Entrepreneurship Ch 3

1. Entrepreneurship Ch 3 Recognizing Opportunity

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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)

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

13. 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

14. 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

15. 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

16. 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

17. 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)

18. 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

19. 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

20. 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

21. 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

22. 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?

23. 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

24. 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

25. 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

26. 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

27. 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

28. 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

29. 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

30. 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?