978-1259912191 Chapter 3 Lecture Notes

Unlock access to all the studying documents.

View Full Document

Chapter Three: Business Idea Generation and Initial

Evaluation

Table of Contents

Brief Chapter Outline.

…………………………………………………………………………………2

Chapter Outline and Lecture notes………………………………………………………………..3

Key Terms……………………………………………………………………………………………….. 11

Suggested Text

Responses…………………………………………………………………………..12

Class Activities and Sample

Assignments…………………………………………………………14

Discussion Questions for Online/Hybrid classes…………………………………………….16

Lecture Links…………………………………………………………………………………………… 19

Lecture Link 3.1: M-Commerce and the Entrepreneur………………………………….19

Lecture Link 3.2: E-Commerce and the Entrepreneur………………………………….20

Lecture Link 3.3: Assess Your Skills…………………………………………………………..21

Bonus Internet Exercises…………………………………………………………………………… 22

Bonus Internet Exercise 3.1: Opportunity Analysis from New Business Trends..22

Bonus Internet Exercise 3.2: Green Alternatives for the New Entrepreneur…….23

Bonus Internet Exercise 3.3: The Bureau of Labor Statistics Projections…………25

Critical Thinking Exercises………………………………………………………………………….26

Critical Thinking Exercise 3.1: The Detail Oriented Entrepreneur………………….26

Critical Thinking Exercise 3.2: Chart the Business Idea………………………………..27

Critical Thinking Exercise 3.3: The deficit Analysis……………………………………..28

Bonus Cases……………………………………………………………………………………………. 29

Bonus Case 3.1: Uber Changes the Business……………………………………………..29

Bonus Case 3.2: Retirement and the Entrepreneur……………………………………..31

Bonus Case 3.3: Community and the New Entrepreneur……………………………..32

Endnotes………………………………………………………………………………………………… 34

Brief Chapter Outline

I. Learning Outcomes (text page 46)

IM 3-1

written consent of McGraw-Hill Education.

Chapter Three: Business Idea Generation and Initial

Evaluation

Describe a systematic means for examining skills in order to generate new

business ideas.

Discuss the elements of opportunity analysis.

Analyze how to choose a business.

II. Generating Business Ideas (text pages 43 through 48)

Learning Outcome 3-1: Describe a systematic means for examining skills in

order to generate new business ideas.

III. Opportunity Identification (text pages 48 and 49)



Learning Outcome 3-2: Discuss the elements of opportunity analysis.

IV. Choosing a Business (text pages 50 through 57)



Learning Outcome 3-3: Analyze how to choose a business.

V. For Review (text page 58)

Chapter Outline and Lecture notes

1. Learning Outcomes (text page 41)

Describe a systematic means for examining skills in order to generate new

business ideas.

Discuss the elements of opportunity analysis.

Analyze how to choose a business.

2. Generating Business Ideas

Learning Objective 3-1: Describe a systematic means for examining skills in

order to generate new business ideas.

A. Potential entrepreneurs evaluate business opportunities and their potential

for success. (text pages 43 through 48)

B. Three approaches to develop quality business ideas

i. List and evaluate their skill sets

1. Hobbies

2. Education

3. Past work experience

4. Family history of experiences

ii. Analyze the market for gaps in unmet need

IM 3-2

written consent of McGraw-Hill Education.

Chapter Three: Business Idea Generation and Initial

Evaluation

iii. Compare the skills and capabilities to gaps in market

1. Ask students to create a chart and compare skills and

capabilities to gaps that reveal opportunities in the market

C. New small business person requires depth of understanding

i. Builds long-term advantage in domain

D. New small business person requires an interest in and a passion for their

business

E. Founders need a synergy that connects skills, understanding and a

competitive advantage so that the sum of the parts is greater than the

individual parts

F. First set of skills is from hobbies and activities

i. Current hobbies and activities

ii. Other hobbies and activities pursued in the past

iii. Assessment of why the hobby or activity is exciting

iv. Specific skills needed to implement the hobby or activity

v. Experiences with the hobby or activity which could help others

vi. Products and services used in the hobby or activity

G. The second set of skills to assess include formal or informal education

i. Assess the courses taken in one’s formal education

1. Evaluate why they were enjoyable

ii. Courses taken that were easy

iii. Programs taken which were unusual

iv. Any specialized training in a specific area

v. If you had to do it all over again, what areas would you pursue now.

