Recognizing Opportunity

Chapter 3 Recognizing Opportunity

Take the steps to recognize an opportunity: • Study current trends • What are the current trends today? • Develop a business concept • Test it with potential customers • Create a business to execute that concept BEGIN THE ENTREPRENEUR PROCESS

Internet Businesses: • has transformed the way business is conducted • Most traditional companies have added online component • Millions of online businesses • Service Businesses: • Dominate modern American economy • Intangible things that are done for us to enhance our lives. • Insurance, tourism, banking, and education Current Entrepreneurial trends

Home-Based Businesses: • Growing rapidly and now represent about 53% of all small businesses • Using available and inexpensive online tools is has an image that is just as professional as large corp. • Consultants, sales representatives, tradespeople, writers, graphic designers, and Web developers. • Even companies that produce products if manufacturing and distribution is outsourced Current Entrepreneurial trends

Green Businesses: • Largest opportunity of the 21st century • SUSTAINABILITY – venture seeks to achieve economic, environmental, and social goals without compromising the ability of future generations to meet their own needs • Food quality, energy resources, pollution, and human rights • General Electric and Wal-Mart have adjusted their business practices to try to promote sustainability Current Entrepreneurial trends

Social Entrepreneurship • Identify social needs, such as finding employment for wounded veterans, combating pollution, or providing shoes for children who cannot afford them, and recognize them as opportunities. • Measure their success in term of positive impact they make on society Current Entrepreneurial trends

Focus on Technology – it the main trend that affect businesses today • Use technology to improve the business processes create a competitive advantage • It is the company’s product or it’s used to increase productivity Current Entrepreneurial trends

Outsourcing – contracting other companies for services. Most common type is business process outsourcing: accounting, benefits and finance functions • Small businesses can tap into outside expertise • Benefits • Allows greater efficiency, saving time and money • Decreases overhead investment or debt • Lowers regulatory compliance burdens • Allows companies to start new projects quickly • Core attractive to investors allows companies to direct more capital into money-making activities Current Entrepreneurial trends

Strategic Alliances – one step beyond Outsourcing is to form a partnership with another company. • Your company provides a product or service that is not part of the larger company’s core competency. • 3M makes adhesive products, they partner with companies for complementary products such as tape dispensers to package with its adhesive tape. Current Entrepreneurial trends

Corporate Ventures – a new venture started inside a large corporation. Large companies find they must act like entrepreneurs to innovate and remain competitive. • Start small companies as spin-offs • Parent company supplies resources to help it get started, eventually becomes an independent company. Current Entrepreneurial trends

Creativity and Innovation – it can be learned. Creativity is the activity that results in innovation, finding new ways of doing things, it involves: Connection – bring together things that leads to… Discovery – that is turned into ….. Invention – new product Application – going beyond the original invention to other uses in new areas Learning to recognize opportunity

Idea or Opportunity – not the same • Generate ideas by thinking creatively • Opportunities are ideas that have commercial potential, which can turn into a business • Entrepreneurs recognize an unmet consumer needs and unfilled market niches. • Niche Market – a small specialized market Learning to recognize opportunity

Understanding Industries – • changes in industry create profitable niches for new businesses to fill. • The development of new products and services in any industry creates the need for complementary types of businesses Learning to recognize opportunity

Practice BRAINSTORMING – • Think freely to generate ideas, not judge as good or bad. • Look at ordinary items in new ways • Find creative solutions to common problems • Connect unrelated items • CHALLENGES to Creativity: • Time pressures, influence of unsupportive people, lack of confidence and rigid thinking Strategies for thinking creatively

Observe the World Around You – start watching people at hotel lobby or at mall, to learn what are people’s wants/needs. Watch for Demographic Changes – cultural diversity impacts the products to develop. Be an Avid Reader – it may help spark an idea that applies to your field Creative sources of ideas

Consider Your Own Experiences • Interests – some ideas solve problems you encounter in everyday life. Think about ways to solve these problems. Practice 5 steps may help you think of great business ideas. • Hobbies – evaluate your favorite pastime in terms of its business potential. • Work – your experience provides insight into that may help recognize opportunities. • Start similar business in a smaller niche market • Does company have a gap in network of suppliers • Are customer’s needs/wants being met? • Has technology advances provide new opportunities? Creative sources of ideas

