1 Recognizing Opportunity Chapter 3: Understanding Entrepreneurial Trends Starting vs. Buying a...

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Recognizing Opportunity

Chapter 3:

Understanding Entrepreneurial Trends

Starting vs. Buying a Business

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Key Terms to Know

Brainstorm Business broker Corporate venture Demographics Franchise Franchisee Franchisor Goodwill Innovation

Niche Online business Outsourcing Services Specialty magazine Strategic alliance Trade magazine Trade show Values

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Current Entrepreneurial Trends

Internet Businesses– Online business —conducts

business via the Internet Service Businesses

– Services – intangible things that businesses do for consumers to enhance their lives

Home-Based Businesses Socially Responsible

Nonprofit Businesses

Focus on Technology Outsourcing – contracting

with other companies for their services

Strategic Alliances – forming a partnership with another company

Corporate Ventures – starting a smaller company within a larger one (spin-off)

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Learn to Recognize Opportunity

Creativity & Innovation – finding new ways of doing things

Idea vs. Opportunity – Ideas are generated by creativity BUT opportunities are ideas that have commercial potential

– A niche is a small specialized market

Finding Opportunities by Understanding Industries

– Industries are groupings of businesses with a common purpose

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Think Creatively About Opportunity

Practice brainstorming – thinking freely to generate ideas

Look at ordinary items in new ways – see things in a different light

Find creative solutions to common problems – a screwdriver has multiple uses!

Connect unrelated items – put misc. items on a tray then create a new product from them

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Challenges to Creativity

Time pressures The influence of unsupportive people Lack of confidence Rigid thinking Challenges you bring on yourself are the

hardest!!

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Creative Sources of Ideas

Your mind is processing ideas while you are brushing your teeth, sleeping, or driving!!

Observe the world around you – what do people want & need?

Watch for demographic changes – population changes (age, gender, income, ethnic backgrounds, education, occupations, etc.); cultural diversity!

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Creative Sources of Ideas, cont.

Be an avid reader – unrelated reading can spark ideas in your area of expertise

Consider your own experiences– Interests– Hobbies– Work

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Creative Sources of Ideas, cont.

Consult outside sources– Trade magazines:

Periodical published for specific types of businesses or industries

Give news on the most up-to-date products & services out there

Offers current, industry-specific news about customers & market trends

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Creative Sources of Ideas, cont.

– Specialty magazines: Periodical published for people with special interests Use these to identify the needs of potential consumers

– Trade shows & exhibitions: National or regional Can see new items & promotions of current G&S Demonstrations by vendors & manufacturers

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Creative Sources of Ideas, cont.

– Newspapers: Check out the business sections

– Internet: Small Business Administration & Google can help you

find existing businesses BUT remember, you should fill a gap where businesses

haven’t gone yet . . .

– Government agencies: U.S. Patent Office Detailed descriptions of new products Publish Official Gazette (published wkly) of new patents

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Starting vs. Buying a Business

Personal values & goals– Define who you are– Shape your attitudes & your choices– Help you identify your priorities– Influenced by family, religious beliefs, teachers,

friends, society, & personal experiences

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Starting vs. Buying a Business, cont.

Entering the family business– Rewards:

Trust & togethernessCan achieve more together than on their ownCan start working at a young ageCan be flexible on hoursCan have more say on your wages

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Starting vs. Buying a Business, cont.

Entering the family business, cont.– Challenges:

Dynamics might not work [together]Can never get away from the businessCan’t view it objectivelyParents don’t trust children in making wise

decisions– Questions to ask before entering the family

business: See p. 59

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Starting vs. Buying a Business, cont.

Buying an existing business– Less risky as it’s already established– Customer-base is already there

Their loyalty is called goodwill An extremely valuable business asset

– Procedures are in place– Equipment already purchased– Inventory on hand– Employees hired & trained

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Starting vs. Buying a Business, cont.

Buying a franchise – you buy the right to set up a new business patterned on an existing model

Franchisee – the buyer– Is trained to operate their location– Pay a fee to purchase the “rights” to own it– Pay an annual royalty on yearly sales (3%-8%)

Franchisor – the seller– Selling their planning & management expertise

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Franchises

Advantages– Name recognition of an existing business & its

products/services– National advertising– Trained in the company’s methods of operations– Included in national distribution channels

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Franchises, cont.

Disadvantages– Little say in product development– Set prices– Set uniforms– Restrictions on how to run the business– Market saturation — investigate the area before you buy

one!

– 1-2 poor running franchises can hurt reputation of the chain as a whole

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Evaluating a Business Opportunity

Investigate:– Hire an accountant – will verify the value of

the business’s inventory, accounts receivable, & assets

– Hire an attorney – investigate the business for any legal liabilities (debts)

– Talk to customers, suppliers, employees

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Evaluating a Business Opportunity, cont.

Where to find a business:– Business Brokers – a realtor of the buying &

selling of businesses– The Wall Street Journal – nationally published– Network (local gov’t, bankers, accountants,

attorneys)

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Evaluating a Business Opportunity, cont.

Ask the right questions!– Why are you selling?– Will I enjoy this business?– Are there plenty of existing customers?– What is the potential for growth?– Is the economic trend for this business

strong?

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Starting Your Own Business

Ask yourself some questions: See pp. 61-62 What must you do next?

– Prepare a business plan to present to bankers & investors

– Include in the plan: marketing research, distribution, employees, advertising, physical location, purchasing of equipment, supplier contacts, & professional advisors

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The END

Read the Chapter handout pp. 44-64