H. Third set of skills obtained from work experience

i. The businesses where you previously worked

ii. The skills that were critical to the jobs performed

iii. Previous positions held

iv. Areas of expertise

v. What you really enjoyed about a previous position

vi. Your frustrations in a previous position

vii. The time when you were most excited about work

I. Next, assess the family orientation

i. Family history with any new business ventures

ii. Types of travel/vacations your family enjoys

iii. Skill sets in your nuclear family

iv. Financial resources of your extended family

v. Unique family traits that interest other individuals or groups

vi. What skills are developed as part of your family activities

J. Consider other factors in the assessment

i. Your top three personal skills

ii. The tasks that you like doing the best every day

IM 3-3

written consent of McGraw-Hill Education.

Chapter Three: Business Idea Generation and Initial

Evaluation

iii. The one or two things you enjoyed doing the most over the past

year

iv. The magazines and books you like to read

v. Your three greatest accomplishments in life

1. The skills that you required to complete those

accomplishments

vi. What you enjoy about working with other people or working alone

while concentrating in a particular area

vii. The industry in which you prefer to work

K. Consider the goals from this assessment in order to explore your range of

skills and abilities

L. Raise other questions to tailor your business to your unique skills and

personality

i. Your level of enjoyment working with people

1. If no

a. Focus on a business that has minimal interpersonal

demands or back-office operations like bookkeeping

or billing

2. If yes and you have adequate skills

a. Focus on a business in retail or other service

businesses

ii. Your level of detail orientation

a. If yes, focus on a complex business that involves the

management of a variety of details

b. Consider a business that helps someone manage the

details of their life (i.e. Supply company to large

manufacturers)

c. If no, pursue business with simple business models

iii. Your level of training

1. Experience

2. Educational skills

iv. Your ability to quickly and easily change and evolve the business

3. Opportunity Identification (text pages 48 and 49)

Learning Objective 3-2: Discuss the elements of opportunity analysis

A. Gap Analysis

i. A relatively simple process of systematically examining the

difference, or gap, between what is expected and what occurs. One

IM 3-4

written consent of McGraw-Hill Education.

Chapter Three: Business Idea Generation and Initial

Evaluation

type of gap analysis, called opportunity analysis, examines

opportunities in the marketplace side-by-side with the individual’s

ability to address those gaps

ii. Potential businesses

1. Methods to identify gaps or business opportunities

a. Examine trends in the region, nation, and world that

may not have reached your geographic location

b. Trends do not start uniformly

c. Interview successful entrepreneurs

d. Pursue opportunities for mentorship

iii. Discuss new business opportunity with family

1. They understand your abilities and disposition

2. They provide honest feedback

iv. Look for environmental and regulatory changes such as in health

care.

v. Do Brainstorming

1. A creative process whereby a group of individuals are

brought together and asked to generate ideas with little or no

effort made to evaluate the potential for each idea

2. Group interaction leads to dynamic new, innovative ideas

3. Works well in informal groups

vi. Consider what frustrates you and your family

vii. Determine your interest and skill set in technology

1. Examination of patent files to discover opportunities from

part of a patent

2. Search for existing patents that are maintained by an original

inventor and together attempt a commercial application

4. Choosing a Business (text pages 50 through 57)

Learning Outcome 3-3: Analysis of how to choose a business

A. The process of generating business ideas

i. Time required

ii. Interaction with others

iii. Consideration of effects

iv. Evaluation of options

v. Iteration to repeat the processes involved

B. Interaction evaluation of ideas

IM 3-5

written consent of McGraw-Hill Education.

