Module 5 How Do I Find a Good Busines Idea

KNOW ABOUT

BUSINESS

Entrepreneurship Education in Schools and Technical Vocational Training Institutions

and Higher Education

MODULE 5 How Do I Find a Good Business Idea?

Authors:

George Manu

Robert Nelson

John Thiongo

Klaus Haftendorn

Editors:

Peter Tomlinson and Klaus Haftendorn

International Labour Office, Geneva

International Training Centre of the ILO, Turin

Copyright International Training Centre of the ILO 2008 This publication enjoys copyright under Protocol 2 of the Universal Copyright Convention. Applications for authorization to reproduce, translate or adapt part or all of its contents should be addressed to the International Training Centre of the ILO. The Centre welcomes such applications. Nevertheless, short excerpts may be reproduced without authorization, on condition that the source is indicated.

Know About Business ISBN 92-9049-396-8 First published 1996

Second edition 2000

Third edition 2002

Fourth edition 2004 Revised edition 2005

Revised edition 2007 Revised edition 2008

The designations employed in the publications of the International Training Centre of the ILO, which are in conformity with United Nations practice, and the presentation of material therein do not imply the expression of any opinion whatsoever on the part of the Centre concerning i.a. the legal status of any country, area or territory or of its authorities, or concerning the delimitation of its frontiers. The responsibility for opinions expressed in signed articles, studies and other contributions rests solely with their authors, and publication does not constitute an endorsement by the Centre of the opinions expressed in them. Publications of the Centre, as well as a catalogue or list of new publications, can be obtained from the following address: Publications International Training Centre of the ILO Viale Maestri del Lavoro 10 10127 Turin, Italy Tel: +39 11 693-6693 Fax: +39 11 693-6352 E-mail: [email protected] http://www.itcilo.org

Know About Business Module 5: How Do I Find a Good Business Idea?

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MODULE 5

How Do I Find a Good Business Idea?

Module objectives:

To provide techniques for generating business ideas as well as for identifying and assessing business

opportunities.

Module coverage:

Page

1. Creativity and Innovation........................................... 4

2. Generating Ideas .................................................... 18

3. Identifying and Assessing Business Opportunities ....... 31


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I TOPIC 1: Creativity and Innovation

II SUGGESTED DURATION:

1 hour/session

III OBJECTIVE:

By being involved in a variety of class activities, learners will have the opportunity to become aware of their own creative potential.

By thinking of ways to change an existing situation or object, learners will learn to apply techniques for developing their creative ability.

IV RATIONALE:

To develop their creative ability, learners need an opportunity to assess their own creative behaviour. They can then begin to practice creative thinking. Creativity is another area where entrepreneurs have various opportunities to use their creative talents. Although employees are often not required to think creatively, they can be excellent sources of new ideas.

Because the entrepreneur has such a broad range of responsibilities, creativity by both entrepreneur and employees can be extremely useful to develop ideas to solve a wide variety of business-related problems. Entrepreneurs have a great deal of freedom to implement creative ideas.

One way to help learners develop their creative ability is to begin with existing ideas. These ideas may be changed in various ways to produce new and original ideas. The technique of changing existing ideas has many useful applications in work situations.

V ACTIVITIES:

1. Have learners complete WORKSHEET 1. Explain to learners that the

worksheet is designed to help them assess their creative potential.

2. Distribute WORKSHEET 2: Three Descriptions. Have learners read the

three descriptions and decide which one best describes them.

3. The following Scoring Key will help learners score their worksheets. Read

the scores for each response to each question. Instruct learners to write

the number of points they scored for their responses beside each

statement on the worksheet. For example, if a learner checked Uncertain

for statement A, the learner should write 1 beside the statement; if a

learner checked yes for statement A, the learner should write 2 beside

the statement.


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TRUE FALSE UNCERTAIN

A 2 0 1

B 2 0 1

C 0 3 1

D 0 2 1

E 0 3 1

F 3 0 1

G 0 3 1

H 0 3 1

I 2 0 1

J 3 0 1

K 2 0 1

L 3 0 1

M 2 0 1

N 3 2 1

O 2 0 1

After all statements have been scored, have learners add up the points for

all statements. Have learners refer to Worksheet 1. Tell them that they

may interpret their scores as follows:

Description I applies to persons who scored 23 points or more. Description II applies to persons who scored between 11 and 22 points. Description III applies to persons who scored 10 points or less.

4. Use the following questions to discuss the results of the scoring. Were you

surprised at the results of the scoring? Why or why not? What do you like about the description from scoring the worksheet? What about the

description would you like to change or improve? In what ways are the

descriptions similar/different? What advantages might a person of each

description have as a self-employed person? Disadvantages?

5. Have learners read and discuss Handout 1 on Creativity.

6. Discuss the technique of changing existing ideas in order to develop new

and original ideas. Existing ideas give us a starting point. By changing


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one or more parts of an idea, we can develop useful new ideas. Discuss

the following ways of changing an idea. Have learners give examples of

each.

Make it bigger or add new parts. Two examples are giant economy sizes of products and increasing the size of a business to include more products or to serve a larger area.

Make it smaller or eliminate parts. Examples are transistor radios, pocket calculators, digital cameras etc.

