ECU 302: INNOVATION AND ENTREPRENEURSHIP

COURSE OUTLINE

1. Concepts of entrepreneur, entrepreneurship and enterprise

2. Foundations of entrepreneurship
3. Entrepreneurship theories
4. Entrepreneurial motivation
5. Personality of entrepreneurs and of intrapreneurs
6. Innovation and Creativity
7. Intellectual property protection
8. Policy perspectives to promote entrepreneurship and enterprises
9. Analysis of business opportunities in different sectors of economy at
national and global levels
10. Legal framework for starting a business in Kenya
11. Feasibility studies
12. Innovation and creativity
13. Idea generation
14. Opportunity Evaluation
15. Business planning

- business description segment

- marketing segment
- management segment
- financial segment
- risk analysis and milestones segment
- business performance indicators
- Business financing including VC finance, equity, debt, business angels

Reference books
• Robert Hisrich and Michael Peters, Entrepreneurship, Tata Mc Graw– Hill
• Vasant Desai, Entrepreneurship
• Marc J Dollinger, Entrepreneurship – Strategies and Resources, Pearson Education

D e f i n it i o n s

Entrepreneur (Oxford Dictionary) – Person who undertakes an enterprise with chances of profit
or loss. (As I have understood, Entrepreneur is a person who undertakes a business activity of
which he has no background and faces considerable risks in the process. If either of the two
elements, i.e., “no background” or “considerable risk” is missing in th e venture, it is no
entrepreneurship).

Enterprise (Oxford Dictionary) – Bold Undertaking

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Entrepreneur – (New Encyclopaedia Britannica) – An individual w ho bears the risk of
operating business in the face of uncertainty about the future conditions.

Common Meaning – one who starts his own, new and small business.

Entrepreneurship – It is a philosophy or process through which an entrepreneur seeks

innovation and employment.

Entrepreneur Entrepreneurship Enterprise

Person Process or Philosophy Object

Entrepreneurship can also be described as a creative and innovative response to the environment.

ENTREPRENEURSHIP THEORIES

1600 – French verb – Entreprendre – to undertake.

1700 – Person bearing Risk or Profit in a fixed price contract (Risk)

Richard Cantillon – Person bearing risks is different from Capital Supplier
1725 – (Risk)

1803 – J. B. Say – Shifts economic resources out from an area of lower to higher
productivity & greater yields (Value Addition)

1934 – Joseph Schumpeter – Innovator and develops untried technology (Productivity&

Innovation)

1961 – David McClelland – Highly motivated, energetic, moderate risk taker (Need for
achievement)

1964 – Peter Drucker – Searches for change, responds to i t & exploits as opportunity
(Opportunity Focused)

1980 – Karl Vesper – Behaviour Perceptions– Economists, Psychologists, Businessmen,

Politicians (Environment)
1983 – Gifford Pinchot – Intrapreneur

1985 – Robert Hisrich – Creating something different with value, devoting time & effort,
assuming risks (FPS); results– rewards and satisfac tion (Leadership & Vision)

Please note that key word in Entrepreneurship is RISK. Any venture where risk is mitigated due
to any reason does not qualify to be called entrepreneurship.

Entrepreneurs are people who create new business activity in the economy and bear considerable
business risk in the process. This is often done by starting new companies. But they can also
create new business activity by introducing a new product or creating a new market

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Some other related facts about entrepreneurship

• Entrepreneurs are made; they aren’t born. (This statement is more of public posturing
than fact. Essential characteristics of an entrepreneur, i.e., ambitiousness, capacity to take
moderate risks, organizing ability, persistence, vision, etc, can not be taught in any
school. These are inborn characteristics of a person. Know this fact but don’t write it in
the answer sheet).

• Incubator organization is an organization that supports entrepreneurs

• Venture Capitalists – VCs are like bankers, but since they aren’t subject to strict
regulations as bankers, they take greater risks in making investments – organized as
formal businesses, they expect to reap 25– 30% annually and get more actively involved
in the ventures than bankers do.

• Angels are private individuals who invest directly in firms and receive equity stake in
return – they act as advisers to founders.

• Don’t confuse entrepreneurship with running a business. Every person launching a

business is not an entrepreneur. A businessman’s son taking over his established family
business or starting another factory in neighbouring town is no entrepreneur because he is
well trained in matters of that business by virtue of constant exposure since childhood.
He has support of family and friends in terms of finance and advice should going gets
tough. With his training, professional and personal contacts and financial backing, risk
element and uncertainty are almost missing in such business. Whereas, a farmer’s son,
venturing to open a grocery or even ‘ pan shop’ is an entrepreneur because he is stepping
into an uncharted territory of which he has little/no training and therefore bears
considerable risk.