Chapter Three: Business Idea Generation and Initial

Evaluation

i. Ask students to list three to five businesses where the founders

have the appropriate skills and there appears to be an opportunity

C. Due diligence analysis

i. After careful analysis, the entrepreneur may choose a different

business opportunity to pursue and initiate the process over again

ii. Due diligence focuses on one business concept

iii. Analysis and thought process is required

1. Focus

2. Time

3. Financial investment

iv. Decision to pursue a specific business is accomplished through gap

analysis

D. Develop a Gap Analysis Chart to examine the issues that impact the

success of the potential new business venture

i. List three to five new small business ideas

ii. Examine the issues that impact the potential success of the new

small business

iii. List the business ideas down the first column

1. Provide explanation of what each idea entails

2. Elevator pitches are used to pitch the business in two

minutes or the time to ride an elevator to the top of the

building.

iv. In the second column list one category to analyze the idea

1. Consider each of the five categories individually

a. Finances

i. Assess your existing resources

1. Savings accounts

2. Retirement accounts

3. Spouses resources

4. Family resources

5. Other money raised in a short period of

time

ii. Assess the financial business needs of the

potential business for one year

1. Rent

2. Furniture

3. Utilities

4. Advertising

5. Renovation

6. Equipment

7. Supplies

IM 3-6

written consent of McGraw-Hill Education.

Chapter Three: Business Idea Generation and Initial

Evaluation

8. Employees

9. Taxes

10.Fees

11. Add the amount of funds estimated and

add 50 percent to it

12.Realize that new start-ups require twice

the money that was initially forecasted

a. Is this number within your range

b. Time

i. Do not underestimate the time necessary to

start the business

ii. Realize that various business types require

different time frames

iii. Determine your resources

1. The amount of time you dedicate to the

business

2. Decision if you will quit your job to work

on new business venture

3. Determination of the time you are willing

to commit on a weekly basis

4. Consideration of your other

commitments

5. Consideration whether your family

supports you

iv. Determine your business needs

1. Hours of operation

2. Additional hours required to manage the

operation

3. When a staff will be needed

4. Consideration when you will eat and

sleep

c. Nonfinancial resources

i. Other resources

ii. Special contacts with suppliers or customers

iii. Physical location of the business

iv. Being creative

1. The resources that provide your

competitive knowledge

a. Unique capabilities

b. Knowledge

IM 3-7

written consent of McGraw-Hill Education.

Chapter Three: Business Idea Generation and Initial

Evaluation

c. Experiences

2. Business needs

a. Unique skills that will be required

b. Contracting to get needed skills

c. Obtain resources quickly

d. Consider the unique business

resources necessary to maintain

a competitive advantage

d. Risk

i. Commensurate with the rewards

ii. Within the tolerance level of the new small

business owner

iii. Two types of risk

1. Personal risk

2. Business risk

v. List resources in the third column

1. Include an estimation of resources

vi. List estimates of the required resources for success in the fourth

column

vii. Provide a gap analysis of the skills/resources with the perceived

requirements of the particular business and record the deficit or gap

in the fifth column

1. Next, ask the question is the deficit surmountable or is it one

that kills the idea

viii. A Gap Analysis Chart is completed with little or no research

ix. Short time frame to complete the analysis

x. The outcome of a Gap Analysis Chart is to provide a quick analysis

to see if the business passes the initial test

xi. Business risk is further examined by considering the three threats

to business success

1. Threats to profit margin

a. The threat of not being able to achieve a profit margin

sufficient to allow the business to attain substantial

returns.

2. Threats to Sales Generation Schemes

a. The threat of not being able to generate sufficient

sales required to make the firm profitable.

3. Threats to Operational Financing

a. The threat of not obtaining sufficient financing to

operate a firm.

IM 3-8

written consent of McGraw-Hill Education.

Chapter Three: Business Idea Generation and Initial

Evaluation

4. Competitors – new firm must be realistic about its

competitors.

a. Evaluate the competition

i. Telephone

ii. Internet

iii. Strategic risk

IM 3-9

written consent of McGraw-Hill Education.