Modify parts or ideas. Examples are changing colors, tastes, odors and styles. Soaps are often changed in their color and odor. Automobile styles are changed yearly.

Rearrange parts. Some examples of rearranging parts are in designing buildings, parks, and machines.

Reverse parts. One example of reversing parts is in automobiles in which the trunk and the engine are reversed in location. Another example is reversing roles of persons, such as a husband assuming homemaking responsibilities while a wife assumes the role of breadwinner.

Substitute different materials, parts, or methods. A common example is the substitution of plastic for wood and metal. Another example is the substitution of an electric motor for an internal combustion engine in a car.

Combine parts or ideas. One example is the home entertainment unit, which combines a television, radio, tape player, and record player. Another example is the motor home, which combines a home with a vehicle.

7. Have Learners complete WORKSHEET 3.

Ask all learners to share their ideas. Have them explain how their ideas can be useful in work situations.

Ask the class to consider combining two or more ideas of individual learners.

Emphasize that the technique used in this activity can be used to develop new ideas and processes as well as new objects.

Have learners apply the same technique to a service instead of an object.

Have learners imagine that the class has decided to form a company to offer a service (for example, lawn mowing or dog walking). Working as a group, have the learners use the same technique they used on the worksheet to develop a creative marketing approach which would attract customers.

8. Have learners complete WORKSHEET 4. Have the class discuss innovative

entrepreneurial responses to the changes in business.

9. Show TRANSPARENCY 1 and have the class discuss ways they can become

more creative.

10. Using TRANSPARENCY 2, introduce the concept of creativity and explain its

importance in generating a good business idea. Then do the nine dot

exercise. Draw nine dots on the black board like shown on the top of

TRANSPARENCY 2 and ask the learners to connect the 9 dots by means of

4 straight, continuous lines. The pencil should not be lifted off the paper.


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Ask each individual to write down their solution. Ask those who managed

to do it to explain how before revealing the answer on the bottom half of

TRANSPARENCY 2. Explain that the solution requires going outside the

square of dots, and that we needed to stretch our imagination and mind

beyond the apparent problem in order to solve the problem.

11. Do the creative squares exercise to provide another example of creativity

in action. Show TRANSPARENCY 3 and ask each individual to count the

total number of squares in the figure. Emphasize that a square is a

rectangle with sides of equal length. Discuss the answers and the process

used in solving the puzzle. Highlight the need for creativity. After the

exercise, in order to illustrate how to come up with all the squares there

are, you may: a) number each square or box in the main diagram; (b)

combine various boxes to form squares, i.e. four equal-sided boxes; (c)

add up the possible combinations to arrive at a total of 30. As a follow-up

activity, ask how many rectangles (different lengths of the two sides) can

be identified in the same overall square (52).

12. Divide the class into small groups and have them count the number of

triangles portrayed in TRANSPARENCY 4. The correct number is 47: ACE;

BFD; AEB; AED, AEH, AFC, AFH; AFD, AFB, ACH; ACD, AGF, AGB, ABH,

ABD, CEB, CEF, CEH, CDH, CDF, CDB, CID, CIB, CBH, CFB, EDH; EBD,

EDF, EJF; EJD, EFH; EFB; HBG; HBI; HFG; HFJ; HDI; HDJ; HFB, HDB;

HFD; FIB; FID; DGB; DGF; BJD; BJF

Ask learners if working in a group helped them to see things from different angles?

Did any of the groups count the triangles originating on a single side, then multiply that by two and then add one for the overall triangle?


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MODULE 5: Topic 1

WORKSHEET 1

Your Creative Potential

Respond to each of the following statements by checking one of the boxes to the left of the

statement. This is not a test. Think carefully about each statement before responding.

TRUE FALSE UNCERTAIN

A My ideas are not always easy to explain to

others.

B I would rather work at discovering new facts

than teaching others.

C I dont like to waste time and energy on

ideas that may not work out.

D I find it easier to express ideas than to think

of new ideas.

E I prefer quick solutions to problems rather

than dealing with uncertainty.

F My way of thinking is often considered

different or unusual.

G I find it easy to interrupt a project when

friends call or visit.

H I feel more comfortable with facts than with

theories.

I I would rather be good at making up stories

than good at telling them.

J I have difficulty giving up my ideas just to

please others.

K I would rather design clothes than model

clothes.

L I prefer to work on ideas by myself rather

than with others.

M Unusual things appeal to me more than

ordinary things.

N When I get an idea, I work on it, even when

others think it is far out and impractical.

O I would follow up on my ideas even if it

means being alone a lot.


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MODULE 5: Topic 1

WORKSHEET 2

Three Descriptions

Below are descriptions of three different types of people. Read all three descriptions

carefully. Mark an X beside the description you believe most closely describes you.

Description I

You are not bound by ordinary ways of thinking. You can develop and recognize ways

to combine ideas in new ways. You are willing to experiment even when you are not

sure your work will be rewarded. Because you seldom depend on others, you can

provide yourself with the time, energy and isolation that are necessary for creative activities. You are not likely to be distracted or discouraged by others once you

become interested in a challenging task.

Description II

You can recognize and appreciate a creative idea, although you usually do not produce

these ideas by yourself. You probably engage in creative activities which involve using

your hands or which involve objects you can see and touch. You start creative projects

sometimes, but you may lose patience and interest when a project requires you to

work for a long time by yourself.