Definition of entrepreneurship in 21st century

An entrepreneur of 21st century is a customer focused innovator. He uses e– knowledge.
Advantage is speed. He is a global thinker even though he may not necessarily be a global
player.

Standard definition

Entrepreneurship is the process of creating something different with value by devoting the
necessary time and effort, assuming the accompanying financial, psychic, social risks and
receiving the resulting rewards of monetary and personal satisfaction and independence.

Word “Entrepreneur” stems from French Verb Entrepre ndre – means between; taker or go
between

New Definition involves four aspects –

(a) The creation process

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 (b) Devotion of time and efforts
(c) Assumption of risks
(d) Rewards of independence, satisfaction, money.

Advantages of entrepreneurship

To an Individual

(a) Provides Self Employment for the entrepreneur

(b) Entrepreneur can provide employment for near & dear one as well
(c) Entrepreneurship often provides an employment and livelihood for next generations as
well.
(d) Freedom to use own ideas – Innovation and creativity
(e) Unlimited income / higher retained income – Bill Gates has risen to become richest in the
world in a single life time through entrepreneurship
(f) Independence
(g) Satisfaction

To the nation

(a) Provides larger employment – Entrepreneurs provide employment for self as well as
other people and is source of employment creation.
(b) Results in wider distribution of wealth – This is a logical sequel of above issue. Higher
the employment, greater the distribution of wealth
(c) Mobilizes local resources, skills and savings
(d) Accelerates the pace of economic development – Entrepreneurship is the govt’s one of
the most trusted vehicles for economic development
(e) Stimulates innovation & efficiency

Factors favoring entrepreneurship

1. Developed Infrastructure Facilities – Availability of infrastructure reduces the cost &
efforts and improves viability of projects through higher profit margins.
2. Financial Assistance – Easy availability of cheap funds is vital for pr omoting
entrepreneurship.

3. Protective and Promotional Policies – Most of the entrepreneurship projects start very
small and have no resilience. They are extremely vulnerable to competitors, market,
money markets, etc, for considerable time. Favourable Govt policies shelter them from
such vagaries.

4. Growth of Education – Science, Technology & Management – Growth of education is

believed to be promoting entrepreneurship. However, there are enough examples to
suggest otherwise. A very large proportion of first generation entrepreneurs are low
educated e.g Microsoft Chairman Mr Bill Gates.
5. Risk Taking Abilities – Risk taking ability is one of the pillars of ent repreneurial spirits.

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 6. Hunger for Success (Capitalistic View) – Fire in the belly and dreams of riches is what
drives most entrepreneurs on this risky path. Any person content with what he has would
take the easier route of salaries job.

7. Environment/Culture Impact – Entrepreneurship is contagious. Communities like

Indians and Gikuyus are historically entrepreneurial. They are known for seeking and
exploiting business opportunities in most remote areas. It is a culture that propels them.
(Go to Pull Factors)

8. Social Security – Social security acts as a safety net against failure of enterprise. Social
security guarantees basic safety net’ in case of failure. Entrepreneurial spirit of United
States is born partly out of this security.

9. Technical/Industrial Training Facilities – Industrial Training facilities on one hand

generate skilled manpower so vitally required for setting up enterprises while on the other
hand they are also nursery for future entrepreneurs. Among the educated entrepreneurs, a
majority is product of technical institutes from IIT to ITI (Tier I to Tier III institutes).

10. Globalization – Globalization has provided another avenue for business. Many dare
devils have taken a head– along plunge into this uncharted water and have written new
success stories.

(Think of numerous other factors)

What makes a successful entrepreneur

1. The urge for achievement (most often monetary ambitions) – Most Important
2. Willingness to take moderate risks – (High risk takers are not entrepreneurs but
gamblers).
3. Determination to win
4. Win– Win Personality

5. Ability to identify & explore opportunities

6. Analytical ability to take strategic decisions
7. Perseverance
8. Flexibility
9. Capacity to plan and organize
10. Preparedness to undergo physical and emotional stress
11. Positive self concept/Self Belief
12. Future orientation – Vision
13. Ethics and Values – Mission

Who can be an entrepreneur?

