IBC Handbook - Opportunity Recognition

 

 

Key Objectives:

 

This appendix and its exercises will enable you to:

• Identify an entrepreneurial opportunity.

• Distinguish between an idea and an opportunity.

• Understand the importance of putting together a team to take advantage of opportunities.

• Find ways to broaden your mind.

 

Where Others See Problems, Entrepreneurs Recognize Opportunities

Many famous businesses have been started because an entrepreneur solved a problem by turning it into a successful business. The problem was treated as an opportunity.

 

Georgette Klinger founded her skin care company because she had terrible acne. Anita Roddick started The Body Shop "a cosmetics company that uses natural ingredients in its products" because she was tired of paying for fancy packaging when she bought makeup.

 

To become an entrepreneur who can recognize business opportunities, ask yourself such questions as:

• What frustrated me the most when I go buy something?

• What product or service would really improve my life?

• What makes me particularly annoyed?

• What product or service would eliminate that annoyance?

 

List three problems that bother you and a business solution for each:

 

Problem

1. ______________________________ ______________________________
2. ______________________________ ______________________________
3. ______________________________ ______________________________
4. ______________________________ ______________________________

Business Solution

1. ______________________________ ______________________________
2. ______________________________ ______________________________
3. ______________________________ ______________________________
4. ______________________________ ______________________________

Source: How to Start and Operate a Small Business

NFTE Fundamentals- A Guide of the Young Entrepreneur

By: Steve Mariotti with Tony Towle

 

Entrepreneurs Imagine What They Want and Then Create It

Businesses also come into existence when entrepreneurs fantasize about products or services they wish existed. You can jump-start your imagination by asking yourself (or your friends) questions like the following:

• What is the one thing you'd like to have more than anything else?

• What does it look like?

• Or taste like?

• What does it do?

List three products or services you would like to see created:

1. ________________________________________________________________
2. ________________________________________________________________
3. ________________________________________________________________

An Idea is not Necessarily an Opportunity

There is one crucial difference, however, between an idea and an opportunity. An opportunity is based on what consumers want. Many small businesses fail because an entrepreneur didn't understand this.

 

A business opportunity is an idea plus these three qualities:

• It is attractive to customers.
• It will work in your business environment.
• It can be executed in the "window of opportunity" that already exists.
• You have the resources and skills to create the business, or you know someone who does and who could start the business with you.

A "window of opportunity" is the time you have to bring a business possibly to the marketplace. You might have a great idea, but if competitors have had the same thought and brought the product or service to the customer first, your window of opportunity has been slammed shut.

 

The Roots of Opportunity in the Marketplace

Problems are just an example of opportunities that entrepreneurs need to be able to recognize. A changing situation or trend is another.

 

In the late 1980s, for example, Russell Simmons was promoting rap concerts at the City College of New York. At the time, rap was considered a passing fad. Simmons had a hunch, though, that music consumers, black and white, were getting board with rock. He formed Def Jam Records with fellow student Rick Rubin for $5,000. They produced hit records by Run DMC and LL Cool J. Today Simmons is a multimedia mogul worth over $50 million.

 

Simmons applied on simple concept: If you personally know ten people who are eager to buy a product or service, there are probably ten million who would buy it if they knew about it.

 

There are five roots of opportunity in the marketplace:

• Problems that your business could solve.
• Changes in laws, situations, or trends.
• Inventions of totally new products or services.
• Competition - If you can find a way to beat the competition based on price, location, quality, reputation, reliability, or hours, you can operate a very successful business with an already existing product or service.
• Technological advances - Scientists may invert new technology, but entrepreneurs must figure out how to market it.

Simmons applied the seven basic rules of building a successful business:

• Recognize an opportunity - Simmons believed rap music was an untapped business opportunity.

• Evaluate it with critical thinking - He tested his idea by promoting concerts and observing consumer reaction.
• Build a team - Simmons added Rick Rubin.

• Write a business plan - Simmons planned his operations.
  
• Gather resources - He and Rubin pooled $5,000.

• Decide ownership - Simmons and Rubin formed their business as a partnership.
• Create wealth - Simmons is now worth over $50 million

 

A Team Approach Opportunity

Simmons and Rubin turned Def Jam into a huge success because they made a good team. Alone, neither of them had enough money to launch a record label, but together they were able to. Their business was also helped by the fact that they each knew different artists and had different contacts in the record industry.

 

Every person you know is a potential business-formation opportunity. Your friends or family members may have skills, equipment, or contacts that would make them valuable business partners.