Description III

You are usually more interested in practical down-to-earth matters than in chasing

dreams. Since you tend to be very realistic in your thinking, you may not be aware of

unusual ideas that are necessary for creative problem solving. Because you prefer to

work with other people, you rarely set aside time to work by yourself on your ideas.

You are more likely to engage in activities which give you immediate results and

which may be shared with others.


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MODULE 5: Topic 1

HANDOUT 1

Creativity

Most people can think of several occupations which require creativity - artist,

musician, dancer, designer and scientist. However the need for creativity is not limited

to these occupations. Creative ideas are needed anywhere there are problems with

unknown solutions. In the business world, entrepreneurs use creativity to solve

everyday problems, promote products and services, update products and services,

and make use of limited resources.

Some people believe that they are not creative. They may overlook situations in which

they have good ideas, or they may avoid sharing their ideas with others. By

recognizing and sharing their ideas, people can begin to develop their creative ability.

Because people become accustomed to thinking in certain ways, they may have

difficulty thinking of original ideas. People can develop their creative potential through

learning and practice. Several techniques can be used to develop more creative

thinking habits. Some of these techniques are: increasing awareness of ones

environment, brainstorming and changing existing ideas.

Increasing awareness of ones environment means learning to pay attention to

sights and sounds we ordinarily ignore. Most people are in the habit of blocking out

certain sights and sounds in order to concentrate on one thing at a time. By paying

attention to what we usually ignore, we can open our minds to new ways of thinking.

Brainstorming is a technique in which persons generate a large number of ideas.

Unusual ideas are encouraged. Ideas are never judged or criticized during

brainstorming. Participants may combine and improve ideas during brainstorming.

New and original ideas can be developed by using existing ideas as a starting point. Parts of existing ideas can be changed in many ways. They can be: made bigger,

made smaller, modified in color, taste or style, rearranged, reversed, substituted or

combined. Products and services are often changed to make them more attractive by

using this simple technique. This method could also be used to help entrepreneurs

make their working situations more pleasant and efficient.

By developing and using their creativity, entrepreneurs can increase their potential for

success.

The appreciation of creativity has been more important for entrepreneurs in the past

several years. It is increasingly accepted that intellect and credentials take a back

seat to the ability to respond creatively to challenging situations.


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Here are seven steps to expanding your creative potential:

1. Examine how you perceive creativity and creative people. Our results-oriented culture has tended to look at those whose creativity produces a product a book, painting or cake as officially creative. We have been less able to recognize people who identify new ways of thinking and behaving, especially in everyday and business life, as just as creative.

2. Spend time with creative people. Observe how they act, think, relax and respond. Ask them to talk about what events in their lives influenced their creativity.

3. Learn your own warm-up process. This warm-up process increases your ability to ready yourself to develop a creative idea and take positive risks in making changes, even small ones. What events and settings seem to encourage your creative actions?

4. Move, dance, exercise, bicycle, walk and stretch. Try yoga or tai chi. These physical activities get us out of our thinking brain and allow us to truly inhabit all of our body. As the body moves, the right and left parts of the brain; both the imaginative side and the cognitive side are able to work together more efficiently.

5. Listen to music and experiment with improvisational exercises. Notice how different types of music promote various levels of energy within you. Theater and drama exercises will help you practice different ways of responding, apart from your habitual roles.

6. Keep a notebook of interesting or creative ideas and observations. Paste a few pictures from magazines that interest or intrigue you, even if you dont know why. Scribble and doodle. Whatever you do, dont censor yourself. See what happens.

7. Find a mentor or coach who can help you develop your creativity to a higher level.


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MODULE 5: Topic 1

WORKSHEET 3

New Ideas from Old

Make it bigger or add new parts. Two examples are giant economy sizes of

products and increasing the size of a business to include more products or to serve a

larger area.

Make it smaller or eliminate parts. Examples are transistor radios, pocket calculators.

Modify parts or ideas. Examples are changing colors, tastes, odors and styles. Soaps

are often changed in their color and odor. Automobile styles are changed yearly.

Rearrange parts. Examples: rearranging parts for designing buildings, parks, and

machines.

Reverse parts. One example of reversing parts is in automobiles in which the trunk

and the engine are reversed in location. Another example is reversing roles of

persons, such as a husband assuming homemaking responsibilities while a wife

assumes the role of breadwinner.

Substitute different materials, parts, or methods. A common example is the

substitution of plastic for wood and metal. Another example is the substitution of an

electric motor for an internal combustion engine in a car.

Combine parts or ideas. One example is the home entertainment unit, which

combines a television, radio, tape player, and record player. Another example is the

motor home, which combines a home with a vehicle.

Practical Application

1. Think of an object used or produced in a work situation. Write the name of the object;

2. Name the basic parts of the object.

3. How could the object or part of the object: be made bigger, be made smaller, be modified?

4. How could the parts of the object: be rearranged, be reversed, be substituted or made of a different material?

5. How could your ideas be combined and be useful in making a new product?


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MODULE 5: Topic 1

WORKSHEET 4

Taking Innovative Action

Entrepreneurship is about taking innovative actions whenever one finds oneself in

different situations of change

Fill in an innovative action an entrepreneur could take to respond to the identified change.