1. Who feels the need for achievement

2. Who can take moderate risks

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 3. Who possess skills in organizing
4. Who can capitalize on opportunities
5. Who has some financial strength – On his own or bor rowed
6. Who has ability to work hard
7. Who has desire for responsibility
8. Who has a clear perception of probability of success
9. Who gets stimulation by feedback
10. Anyone – He can be male, female or even a Eunuch
11. Who does not have previous experience

Characteristics of entrepreneur

1. Mental ability
2. Clear objectives
3. Business secrecy
4. H.R. ability
5. Communication ability
6. Technical knowledge
7. Achievement– oriented
8. Perseverance
9. Ethical
10. Motivator
11. Self– confident
12. Long term involvement
13. High energy level
14. Problem solver
15. Initiator
16. Goal setter
17. Risk taker

(Please note that all the three headings are necessarily the same)
Key elements of an entrpreneur

1. Need for Achievement

2. Risk taking

3. Organizing Skills

4. Ethics & Values

5. Vision

6. Innovation

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Above is the list of key elements as per the professor, Mr JC Saboo. Individual opinions may
vary. In my own assessment, the last three do not form the part of key elements of entrepreneur.
Justification is as follows –

Ethics and Values – Almost every entrepreneur is raw and weak at the time of start. He has little
knowledge and even meager resources. He is pitted against heavy odds like established players
in the market who usually have little respect for ethics. There is no denying that Ethics will win
in long term; provided you survive that long to benefit from that win. For short and medium
term, it is “hook or crook” attitude which brings business success. Remember Sania Mirza’s Tee
Shirt! – Nice girls don’t win matches. The list of unethical, and yet successful, companies is
rather long. We don’t have any system of rating companies on ethical scale; else, the issue would
have never arisen.

Vision – Rarely does an entrepreneur start with a 10 year vision. Almost every entrepreneur,
including Sir JRD Tata, starts small with basic survival or “little riches” as the aim. The vision,
mission and all such management jargons erupt only after a reasonable level of success is
attained.

Innovation – I personally consider Innovation fairly low in t he entrepreneurial element basket.

Innovation helps in achieving success in business whether it is 10 generations old business or an
entrepreneur’s new enterprise. An entrepreneur is one who starts a business enterprise of which
he had no previous experience. Most entrepreneurs start with a routine business activity without
any innovative idea. It may be as common a business as a pan shop. So, if a farmer’s son opens a
pan shop, there is no innovation but it is entrepreneurship. Whereas, if a farmer’s son opens a
new pan shop away from his father’s shop, it is not even an entrepreneurship. But yes, if he later
finds a way to export his pan to some foreign country, there is innovation of finding a new
market for his product and it is entrepreneurship. He has gone into a territory which was new to
him and probably even to his trade.

As per my assessment, three qualities that replace above qualities are –

4. Perseverance – The start is tough and initial failures are common phenomenon. If the
person does not have a steely resolve and perseverance to keep going against all odds, his
failure is almost certain. In US, only one out of 10 new businesses survive beyond 2nd
year.

5. Hard Working – The initial years are sweat and sweat and even m ore sweat. Resources
are scarce, finances are scanty, knowledge is sketchy and goodwill is zero. Untiring work
bordering on the madness is common element in every successful entrepreneur’s story.
Almost every entrepreneur packs a 48 hrs work schedule in his 24 hour day.

6. Self Confidence – They all have the confidence to overcome every odd.

Study the Profile of a Successful Entrepreneur and identify six key elements in order of
priority

Entrepreneur’s Background characteristics

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 1. Family Environment – In most cases, people follow the footstep of fat her. A
businessman’s son takes up business and a salaried person’s son tries to find a job. So, if
a family has had a tradition of entrepreneurship, later generations also follow the step of
their ancestors. Conversely, if a family has had a bad experience with entrepreneurship, it
is unlikely that next generation will be very entrepreneurial.

2. Education – Education has no correlation with entrepreneurial spirit. If at all there is one,
it seems to be inverse. Most of the entrepreneurs come from low education background.
Educated people who get decent job rarely prefer comfort of salaried job. It is only those
who are unable to find a living for themselves eventually try their hands at new business.
For long years, due to problems of license, quota and inspector raj, most educated people
preferred govt job, for it symbolized power, comfort, social status and for the people with
low scruples, money too. However, trend is slowly changing. With business environment
becoming easier and govt officials’ powers being on the wane, many educated people are
also beginning to venture into entrepreneurship

3. Age – There are people who start as early as probably 10 and some others after their
retirement. Harland David Sanders, better known as Colonel Sanders (not a

Army Colonel but an honorary one) started his famous Kentucky Fried Chicken business quite
late in his varied career. But commonly, men are often in the age group of 25 – 35 and women in
the age group of 30– 45.

