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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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NEW VENTURE ASSESSMENT
PERSONAL CHARACTERISTICS OF THE ENTREPRENEUR
Need for self-achievement Need for independence Risk-taking propensity Work experience/knowledge
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NEW VENTURE ASSESSMENT
PERSONAL CHARACTERISTICS OF THE ENTREPRENEUR
Managerial competencies Wealth expectations Determination & commitment Passion/drive
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NEW VENTURE ASSESSMENT
THE BUSINESS ENVIRONMENT Government support Level of bureaucracy Ease of entry Level of competition CSM
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NEW VENTURE ASSESSMENT
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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WHY NEW VENTURES FAIL
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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WHY NEW VENTURES FAIL
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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WHY NEW VENTURES FAIL
PRODUCT/MARKET ISSUES Inappropriate distribution strategy Over-reliance on one customer Insufficient knowledge of buying
habits of customers
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WHY NEW VENTURES FAIL
FINANCIAL DIFFICULTIES Initial under-capitalization Assuming debt too early - debt
service problems
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WHY NEW VENTURES FAIL
FINANCIAL DIFFICULTIES Poor estimate of costs and initial
working capital requirements Unrealistic sales projections-
seasonality often ignored
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WHY NEW VENTURES FAIL
MANAGERIAL PROBLEMS Poor recruitment and selection of
staff Weak management team -poor
guidance Poor staff relationships -weak
team approach
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WHY NEW VENTURES FAIL
MANAGERIAL PROBLEMS Productive time spent in conflict
management High staff turn-over
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END OF PRESENTATION