CHANGE

POSSIBLE

ENTREPRENEURIAL

RESPONSE

Structure of population changes

Values and lifestyles change

Incomes and purchasing power decrease

Government policies on gender reviewed

Natural resources getting exhausted

Ownership of factors of production changing hands

Banks advertise availability of loans

Use of computers increases

Use of mobile phones increases

Use of computers and internet facilities in homes

increase

New advanced equipment bought by business

competitor

New strategies for accommodating people living

with HIV


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MODULE 5: Topic 1

TRANSPARENCY 1

Meaning of Creativity

Creativity is the ability to design, form, make or do something in a new or different way.

Creativity is the ability to come up with innovative solutions to needs/problems and to market them. An entrepreneurs creativity is often the difference between success and failure in business.

Creativity often distinguishes high-growth or dynamic businesses from ordinary, average firms.

To be creative, entrepreneurs need to keep their mind and eyes open to their environment.


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MODULE 5: Topic 1

TRANSPARENCY 2

The Nine Dots


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MODULE 5: Topic 1

TRANSPARENCY 3

Creative Squares


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A B C

D

E

F

G

H

I

J

MODULE 5: Topic 1

TRANSPARENCY 4

How Many Triangles In A Triangle?


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I TOPIC 2: Generating Ideas

II SUGGESTED TIME:

4 hours/sessions

III OBJECTIVE:

To enable learners to:

(a) appreciate the importance of having a good business idea as a prerequisite

for successful business start-up and for an existing business.

(b) know how to generate business ideas.

IV RATIONALE:

A good business idea is essential for starting a successful venture and for staying competitive afterwards. Good business ideas, however, do not usually just occur to an entrepreneur. Rather, they are the result of hard work, effort and often creativity on the part of the entrepreneur.

V ACTIVITIES:

1. Ask the learners to define a business idea. Jot down their answers on

the board or flipchart. Show TRANSPARENCY 1 and discuss any aspects

not covered to arrive at a common understanding of the term.

2. Ask the learners to indicate why it is important to generate ideas. List

responses on a board or flipchart. Show TRANSPARENCY 2 and compare

the learners list with the points suggested on TRANSPARENCY 2. Tell the

students that women and men should select business ideas on the basis of

their skills and interest, irrespective of what people say about certain

business sectors being more suitable for women or for men. Discuss key

issues including the fact that the development of business ideas is

necessary both before and after a business has been set up. Have learners

read HANDOUT 1.

3. Have learners give examples of people or firms in their community or

elsewhere that have come up with good business ideas, and explain their

reasons for considering these ideas as being good.

4. Ask learners to suggest ways in which business ideas can be generated.

List these on a board or flipchart. Show TRANSPARENCY 3 and compare it

with the learners responses. Lead a discussion on the main points, giving

examples and illustrations. Have learners read HANDOUT 2 and use it for

the class discussion.


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5. Use TRANSPARENCY 2 to remind learners of the concept and principles of

brainstorming. To give some practical experience of using the technique,

tell learners that they have just 5 minutes to come up with at least a

dozen uses for one of the following (choose one item only): old

newspapers, bricks, old clothes, boxes (made of cardboard or wood), poles/sticks, any other object of your choosing.

6. Divide learners into small groups of 4 or 5 and tell them that they are going to

do an exercise to give them practice in using the concepts and techniques

discussed so far. Use WORKSHEET 1. You may hold a competition to determine

the best business idea.

Gender tip:

Teachers should take note if girls and boys cluster in any particular group or focus

on any particular type of business idea. Do girls and boys within the groups have

equal voice and participate in the same way in the brainstorming exercise?

Teachers should be ready to address differences and highlight how women and men

can benefit from each others ideas.

7. Bring sufficient newspapers by different publishers (outdated recent

newspapers) to the class. Let learners use the newspapers as they work in

groups of three to four on the WORKSHEET 2.


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MODULE 5: Topic 2

TRANSPARENCY 1

What is a Business Idea?

A business idea is the response of a person or persons, or an organization to solving an identified problem or to meeting perceived needs in the environment (markets, community, etc.).

Finding a good idea is the first step in transforming the entrepreneurs desire and creativity into a business opportunity.


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MODULE 5: Topic 2

TRANSPARENCY 2

Why Generate Business Ideas?

You need a great idea to start a new business

Business ideas need to respond to market needs

Business ideas need to respond to changing consumer wants and needs

Business ideas help entrepreneurs to stay ahead of the competition

Business ideas use technology to do things better

Business ideas are needed because the life cycles of products are limited

Business ideas help to ensure that businesses operate effectively and efficiently


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MODULE 5: Topic 2

HANDOUT 1

Why Should you Generate Business Ideas?

There are many reasons why entrepreneurs or would-be entrepreneurs need to

generate business ideas. Here are just a few:

You need an idea and a good one at that for business. As indicated earlier, in looking at the rationale for this topic, a good idea is essential for a successful business venture both when starting a business and to stay competitive afterwards.

