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Chapter Three: Business Idea Generation and Initial
Evaluation
Key Terms
Brainstorming: A creative process whereby a group of individuals are brought together
Gap Analysis: A relatively simple process of systematically examining the difference, or
gap, between what is expected and what occurs. One type of gap analysis, called
opportunity analysis, examines opportunities in the marketplace side-by-side with the
individual’s ability to address those gaps. (LO 3-2)
Synergy The connection between the entrepreneur’s skills, understanding of an
industry, and the ability to create a competitive advantage such that the sum of the parts
of the new business is greater than the individual parts alone. (LO 3-1)
Threats to Operational Financing: The threat of not obtaining sufficient financing to
operate a firm. (LO 3-3)
Threats to Profit Margin: The threat of not being able to achieve a profit margin
sufficient to allow the business to attain substantial returns. (LO 3-3)
Threats to Sales Generation Schemes: The threat of not being able to generate
sufficient sales required to make the firm profitable. (LO 3-3)
Suggested Text Responses
Opening Vignette- “Uber Changes the Business” - p. 41
Student responses will vary.
Exercise 1 – p. 43
Student responses will vary.
Exercise 2 – p. 49
Student responses will vary.
IM 3-1
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Chapter Three: Business Idea Generation and Initial
Evaluation
Ethical Challenge – p. 55
Student responses will vary.
Review Questions – p. 58
1. Based on your education, what are the skills you have that could be the basis
2. Based on your work experience, what are the skills you have that could be the
3. Based on your hobbies, what are the skills you have that could be the basis for
4. What are your top three personal skills? Student responses will vary.
5. What things do you like doing best? Student responses will vary.
6. What magazines and books do you read? Student responses will vary but suggest
7. What are your three greatest accomplishments in life? What skills were
involved in these accomplishments? Student responses will vary but have students
8. Do you enjoy working with people? Student responses will vary but point out that
9. In what general industry (retail/wholesale/manufacturing/service) would you
prefer to work? Student responses will vary
IM 3-2
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Chapter Three: Business Idea Generation and Initial
Evaluation
Business Plan Development Questions: p.58
Student responses will vary.
Individual Exercises: p.58
Student responses will vary.
Class Activities and Sample Assignments
1. Ask students to write a five-page essay in MLA or APA writing style and conduct
research about the business risk associated with a new small business owner
(entrepreneur). Ask students to include at least four scholarly research reference
sources. This project could be a term project or an assignment to be completed by a
specified time. (LO 3-1, 3-.2, 3-3)
2. Ask students to write a three or four page essay in MLA or APA writing style that
summarizes their skill sets, analyzes the market for gaps or business needs, and
compares and contrasts their skills and abilities with a particular business need.
Students should include at least four scholarly research reference resources.
(LO 3-1)
3. As a class activity, ask students to list their personal skill sets. Next, ask students to
list their education (formal and informal). Finally, ask students to list the skills they
acquired as a result of past employment. Discuss how they can use a trait that they
revealed from any of their lists or a compilation of skills or traits that they revealed
from their lists, and apply them to generate an innovative business idea or new
business venture opportunities. The key to this assignment is to have students
explore their inner talents and generate a business idea. (LO 3-1)
4. As a group, discuss and define gap analysis. For a period of one week, ask students
to explore businesses in their communities for potential business needs that are not
met. Next, ask students to decide whether or not they can find a new business need.
Students can also conduct research on the internet, their local paper, career web
sites or they can speak to recruiters or career counselors to complete their analysis.
Have each student present his or her findings; or you could assign this particular
IM 3-3
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Chapter Three: Business Idea Generation and Initial
Evaluation
assignment as a group assignment. You can also assign this project as a
three-to-five page essay in MLA or APA writing style. Students could be required to
have at least three research reference sources. (LO 3-2)
5. Divide students into groups of two or three and ask each group to create a list of
innovative business opportunities and to brainstorm about one innovative business
opportunity. Write their responses on a board or flip chart. Discuss the possible
outcomes of each innovative idea as a class. (LO 3-2)
6. Ask the class to discuss business risk and summarize the three threats that impede
business success. In groups, assign students to different business types and ask
them to list the business risks for each business type. Discuss the three threats that
impede each particular business type. For example, group one is assigned a
restaurant, group two is assigned a manufacturing company, group three is assigned
a wholesale company, and group four is assigned a career recruiting company.
