Chapter 3

1. Take the steps to recognize an opportunity: 1. Study current trends 2. What are the current trends today? 2. Develop a business concept 3. Test it with potential customers 4. Create a business to execute that concept

 Internet Businesses:  has transformed the way business is conducted  Most traditional companies have added online component  Millions of online businesses  Service Businesses:  Dominate modern American economy  Intangible things that are done for us to enhance our lives.  Insurance, tourism, banking, and education

 Home-Based Businesses:  Growing rapidly and now represent about 53% of all small businesses  Using available and inexpensive online tools is has an image that is just as professional as large corp.  Consultants, sales representatives, tradespeople, writers, graphic designers, and Web developers.  Even companies that produce products if manufacturing and distribution is outsourced

 Green Businesses:  Largest opportunity of the 21 st century  SUSTAINABILITY – venture seeks to achieve economic, environmental, and social goals without compromising the ability of future generations to meet their own needs  Food quality, energy resources, pollution, and human rights  General Electric and Wal-Mart have adjusted their business practices to try to promote sustainability

 Social Entrepreneurship  Identify social needs, such as finding employment for wounded veterans, combating pollution, or providing shoes for children who cannot afford them, and recognize them as opportunities.  Measure their success in term of positive impact they make on society

 Focus on Technology – it the main trend that affect businesses today  Use technology to improve the business processes create a competitive advantage  It is the company’s product or it’s used to increase productivity

 Outsourcing – contracting other companies for services. Most common type is business process outsourcing: accounting, benefits and finance functions  Small businesses can tap into outside expertise  Benefits  Allows greater efficiency, saving time and money  Decreases overhead investment or debt  Lowers regulatory compliance burdens  Allows companies to start new projects quickly  Core attractive to investors allows companies to direct more capital into money-making activities

 Strategic Alliances – one step beyond Outsourcing is to form a partnership with another company.  Your company provides a product or service that is not part of the larger company’s core competency.  3M makes adhesive products, they partner with companies for complementary products such as tape dispensers to package with its adhesive tape.

 Corporate Ventures – a new venture started inside a large corporation. Large companies find they must act like entrepreneurs to innovate and remain competitive.  Start small companies as spin-offs  Parent company supplies resources to help it get started, eventually becomes an independent company.

 Creativity and Innovation – it can be learned. Creativity is the activity that results in innovation, finding new ways of doing things, it involves: Connection – bring together things that leads to… Discovery – that is turned into ….. Invention – new product Application – going beyond the original invention to other uses in new areas

 Idea or Opportunity – not the sameOpportunity  Generate ideas by thinking creatively  Opportunities are ideas that have commercial potential, which can turn into a business  Entrepreneurs recognize an unmet consumer needs and unfilled market niches.  Niche Market – a small specialized market

 Understanding Industries –  changes in industry create profitable niches for new businesses to fill.  The development of new products and services in any industry creates the need for complementary types of businesses

 Practice BRAINSTORMING –BRAINSTORMING  Think freely to generate ideas, not judge as good or bad.  Look at ordinary items in new ways  Find creative solutions to common problems  Connect unrelated items  CHALLENGES to Creativity:  Time pressures, influence of unsupportive people, lack of confidence and rigid thinking

 Observe the World Around You – start watching people at hotel lobby or at mall, to learn what are people’s wants/needs.  Watch for Demographic Changes – cultural diversity impacts the products to develop.  Be an Avid Reader – it may help spark an idea that applies to your field

 Consider Your Own Experiences  Interests – some ideas solve problems you encounter in everyday life. Think about ways to solve these problems. Practice 5 steps may help you think of great business ideas.  Hobbies – evaluate your favorite pastime in terms of its business potential.  Work – your experience provides insight into that may help recognize opportunities.  Start similar business in a smaller niche market  Does company have a gap in network of suppliers  Are customer’s needs/wants being met?  Has technology advances provide new opportunities?