To respond to market needs. Markets are made up essentially of customers who have needs and wants waiting to be satisfied. A business can become successful if it provides new products or services, or manages to reach a new group of clients, or finds a new channel to reach customers better. Many businesses starters who copy the business idea of others, are not successful because they do not respond to a market need.

Changing fashions and requirements provide opportunities for entrepreneurs to respond to demand with new ideas, products and services.

To stay ahead of the competition. Remember, if you do not come up with new ideas, products and services, a competitor will. The challenge is to be different or better than others.

To exploit technology do things better. Technology has become a major competitive tool in todays markets, with the rate of change forcing many firms to innovate. There are several companies in the world, operating in the electronics and home appliances industries, which come up with dozens of new products every month. For these and many others in todays global markets, generation of business ideas is crucial.

Because of product life cycle. All products have a finite life. As the product life cycle chart shows, even new products eventually become obsolete or outmoded. Thus, there is a need to plan for new products and the growth of these. The firms prosperity and growth depends on its ability to introduce new products and to manage their growth.

To spread risk and allow for failure. Linked to the product life cycle concept is the fact that over 80 per cent of new products fail. It is therefore necessary for firms to try to spread their risk and allow for failures that may occur from time to time by constantly generating new ideas.


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MODULE 5: Topic 2

TRANSPARENCY 3

Sources of Business Ideas

Hobbies/Personal Interests

Personal Skills and Experience

Franchises

Mass Media (newspapers, magazines, TV, Internet)

Business Exhibitions

Surveys

Customer Complaints

Changes in Society

Brainstorming

Being Creative


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MODULE 5: Topic 2

HANDOUT 2

Generating a Business Idea

A good business idea is essential, or even a prerequisite, for a successful business

venture. However, good business ideas do not usually just occur to an entrepreneur.

Rather, they are the result of hard work and effort on the part of the entrepreneur in

generating, identifying and evaluating business ideas that can be developed into a

business opportunity.

What is a Business Idea?

A business idea is the response of a person or an organization to solving an identified

problem or to meeting perceived needs in the local environment (markets,

community, etc.). Finding a good idea is the first step in transforming the

entrepreneurs desire and creativity into a business opportunity.

Two things should however be noted:

(a) although it is a prerequisite, a business idea is only a tool;

(b) an idea by itself, however good, is not sufficient for success.

In other words, notwithstanding its importance, an idea is only a tool that needs to be

developed and transformed into a viable business opportunity. Out of 30 business

ideas, there may be only one good business opportunity.

What is Creativity?

Creativity is the ability to design, form, make or do something in a new or different

way. The ability to come up with creative solutions to needs/problems and to market

them often marks the difference between success and failure in business. It also

distinguishes high-growth or dynamic businesses from ordinary, average firms. Real,

successful entrepreneurs are creative in identifying a new product, service or business

idea and turning it into a business opportunity. To be creative, you need to keep your

mind and eyes open as you work through the sources of business ideas explained

below, and apply the techniques.

Sources of Business Ideas

There are millions of entrepreneurs throughout the world and their testimonies

suggest that there are many potential sources of business ideas. Some of the more

useful ones are outlined below.

Hobbies/Interests

A hobby is a favorite leisure-time activity or occupation. Many people, in pursuit of

their hobbies or interests, have founded businesses. If, for example, you enjoy

playing with computers, cooking, music, traveling, sport or performing (to name but a


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few), you may be able to develop this hobby/interest into a business. To illustrate

this, if you enjoy traveling, performing and/or hospitality, you may consider going into

tourism, which is one of the biggest industries in the world.

Personal Skills and Experience

Over half of the ideas for successful businesses come from experiences in the work

place. For example, a mechanic with experience in working for a large garage who

eventually sets up his/her own car repair or used car business. Thus, the background

of potential entrepreneurs can play a crucial role in the decision to go into business as

well as the type of venture to be created. Your skills and experience are probably your

most important resource, not only in generating ideas but also in capitalizing on them

to develop a good business opportunity.

Franchises

A franchise is an arrangement whereby the manufacturer or sole distributor of a

trademark, product or service gives exclusive rights for local distribution to independent retailers in return for their payment of royalties and their willingness to

conform to standardized operating procedures. Franchising may take several forms,

but the ones of interest to potential entrepreneurs are the types that offer a name,

image and method of doing business and operating procedures.

In the 1990s franchising experienced tremendous growth, becoming a much-used

method of going into business for the millions of enterprises that were starting up in

the USA and Europe. In the 1990s, there were over 2,000 types of franchise

businesses, accounting for over US$300 billion in annual sales revenue and about a

third of all retail sales in the United States. There are many directories and handbooks as well as associations, including the International Franchise Association, which can

provide further information.

Mass Media

The mass media is a great source of information, ideas and often opportunity.

Newspapers, magazines, television, and the Internet are all examples of mass media.

Take a careful look, for example, at the commercial advertisements in a newspaper or

magazine and you may well find businesses for sale. One way to become an

entrepreneur is to buy an existing business.

Articles in the printed press or on the Internet or documentaries on television may

report on changes in fashions or specific consumer needs. For example, you may read

or hear that people are now increasingly interested in healthy eating or maintaining

their physical fitness.

You may also find advertisements calling for the provision of certain services based on

skills, for example accounting, catering or security. Or you may discover a new

business concept, but investors would be needed.

