or providing shoes for children who
cannot afford them, and recognize them as
opportunities.
 Measure their success in term of positive
impact they make on society

 Focus on Technology – it the main trend
that affect businesses today
 Use technology to improve the business
processes create a competitive advantage
 It is the company’s product or it’s used to increase
productivity

 Outsourcing – contracting other companies
for services. Most common type is business
process outsourcing: accounting, benefits and
finance functions
 Small businesses can tap into outside expertise
 Benefits
 Allows greater efficiency, saving time and money
 Decreases overhead investment or debt
 Lowers regulatory compliance burdens
 Allows companies to start new projects quickly
 Core attractive to investors allows companies to direct
more capital into money-making activities

 Strategic Alliances – one step beyond
Outsourcing is to form a partnership with
another company.
 Your company provides a product or service
that is not part of the larger company’s core
competency.
 3M makes adhesive products, they partner
with companies for complementary products
such as tape dispensers to package with its
adhesive tape.

 Corporate Ventures – a new venture
started inside a large corporation. Large
companies find they must act like
entrepreneurs to innovate and remain
competitive.
 Start small companies as spin-offs
 Parent company supplies resources to help it
get started, eventually becomes an
independent company.

LEARNING to RECOGNIZE OPPORTUNITY
 Creativity and Innovation – it can be
learned. Creativity is the activity that
results in innovation, finding new ways of
doing things, it involves:
Connection – bring together things that leads to…
Discovery – that is turned into …..
Invention – new product
Application – going beyond the original invention
to other uses in new areas

 Idea or Opportunity – not the same
 Generate ideas by thinking creatively
 Opportunities are ideas that have commercial
potential, which can turn into a business
 Entrepreneurs recognize an unmet consumer needs
and unfilled market niches.
 Niche Market – a small specialized market

 Understanding Industries –
 changes in industry create profitable niches
for new businesses to fill.
 The development of new products and
services in any industry creates the need for
complementary types of businesses

STRATEGIES for THINKING CREATIVELY
 Practice BRAINSTORMING –
 Think freely to generate ideas, not judge as
good or bad.
 Look at ordinary items in new ways
 Find creative solutions to common
problems
 Connect unrelated items
 CHALLENGES to Creativity:
 Time pressures, influence of unsupportive people,
lack of confidence and rigid thinking

CREATIVE SOURCES OF IDEAS
 Observe the World Around You – start
watching people at hotel lobby or at mall,
to learn what are people’s wants/needs.
 Watch for Demographic Changes – cultural
diversity impacts the products to develop.
 Be an Avid Reader – it may help spark an
idea that applies to your field

 Consider Your Own Experiences
 Interests – some ideas solve problems you
encounter in everyday life. Think about ways to
solve these problems. Practice 5 steps may help
you think of great business ideas.
 Hobbies – evaluate your favorite pastime in
terms of its business potential.
 Work – your experience provides insight into
that may help recognize opportunities.
 Start similar business in a smaller niche market
 Does company have a gap in network of suppliers
 Are customer’s needs/wants being met?
 Has technology advances provide new opportunities?

 Consult Outside Sources
 Trade Magazines – periodical for industry specific; contain
articles and advertisements for new products, current news,
market trends, information on customers
 Specialty Magazines – targets people with special
interests. Identify interests and needs of potential customers.
 Trade Shows and Exhibitions – vendors and
manufacturers introduce new items with exhibits and
demonstrations, can be a source of spin-off ideas.
 Newspapers – business section reports on trends and
innovations or identify problems that may be source of opportunity

 Consult Outside Sources
 The Internet – source for opportunities, Google search
engines, SBA business ideas
 Government Agencies – source of information
 Dept. of Commerce’s The Bureau of Economic Analysis publishes
current business conditions.
 U.S. Patent Office contains detailed descriptions of new products.
It also publishes Official Gazette weekly periodical that
summarizes each patent granted and lists all patents available for
license or sale.
 OSHA – new products come in response to new regulations, such as
OSHA requires medical kit, so entrepreneurs responded by
manufacturing kits

STARTING VS BUYING A BUSINESS
 Personal Values and Goals
 Values – beliefs and principles you choose to live by.
 Core Values – do not change in different situations,
they endure over time.
 Goals – are the objectives you are trying to achieve

 Entering the Family Business
 The rewards and challenges of Family Business
 Only 1/3 survive second generation
 Family dynamics
 Greatest advantage trust and togetherness
 Disadvantage can’t get away from the business
 Develop clear lines of responsibility, be objective of
family members qualifications, keep decisions unaffected
by personal emotions, and respect individual needs

 Entering the Family Business
 Questions to Ask Yourself
1. Do I have the ability to work for a member of my family?
2. Do I get along well with the family member who is involved in
business?
3. Do we share the same goals for the business?
4. Do we share the same general goals for our personal lives?
5. Can we be clear and specific about our expectations of each
other?
6. Can I leave business problems at work when I go home each
night?
7. Can we maintain a positive family relationship?

 Buying an Existing Business
 Acquire a business is to buy an existing one.
 Less risky:
 employees are trained
 equipment is in place
 company has customers, such loyalty called Goodwill which is
extremely valuable business asset

GOODS OR SERVICE?
Fantastic Sam’s
Radio Shack
A&W Restaurants
Nathan’s Famous Inc.
Century 21 Real Estate
Hollywood Tans
International House of Pancakes
Subway
Embassy Suites Hotels
Scott’s Lawn Service
What do they all have in common?

 Buying a Franchise
 buy the right to set up a business patterned on an
existing model
 Franchise is a legal agreement to begin a new business
in the name of a recognized company
 Franchisee (buyer) has right to a product, process, or
service, training and assistance in setting up the
business and ongoing marketing and quality support.
 Pay a franchise fee and royalty fees
 Buys rights to geographic locations
 Franchisor (seller) provides planning and management
expertise

 Evaluating a Business Opportunity
 Investigate business and industry carefully
 Talk to customers, employees and suppliers
 Hire an accountant to verify the value of the business
 Hire an attorney to advise you and investigate business
for any legal liabilities
 Where to Find a Business
 Look in newspaper and WSJ
 Network with people in community
 Business Broker - someone who brings buyers and sellers
together

 Questions to Ask
 Is the business interesting to me and to others?
 Make sure its really interesting to you and plenty of
existing customers
 Why is the owner selling?
 Is owner selling for personal reasons or because the
business is not doing well?
 Check company’s financial statements against
information from suppliers and competitors
 What is the business’s potential for growth?
 Determine where the business is in it’s life cycle of
growth, maturity, and decline

 Starting Your Own Business
 Questions to Ask
 Do I have motivation?
 Does business align with my personality, abilities,
values, and goals?
 Do I have sufficient knowledge of operations,
managerial ability?
 Do I have the right partners to help me?
 Do I have enough financial resources?
 Am I willing to accept the risk?

 Starting Your Own Business
 What You Must Do
 Feasibility study of your concept in market are there
enough customers to make the effort worthwhile
 Decide on a traditional business or an online business
 Prepare a business plan seek capital, partners, and
employees
 Secure professional advisors
 Hire employees and initiate relationships with
suppliers
 Purchase equipment and set up distribution channels
 Create awareness for business

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