1 Recognizing Opportunity Chapter 3: Understanding Entrepreneurial Trends Starting vs. Buying a Business

2 Key Terms to Know Brainstorm Business broker Corporate venture Demographics Franchise Franchisee Franchisor Goodwill Innovation Niche Online business Outsourcing Services Specialty magazine Strategic alliance Trade magazine Trade show Values

3 Current Entrepreneurial Trends Internet Businesses – Online business —conducts business via the Internet Service Businesses – Services – intangible things that businesses do for consumers to enhance their lives Home-Based Businesses Socially Responsible Nonprofit Businesses Focus on Technology Outsourcing – contracting with other companies for their services Strategic Alliances – forming a partnership with another company Corporate Ventures – starting a smaller company within a larger one (spin-off)

4 Learn to Recognize Opportunity Creativity & Innovation – finding new ways of doing things Idea vs. Opportunity – Ideas are generated by creativity BUT opportunities are ideas that have commercial potential – A niche is a small specialized market Finding Opportunities by Understanding Industries – Industries are groupings of businesses with a common purpose

5 Think Creatively About Opportunity Practice brainstorming – thinking freely to generate ideas Look at ordinary items in new ways – see things in a different light Find creative solutions to common problems – a screwdriver has multiple uses! Connect unrelated items – put misc. items on a tray then create a new product from them

6 Challenges to Creativity Time pressures The influence of unsupportive people Lack of confidence Rigid thinking Challenges you bring on yourself are the hardest!!

7 Creative Sources of Ideas Your mind is processing ideas while you are brushing your teeth, sleeping, or driving!! Observe the world around you – what do people want & need? Watch for demographic changes – population changes (age, gender, income, ethnic backgrounds, education, occupations, etc.); cultural diversity!

8 Creative Sources of Ideas, cont. Be an avid reader – unrelated reading can spark ideas in your area of expertise Consider your own experiences – Interests – Hobbies – Work

9 Creative Sources of Ideas, cont. Consult outside sources – Trade magazines: Periodical published for specific types of businesses or industries Give news on the most up-to-date products & services out there Offers current, industry-specific news about customers & market trends

10 Creative Sources of Ideas, cont. – Specialty magazines: Periodical published for people with special interests Use these to identify the needs of potential consumers – Trade shows & exhibitions: National or regional Can see new items & promotions of current G&S Demonstrations by vendors & manufacturers

11 Creative Sources of Ideas, cont. – Newspapers: Check out the business sections – Internet: Small Business Administration & Google can help you find existing businesses BUT remember, you should fill a gap where businesses haven’t gone yet... – Government agencies: U.S. Patent Office Detailed descriptions of new products Publish Official Gazette (published wkly) of new patents

12 Starting vs. Buying a Business Personal values & goals – Define who you are – Shape your attitudes & your choices – Help you identify your priorities – Influenced by family, religious beliefs, teachers, friends, society, & personal experiences

13 Starting vs. Buying a Business, cont. Entering the family business – Rewards: Trust & togetherness Can achieve more together than on their own Can start working at a young age Can be flexible on hours Can have more say on your wages

14 Starting vs. Buying a Business, cont. Entering the family business, cont. – Challenges: Dynamics might not work [together] Can never get away from the business Can’t view it objectively Parents don’t trust children in making wise decisions – Questions to ask before entering the family business : See p. 59

15 Starting vs. Buying a Business, cont. Buying an existing business – Less risky as it’s already established – Customer-base is already there Their loyalty is called goodwill An extremely valuable business asset – Procedures are in place – Equipment already purchased – Inventory on hand – Employees hired & trained

16 Starting vs. Buying a Business, cont. Buying a franchise – you buy the right to set up a new business patterned on an existing model Franchisee – the buyer – Is trained to operate their location – Pay a fee to purchase the “rights” to own it – Pay an annual royalty on yearly sales (3%-8%) Franchisor – the seller – Selling their planning & management expertise

17 Franchises Advantages – Name recognition of an existing business & its products/services – National advertising – Trained in the company’s methods of operations – Included in national distribution channels

18 Franchises, cont. Disadvantages – Little say in product development – Set prices – Set uniforms – Restrictions on how to run the business – Market saturation — investigate the area before you buy one! – 1-2 poor running franchises can hurt reputation of the chain as a whole

19 Evaluating a Business Opportunity Investigate: – Hire an accountant – will verify the value of the business’s inventory, accounts receivable, & assets – Hire an attorney – investigate the business for any legal liabilities (debts) – Talk to customers, suppliers, employees

20 Evaluating a Business Opportunity, cont. Where to find a business: – Business Brokers – a realtor of the buying & selling of businesses – The Wall Street Journal – nationally published – Network (local gov’t, bankers, accountants, attorneys)

21 Evaluating a Business Opportunity, cont. Ask the right questions! – Why are you selling? – Will I enjoy this business? – Are there plenty of existing customers? – What is the potential for growth? – Is the economic trend for this business strong?

22 Starting Your Own Business Ask yourself some questions: See pp What must you do next? – Prepare a business plan to present to bankers & investors – Include in the plan: marketing research, distribution, employees, advertising, physical location, purchasing of equipment, supplier contacts, & professional advisors

23 The END Read the Chapter handout pp