Exhibitions

Another way to find ideas for a business is to attend exhibitions and trade fairs. These are usually advertised on the radio or in newspapers. By visiting such events


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regularly, you will not only discover new products and services, but you will also meet

sales representatives, manufacturers, wholesalers, distributors and franchisers. These

are often excellent sources of business ideas, information and help you in getting your

business started. Some of them may also be looking for someone just like you to be a

business partner.

Surveys

The focal point for a new business idea should be the customer. The needs and wants

of the customer, which provide the rationale for a new product or service, can be

ascertained through a survey. Such a survey might be conducted informally or

formally by talking to people. Surveys may be conducted using a questionnaire,

through interviews or through observation.

You may start by talking to your family and friends to find out what product or service

they think is needed or wanted but is not available in the market. Or, for example,

whether they are dissatisfied with an existing product or service and what

improvements or changes they would like to see. You can then talk to people who are

part of the distribution chain, that is manufacturers, wholesalers, distributors, agents

and retailers. It would be useful to prepare a set of questions which might be put on a

questionnaire or used in an interview. Given their close contact with customers, these

people have a good sense of what is required and what will sell and what will not sell. Finally, you should talk to as many customers as possible (both existing and potential

customers). The more information you can get from them, the better.

Besides talking to people, you could also get information through observation. For

example, in deciding whether to open a shop on a particular street, you can observe

and count the number of people going past on given days and compare these

numbers to other sites. Or, if you are interested in an area frequented by tourists, you

might sell products from a craft business. Or you may have noticed that there is no

decent restaurant or hotel on a tourist route or in a given town.

One way of ensuring that you are not negligent in identifying new business ideas is to

be alert at all times to customer needs. One entrepreneur apparently went round at

every cocktail party asking if anyone was using a product that did not adequately fulfil

its intended purpose. Another monitored the toys of a relatives children looking for

ideas for a market niche.

Complaints

Complaints and frustrations on the part of customers have led to many a new product

or service. Whenever consumers or customers complain bitterly about a product or

service, or when you hear someone say I wish there was ..... or If only there were

a product/service that could ...., you have the potential for a business idea. The idea

could be to set up a rival firm offering a better product or service, or it might be a

new product or service which could be sold to the firm in question and/or to others.


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Change

The world is constantly changing. Change can be a threat; however, most

entrepreneurs consider change as a challenge and opportunity to trigger new needs

for products and services. An innovative entrepreneur always responds to changes in

a positive manner.

Brainstorming

Brainstorming is a technique for creative problem-solving as well as for generating

ideas. The objective is to come up with as many ideas as possible.


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MODULE 5: Topic 2

TRANSPARENCY 4

Brainstorming

Brainstorming is a technique for creative problem

solving and for generating ideas. The objective is to

come up with as many ideas as possible.

Brainstorming usually starts with a key question or

problem statement. Each idea leads to one or more

additional ideas. As a result, you will have in a good

number of business ideas.

FOUR RULES FOR BRAINSTORMING:

Dont criticize or judge the ideas of others

Freewheeling is encouraged ideas that seem to be wild or crazy are welcome

Quantity is desirable the greater the number of ideas, the better

Try to combine and improve upon the ideas of others


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MODULE 5: Topic 2

WORKSHEET 1

Identifying Business Ideas

Introduction

1. A business idea is a prerequisite for a successful business venture. Good business ideas, however, do not usually just occur to an entrepreneur. Rather, they are the result of effort and often creativity on the part of the entrepreneur.

2. Finding a good idea is the first step in transforming the entrepreneurs desire and creativity into a business opportunity.

3. There are numerous sources of good ideas. To be successful in generating or finding one, however, the entrepreneur needs to keep his/her mind and eyes open and be alert to opportunities.

4. An idea, however good, is only a tool. The idea needs to be developed and transformed into a viable business opportunity.

Activity 1

Each learner should write down the skills, experience, training and background that

they have to start a business. Examples could include: catering, welding, computer

programming, secretarial experience, etc.

Activity 2

Divide the class into small groups based on the common hobbies/interests listed by

the group members. Each group of learners must now choose one idea they wish to

develop into a business. Group members are to negotiate this themselves. On a

separate sheet of paper, the group should describe their best business idea, including the product or service in detail as well as who the likely customers might be. Each

group would have 15 minutes for this task, after which each group will be given 5

minutes to present their idea to the entire class.


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MODULE 5: Topic 2

WORKSHEET 2

Mass Media: Newspapers/Magazines

Your group should identify 7 business ideas from the articles as well as the commercial opportunities section of a newspaper or magazine. The commercial section may contain advertisements for businesses or machines on sale whilst articles may describe new types of businesses or announce changes in fashion or consumer needs. Then, for each idea chosen, give reasons as to why you are interested in it. You have 20 minutes for this task.

Business idea Reason(s) for interest

1.

2.

3.

4.

5.

6.

7.


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I TOPIC 3: Identifying and Assessing Business

Opportunities

II SUGGESTED TIME:

3 hours/sessions

III OBJECTIVE:

To enable learners to appreciate the importance of, and possess techniques for identifying and assessing business opportunities.