 

Let's say you would love to start a T-shirt business, buy your not an artist. If you have a friend who is, the two of you could start a business together. Or maybe you'd like to form a D.J. business, but you only have one turntable. If you form the business with a friend, you can pool equipment and records.

 

When forming a business team, organize it so that everyone involved shares in the ownership and profits. People work harder when they are working for themselves.

 

Success Starts with Great Ideas -- New or Repackaged

Profitable businesses are all based on good ideas, but very few ideas are actually brand new. Most companies are started by re-creating or repackaging old ideas and concepts. Computer dating, for example, combined existing computer technology and personal-dating services.

 

It is not necessary to come up with a brand-new invention or product to be an entrepreneur. It is necessary, though, to provide a product or service that fills a customer need.

 

Apple Computer & Ford Motor Co. - Entrepreneurial Vision

In the 1970s, Steven Jobs and Stephen Wozniak, among others, realized that computers didn't have to be giant machines owned by giant companies. They didn't see any reason why ordinary people couldn't have small computers in their homes to use to write letters, play games, or pay bills.

 

Neither Jobs nor Wozniak had the money to develop or finance their dream. They were both under twenty-one. They tried to convince major computer companies to invest. No one understood their vision, however, so the two young men started the Apple Computer Company in Wozniak's parents' garage.

 

Like Jobs and Wozniak, Henry Ford dreamed of making new technology affordable of the average American family. Many people in the early 20^th century assumed motorcars would only be toys for the rich. Ford challenged that assumption. He imagined a car in front of every house in the United States. He directed all his efforts toward achieving that dream, and eventually created the Ford Motor Company. Today, Ford is one of the largest and most important companies in the world.

 

Privatization

Profitable businesses can also be based on changes in governmental policy. One recent trend is to allow entrepreneurs to provide services that the government has traditionally provided, such as schools, postal service, and trash collection. This changeover of government-owned business to private ownership is called privatization. For the foreseeable future, alert entrepreneurs may find business opportunities in supplying services formally controlled by the government.

 

King C. Gillette: An Extraordinary Success Story

King C. Gillette was a small-time inventor and traveling salesman. At the age of forty he was broke. Every morning, while shaving, he would run through the entire alphabet in his head, trying to think up a big, moneymaking idea.

One day in 1895, while on the letter "r", Gillette nicked himself with his razor. The idea for what came to be called the "safety razor" hit him like a bolt of lightening. He eventually invented a razor that was easier to use and safer than the one men used at that time. He had it mass-produced, so that every man could easily buy a safe, inexpensive razor with disposable blades.

 

This seems like an obvious idea, yet no one had thought of it. Gillette had stumbled upon a vast consumer need - something that most men would want to buy.

 

Who knows? Maybe your business idea could develop into something as big as the Gillette Company.

 

Things to Consider

Imagine yourself for a moment in the business of your choice. Is it a "good fit"? Are you going to stay interested and enthusiastic for a long time?

 

Consider keeping your business simple. This is going to be your very first enterprise, so don't bite off more than you can chew. Many successful entrepreneurs start more than one business over the course of a lifetime. Start with something simple that you can do well. You will have the rest of your life to move on to greater and more complex challenges.

 

For now, if you choose a simple business and follow these rules, you can't lose:

1. Satisfy a customer need.
2. Buy low, sell high.
3. Keep good records.

The successful entrepreneur listens to what people in the community are saying. What do the people you know like? What they want? What do they need? Could you fill any of these needs?

 

By now you may have several ideas and can't decide which on would be best. Try writing down several possibilities, and then eliminate them one by one until you end up with the business you like best. The one you choose will be the subject of your business plan.

 

Possible Businesses for Young Entrepreneurs

Some of the businesses started by young people who have taken similar courses include:

 

• Candy Wholesaling
• Carpentry
• Car repair for remote-control cars
• Computer repair
• Dating newsletter
• Delivery Service
• Dressmaking
• Entertaining - magic shows, clown acts
• Greeting Card Design
• House/Office Cleaning
• Jewelry-making
• Messenger Service
• Music lessons
• Music-recording studio
• Pet care
• Plant care
• Rap-musician agency
• Selling retail products: perfume, headbands, ties, watches
• Software installation
• Songwriting
• Tutoring
• T-shirt design
• Typing or word processing service
• Wake-up service
• Web site design

Source: How to Start and Operate a Small Business

NFTE Fundamentals- A Guide of the Young Entrepreneur

By: Steve Mariotti with Tony Towle