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Business ideas vs opportunities
- 2. 2 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
- 3. 3 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
- 4. 4 WHAT IS A BUSINESS IDEA? Mental impression Vague belief Fancy Whim Notion Not necessarily workable
- 5. 5 SOURCES FOR IDEAS Work experience (major source) Hobby/vocational interest Copy existing ideas Brainstorming
- 6. 6 SOURCES FOR IDEAS Systematic search/careful planning Agencies & institutions Yellow pages Trade journals Trade directories Net-working
- 7. 7 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)
- 8. 8 WHAT IS A BUSINESS OPPORTUNITY? Viable business idea Workable idea Innovation & creativity Limited competition
- 9. 9 WHAT IS A BUSINESS OPPORTUNITY? High & consistent product demand Value-added products/services Positive industry analysis/trends
- 10. 10 NEW VENTURE ASSESSMENT CRITICAL FACTORS 1. PERSONAL CHARACTERISTICS OF THE ENTREPRENEUR 2. THE BUSINESS ENVIRONMENT 3. THE VENTURE ITSELF
- 11. 11 NEW VENTURE ASSESSMENT PERSONAL CHARACTERISTICS OF THE ENTREPRENEUR Need for self-achievement Need for independence Risk-taking propensity Work experience/knowledge
- 12. 12 NEW VENTURE ASSESSMENT PERSONAL CHARACTERISTICS OF THE ENTREPRENEUR Managerial competencies Wealth expectations Determination & commitment Passion/drive
- 13. 13 NEW VENTURE ASSESSMENT THE BUSINESS ENVIRONMENT Government support Level of bureaucracy Ease of entry Level of competition CSM
- 14. 14 NEW VENTURE ASSESSMENT THE BUSINESS ENVIRONMENT Globalization/Liberalization Barriers to entry Life-styles & social trends Credit availability Availability of support services
- 15. 15 SCREENING THE IDEA THE VENTURE ITSELF a – 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?
- 16. 16 SCREENING THE IDEA THE VENTURE ITSELF a – 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?
- 17. 17 SCREENING THE IDEA THE VENTURE ITSELF b – Competitive Advantages What specific competitive advantages will the product/service offer? Can these competitive advantages be sustained?
- 18. 18 SCREENING THE IDEA THE VENTURE ITSELF b – Competitive Advantages How are competitors likely to respond? Competitive advantages of existing firms?
- 19. 19 SCREENING THE IDEA THE VENTURE ITSELF c – Potential Customers Who are your customers? How many customers are there? What are their preferences, tastes and buying habits?
- 20. 20 SCREENING THE IDEA THE VENTURE ITSELF c – Potential Customers How much will they buy and how often? Where are these customers located and how will they be serviced?
- 21. 21 SCREENING THE IDEA THE VENTURE ITSELF d – Marketing of the Goods & Services Who will perform the selling functions? Promotion strategies?
- 22. 22 SCREENING THE IDEA THE VENTURE ITSELF d – 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?
- 23. 23 SCREENING THE IDEA THE VENTURE ITSELF e – 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?
- 24. 24 SCREENING THE IDEA THE VENTURE ITSELF e– Production of the Goods & Services Are the needed machinery/equipment readily available? How will quality be controlled? How will waste, pilfering, spoilage be controlled?
- 25. 25 SCREENING THE IDEA THE VENTURE ITSELF f – 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
- 26. 26 SCREENING THE IDEA THE VENTURE ITSELF f – 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?
- 27. 27 WHY NEW VENTURES FAIL 1. PRODUCT/MARKET ISSUES 2. FINANCIAL DIFFICULTIES 3. MANAGERIAL PROBLEMS
- 28. 28 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
- 29. 29 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
- 30. 30 WHY NEW VENTURES FAIL PRODUCT/MARKET ISSUES Inappropriate distribution strategy Over-reliance on one customer Insufficient knowledge of buying habits of customers
- 31. 31 WHY NEW VENTURES FAIL FINANCIAL DIFFICULTIES Initial under-capitalization Assuming debt too early - debt service problems
- 32. 32 WHY NEW VENTURES FAIL FINANCIAL DIFFICULTIES Poor estimate of costs and initial working capital requirements Unrealistic sales projections- seasonality often ignored
- 33. 33 WHY NEW VENTURES FAIL MANAGERIAL PROBLEMS Poor recruitment and selection of staff Weak management team -poor guidance Poor staff relationships -weak team approach
- 34. 34 WHY NEW VENTURES FAIL MANAGERIAL PROBLEMS Productive time spent in conflict management High staff turn-over