IV RATIONALE:

The recognition of a business opportunity coupled with the ability to respond effectively is the basis for starting and maintaining successful ventures. It is also a characteristic of successful entrepreneurs. It involves not only generating ideas or identifying opportunities but also screening and evaluating them to determine the most viable, attractive propositions to be selected.

V ACTIVITIES:

1. Have the learners define the term `business opportunity. Show

TRANSPARENCY 1 to clarify. In the process, draw a distinction between an

idea and an opportunity.

2. Ask learners to list the factors involved in the identification and

assessment of a business opportunity. Compare the list with

TRANSPARENCY 2. Have learners read HANDOUT 1 as the basis for the

discussion.

3. Invite an entrepreneur to talk to the learners about how he or she found a

business idea/opportunity and transformed it into a successful venture.

4. Ask someone from the local community or a regional/national organization

such as an investment promotion centre, an employers organization, the

regional/local economic development board, a business promotion agency,

the university or polytechnic, the business community or a consultancy

firm to come and talk about business opportunities.

5. Divide the learners into groups. Ask them to draw up a simple questionnaire to use in interviewing an entrepreneur. Then, have each

group visit and speak to a successful entrepreneur. The interview should

focus on

how the entrepreneur generated the business idea, how he or she identified or recognized the business opportunity,


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how he or she assessed the opportunity and how he or she transformed it into a successful business.

During this interview, each group should also collect some basic

background information about the entrepreneur and his/her firm, such as

the type of business, number of employees, how long ago the business

was established etc. Group members must negotiate and arrange the

whole process by themselves, although the facilitator may provide some

assistance where required. When they have completed the exercise, each group would prepare a report and presents it to the entire class.

6. Finally, draw some conclusions from the exercise and reinforce the key

learning points:

A. The recognition of a business opportunity coupled with the ability to respond effectively is the basis for starting and maintaining successful ventures. This involves not only generating ideas or identifying opportunities, but also screening and evaluating them to determine the most viable, attractive opportunity to be pursued.

B. A business opportunity may be defined as an attractive investment idea or proposition that provides the possibility of a financial return for the person taking the risk. Such opportunities are reactions to customer needs and lead to the development of a product or service that creates added value for its buyers or end-users.

C. A good idea is not necessarily a good business opportunity. Consider, for example, that over 80% of all new products fail. It is therefore important for all ideas and opportunities to be well screened and assessed.

D. Identifying and assessing business opportunities is not an easy task. However, it is necessary to minimize the risk of failure. It involves, in essence, determining potential risks against potential rewards.


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MODULE 5: Topic 3

TRANSPARENCY 1

What is a Business Opportunity?

A business opportunity may be defined simply as an

attractive investment idea or proposition that

provides the possibility of a monetary return for the

person taking the risk.

Such opportunities are represented by customer

requirements and lead to the provision of a product

or service which creates or adds value for the buyers

or end-users.

Distinction between ideas and opportunities

A good idea is not necessarily a good business opportunity. Consider, for example, that over 80% of all new products fail.

So, what turns an idea into a business opportunity?

To put it simply in economic terms, Income must exceed Costs to earn a Profit.

The characteristics of a good business opportunity need to be carefully examined.


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MODULE 5: Topic 3

HANDOUT 1

Identifying Business Opportunities

Seeing, seeking and acting on opportunities is one of the characteristics of successful

entrepreneurs. It is also the basis for starting and maintaining successful ventures. It

involves not only generating ideas and recognizing opportunities, but also screening

and evaluating them to determine the most viable, attractive propositions to be

pursued.

What is a business opportunity?

A business opportunity may be defined simply as an attractive idea or proposition that

provides the possibility of a return for the investor or the person taking the risk. Such

opportunities are determined by customer requirements and lead to the provision of a

product or service which creates or adds value for its buyers or end-users.

However, a good idea is not necessarily a good business opportunity. For example,

you may have invented a brilliant product from a technical point of view and yet the

market may not be ready for it. Or the idea may be sound, but the level of

competition, and the resources required may be such that it is not worth pursuing.

Sometimes there may even be a ready market for the idea, but the return on

investment may not be acceptable. To underscore the point further, consider the fact

that over 80% of all new products fail. Surely, to the inventors (and their backers) the

idea seemed a good one, yet clearly it could not withstand the test of the market.

What turns an idea into a business opportunity? A simplified answer is when income exceeds costs and generates a profit. In practice, to be comprehensive, you need to

examine the factors listed below.

Characteristics of a good business opportunity

To be a good business opportunity, it must fulfill, or be capable of meeting, the

following criteria:

Real demand: responds to unsatisfied needs or requirements of customers who have the ability to purchase and who are willing to buy

Return on investment, provides acceptable returns or rewards for the risk and effort required

Be competitive: be equal to or better (from the viewpoint of the customer) than other available products or services

Meet objectives: meet the goals and aspirations of the person or organization taking the risk

Availability of resources and skills: the entrepreneur is able to obtain the necessary resources.


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Assessing Business Opportunities

Ideas and opportunities need to be screened and assessed for viability once they have been identified. This is not an easy task, and yet at the same time, the assessment of

business opportunities is extremely important. This assessment can make the

difference between success and failure, between making a fortune and losing

everything. While the assessment exercise does not guarantee success, it certainly

helps in minimizing the risks and reduces the odds for failure.