Assign other business types as needed. (LO 3-3)
7. Discuss the important consideration about how a new small business owner will
finance the new small business operation. Ask students to consider the amount of
money that they have available to finance their new small business. Next, ask
students to estimate the amount of money they anticipate they will require to open
their new small business. List their responses and discuss how much money they
will need to establish their new small business. (LO 3-4)
Discussion Questions for Online/Hybrid classes
1. What is brainstorming? Why is it important to the new entrepreneurial owner?
(LO 3-2)
2. Define gap analysis. Discuss how innovative individuals utilize it with their individual
skills and abilities to reveal new entrepreneurial opportunities. (LO 3-2, 3.3)
3. Summarize the six ways that potential entrepreneurs identify business opportunities
in the marketplace.
(LOL 3-2)
4. Discuss if you think social networking (such as Facebook, Twitter, or LinkedIn) assist
innovative individuals to network and find a potential partner for their new
IM 3-4
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Chapter Three: Business Idea Generation and Initial
Evaluation
entrepreneurial idea. What other ways can new small business owners find partners
for their business ideas? (LO 3-1, 3-2, 3-3)
5. Summarize the five important headings that potential entrepreneurial owners should
consider when complete their gap analysis. Can you think of additional items to
consider? (LO 3-3)
6. What is business risk? What are the three threats that impede entrepreneurial
venture success? Discuss why potential entrepreneurs should be concerned about
business risk. (LO 3-3)
7. How can new small business owners finance their new small businesses? What do
they do if they do not have enough money to initiate their business operations? List
at least three ways individuals can acquire the money they require to start a new
entrepreneurial venture. (LO 3-3)
8. What is a deficit analysis? Why do new entrepreneurs evaluate it?
(LO 3-1, 3-2, 3-3)
9. What is due diligence? Why is it important? (LO 3-3)
10.List at least five ways you can identify a new entrepreneurial need.
(LO 3-1, 3-2, 3-3)
Discussion Questions for Online/Hybrid classes-Responses
1. What is brainstorming? Why is it important to the new entrepreneurial
owner? (LO 3-2) Brainstorming is a creative process whereby a group of
2. Define gap analysis. Discuss how innovative individuals utilize it with their
individual skills and abilities to reveal new entrepreneurial opportunities.
IM 3-5
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Chapter Three: Business Idea Generation and Initial
Evaluation
3. Summarize the six ways that new potential entrepreneurs identify business
opportunities in the marketplace. (LO 3-1, 3-2, 3-3) The six ways include
4. Discuss if you think social networking (such as Facebook, Twitter, or
LinkedIn) assist innovative individuals to network and find a potential
partner for their new entrepreneurial idea. What other ways can new small
business owners find partners for their business ideas? (LO 3-1, 3-2, 3-3)
5. Summarize the five important headings that a potential entrepreneurial
owner should consider when completing a gap analysis. Can you think of
additional items to consider? (LO 3-3) The new entrepreneur should consider
6. What is business risk? What are the three threats that impede
entrepreneurial venture success? Discuss why potential entrepreneurs
should be concerned about business risk. (LO 3-3) Business risk includes
7. How can new small business owners finance their new entrepreneurial
businesses? What do they do if they do not have enough money to initiate
their business operations? List at least three ways individuals can acquire
the money they require to start a new entrepreneurial venture. (LO 3-3)
IM 3-6
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Chapter Three: Business Idea Generation and Initial
Evaluation
8. What is a deficit analysis? Why do entrepreneurs evaluate it? (LO 3-2, 3-3)
9. What is due diligence? Why is it important? (LO 3-3) A new business will
10. List at least five ways you can identify a new entrepreneurial need.
IM 3-7
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
