Transcript Entrepreneurship Ch 3 - Sheffield

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
1. Allows greater efficiency, saving time, and
money
2. Decreases overhead investment or debt
3. Lowers regulatory compliance burdens
4. Allow companies to start new projects quickly
5. 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
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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
1. Do you have the ability to work for a member of my
family?
2. Do I get along with the family members who I’ll be
involved with?
3. Do we share the same goals for the business?
4. Do we share the same general goals for our personal
lives?
5. Can we be clear and specific about our expectations
for each other?
Starting versus Buying a Business
– Questions to ask yourself
6. Can I leave business problems at work when I go
home?
7. 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?