Sensing the right opportunity


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Sensing the right opportunity

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Sensing the right opportunity

  1. 1.  Behind any high performance entrepreneurship are invariably two things 1. A great idea that leads to a family of ideas. 2. Solid implementation.
  2. 2.  The purpose of idea screening is to more thoroughly evaluate the idea before the goahead is given to formulate work to satisfy others’ needs/wants that are unfulfilled by the market due to transaction costs.
  3. 3.  There are 2 parts to level 1. The first is to conduct a feasibility analysis.  The analysis consists of 4 steps that are as follows:
  4. 4.  This involves examining trends beyond the short run control of the venture that could significantly alter industry conditions and affect the venture’s sustainability. Four major forces are examined. i. Political / regulatory ii. Economic iii. Social iv. Technological
  5. 5.  This involves assessing whether the industry is attractive to enter. It involves examining five “forces” as follows: i. Threat of substitutes ii. Bargaining power of buyers iii. Bargaining power of suppliers iv. Rivalry among existing competitors v. Threat of new entrants
  6. 6.  Usually conducted after the firm has been operating for an extended period of time.  It involves thought what competencies the venture could have. Four key questions must be answered. 1. Is the competence valuable? 2. Is the competence rare? 3. Is the competence inimitable? 4. Is the competence exploitable?
  7. 7.  This involves analyzing the attractiveness of the market. It includes answering 4 questions:  What is the current size of the market, and how large is it expected to be?  What are the current and projected growth rates?  In which stage of the development cycle is the market?  What is the average industry profitability?
  8. 8.  The second part to level 1 is to conduct a financial analysis.  This analysis consists of six steps.
  9. 9.  This o o o o involves looking at financial statements and operations of the key players in the industry. What are the returns of these firms? What are their turnover ratios, working capital, and so on? Could these firms be operating more efficiently? What is the level of competence of these firms?
  10. 10.  This involves analyzing the relative share of the key industry players and making judgments about how proposed venture would fare within the industry.
  11. 11.  This involves projecting the expected margins that can be expected from the venture.  Information gathered from the market profile analysis (industry financial ratios) and SIC codes may also be a valuable source of information.
  12. 12.  This  involves using information gathered from margin analysis to determine projected break – even volume and break-even sales dollars. Is there sufficient volume to sustain the venture?
  13. 13.  This involves forecasting projected income and assets required to generate that income.
  14. 14.  This involves projecting the return on investment (ROI) from undertaking the venture.  What is the opportunity cost of undertaking the venture?
  15. 15.  Involves using the information gathered from the feasibility and financial analyses to project the viability of the proposed venture.  If the answer to any one of the 15 NVT questions is no, do not go on.  If the answers to all questions are yes, consult with trusted expert and peers/associates.
  16. 16.  If, after consultation wit these individuals, the idea is still favorable, move onto the planning financing phase.  If, after consultation, the idea seems less favorable than anticipated, disseminate this feedback/information and redo the NVT analysis.
  17. 17. IDEAS NVT Analysis (VAS 2000) FEASIBILITY ANALYSIS •Trend Analysis •Industry Analysis •Internal Analysis •Market Profile Analysis REJECT PRELIMIN ARY ACCEPTAN CE FINANCIAL ANALYSIS •Analysis of similar firms in industry •Projected Market Share •Break Even Analysis •Pro Forma Analyses •ROI Projections •Margins Consultation with Trusted Experts Disseminate New Information and Feedback Consultation with Peers/Associates Reject Planning/ Financing Accept
  18. 18. THANK YOU
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