1. Physical Attributes – Have absolutely no correlation with entrepreneurial spirit.

2. Marital Status – No direct correlation but going by the age group, most entrepreneurs
are married.

3. Working History – Entrepreneurs quite often have some working experience as a

salaried employee in the field of their venture. It always helps to learn a little about
business before putting your money in. Sindhi community follows this practice
assiduously.

4. Family Contacts – Family contacts in business world reduce the risks and help the
entrepreneur.

5. Professional Contacts – Professional contacts again help. IIT and IIM graduates
venturing into entrepreneurship often get help from their peer and seniors.

6. Personal values

7. Lifestyle – Most entrepreneurs are fond of good things in life but are willing to wait till
they strike rich. In the interim they are willing to rough it out.

What is a job competency

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It is knowledge, skills and attitude related to a particular job. Performance emerges from the
combination of knowledge, skills and attitude. A perfect balance of all the three is required. They
can not compensate each other. Mathematically, competency is not sum total of knowledge, skill
and attitude but their product. If one of the factors is zero, output is zero irrespective of how
high are the other two. So, very high knowledge and skill can not compensate absence of right
attitude.

Some definitions and explanations

1. Knowledge – Collection and retention of information in a form that it can be effectively

used.
2. Skill is the physical or mental ability to do something well (hard and soft skills)
3. Motives are reasons for doing something (need)
4. Traits – Characteristical way in which a person behaves o r responds to a particular
situation.
5. Attitude reflects the way of thinking and acting (Self and others determine the attitude)
6. Initiative – Willingness to take action solely on demand of th e occasion without being
asked/prompted/forced by others. Taking actions to start the business and expand into
new areas, products and services.
7. Persistence – Repeated attempts to overcome obstacles despite failures. But a successful
entrepreneur analyses reasons for his failure, learns and modifies his methods every time.
But wisdom of knowing when to abandon attempts is more important that capacity to
persevere in the face of obstacles.
8. Information Seeking – Information is power. Right information at the r ight time makes
the job easier. Knowing that flight has got cancelled before you leave home will save you
time, money and spare frustration. A successful entrepreneur invests in establishing
information channels.
9. Concern for High Quality of Work – Quality has no set standards. Eventually, it settles
down to price – performance ratio. Whether a company follows Cost Leadership or
Differentiation strategy, it is value that customer perceives in product which will sell the
product in the market. Therefore, a entrepreneur has to be conscious of delivering value.

10. Efficiency Orientation – Constantly looking for ways to do things faster or with fewer
resources or at a lesser cost.
11. Systematic Planning
(a) Breaking a large task into several sub tasks.
(b) Developing and using logical steps to analyze past events and forecast future
developments.
(c) Developing plans after duly anticipating obstacles and opportunities.
(d) Evaluating alternatives on merits and demerits.

12. Problem Solving

(a) Identifying the root cause of the problem.

(b) Developing strategies in the light of objectives, resources, and constraints.

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 (c) Generating new ideas or innovative solutions.
(d) Identifying the best idea and applying to reach the goals.
13. Persuasion – Persuasive ability is another key to success in entrepreneurial success.
Right from the time of arranging finances to the point where people are cajoled to
abandon a trusted product/brand and try out a new product, there are 100s or 1000s of
people whose cooperation has to be sought. Persuasive skills make the job much easier
and faster.

14. Use of Influence Strategies – Using influence to get your job done is often at cross roads
with ethics. But every use of influence may not be unethical. If someone is creating
hurdles just because he is expecting bribe or simply being lazy, use of little influence to
get your job is done is definitely not unethical. However, if influence is used to jump a
queue and deny or delay a genuine claimant in the process is definitely unethical.

15. Assertiveness
(a) Confronting problems and issues with other directly
(b) Be polite but firm.
(c) Telling others clearly what they have to do.
(d) Reprimanding those who fail to perform as expected however close they may be.
16. Concern for Other’s Welfare – It is an important quality for team building whi ch is
necessary if the initial success is to be translated into a larger success.

Entrepreneurship and management students

1. A Management Graduate is a person trained in necessary skills and knowledge to manage

an enterprise.

2. A Management Graduate is best placed to be an entrepreneur. With his knowledge of

business domain, his chances of launching a successful entrepreneurial venture are much
higher than anyone else. It will benefit the Management Graduate as well as the country.

3. Experience even from Harvard Business School confirms that more Management
Graduates take Entrepreneurial Role (after gaining some experience) and the average
income of entrepreneurs is higher by almost 2.5 times compared to their friends who are
in job.

