1	Recognizing Entrepreneurial Opportunities Dr. Jeff Shay
2	Here are just a few areas to explore business ideas Continuing your current career, but in business for yourself Turning a hobby or other leisure activity into a business Selling your expertise Using equipment you already own to start a business Providing needed services to individuals and businesses Taking classes or working at a job to learn about a field of interest Developing a new product or improvement on an existing product
3	Where new ideas come from
4	When entrepreneurs are first getting started they often have a limited perspective on their product or service. Consider the components below relative to your business idea.
5	Many would be entrepreneurs confuse business ideas with real opportunities. Consider the following questions for your new venture: Is it a business that is attractive to you? For example, can you see yourself working long hours for many years on developing it into a viable business? Is the product or service durable? That is, will people continue to have a need for this product or service in 5 to 10 years? Is your introduction of the product or service timely? Is there are real value that your product or service offers customers? Don’t lose sight of this
6	So, what are real opportunities…? Opportunities… Are developed using ideas and entrepreneurial creativity Evolve when there is chaos, changing circumstances, knowledge and information gaps, lags or leads, and other types of vacuums in the market Are situational, yet have some characteristics that may be generalizable or transferable to other markets or industries
7	Some opportunities are referred to as market vacuum opportunities. These occur as a result of changes in the marketplace. Some examples include: Deregulated telecommunications and airlines industries Micro computer hardware sales initially outpacing software development Dual income families and the growth of the mid-scale, chain restaurant market Can you think of any others that exist today?
8	There are some specific criteria that investors and lenders use to evaluate opportunities, including: Industry and market Economics Harvest issues Competitive advantage issues Management team Fatal flaw issue Personal criteria Let’s take a closer looks at each…
9	Industry and Market Issues Market – need, customers, user benefits, value added, product life Market structure – number of players, fragmentation, barriers to entry and exit, etc. Market size – is it large enough? Growth rate – how fast is it growing? Market capacity – is there room for more players? Market share attainable – can you achieve a reasonable market share? Cost structure – low cost providers?
10	Economics of the Opportunity Consider the each of the following for the new business venture. Is there a reasonable…: Profit after tax? Return of Investment potential? Amount of capital requirements to get started? Internal Rate of Return? Cash flow? Level of gross margins? Time to breakeven – cash flow and profit? Do these all make sense in terms of the amount of money invested into the business?
11	Harvest Issues for the Opportunity Entrepreneurs often fail to consider how the business will be harvested. Here are some questions you should ask before getting started… Is there a potential to increase the value of the initial investment that results from operating the business? What exit mechanism and strategy will you use for yourself and for investors? Will you sell the business? Sell shares in the business through an Initial Public Offering? Have you determined a method for giving investors their money back with a reasonable rate of return? Etc.
12	Management Team Issues How strong is the entrepreneurial team? Does the team possess the requisite level of industry and technical experience? Does the management team have a high level of integrity? Is there a high level of intellectual honesty among the management team? That is, do they openly recognize the areas in which they need help?
13	Fatal flaw issues What are the potential risks associated with the venture? Where are the weak points in the opportunity, entrepreneurs, or resources?
14	Personal Criteria Is there a fit between the new businesses goals and the personal goals of the entrepreneurial team? How prepared are the individual team members for handling the upside and downsides of the business? What is the opportunity cost for investing in this business? Would the money be better spent on another venture? How desirable is this type of business for the investors? Do the investors and the team have a reasonable tolerance for the risks when considered in conjunction with the potential rewards? Does the entrepreneurial team have a high tolerance for stress? How much risk is the team willing to take?
15	Evaluating opportunities Would be entrepreneurs often make the mistake of trying to come up with a completely new idea for a business The reality is that many of the entrepreneurship success stories were based on improving an existing product or service Consider the following businesses that were not necessarily new ideas: Federal Express – developed a more time efficient and reliable process for distributing packages Southwest Airlines – discarded industry idea that airlines must use the hub and spoke system Amazon.com – used a new channel for selling books
16	Testing the concept quickly Talk with trusted friends and get initial feedback on the idea Do a quick analysis of the forces working for and against your idea Ask yourself these questions: Am I really interested in this business idea? Is anyone else interested? Will people really pay for what I am offering
17	Recognize what stage of development you are in Idea stage Come up with idea and evaluate Concept stage Further development and evaluation Product development stage Pilot production run and evaluation Test marketing stage Semicommercial plan trials and evaluation
18	Next Module In the next module we’ll expand your understanding of the different ways in which you can get a business started Many entrepreneurs think that new businesses must start from scratch We’ll provide you with a variety of “Entry Strategies”