1. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall
Chapter Two
Developing
and
Screening Business
Ideas
Dr. Bruce Barringer
University of Central Florida
Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

2. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall
Chapter Two
Developing and screening business ideas
Three most common sources of new business ideas
Techniques for generating ideas
First screen
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3. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall
Introduction
Many businesses fail because the idea wasn’t a good one to begin with
Techniques can be used to explore the most common sources for new business ideas
First Screen provides entrepreneurs with multiple business ideas
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4. Three Most Common Sources of Business Ideas
The first step in creating an effective business plan is selecting an idea that fills a need and provides unique value to the customer
It is difficult to get people to change habits and behaviors to try a new product even if the new product is better or less expensive
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5. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall
Figure 2.2
Three sources of new business ideas
Changing Unsolved Gaps in the
environmental problems marketplace
trends
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6. Three Most Common Sources of Business Ideas
Changing environmental trends
Economic trends
Social trends
Technological advances
Political and Regulatory changes
Unsolved problems
Gaps in the marketplace
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7. Changing Environmental Trends
Economic trends
When the economy is strong, customers are more willing to purchase discretionary products and services
Need to evaluate who has the money to spend
Identify areas to avoid
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8. Changing Environmental Trends
Social trends
Impact the way people live their lives and the products and services they need
Products often do more to satisfy a social need than the actual need the product fills
Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

9. Changing Environmental Trends
Technological advances
Ongoing source of new business ideas
Technologies can be used to satisfy basic or changing human needs
Once a technology is created, products emerge to advance it
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10. Changing Environmental Trends
Political and regulatory changes
New laws create opportunities for entrepreneurs
Changes in government regulations motivate entrepreneurs to differentiate themselves by exceeding the regulation
Political change can encourage the emergence of new business ideas
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11. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall
Unsolved Problems
Many companies have been started by people who by trying to solve a problem create a business idea
Entrepreneurs can capitalize by modifying products created by advances in technology
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12. Gaps in the Marketplace
Key large retailers compete on price and target the mainstream customer, leaving gaps in the marketplace
New business ideas can be formed by taking an existing product and targeting a new market or geographic area
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13. Techniques for Generating Ideas
Casual observation, intuition, serendipity, or luck
Three sources of business ideas
Brainstorming
Focus groups
Library and Internet research
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14. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall
Brainstorming
A brainstorming session is targeted to a specific topic about which a group of people are instructed to come up with ideas
Participants share their ideas and react to others in a lively, freewheeling manner
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Focus Groups
A focus group is a gathering a 5 to 10 people who are selected because of their relationship to the issues being discussed
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Focus Groups
Works best as a follow-up to brainstorming
Conducted by trained moderators to keep the group focused
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Focus Group
College drop in
A hybrid type of focus group in which college students are provided food and a snack budget to hold videotaped interviews about specific market issues or business ideas
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18. Library and Internet Research
The best business ideas include extensive library and Internet research
Discuss your area of interest with a reference librarian
Use search engines and alerts for Internet research
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19. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall
First Screen
The First Screen is an entrepreneur’s first pass at assessing the feasibility of a business idea
There are 5 main parts in a First Screen
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20. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall
First Screen
Part One: Strength of the business idea
Part Two: Industry-related issues
Part Three: Market- and customer-related issues
Part Four: Founder-related issues
Part Five: Financial issues
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21. Part One: Strength of the Business Idea
The strength of the business idea is based on
Its timeliness in market introduction
An open window of opportunity
The added value for the buyer
The successfulness of replacing an existing product that consumers are satisfied with
The likelihood that product will cause consumers to make meaningful changes in behavior
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22. Part Two: Industry-related Issues
Industry-related issues account for 8 to 30% in firm profitability
Number of competitors
Current life cycle stage of industry
Growth rate of industry
Relative importance of product to customers
Average operating margins
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23. Part Three: Market- and Customer-related Issues
Market and Customer-related Issues include
Identification of the target market
A target market is a place within a larger industry or market segment that represents a narrower group of customers with similar interests
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24. Part Three: Market and Customer-related Issues
Barriers to entry
A condition that creates a disincentive for another firm to enter the company’s niche market
Economies of scale
Product differentiation
Unique access to distribution channels
Intellectual property protection
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25. Part Three: Market- and Customer-related Issues
Additional market and customer-related issues include
Purchasing power of potential customers
The ease of making customers aware of the new product
Growth potential of a firm’s target market
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26. Part Four: Founder-related Issues
Attributes of a strong founding team
Experience in the industry
Skills related to the new product
Social and professional networks
Personal goals and aspiration
Likelihood the team can grow and launch the new venture
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27. Part Five: Financial Issues
Initial capital investment with growth estimates
Average small business is started for about $10,000 from owners’ personal savings
Number of revenue drivers
Time needed to break even or recoup initial investment
Assess financial performance of similar firms
Fund initial product development and start-up expenses
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Key Words
Barriers to entry
A condition that creates a disincentive for another firm to enter the company’s niche market
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29. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall
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Copyright ©2009 Pearson Education, Inc.  publishing as Prentice Hall
Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall