Developing Ideas and Business Opportunities

Developing Ideas and Business Opportunities

Prepare an Opportunity Analysis and Learn Five Steps to Success

copyright 2003 Jack M. KaplanPrepare an Opportunity AnalysisIdentifying which business ideas have real commercial potential is one of the most difficult challenges that an entrepreneur will face. Five steps model that help an entrepreneur to know a winning opportunityStep 1 : Seize the Opportunity Know what factors create opportunity.How much value an opportunity can add to a businessAccess the risks and rewards.

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copyright 2003 Jack M. KaplanWhat Factors Create Opportunity?

Opportunity Factors

TechnologyReplace present technology?Niche Market ApplicationsInfrastructure ReplacementEconomicCost decreasingProductivity gainsBetter serviceDemographicTechnology generationIndustryStandardsGovernment & Privacy IssuesMarket ShiftWill these factors continue?For how long?What is the market size, growth and outlook?Will this lead to another opportunity?

Infrastructure replacement : aging infrastructureDemographic new technology4

copyright 2003 Jack M. KaplanQuestions to Evaluate the Business OpportunityWhat are the indicators that lead to this idea and opportunity?What are the conditions that permit the opportunity to occur?How will the future of this new product or service change the idea?How great (in terms of time) is the window of opportunity?

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copyright 2003 Jack M. KaplanEvaluating the Opportunity

Does the Opportunity:Fill a need?Show evidence of productacceptance?Show that a marketexists now?Reflect that yours is betterthan the competitions?Show an upside gain potential?Describe the cost to achievethis potential?

B. Understand the Time HorizonA window of opportunity is a time horizon during which opportunities exist before something else happens to eliminate them.A unique opportunity, once shown to produce wealth will attract competitors, and if the business is easy to enter, the industry will quickly become saturated.In this situation, entrepreneurs must quickly get in quickly and get out before revenues become dispersed in an overloaded market

C. Calculate the Opportunity Costs Opportunity costs are the value of benefits lost when one decision alternative is selected over another. For example, a software company refuses to deliver a software program, because writing the software code will require the company to miss a major deadline for another company.

The order for the software program would generate revenue of $25,000 and $14,000 of additional costs. Then the opportunity cost and the net benefit lost associated with the software deadline is $11,000 (i.e. $25,000 - $14,000).

Step 2. Investigate the needs through Market ResearchAsk preliminary questionsPrepare data collection.Execute a study to get answers.Analyze the data.

a. Ask Preliminary QuestionsSolidify the purpose and objective of the researchEntrepreneurs should consider their goals now Areas and question that are meant to guide the direction of research are :Need, Niche/competition, proprietary questions, cost and Manufacturing, advertisement and Packaging, Sales, Transport, Employees.

copyright 2003 Jack M. KaplanAsk Preliminary QuestionsNeed. Will this product be serving customers real needs? Niche/Competition. What is different about the product or service that will cause the customer to choose it over the competitions product or service? Proprietary Questions. Can the product be patented or copyrighted? Is it unique enough to get a significant head start on the competition? Can the process be easily copied?

copyright 2003 Jack M. KaplanAsk Preliminary QuestionsCosts- How much will materials and labor time cost? How much will be needed in the future? Now? Advertisement and Packaging. What type of advertising and promotional plans will be used to market the product? Sales. What distributions and sales methods will be used? ?

copyright 2003 Jack M. Kaplan

b. Prepare Data Collection Method

Where to Find Information

Visit Experts in FieldInternet Searches

Library Research

Questionnaire Surveys

Existing Research

Trade Associations

Market Research FirmsContact well known entrepreneurs to get advice.Visit web sites on companies and new products or technologiesUse college libraries to access references and specialized bibliographiesUse mail, phones, Internet, or professional interviews. Write and prepare questions to give you the right data.Use investment banking firms, advisory services, or consulting firms to gather data and ask to receive findings.Visit trade shows, read trade publications.Hire a firm to prepare a report on market survey for the proposed idea.

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c. Execute a Study to Get Answers.

Consult directly with existing business owners and experts in the field and ask relevant key questions.Identify companies with similar products and services then inquires as to who may be willing to give advice.To eliminate receiving questionable data certain pitfalls must be avoided. Ensure all participants are asked same question and in same mannerBe sure that the answers are accurate by maintaining a precise and objective method of questioning.Any survey recorder and telephone interviewers the entrepreneur employs should be trained and monitored

d. Analyze the data Data collected needs to be analyzedWhat do the data reveal?How can they be interpreted?Examine the secondary resources?

Step 3 Develop the PlanA. Ask the right questionsOnce the opportunity has been identified, decisions must be made regarding performance and staffing.Who is going to do what? How will decisions be made?Business plan should be flexibleShould be broad enough to incorporate unexpected changes.

B. prepare the business plan A good plan will do the followingDetermine the viability of the business and application in selected markets.Provide guidance in planning and organizing the activities and goalsServe as a vehicle to obtain financing and personnel for the business

Business plan guides the entrepreneurs in three junctures (moment)It simplifies decision making in the time of crisis.It is the roadmap at the point of indecisions.It is motivational guide during setbacks or downturns.

Step 4 determine the resource neededAll businesses must address resource capabilities to foster venture developmentThree aspects of assessing resource capabilities:

a. Start Making Personal Contacts and NetworkingResources are needed to identify, contact and establish a network with appropriate clients and vendors.Who will meet people personally?Who will do telephone work ?Who will be in charge of email correspondence

b. Perform Financial Requirements How much initial capital is needed? What resources are available for financial support?How long can the new business be self financed? How long will it take to make business profitable?What kind profit margin will eventually result from the product or service?How can the revenue and financial model be presented to investors for their involvement in business?

c. Gather Sources of Technical Skillsthe entrepreneur may have an idea but not posses the creative process and innovative technical skills necessary to implement it.In this case external skilled labor is neededTraining costs need to be calculated into startup costs.

Step 5. Manage the distinguishing features of the business

Step 5 entails running the business, applying a specific management structure and style to any questions, difficulties and roadblocks to success that may ariseEmphasis here is on investingEntrepreneurs now must break off from the path blazed out by the most successful businesses and invest in people, operating procedures, and information technology. This involves the following events.

1. Deliver a total solutionSmall companies have traditionally assumed unchallenged territory and special distribution channels for their products Today however all companies play in the same markets and provide the entire range of service for their customers.Investors and customers want to buy a total solution product or service

In business computing a total solution is one that contains all products and services in one delivery that meets a specific function or provides one solution or system to solve multiple problems. For example a computer system with all software and applications preinstalled and the installation of that system on the network would constitute a total solution product

Companies are creating high-value solutions by integrating various products and services () to solve a complete customer problem.differentiate themselves from competitors by providing added customer value

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2. Cultivate advanced Resources

Layoffs of highly skilled workers from major corporations create an important opportunity

These trained personnel are looking to apply their business skills and experience to startups