4. A Management Graduate should therefore not be just a Job Seeker. He can and should
take the role of Job Provider.

5. Enterprises in protected economy can sustain mismanagement because the markets are
assured under quota and license raj. In the ensuing monopoly or monopolistic market,
there is a demand supply mismatch and therefore profit margins are high. Therefore, there
is enough resilience to sustain errors and consequential losses in an entrepreneurial
venture once the license was obtained.

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 6. Enterprises in competitive environment are essentially to be well managed. In the
resulting perfect or near perfect market, profits are thin and any losses due to errors can
not be passed on to the consumer. Therefore, entrepreneurial ventures have to be well
managed.

7. Even in his employment in a company, he needs to become an INTRAPRENEUR in

order to deliver maximum to his employer and increase his own stock in return.

8. Therefore, either way, Entrepreneurship Management becomes an essential part of

curriculum of management studies.

Entrepreneurship decision making process

A person decides to do something either because something in that activity lures him or he he
takes it as option in lieu of something else, ie, he is forced to do it by people or circumstances.
The factors which lure a person to become entrepreneur are called Pull factors and the factors
that compel him are called Push factors.

Pull Factors

(a) Perception of Advantages – If a person feels that he can earn better or overall gains in
terms of money. Status, security, future, etc as an entrepreneur are better than working as
an employee, he tends to turn an entrepreneur.

(b) Spotting an Opportunity – Many employees spot a business opportunity in the course
of their work and decide to exploit that opportunity rather than pass it on to their
employer. Many employees buy unsuccessful businesses at throw away prices from their
former employers and turn them around.

(c) Government Policies – Govts very often formulate policies to promote certain business
activity or backward areas which offer tax concessions/holidays, cash subsidies, cheap
land, etc, which improve success and profit prospects.

(d) Motivation from biographies or success stories.

(e) Influenced by Culture, Community, Family Background, Teachers, Peers, etc. – (Go to
Environment_Impact

Push Factors

(a) Job Dissatisfaction – Many people start their own venture because they feel dissatisfied
with their existing jobs/boss/work environment.

(b) Relocation – Repeated or especially unhappy relocation some t imes prompts some
people to entrepreneurship.

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 (c) Joblessness – This is the biggest source of micro level entrep reneurships. Many parents
help their academically poor children, who fail to find a job, to start their own micro
ventures. But success rate in such ventures is poor. The very traits responsible for their
academic failure lead to business failure.

(d) Lay off – Layoffs often lower the market value of an emp loyee to half. Thus, if a person
is laid off and he is unable to find a suitable job for him, he might think of starting his
own business.

(e) Retirement – Many retired, but physically and mentally fit, p eople start their own
business either to supplement their pension/savings or just to keep themselves gainfully
occupied.

(f) Boredom – This is applicable to many ladies from well to d o families. With their army
of servants to take care of home, they find an avenue to keep the boredom away and start
ventures like boutiques, fashion designing, etc.

Entrepreneurship and economic development

Entrepreneurial spirit of people is greatly responsible for economic development of any country.
There is no resource including diamond mines as valuable as human resource. South Africa and a
few other African countries despite their fertile gold and diamond mines have remained
poor/relatively poor, where as Japan with literally no natural resources and having suffered
devastation during WW–II became a developed country in just three decades. Therefore, if a
country allows its human resources to be unutilized/underutilized (unemployment/disguised
unemployment), its economic development would be severely hampered.

Failure of communism worldwide and our own harrowing experience with socialism has shown
that “Govt has no business to b e in Business”. Govt should only govern. Business activity
should be left to people. And this is where entrepreneurs enter the picture.

(a) Entrepreneurs set up enterprises which provide employment not only to themselves but to
many others directly and indirectly and thereby put into utilization Human Resource of
the country.

(b) Entrepreneurs combine resources, put their time and efforts and produce goods or
services. The Value Addition that they do to the resources brings prosperity to the
country.

(c) What they contribute – productivity, output, value addition, income and employment

(d) Entrepreneurship is a “Low Cost Strategy”. An entrepreneur works with maximum

financial efficiency in order to maximize his profits. Entrepreneurs rarely indulge
themselves in luxury of Business Class travel and 5 Star Hotel comforts which the
managers avail without fail. Thus, many such costs are either avoided or kept in check.
Entrepreneurs perform the crucial role themselves.

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 (e) The spirit of Entrepreneurship – Drive, achieving higher goals, creativity, innovative
attitude.