Consult Outside Sources • Trade Magazines – periodical for industry specific; contain articles and advertisements for new products, current news, market trends, information on customers • Specialty Magazines – targets people with special interests. Identify interests and needs of potential customers. • Trade Shows and Exhibitions – vendors and manufacturers introduce new items with exhibits and demonstrations, can be a source of spin-off ideas. • Newspapers – business section reports on trends and innovations or identify problems that may be source of opportunity Creative sources of ideas

Consult Outside Sources • The Internet – source for opportunities, Google search engines, SBA business ideas • Government Agencies – source of information • Dept. of Commerce’s The Bureau of Economic Analysis publishes current business conditions. • U.S. Patent Office contains detailed descriptions of new products. It also publishes Official Gazette weekly periodical that summarizes each patent granted and lists all patents available for license or sale. • OSHA – new products come in response to new regulations, such as OSHA requires medical kit, so entrepreneurs responded by manufacturing kits Creative sources of ideas

Personal Values and Goals • Values – beliefs and principles you choose to live by. • Core Values – do not change in different situations, they endure over time. • Goals – are the objectives you are trying to achieve Starting VS BUYING A BUSINESS

Entering the Family Business • The rewards and challenges of Family Business • Only 1/3 survive second generation • Family dynamics • Greatest advantage trust and togetherness • Disadvantage can’t get away from the business • Develop clear lines of responsibility, be objective of family members qualifications, keep decisions unaffected by personal emotions, and respect individual needs Starting VS BUYING A BUSINESS

Entering the Family Business • Questions to Ask Yourself • Do I have the ability to work for a member of my family? • Do I get along well with the family member who is involved in business? • Do we share the same goals for the business? • Do we share the same general goals for our personal lives? • Can we be clear and specific about our expectations of each other? • Can I leave business problems at work when I go home each night? • Can we maintain a positive family relationship? Starting VS BUYING A BUSINESS

Buying an Existing Business • Acquire a business is to buy an existing one. • Less risky: • employees are trained • equipment is in place • company has customers, such loyalty called Goodwill which is extremely valuable business asset Starting VS BUYING A BUSINESS

Fantastic Sam’sRadio ShackA&W RestaurantsNathan’s Famous Inc.Century 21 Real EstateHollywood TansInternational House of PancakesSubwayEmbassy Suites HotelsScott’s Lawn Service What do they all have in common? Goods or Service?

Buying a Franchise • buy the right to set up a business patterned on an existing model • Franchise is a legal agreement to begin a new business in the name of a recognized company • Franchisee (buyer)has right to a product, process, or service, training and assistance in setting up the business and ongoing marketing and quality support. • Pay a franchise fee and royalty fees • Buys rights to geographic locations • Franchisor (seller) provides planning and management expertise Starting VS BUYING A BUSINESS

Evaluating a Business Opportunity • Investigate business and industry carefully • Talk to customers, employees and suppliers • Hire an accountant to verify the value of the business • Hire an attorney to advise you and investigate business for any legal liabilities • Where to Find a Business • Look in newspaper and WSJ • Network with people in community • Business Broker - someone who brings buyers and sellers together Starting VS BUYING A BUSINESS

Questions to Ask • Is the business interesting to me and to others? • Make sure its really interesting to you and plenty of existing customers • Why is the owner selling? • Is owner selling for personal reasons or because the business is not doing well? • Check company’s financial statements against information from suppliers and competitors • What is the business’s potential for growth? • Determine where the business is in it’s life cycle of growth, maturity, and decline Starting VS BUYING A BUSINESS

Starting Your Own Business • Questions to Ask • Do I have motivation? • Does business align with my personality, abilities, values, and goals? • Do I have sufficient knowledge of operations, managerial ability? • Do I have the right partners to help me? • Do I have enough financial resources? • Am I willing to accept the risk? Starting VS BUYING A BUSINESS

Starting Your Own Business • What You Must Do • Feasibility study of your concept in market are there enough customers to make the effort worthwhile • Decide on a traditional business or an online business • Prepare a business plan seek capital, partners, and employees • Secure professional advisors • Hire employees and initiate relationships with suppliers • Purchase equipment and set up distribution channels • Create awareness for business Starting VS BUYING A BUSINESS

Current Entrepreneurial trends

Recognizing Opportunity