Recognizing Opportunity Entrepreneurship Ch 3 Recognizing Opportunity

Understanding Entrepreneurial Trends Current Trends Internet Business Transformed the way business is conducted Online Business – Business that conducts business by means of the internet Potential to attract a huge number of customers Service Businesses Most small business are service businesses Services – intangible things that a business does for us that enhances our lives

Understanding Entrepreneurial Trends Current Trends Home-Based Businesses Represents roughly 53% of all small businesses Many people who have lost their job due to cutbacks choose to work from home in the field where they were once employed Many companies choose Homesourcing (transfer of service industry employment from offices to home-based employment) to fill human resource needs

Understanding Entrepreneurial Trends Current Trends Green Businesses Design their business practices so that they promote sustainability (Venture seeks to achieve economic, environmental, and social goals without compromising the ability of future generations to meet their own needs) Includes: Food quality, energy resources, pollution, and human rights

Understanding Entrepreneurial Trends Current Trends Social Entrepreneurship Start business to improve society Identify social needs, such as finding employment for wounded veterans, combating pollution, or providing shoes for children who cannot afford them Focus on the arts Measure success by their positive impact they make on society

Understanding Entrepreneurial Trends Current Trends Focus on Technology An increased reliance on technology is the main trend that affect businesses today. Creates a strong competitive advantage

Understanding Entrepreneurial Trends Current Trends Outsourcing Contracting with other companies for services Allows small businesses to focus on what it does best while tapping into outside resources

Understanding Entrepreneurial Trends Current Trends Outsourcing Benefits Allows greater efficiency, saving time, and money Decreases overhead investment or debt Lowers regulatory compliance burdens Allow companies to start new projects quickly Makes companies more attractive to investors

Understanding Entrepreneurial Trends Current Trends Strategic Alliances Forming a partnership with another company Supply a product or service that is part of the other company Corporate Venture New venture started inside a large corporation Parent company supplies resources to the corporate venture to help the new venture get started New ventures usually become independent companies

Learning to Recognize Opportunity Creative and Innovation Creativity – Activity that results in innovation (finding new ways of doing something) All creativity leading to the invention of something new involves connection, discovery, invention, and application Connection – bring things together that are not usually connected Connection leads to a discovery that is turned into an invention

Learning to Recognize Opportunity Creative and Innovation Application – Is going beyond the original invention to other uses in new areas. Idea or Opportunity Ideas are generated by thinking creatively Opportunities are ideas that have commercial potential Innovative opportunity can be turned into a business Most business opportunities result from the entrepreneurs alertness to consumer needs and unfilled market niche (small specialized market)

Learning to Recognize Opportunity Creative and Innovation Understanding Industries One way to identify opportunities Industries – Group of businesses with a common purpose

Strategies for Thinking Critically New Enterprise Ideas Practice Brainstorming Brainstorm – Think freely to generate new ideas Ideas are not judged as good or bad Look at ordinary items in new ways Figure out new ways or uses you can find for it, Find creative solution's to common problems Connect unrelated items Try to come with new products Challenges to Creativity

Strategies for Thinking Critically Challenges Sources of Ideas Ideas can come to you from anywhere Observe the World Around You Watch People You can learn a lot about peoples wants and needs Watch for Demographics Changes Demographics – Personal characteristics that describe a population Includes age, gender, income, ethnic background, education, and occupation

Strategies for Thinking Critically Challenges Sources of Ideas Be an Avid Reader Consider Your Own Experiences Interests Practice thinking about the problems you encounter each day as you pursue your interest Hobby Turn into successful ventures Work Experience in the world of work can be an excellent source of business ideas

Strategies for Thinking Critically Consult outside sources Look at people, places, and things in the business community for business ideas Trade Magazines Periodical published for specific types of businesses or industries Contains articles, new products, services Specialty Magazines Periodicals that target people with special interests

Strategies for Thinking Critically Consult outside sources Trade Shows and Exhibits Vendors and manufactures introduce new items and promote established products and services Newspapers Provides ongoing source of ideas (Trends and Innovations)

Strategies for Thinking Critically Consult outside sources The Internet Government Agencies US Patent Office – contains detailed description of new products OSHA – Occupational Safety and Health Act

Starting versus Buying a Business Personal Value and Goals Values – Beliefs and principles you choose to live by Define who you are, shape you attitudes, and your choices, and help you identify your priorities Once you identify your core values, you can use them to lay out your goals for your future Goals are the objectives you are trying to achieve

Starting versus Buying a Business Entering the Family Business One way to experience entrepreneurship Important part of the US economy The rewards and challenges of family businesses Only about 1/3 of them survive to the second generation Greatest advantage is the trust and togetherness that family members share One of the greatest disadvantages is that its owners can never get away from the business

Starting versus Buying a Business The rewards and challenges of family businesses Important to establish clear lines of responsibility, be objective about family members qualifications, keeping decisions unaffected by personal emotions, and respect individual family members needs

Starting versus Buying a Business Questions to ask yourself Do you have the ability to work for a member of my family? Do I get along with the family members who I’ll be involved with? Do we share the same goals for the business? Do we share the same general goals for our personal lives? Can we be clear and specific about our expectations for each other?

Starting versus Buying a Business Questions to ask yourself Can I leave business problems at work when I go home? Can we maintain a positive family relationship? If you answered no to any of the questions, then we have a potential problem

Buying an Existing Business Acquire – Buy an existing business Less risky then starting a new one Because: Employees already hired and trained Equipment is already in place Company already has customers Goodwill – Customer loyalty Extremely valuable business asset

Buying an Existing Business Buying a Franchise Franchise – A legal agreement to begin a new business in the name of a recognized company Gives the franchisee (buyer) the right to a product, process, or service; training and assistance in setting up the business; and ongoing marketing and quality support while the business is in operation Most important advantage is that the entrepreneur does not incur all of the risk associated with starting a business

Buying an Existing Business Buying a Franchise Franchisee usually buys into a business with accepted name, product, or service. Franchisee is buying a way of operating a business and a product with name recognition Franchisee pays a fee and an annual royalty on sales, usually 3-8% Franchisor – Seller Franchisor is selling its planning and management experience

Buying an Existing Business Buying a Franchise Before buying franchise, understand all of the costs and limitations involved Evaluating a Business Opportunity Evaluate whether the business is a good prospect Why is it for sale? Hire an accountant to verify the value of the business’s inventory, accounts receivable, and assets

Buying an Existing Business Where to Find a Business Look in newspaper Most effective way - Network with people in the community You can hire a business broker – Someone whose job is to bring buyers and sellers together

Buying an Existing Business Questions to Ask? Is the business interesting to me and to other? Why is the owner selling? Check the businesses financial statements What is the business’s potential for growth? Business’s go through a cycle of growth – Growth, Maturity, and Decline

Starting Your Own Business Questions to ask: Do I have the motivation to start a new business from nothing? Does the business align with my personality, abilities, values, and goals? Do I have sufficient knowledge of basic operation to undertake the business? Do I have the necessary managerial skills? Do I have the right partners to help me with the business? Do I have enough financial resources to start from scratch? Am I willing to accept the risk?