Identifying and assessing business opportunities involves, in essence, determining

risks and rewards/returns reflecting the following factors discussed below.

Industry and market

The key question to be answered is whether there is a market for the idea. A market

in this context consists of customers potential or actual who have needs and

wants, and who have the ability to purchase your intended product or service. There

is also a need to consider whether what the customer wants can be provided at the

right price, in the right place, and in a timely manner.

Another important consideration is the size of the market and the growth rate of the

market. The ideal situation is a market that is large and growing, where getting even

a small market share can represent a significant and increasing volume of sales.

For this assessment exercise, the would-be entrepreneur needs to gather information.

If some potential entrepreneurs are tempted to think that it involves too much hard

work, they might take some comfort from the saying that the data available about

markets (size, characteristics, competitors etc.) is often inversely related to the real

potential of an opportunity. In other words, if market data is readily available and if the data clearly shows significant potential, then it is likely that a large number of

competitors will enter the market and the opportunity will not be as good. There are

several sources of published information (also called secondary information), including

libraries, chambers of commerce, investment promotion centers, government

ministries, universities, foreign embassies, the Internet, newspapers, and so on.

In addition to the above, there is often the need to collect information at the source

(also called primary research) by interviewing key people, such as customers and

suppliers. In that case, you will need to conduct survey research.

Length of the window of opportunity'

Opportunities are said to have a window of opportunity. That is, they do exist, but

they do not remain open forever. Markets grow at different rates over time, and as a

market gets bigger and more well-established, conditions for success are not as

favorable. Timing is therefore important. The issue then is to determine the length of

time the window will be open, and whether the opportunity can be created or seized

before the window closes.


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Personal goals and competencies of the entrepreneur

An important question for anyone venturing into business is whether they want to

undertake that particular venture. Personal motivation is an essential attribute of a

successful entrepreneur. Unless a person really wants to do that kind of business, he

or she should not venture into it.

A related question is whether the potential entrepreneur has the necessary competencies (including the knowledge, skills and abilities) for the requirements of

the business and, if not, whether other people could be brought in. Many small

business owners/managers have entered into business based on the strengths of their

own skills and ability.

When the above aspects are combined, the issue then becomes one of whether there

is a good fit between the requirements of the business and what the entrepreneur

wants or desires. This is important, not only for success, but also for the

entrepreneurs happiness. As the saying goes, Success is getting what you want;

happiness is wanting what you get.

Management team

In many ventures, particularly those involving a large amount of capital, high risk,

sophisticated markets and high competition, the management team is usually the

most important dimension in determining the success of a business. The experience and skills that the team possess in relation to the same or a similar industry often

determine success or failure of a new business. This explains why venture capitalists,

or those people who provide finance for businesses, put so much emphasis on the

management factor. Investors often say that they would rather have good

management with an average idea/product/service than a brilliant

idea/product/service with bad management.

Competition

To be attractive, an opportunity must have a unique competitive advantage. For

example, a business may have a competitive advantage by lowering costs in terms of

production and marketing. Or better, a business may offer better quality. In addition,

the availability of entry barriers which could take the form of high amounts of

capital required, protection such as patents or regulatory requirements, contractual

advantage such as exclusive rights to a market or with a supplier can make the

crucial difference between a go and a no go investment decision. If a business

cannot keep most would-be competitors out of its market, or if it faces existing entry

barriers, then the opportunity may not be very attractive.

Capital, technology and other resource requirements

The availability and access to capital, technology and other resources such as skills

determine the extent to which certain opportunities can be pursued. As a general rule, the more difficult the resource requirements are to obtain, the more attractive the

proposition, provided of course that there is a market for the idea/product/ service. To

give an example, while marketing a breakthrough product based on a patented

technology is no guarantee of success, it certainly creates a formidable competitive

advantage.


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Business environment

The environment within which the business will operate has a great influence on the

attractiveness of any opportunity. By business environment, we are referring not only

to the physical environment, which is important and increasingly so, but also the

political, economic, geographical, legal and regulatory contexts. Political instability, for

example, renders business opportunities unattractive in many countries, especially for

those ventures requiring high investment with a long payback period. Similarly, inflation and exchange rate fluctuations, or a weak judiciary system, are not a good

environment to start a business, even if the potential returns are high. The lack of

infrastructure and services (such as roads, electricity, water supply,

telecommunications, transportation, and even schools and hospitals) also affect the

attractiveness of an opportunity in a given environment.

Business Plan

The process of examining the factors discussed above is often the initial step in

developing a business plan. Investors and lenders may require these issues to be

considered and set out in the form of a business plan.


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MODULE 5: Topic 3

TRANSPARENCY 2

Identifying and Assessing Business

Opportunities

Not an easy task. Out of approximately 30 business ideas, there may only be one good business opportunity

A good business opportunity should take into account:

- Industry and market, real demand for a product or service

- Length of the window of opportunity

- Personal goals and competencies of the entrepreneur

- Management team (human resources)

- Competition

- Capital, technology and other resource requirements

- Business environment (political, economic, legal, government regulations etc.)

Module 5 How Do I Find a Good Busines Idea

Documents

Transcript of Module 5 How Do I Find a Good Busines Idea