MODULE 2

STARTING UP A SMALL BUSINESS: RECOGNIZING

OPPORTUNITIES AND DEVELOPING IDEAS

This module introduces students to factors for consideration in starting up a

small business. Identification of Business Opportunities and Development of Business
Ideas will be given emphasis in this module.

At the end of this module, students should be able to have the attitude of
identifying business opportunities in their local market environments and to be able to
generate business ideas as solutions to the needs and wants of their market.

Important factors to consider when thinking of establishing one’s

own business

Starting a business is not just about having the guts to make great business
ideas happen. But it’s also about (1) knowing how realistic or viable your business
idea will be (Feasibility) and (2) having right Management skills so that your
entrepreneurial venture will be successful and grow.

Refer to PPT (Starting up your small business ).

Identifying Business Opportunities

How Do Entrepreneurs Find Opportunities to Start New Businesses?

Schumpeter’s definition describes five basic ways that entrepreneurs find

opportunities to create new businesses:

1. Using a new technology to produce a new product

2. Using an existing technology to produce a new product
 3. Using an existing technology to produce an old product in a new way
4. Finding a new supply of resources (that might enable the entrepreneur to
produce a product more economically)
5. Developing a new market for an existing product

How Do Entrepreneurs Create Business Ideas?

Schumpeter (as cited by Mariotti and Glackin, 2016) mentioned three activities
that lead to the creation business ideas — (1) Listen, (2) Observe, and (3) Analyze.

1. Listen. By listening to others, entrepreneurs get ideas about improving a

business or creating a new one. Create one business idea
by listening. Describe how you got the idea.

2. Observe. By constantly keeping their eyes and ears open, entrepreneurs

get ideas about how to help society, about what kind of businesses they
could start, and about what consumers need. Create a business idea by
observing. Describe how you got the idea.

3. Analyze. When entrepreneurs analyze a problem, they think about what

product or service could solve it. Create a business idea by thinking up a
solution to a problem. Describe how you arrived at the idea.

In line to this, Peter Drucker, a management expert, defined an entrepreneur

as someone who “always searches for change, responds to it, and exploits it as an
opportunity.” Entrepreneurs are always on the lookout for ways to create businesses
from the opportunity of change.

Where Others See Problems, Entrepreneurs Recognize Opportunities

An entrepreneur recognized that the problem in the society was actually an

opportunity. Where there are dissatisfied consumers, there are likely opportunities for
entrepreneurs!

Train Your Mind to Recognize Business Opportunities. A further step is to let

your creativity fly.
 Consider developing your entrepreneurial instincts by asking yourself:

______________________________
Figure B: Questions entrepreneurs ask when identifying opportunities

An Idea Is Not Necessarily an Opportunity

An opportunity is an idea that is based on what consumers need or want and

are willing to buy sufficiently often at a high enough price to sustain a
business. Timmons’s definition of a business opportunity includes these four
characteristics:

1. It is attractive to customers because it creates or adds value for its

customers.
2. It will work in the business environment.
3. It can be executed in a defined
window of opportunity.
4. It can be implemented with the right team to make it durable.
The Five Roots of Opportunity in the Marketplace

Entrepreneurs can exploit “five roots of opportunity.”

1. Problems your business can solve

2. Changes in laws, situations, or trends
3. Inventions of new products or services
4. Competitive advantage in price, location, quality, reputation, reliability,
speed, or other attributes of importance to customers
5. Technological advances that entrepreneurs take from the laboratory to the
marketplace

Integrating Internal and External Opportunities

Opportunities fall into two classes: (1) internal opportunity and (2) external
opportunity.

______________________________
Figure C: Types/Sources of opportunities (Mariotti and Glackin, 2016)

An internal opportunity is one that comes from inside you—from a personal

hobby, interest, or even a passion—or inside your organization. An external
opportunity, in contrast, is generated by an outside circumstance.
 Given this, entrepreneurs need to create a strategy. A strategy is a plan for
how an organization or individual plans to proceed with business operations and
outperform that of its competitors. Michael Porter (1998) mentions the following
strategic actions to win over competitions in the market.

Paths to Small Business Ownership (Business Entry Options)

The table bellow show some business entry options. There are pros and cons
to each approach, and it is worthwhile to give thought to each option.

source: Jerome A. Katz and Richard P. Green, Entrepreneurial Small Business, New York: McGraw-Hill/Irwin,
2008.
Developing Business Ideas
Refer to the PowerPoint presentation (Starting Up Your Small Business.PPT).
Discussed are sources of Business Ideas:
• Work Experience
• A Similar Business Hobby or Personal Interest
• Chance Happening or Serendipity
• Family and Friends
• Education and Expertise
• Idea Sites
• Technology Transfer and Licensing (ideas from Universities and Government)

Suggested Technique in Developing Creative Business Ideas

An entrepreneur can use the SCAMPER MODEL to develop business ideas.