 Consult Outside Sources  Trade Magazines – periodical for industry specific; contain articles and advertisements for new products, current news, market trends, information on customers  Specialty Magazines – targets people with special interests. Identify interests and needs of potential customers.  Trade Shows and Exhibitions – vendors and manufacturers introduce new items with exhibits and demonstrations, can be a source of spin-off ideas.  Newspapers – business section reports on trends and innovations or identify problems that may be source of opportunity

 Consult Outside Sources  The Internet – source for opportunities, Google search engines, SBA business ideas  Government Agencies – source of information  Dept. of Commerce’s The Bureau of Economic Analysis publishes current business conditions.  U.S. Patent Office contains detailed descriptions of new products. It also publishes Official Gazette weekly periodical that summarizes each patent granted and lists all patents available for license or sale.  OSHA – new products come in response to new regulations, such as OSHA requires medical kit, so entrepreneurs responded by manufacturing kits

 Personal Values and Goals  Values – beliefs and principles you choose to live by.  Core Values – do not change in different situations, they endure over time.  Goals – are the objectives you are trying to achieve

 Entering the Family Business  The rewards and challenges of Family Business  Only 1/3 survive second generation  Family dynamics  Greatest advantage trust and togetherness  Disadvantage can’t get away from the business  Develop clear lines of responsibility, be objective of family members qualifications, keep decisions unaffected by personal emotions, and respect individual needs

 Entering the Family Business  Questions to Ask Yourself 1. Do I have the ability to work for a member of my family? 2. Do I get along well with the family member who is involved in business? 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 of each other? 6. Can I leave business problems at work when I go home each night? 7. Can we maintain a positive family relationship?

 Buying an Existing Business  Acquire a business is to buy an existing one.  Less risky:  employees are trained  equipment is in place  company has customers, such loyalty called Goodwill which is extremely valuable business asset

Fantastic Sam’s Radio Shack A&W Restaurants Nathan’s Famous Inc. Century 21 Real Estate Hollywood Tans International House of Pancakes Subway Embassy Suites Hotels Scott’s Lawn Service What do they all have in common?

Fantastic Sam’s Radio Shack A&W Restaurants Nathan’s Famous Inc. Century 21 Real Estate Hollywood Tans International House of Pancakes Subway Embassy Suites Hotels Scott’s Lawn Service What do they all have in common?

 Buying a Franchise  buy the right to set up a business patterned on an existing model  Franchise is a legal agreement to begin a new business in the name of a recognized company  Franchisee (buyer) has right to a product, process, or service, training and assistance in setting up the business and ongoing marketing and quality support.  Pay a franchise fee and royalty fees  Buys rights to geographic locations  Franchisor (seller) provides planning and management expertise

 Evaluating a Business Opportunity  Investigate business and industry carefully  Talk to customers, employees and suppliers  Hire an accountant to verify the value of the business  Hire an attorney to advise you and investigate business for any legal liabilities  Where to Find a Business  Look in newspaper and WSJ  Network with people in community  Business Broker - someone who brings buyers and sellers together

 Questions to Ask  Is the business interesting to me and to others?  Make sure its really interesting to you and plenty of existing customers  Why is the owner selling?  Is owner selling for personal reasons or because the business is not doing well?  Check company’s financial statements against information from suppliers and competitors  What is the business’s potential for growth?  Determine where the business is in it’s life cycle of growth, maturity, and decline

 Starting Your Own Business  Questions to Ask  Do I have motivation?  Does business align with my personality, abilities, values, and goals?  Do I have sufficient knowledge of operations, managerial ability?  Do I have the right partners to help me?  Do I have enough financial resources?  Am I willing to accept the risk?

 Starting Your Own Business  What You Must Do  Feasibility study of your concept in market are there enough customers to make the effort worthwhile  Decide on a traditional business or an online business  Prepare a business plan seek capital, partners, and employees  Secure professional advisors  Hire employees and initiate relationships with suppliers  Purchase equipment and set up distribution channels  Create awareness for business