(f) A dynamic society emerges and the spirit spreads like a chain reaction – Many
entrepreneurs have proved to be catalyst for growth of a bevy of smaller entrepreneurs.
Jamshedpur was a small town before Tata Steel Plant was set up. Once the plant came up
in the place, many people set up their small enterprises to cater to the needs of the
growing population.

The evolution process

(a) Intersection of knowledge and a recognized social need

(b) Initiation of technological innovation
(c) Iterative Synthesis
(d) Development Phase
(e) Industrial Phase

Product planning and development process

(a) Idea Stage – Idea – Evaluate

(b) Concept Stage – Lab Development – Evaluate
(c) Product Development Stage – Pilot Production – Evaluation
(d) Test Marketing Stage – Semi Commercial Production Evaluation
(e) Commercial Stage –
(i) Introduction
(ii) Growth
(iii) Maturity
(iv)Decline

Commercialization

(a) Role of Government

(b) Role of Corporate – Intrapreneurship

(c) Role of Individuals – Entrepreneurship
(d) Development of Technology

(i) Utilization of materials

(ii) Exploitation & transformation of energy
(iii) Understanding and application of Scientific Principles

(e) The Role of Government

(i) Promotional
(ii) Neutral
(iii) Regulatory

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The Strategies for an Entrepreneurial firm

Below is illustrated recommended strategic response for a small firm under differing conditions
of technological and finance requirements for various industries

T – Technological Inputs M – Money Inputs

(a) Technology – High, M oney – High – Industry requires large skilled

resources (difficult to obtain for a start up firm) and large financial strength
(again a difficult proposition for a new firm). Recommended response – Act as a
Supplier or Sub –Contractor.

(b) T– High, M– Low – Specialist firm, access to low cost research

(c) T– Low, M– High – Linkage with well– established channels

(d) T– Low, M– Low – Well suited to small firm

(e) Low Tech – High Volume – Requires strong Financial Ability

(f) High Tech – Low Volume – Requires Strategic Ability

(g) Emerging Options – Franchisee; Sub– contractor

Business environment and entrepreneurship

(a) Political – System, Stability, Leadership

(b) Socio– cultural – Culture, Community, Values, Ethics, Attitude
(c) Technological – Education, Absorption, Competition, Innovation
(d) Legal – Regulatory framework, Consumer protection, Concern for environment, Labour
laws

(e) Economic – GDP, GNP, Resources, Fiscal, Non– fiscal policies, Incentives and Subsidies

Dimensions of Environment

(a) SPECTACLES – Social, Political, Economic, Cultural, Technological, Aesthetic,

Customer, Legal, Environmental and Sectoral
(b) PEETS – Political, Economic, Ecological, Technological and Socio– demographical
(c) SLEPT – Social, Legal, Economical, Political and Technological

Factors influencing environment

Economic
Environment
Individual
Socio-cultural factors

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 Support Systems

SOURCES OF BUSINESS IDEAS

Do you want to start your own business, but aren't sure what kind of business to start? Maybe
you've been laid off and haven't been able to find a new job. Or you're tired of working for a boss
who makes every workday stressful. Perhaps you are convinced you can make more on your own
than you can working for someone else -- or you just want to bring in a little extra money to pay
for a few luxuries in life. Or, perhaps your family really needs two incomes but you don't want
your kids to be latchkey kids.

Good sources of business ideas

1) Examine your own skill set for business ideas.

Do you have a talent or proven track record that could become the basis of a profitable business?

The other day I spoke to a man who had spent years managing cleaning services at a hospital.
Today he runs his own successful domestic and business cleaning service. An ex-logger I know
is now making his living as an artist; he creates "chainsaw sculptures" out of wood. And the
examples of professionals who have started their own agencies or consulting service businesses
are legion.

To find a viable business idea, ask yourself, "What have I done? What can I do? Will people be
willing to pay for my products or services?"

2) Keep up with current events and be ready to take advantage of business opportunities.

If you read or watch the news regularly with the conscious intent of finding business ideas, you'll
be amazed at how many business opportunities your brain generates. Keeping up with current
events will help you identify market trends, new fads, industry news - and sometimes just new
ideas that have business possibilities.

For instance, same-*** marriages are now legal in Canada. There are now also entrepreneurs
who are selling tourist travel packages that include a marriage ceremony to same-*** couples
from other countries. Would you have identified that business opportunity when you heard that
the Canadian marriage laws had changed?

3) Invent a new product or service.

Think back 30 years ago. Was there a huge demand for anti-virus software, Internet Service

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Providers, or desktop computers? No! The key to coming up with business ideas for a new
product or service is to identify a market need that's not being met. The clamor for ever-
increasing security, for instance, has led to an explosion of new security products and services,
ranging from iris-recognition machines through home security services.

