1. Do Now 1. How is a monopoly different that competition? 2. What are the two ways consumers benefit from competition? **Just a few things… I know my room can be hot. Stop complaining about it. And DO NOT open any windows or turn on the blower without my permission I am giving out writing assignment, again, because the same people are continuing to talk. Just a forewarning…

2. Chapter 4 Opportunity Recognition

3. Look at problems to see opportunities Entrepreneurs must recognize business opportunities. They ask questions like: – What would I like to buy that I can never find? – What product or service would improve my life? – What really annoys me? What product or service would help? Think of all the items we have now b/c someone recognized a need: -the zipper, post-it notes, stapler, velcro, dog walking, personal shoppers, match makers, etc.

4. Idea or Opportunity? There is a difference! An opportunity is based on what consumers want– not necessarily on what you want. You can have a very interesting idea for a business, but if what you’re selling doesn’t meet anyone else’s needs, the business will fail.

5. A business opportunity is an idea, plus: 1. It is attractive to customers. 2. It will work in your business environment. 3. It can be executed in the “window of opportunity” that already exists. 4. You have the resources and skills to create the business, or you know someone who does and who could start the business with you.

6. Look at changing trends for opportunities… In the late 1980’s for example, Russell Simmons was promoting rap concerts at the City College of New York. At the same time, rap was considered a passing fad. Simmons believed in rap, though. He formed Def Jam Records with a fellow student Rick Rubin for $5000. They produced hit records and Simmons came to be worth over $400 million. He has started many businesses based on opportunities he saw in the hip-hop culture he loves- Def Comedy Jams and the Phat Farm clothing line. Simmons applied one principle: if you personally know 10 people who are eager to buy a product or service, there are probably 10 million who would buy it if they knew about it.

7. 10 rules of building a successful business. 1. Recognize an opportunity- Simmons believed rap music was a growing trend and therefore a business opportunity. 2. Evaluate it with critical thinking- Simmons tested his idea by promoting concerts and observing consumer reaction. 3. Write a business plan- Simmons planned his operations. 4. Build a team- He partnered with Rick Rubin 5. Gather resources- He and Rubin got $5000 together.

8. 10 rules of building a successful business, cont. 6. Decide ownership- Simmons and Rubin formed their business as a partnership. 7. Keep good financial records. 8. Stay aware of your economics of one unit and your unique selling proposition. 9. Keep satisfying consumer needs- Simmons understood his customers and created new products like TV shows, clothing, Broadway plays, etc. 10. Create wealth- As of 2003, Simmons was worth over $400 million

9. The 6 roots of opportunity 1. Problems that your business could solve. 2. Changes in laws, situations, or trends. 3. Inventions of totally new products or services. 4. Competition- you may find a way to do something better than your competitors 5. Technological advances- you may figure out how to market this new technology 6. Unique knowledge- you have unique knowledge of your friends, community, neighborhood, etc.

10. Cost/Benefit Analysis Before making any investment, compare costs with benefits. Don’t forget to include the opportunity cost. This is the cost of your “next best investment.” If the benefits of making the investment are greater than the costs (including opportunity cost), the investment is probably a good one. You can apply cost/benefit analysis to both business and personal decisions.

11. Opportunity Cost Opportunity cost- The value of what must be given up in order to obtain something. For example: If you join the Army the benefits are: – Training, travel, money for college BUT – You will lose other opportunities such as: The opportunity to go to college immediately The opportunity to make money working, or to start a business

12. SWOT Analysis To evaluate a business opportunity explore its: – Strengths – Weaknesses – Opportunities – Threats SWOT Analysis

13. SWOT Analysis- should I start a DJ business with a friend? StrengthsWeaknessesOpportunitiesThreats I’ve worked in a dance record store and know what kind of music people want I’m not sure my friend will make a good business partner My cousin has already asked me to DJ at her party Some parties we might be asked to work might be in illegal spaces My partner and I … WE need money… My partners knows a DJ… There are a lot of good DJ’s

14. A few more things… 4 types of businesses: – 1. Retail- A business that sells products or services directly to the customer – 2. Wholesale- the kind of business that buys from manufacturers and sells to retail businesses – 3. Service- intangible work providing time, skills, or expertise in exchange for money – 4. Manufacturing- The making or producing of tangible products

15. Characteristics of an entrepreneur 1. Optimistic- to look on the bright side of things 2. Honest 3. Risk-taker 4. Perseverance 5. Focused

16. Let’s review from yesterday What is likely to happen to the price of lawn mowers in the wintertime in Michigan? What would you expect to happen to the DEMAND for gasoline if everyone began using electric cars? How would you expect the use of electric cars to affect the SUPPLY of gasoline and its prices? Which is better for CONSUMERS? A monopoly or competition?

17. Complete these profit questions 1.It costs $3.50 in labor to make 1 video game and $12 for materials. You sell the video game for $32.75. How much is the gross profit for one video game? 2.The wholesaler buys a case of 24 video games from the manufacturer for $960, then resells the case to a retailer for $1200. How much did the wholesaler profit selling 1 case of video games? 3.Game Stop buys a case of 24 video games from a wholesaler for $1200. The cost of goods sold for 1 game is $50 ($1200 / 24 =$50). So if Game Stop sells a video game for $75, how much do they profit off 1 video game? 4.You baby sit for your next door neighbor for 10 hours. You charge $11.00 per hour of baby sitting. You brought along some food for the kids, which cost you $30.00. How much should you charge your next door neighbor if you want to make a PROFIT of $20.00?

18. SALES – COST = PROFIT 1. $3.50 + $12= $15.50 (cost) $32.75- $15.50= $17.25 2. $1200-$960 = $240 3. $75.00 - $50.00 = $25.00 4. $11.00 X 10 = $110.00 $110 + $30 = $140.00 (cost) $140.00 + $20 = $160.00 (what you will charge to make a $20 profit)

19. Answers 1. 5 + 3.50= 8.50 4.25 12.75- 8.50=4.25 2. 4.25*10=42.50 3. 4.25* 123= 522.75 4. 480-350= 130 5. 130*7= 910 6. 24.99-20= 4.99 7. 4.99*20=99.80 8. 27*3= 81 81+4= 85 150-85=65