This document differentiates between business ideas and opportunities, providing guidance on evaluating new venture prospects. It discusses sources for generating business ideas and defines a business opportunity. Key factors for assessing new ventures are outlined, including the entrepreneur's characteristics, business environment, and venture specifics. A screening methodology involving a macro/micro analysis is presented. Reasons for new business failure center around problems with the product/market, financial difficulties, and managerial issues.
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
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?
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