Look around and ask yourself, "How could this situation be improved?" Ask people about
additional services that they'd like to see. Focus on a particular target market and brainstorm
business ideas for services that that group would be interested in. For example, there are millions
of aging gardeners across North America. What products or services could you create that would
enable them to garden longer and more easily?

4) Add value to an existing product.

The difference between raw wood and finished lumber is a good example of putting a product
through an additional process which increases its value, but additional processes are not the only
way value can be added. You might also add services, or combine the product with other
products. For instance, a local farm which sells produce also offers a vegetable delivery service;
for a fee, consumers can have a box of fresh vegetables delivered to their door each week.

What business ideas can you develop along these lines? Focus on what products you might buy
and what you might do to them or with them to create a profitable business.
5) Investigate other markets.

Some business ideas aren't suited to local consumption - but appeal greatly to a foreign market.
My own little town is surrounded by acres of wild blueberries. For years the bushes produced
berries that mainly fed bears and birds; B.C. has a thriving blueberry industry that doesn't leave
room for a wild blueberry market. But one entrepreneur realized that there is a high demand for
products such as these in Japan - and those same wild blueberries are now being harvested and
shipped. Finding out about other cultures and investigating other market opportunities is an
excellent way to find business ideas.

6) Improve an existing product or service.

You know what they say about the person who builds a better mousetrap. That person could be
you! A local entrepreneur has created an improved version of the hula hoop; it's bigger and
heavier so hula-hoopers can control it more easily and do more tricks. How did she come up with
this business idea? She thought hula hooping would be a fun thing to do with her daughter, but
found the commercially available product too flimsy.

There are very few products (or services) that can't be improved. Start generating business ideas
by looking at the products and services you use and brainstorming ideas as to how they could be
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better.

7) Get on the bandwagon.

Sometimes markets surge for no apparent reason; masses of people suddenly "want" something,
and the resulting demand can't be immediately met. For example, during the SARS epidemic,
there was an insatiable demand for facial masks in several countries - and many entrepreneurs
capitalized on this business idea.

A "bandwagon effect" is also created by larger social trends. There is much more of a demand for
home-care services for the elderly than is currently being supplied. And the trend for pets to be
treated as family members continues, creating demand for all kinds of pet-related services that
didn't exist even ten years ago.

Look at existing businesses and the products and services they offer and determine if there's a
need for more of those products or services. If there is, develop business ideas to fit the market
gap.

Are you brimming with ideas for starting a business now? Write your business ideas down. Let
them swirl around in your head and coalesce. And keep an open mind and continue to assess
everything you read and hear from an entrepreneurial point of view. You don't want to run with
the first business idea you think of; you want to discover the idea that's best suited to your skills
and desires. Dream, think, plan - and you'll be ready to transform that business idea into the
business you've always wanted.

How to Evaluate Potential Business Opportunities

Entrepreneurs have begun and failed at new businesses since capitalism was invented. However,
most entrepreneurs who fail do not make mistakes during the start-up phase, but actually fail to
fully analyze and evaluate business ideas and opportunities in the first place.

Before an entrepreneur starts a new small business, business ideas must pass a series of tests and
questions before it is deemed a truly valid and valuable opportunity. Here are a few important
initial questions you might ask yourself as part of a business opportunity evaluation.

 Does your business idea have a demonstrated market need?

 Is there sufficient demand for the product or service?

 Is creating the product or service economically feasible?

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  Will there be a sufficient return on the investment of starting a new business?

While these are good initial questions, there are many more questions to ask as part of a business
opportunity evaluation. If a business idea does have initial merit, one should also perform a more
detailed business opportunity evaluation. One such method is the RAMP model developed by
Ryan P. Allis, CEO of two successful marketing software and consulting companies.

RAMP stands for Return, Advantages, Market, and Potential. Here is an inside look at this
method of evaluating business opportunities:

 RETURN

The big question that an entrepreneur should ask is whether a business opportunity will generate
revenue, and ultimately, profit. Without a potential profit, a great business idea is just a great idea
without financial merit. Can you make a product that generates more money than you expend?
How much investment will you need to get the business idea off the ground? And ultimately,
what are your or your investors' return requirements?

 ADVANTAGES

What makes your business idea better than others? Is your idea unique, and does it have minimal
competition? Do you have intellectual property like a patent that gives your business idea an
advantage?