Watch this video SCAMPER.
(©www.equalta.co.uk; youtube
link: https://www.youtube.com/watch?v=G8w0rJhztJ4 )
The Entrepreneurial Process
(source: Barringer and Ireland, 2016)

The entrepreneurial process is a methodical way of starting a new venture

which involves four (4) steps. The entrepreneur realizes, evaluates, and develops an
opportunity by defeating “forces of resistance” (Dhenak, 2010). Barringer and Ireland,
(2010) as cited by Lopes-Rivas (2016) mentioned that there are four phases in the
entrepreneurial process which include (step 1) identifying and evaluating and
opportunity, (step 2) developing a business plan, (step 3) ascertaining resource
needs, and (step 4) managing the resulting enterprise.

Step 1: Opportunity Identification

Stage one of the entrepreneurial process deals with opportunity identification.

An opportunity by definition is a favorable set of circumstances which creates a need
for a new product, business, or service (Barringer & Ireland, 2010). Opportunity
identification is the process by which the entrepreneur comes up with a prospective
idea for a new venture. Identifying the opportunity is not simple. Identification takes
research, exploration, and evaluation of current needs, demands, and trends from
consumers and others (Dhenak, 2010).With researching and surveying, the product
or service can develop. The organization or individual can now innovate what is
lacking as long as the market exists for the opportunity to present itself. If the market
is mature the window of opportunity is closed (Barringer & Ireland, 2010). Qualities
through innovation add value to a product, service, or business. The qualities are
attractiveness, durability, timeliness, and fixation to the product (Barringer & Ireland,
2010). These four conditions are what the consumer and end user want. Evaluating
the opportunity through observing environmental forces, social forces, technology
advances, and political or regulatory changes are attributes to thriving in any industry
(Dhenak, 2010). From an individual perspective, opportunity identification and
evaluation is the most important element because it identifies general trends, needs,
and risks that involve the original idea which the entrepreneurial process can improve.

Step 2: Developing a Business Plan

The second stage is developing a business plan. Business plan development

is an integral piece for submitting a proposal for an entrepreneurial or intrapreneurial
business (Harjai, 2012). The organization or entrepreneur develops a description of
the future direction of the business. A good business plan must be in place that
displays a distinct opportunity (Harjai, 2012). The process in business plan formulation
can be the most time-consuming stage for the individual entrepreneur or organization
(Harjai, 2012). An example of this is researching and doing a feasibility analysis for
business plan formulation (Barringer & Ireland, 2010). Testing the viability of the idea
gives the ability to change the thought process from idea to a business plan. Business
plan development is part of strategic thinking and planning and works well with
organizational activities. On an individual basis, the sole entrepreneur must rely on
brainstorming in smaller focus groups. From a corporate perspective, business
planning is the essential element to the entrepreneurial process.

Step 3: Allocating Resources

The third stage is determining and allocating resources. Ascertaining resource

needs is a requirement to opportunity and business plan implementation (Dhenak,
2010). Assessing the risks in association with insufficient or inappropriate resources
must be set apart from useful ones (Harjai, 2012). The question that needs an answer
here is: Can the organization or individual propositioning the venture be capable of
obtaining sufficient resources to move forward (Barringer & Ireland, 2010)? The
entrepreneurial process calls for securing financial and non-financial resources as well
as intellectual proprietary protection where it applies (Barringer & Ireland, 2010).
Financial resources include start-up costs, the financial performance of like business,
and economic attractiveness (Barringer & Ireland, 2010). Non-financial resources
include skill sets and labor pools for potential employees (Barringer & Ireland, 2010).
In the health care setting, for example, the skill set for nurses is different from radiology
technicians. Organizations and individuals performing a resource assessment must
be aware of the community the business exists in and whether or not this is a major
factor. Resource allocation and availability are important to corporations because
sustainability and profit depend on proper planning and understanding the physical
internal and external environments. For the individual gaining funding from investors
and loans and knowing where to cut cost in execution and implementation is the most
important issue with resource determination and allocation (Barringer & Ireland, 2010).
An example from an individual perspective is making a product via a manufacturer
that already exists as opposed to manufacturing the product themselves (Barringer &
Ireland, 2010).

Step 4: Managing the Enterprise

 The fourth stage is managing the enterprise. Once resources are secure with
the entrepreneurial process business plan implementation can take place. Managing
the company means examining operational issues that will occur when
implementation begins and throughout the entire business plan cycle (Barringer &
Ireland, 2010). The management process involves implementing structure and
business style while determining variables for success (Harjai, 2012). Establishing a
control system to identify and resolve any problem areas will help the management
process. Lack of experience can give the individual entrepreneur issues with business
growth and administration (Harjai, 2012). Organizations understand the business
development, growth, and sustainability better than individuals in many cases
because resources are easier to be had and utilize as well as methods with strategic
management and system development cycles (Harjai, 2012). Individuals fare better in
the entrepreneurial process improving on existing ideas that have a strong consumer
focus and demand.
REFERENCES and SOURCES:

Kuratko, D. (2017). Entrepreneurship: theory, process, practice. Cengage

Learning.

Edralin, D. (2016). Entrepreneurship. Vibal Group, Inc. Quezon City.

3G ELearning (2016). Entrepreneurship. 3G ELearning FC LLC

Katz, J. and Green, R. (2014). Entrepreneurial Small Business. McGraw-Hill.

New York.

Barringer, B. &; Ireland, R. (2013). Entrepreneurship: successfully launching

new ventures. Pearson, New York.