Sources of Business Ideas

Moving Forward We have previously looked at why people

may want to start up their own business and the risks and benefits that brings.

Now we will look at how a budding entrepreneur will generate a business idea and where they may be inspired.

Possible Sources Research suggests that the following are

four major sources of ideas for entrepreneurs: Spotting Trends and anticipating their impact Identifying a market niche Copying ideas from other countries Taking a scientific approach

Spotting trends Tapping into what is happening in society

around us or in the market and responding quickly to these changes.

E.g. Innocent Drinks (1999)

Identifying a Niche Involves noticing something missing in the

market or that can be improved on.

About spotting “Gaps”! E.g. Red Letter Days – experiences as gifts

Copying ideas from other countries Travelling to different countries and

cultures enables entrepreneurs to pick up ideas that have worked elsewhere

E.g. Howard Shultz from Starbucks copied the coffee bar culture from Italy and adapted it for US.

Scientific Approach Some entrepreneurs spend time inventing

new products.

Can take a lot of time to produce product but do benefit from short term niche market before the idea is copied, e.g. James Dyson made 5,127 prototypes before the final design.

Franchising

A slightly different approach

Franchising This is when you purchase the right to sell

a product or service. Or

When a business (franchisor) gives another business (franchisee) the right to supply its product or service.

Some examples include: Burger King, McDonalds, Dynorod

Involvement Varies Some franchisors have a lot of

involvement in how the franchisee operates e.g. McDonalds

Others may give more independence to the franchisor e.g. Toyota

Benefits of Franchising Least risk in starting business. Usually established brands with proven

success Easier to get finance Usually incur lower marketing costs Franchisee usually has exclusive rights in

area Supplier relationships often already

established Franchisor offers support, training, advice

Drawbacks of Franchising Costs can be high, initial start up cost to

get rights, then ongoing royalties and percentages of turnover

Other franchisees could give brand bad reputation

Agreements often have restrictions on how business must be run

Heavy reliance on success and methods of franchisor

Franchisees have to sign non-competition clauses