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Transcript of 1 Recognizing Opportunity Chapter 3: Understanding Entrepreneurial Trends Starting vs. Buying a...
1
Recognizing Opportunity
Chapter 3:
Understanding Entrepreneurial Trends
Starting vs. Buying a Business
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Key Terms to Know
Brainstorm Business broker Corporate venture Demographics Franchise Franchisee Franchisor Goodwill Innovation
Niche Online business Outsourcing Services Specialty magazine Strategic alliance Trade magazine Trade show Values
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Current Entrepreneurial Trends
Internet Businesses– Online business —conducts
business via the Internet Service Businesses
– Services – intangible things that businesses do for consumers to enhance their lives
Home-Based Businesses Socially Responsible
Nonprofit Businesses
Focus on Technology Outsourcing – contracting
with other companies for their services
Strategic Alliances – forming a partnership with another company
Corporate Ventures – starting a smaller company within a larger one (spin-off)
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Learn to Recognize Opportunity
Creativity & Innovation – finding new ways of doing things
Idea vs. Opportunity – Ideas are generated by creativity BUT opportunities are ideas that have commercial potential
– A niche is a small specialized market
Finding Opportunities by Understanding Industries
– Industries are groupings of businesses with a common purpose
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Think Creatively About Opportunity
Practice brainstorming – thinking freely to generate ideas
Look at ordinary items in new ways – see things in a different light
Find creative solutions to common problems – a screwdriver has multiple uses!
Connect unrelated items – put misc. items on a tray then create a new product from them
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Challenges to Creativity
Time pressures The influence of unsupportive people Lack of confidence Rigid thinking Challenges you bring on yourself are the
hardest!!
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Creative Sources of Ideas
Your mind is processing ideas while you are brushing your teeth, sleeping, or driving!!
Observe the world around you – what do people want & need?
Watch for demographic changes – population changes (age, gender, income, ethnic backgrounds, education, occupations, etc.); cultural diversity!
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Creative Sources of Ideas, cont.
Be an avid reader – unrelated reading can spark ideas in your area of expertise
Consider your own experiences– Interests– Hobbies– Work
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Creative Sources of Ideas, cont.
Consult outside sources– Trade magazines:
Periodical published for specific types of businesses or industries
Give news on the most up-to-date products & services out there
Offers current, industry-specific news about customers & market trends
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Creative Sources of Ideas, cont.
– Specialty magazines: Periodical published for people with special interests Use these to identify the needs of potential consumers
– Trade shows & exhibitions: National or regional Can see new items & promotions of current G&S Demonstrations by vendors & manufacturers
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Creative Sources of Ideas, cont.
– Newspapers: Check out the business sections
– Internet: Small Business Administration & Google can help you
find existing businesses BUT remember, you should fill a gap where businesses
haven’t gone yet . . .
– Government agencies: U.S. Patent Office Detailed descriptions of new products Publish Official Gazette (published wkly) of new patents
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Starting vs. Buying a Business
Personal values & goals– Define who you are– Shape your attitudes & your choices– Help you identify your priorities– Influenced by family, religious beliefs, teachers,
friends, society, & personal experiences
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Starting vs. Buying a Business, cont.
Entering the family business– Rewards:
Trust & togethernessCan achieve more together than on their ownCan start working at a young ageCan be flexible on hoursCan have more say on your wages
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Starting vs. Buying a Business, cont.
Entering the family business, cont.– Challenges:
Dynamics might not work [together]Can never get away from the businessCan’t view it objectivelyParents don’t trust children in making wise
decisions– Questions to ask before entering the family
business: See p. 59
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Starting vs. Buying a Business, cont.
Buying an existing business– Less risky as it’s already established– Customer-base is already there
Their loyalty is called goodwill An extremely valuable business asset
– Procedures are in place– Equipment already purchased– Inventory on hand– Employees hired & trained
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Starting vs. Buying a Business, cont.
Buying a franchise – you buy the right to set up a new business patterned on an existing model
Franchisee – the buyer– Is trained to operate their location– Pay a fee to purchase the “rights” to own it– Pay an annual royalty on yearly sales (3%-8%)
Franchisor – the seller– Selling their planning & management expertise
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Franchises
Advantages– Name recognition of an existing business & its
products/services– National advertising– Trained in the company’s methods of operations– Included in national distribution channels
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Franchises, cont.
Disadvantages– Little say in product development– Set prices– Set uniforms– Restrictions on how to run the business– Market saturation — investigate the area before you buy
one!
– 1-2 poor running franchises can hurt reputation of the chain as a whole
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Evaluating a Business Opportunity
Investigate:– Hire an accountant – will verify the value of
the business’s inventory, accounts receivable, & assets
– Hire an attorney – investigate the business for any legal liabilities (debts)
– Talk to customers, suppliers, employees
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Evaluating a Business Opportunity, cont.
Where to find a business:– Business Brokers – a realtor of the buying &
selling of businesses– The Wall Street Journal – nationally published– Network (local gov’t, bankers, accountants,
attorneys)
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Evaluating a Business Opportunity, cont.
Ask the right questions!– Why are you selling?– Will I enjoy this business?– Are there plenty of existing customers?– What is the potential for growth?– Is the economic trend for this business
strong?
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Starting Your Own Business
Ask yourself some questions: See pp. 61-62 What must you do next?
– Prepare a business plan to present to bankers & investors
– Include in the plan: marketing research, distribution, employees, advertising, physical location, purchasing of equipment, supplier contacts, & professional advisors
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The END
Read the Chapter handout pp. 44-64