CHAPTER 2:

BUSINESS IDEAS AND

OPPORTUNITIES
 Learning Outcomes

1. Discuss the overall view of business opportunities in

entrepreneurship.
2. Explain the meaning of business ideas and
opportunities.
3. Describe the primary and secondary sources of
business ideas and opportunities.
 Learning Outcomes (cont.)

4. Describe the process of recognizing, analyzing, and

choosing a business opportunity.
5. Explain the approaches to seeking business ideas.
6. List the guidelines that must be followed in choosing
business ideas and opportunities.
 Definition of Business Idea
and Opportunity

Business Idea:
A concept that results in profits if it is turned into a
tangible product or service.
An idea is the first milestone in the process of
founding a business.
 Definition of Business Idea
and Opportunity (cont.)

Business Opportunity
The potential to create something new that involves
change in knowledge, technology, economy, politics,
social, and demographic conditions.
A proven concept that generates ongoing incoming.
A business idea that has been researched upon,
refined, and packaged into a promising venture that is
ready to launch.
 Sources of Business Ideas and
Opportunities

Primary Source:
First hand data or information gathered directly through
observation, experiments, interviews, and surveys.
Secondary Source:
Gathering data that have already been compiled.
Relatively inexpensive; but often become outdated and
outmoded.
 Primary Sources

Observation:
Data is gathered by observing and recording the
respondents actions in an activity.
Experiments (or Product Sampling):
Sample products are provided to a small group of
consumers to determine how well it is received by
consumers.
 Primary Sources (cont.)

Interviews:
Field research covers interviews with customers,
suppliers, competitors, and industry experts.
Conducted through personal or telephone interviews.
Surveys:
A short questionnaire with respect to the targeted
product.
 Secondary Sources

Reliable Existing Data:

Compiled information which is trustworthy, such as
information from annual reports of companies.
References:
Published information which provide information on
market growth, overall industry perspectives, and
customer profiles.
From the library, Internet, or paid database services.
 Entrepreneurial Ideas

Ideas:
Exchanging ideas with their partners, a chance to
compare their views of entrepreneurship with those of
others.
Exchanging ideas allows an entrepreneur to examine
their ability to take actions and to identify their strengths
and limitations.
 Performing Self-evaluation

Experience:
Running a business that suits his experience in the
profession.
Ability to find an opportunity from past experience.
 Performing Self-evaluation (cont.)

Knowledge:
Equipped with the knowledge of running a certain
business.
Skills:
Necessary in carrying out an entrepreneurs job.
Usually born from experience and knowledge.
 Performing Self-evaluation (cont.)

Financial ability:
Determines the growth of business.
Capital is the most basic aspect to think of before
opening up a business.
An entrepreneur can start a small business using his
existing capital.
Financial ability will grow with corresponding increase
in profits.
 Performing Self-evaluation (cont.)

Interest:
Can give self confidence and a sense of
responsibility towards business.
Will be able to concentrate on his profession and
put more effort for the growth of his business.
 Performing Self-evaluation (cont.)

Networking Ability:
Reduce unnecessary procedures and bureaucracy
in business.
Creating a network with relevant parties and
seeking their cooperation will result in a win-win
situation.
 Assessing the Values, Responses
and Acceptance of Society

Must be taken into consideration before starting a

business.
Must be consistent so as to not oppose the societys
acceptance in terms of consumers value, norms and
culture.
 Choosing a Business Opportunity

Criteria:
Legality
Competitors
Capital Requirement
Risk
 Choosing a Business Opportunity
(cont.)

Legality:
Business ideas must be approved by the law.
Competitors:
Those fulfilling similar customers needs.
Can identify by asking customers, or business directories.
Identify their strengths and weaknesses in terms of
organizational resources, financial and physical assets, and
reputation.
 Choosing a Business Opportunity
(cont.)

Capital Requirement:
Amount invested in the company.
Fixed/ Permanent Capital:
Permanently invested in a business for the purchase of
durable assets that can be used repeatedly over a long
period.
Known as supplementary factor, indirect factor, or
overhead factor.
 Choosing a Business Opportunity
(cont.)

Working Capital (Operating Capital):

Can be used to support business operations involving a
short time period.
Often used to buy inventory, pay bills and salaries, or for
emergency purposes.
Finances day-to-day operational costs.
Varies according to output.
Also known as variable factor, prime factor, or direct factor.
 Choosing a Business Opportunity
(cont.)

Plantation or Growth Capital:

Not related to current business situations.
Needed when businesses undergo development or
changes according to the direction of the business.
Used to help small businesses expand or change its
primary direction.
 Choosing a Business Opportunity
(cont.)

Risk:
A period of uncertainty experienced by a business as
a result of unforeseen events.
Leads to either poor earnings and resultant failure,
or inadequate cash flow on operating expenses.
 Choosing a Business Opportunity
(cont.)

Risks are often based on:

The level of difficulties in entering the business field.
The size or amount of capital to be invested.
The amount of profit that can be gained from revenue.
The ability and competency of existing workforce or
human resources in managing the business.
Management of energy resources.
The products potential to penetrate the market.
 Choosing a Business Opportunity
(cont.)

Business Risks :
Factors which have the tendency and potential of
adversely affecting a business operation.
Controllable:
o Can be managed by the entrepreneur.
Uncontrollable:
o Impossible to prevent.
 Choosing a Business Opportunity
(cont.)

Financial Risks :
Any risk associated with any form of financing.
Four categories:
o Credit
o Level of cash liquidity
o Loan
o Currency Exchange
 Choosing a Business Opportunity
(cont.)

Credit Risks :
Occurs when clearing/ settlement of payments are
not made when due.
Liquidity Risks :
When liquid resources are insufficient to make all
payments on the due date.
 Choosing a Business Opportunity
(cont.)

Loan Risks :
Occurs with failure to make prompt payment in time
that will cause a certain amount of increase to the
loan amount.
Currency Exchange Risks :
Caused by the high flexibility and changes in
currency value.
 Approaches to Seeking a
Business Idea

Fulfilling needs and interests:

Ideas for setting up a business can be found from an
individuals different needs or interests that are
constantly changing.
Analyzing Life Problems
Problems experienced in life can provide a good
idea for starting a business.
 Approaches to Seeking a
Business Idea (cont.)

Diversifying the Usage of Goods:

Devices with multi-purpose usage, or using the
concept of recycling.
Observing Changes in the Community:
Available needs and opportunities can be seen by
those who are alert.
 Approaches to Seeking a
Business Idea (cont.)

Using the Latest Technology:

Opportunity to innovate products or services.
Observing and Establishing a Network:
Individuals who are still attached with their
organizations can create a network at the workplace
and make it a source of innovative ideas.
 Guidelines in Choosing a
Business Idea and Opportunity

Date collection and research

Preparation of a complete business plan
Establishment of a linkage or network
Funding
Hiring of a Workforce if Necessary
Confidence
Good time management