 MARKET

Who will be your target consumer? Is there a need for your business idea? Can you fill a market
need? For instance, you might think of a great business idea to produce a carbonated beverage
flavored with roots, berries, and other natural flavors. However, in your RAMP evaluation you
find that this type of product is already saturated on the market. The idea is good and a market
exists, but the market is saturated from other competition and would not likely be profitable (see
RETURN above).

 POTENTIAL

When you evaluate business opportunities, also think of the potential. Will there be sufficient
financial reward? Do you see a potentially growing market for the product? Do you have others
who believe in your business ideas?

You as an entrepreneur have a lot of thinking to do. Come up with great business ideas. Be
creative. Get enthusiastic about your ideas. However, always take the time to perform sound
business opportunity evaluation. You can learn a lot about your business ideas and their potential
by performing a simple RAMP analysis. Only after your genius idea passes the RAMP test
should you begin to invest your time and money.

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Business Idea & Opportunity Evaluation

Ryan P Allis, Knowledge Level: Moderate, Keywords: business, idea, evaluation

In analyzing your business ideas you must be able to pass them through a test to determine if
they truly are valid opportunities. All of your ideas must have a demonstrated need, ready
market, and ability to provide a solid return on investment.

Is the idea feasible in the marketplace? Is there demand? Can it be done? Are you able to pull
together the persons and resources to pull it off before the window of opportunity closes? These
questions must be considered and answered.

Opportunity-focused entrepreneurs start with the customer and the market in mind. They analyze
the market to determine industry issues, market structure, market size, growth rate, market
capacity, attainable market share, cost structure, the core economics, exit strategy issues, time to
breakeven, opportunity costs, and barriers to entry. Below are two models that entrepreneurs use
to evaluate their business ideas and plans.

Fourteen Questions to Ask Every Time

To evaluate opportunities, entrepreneurs ask the following questions:

1. What is the need you fill or problem you solve? (Value Proposition)
2. Who are you selling to? (Target Market)
3. How would you make money? (Revenue Model)
4. How will you differentiate your company from what is already out there? (Unique selling
proposition)
5. What are the barriers to entry?
6. How many competitors do you have and of what quality are they? (Competitive Analysis)
7. How big is your market in dollars? (Market Size)
8. How fast is the market growing or shrinking? (Market Growth)
9. What percent of the market do you believe you could gain? (Market Share)
10. What type of company would this be? (Lifestyle or High Potential, Sole Proprietorship or
Corporation)
11. How much would it cost to get started? (Start-up Costs)
12. Do you plan to use debt capital or raise investment? If so, how much and what type?
(Investment needs)
13. Do you plan to sell your company or go public (list the company on the stock markets) one
day? (Exit Strategy)
14. If you take on investment, how much money do you think your investors will get back in
return? (Return on Investment)

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Let’s take the above fourteen questions and term them into an easy model that you can use to
evaluate your business ideas you come up with. This is called the RAMP model.

The RAMP Model

Let’s start with the first letter, R, which stands for Return. Return really is return on investment.

R Discuss Exit Strategy (acquisition or IPO)

R Is it profitable? Will your revenues be higher than your expenses?

Time to breakeven (how long before cash flow positive? How long until the company begins
R
to have an aggregate net income)

Investment Needed. How much money will it take to start-up this venture. Will it be
R
$20,000, $200,000, or $2,000,000?

Now let’s look at A. A stands for advantages.

A Look at cost structure (suppliers, what each element will cost to source or manufacture)

Barriers to entry (large competitors, regulations, patents, large capital requirements. If there
A are many barriers to entry, it will be difficult to enter a market. The higher the barriers to
entry, the more disadvantaged you will be.

Intellectual Property. Do you have a proprietary advantage such as a patents or exclusive

A
licenses on what you will be selling.

Distribution Channel. How will you be selling your product? Will you sell it direct to the
A consumer via the Internet, sell it to wholesales, sell it to businesses, or sell it to retail stores.
If can develop a unique distribution channel this can surely be an advantage.

Now let’s look at M. M stands for Market.

The Need. Is there a big need for this product or service. Try to avoid ideas that sound cool
M but there is no real need for. Make sure your product or service fills and need or solves a
problem.

M Target market (who are you selling to? businesses? consumers? what demographics?)

Analyze target market (who are you selling to? businesses? consumers? what
M
demographics?)

M Pricing (what you they charge, what will be the price, will there be a high enough markup).

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M Analyze market size

Finally let’s look at P. P stands for potential.

Risk vs. Reward. How risky is the opportunity? If it is very risky, it there a chance for the
P business to do very well. Will there be a high reward for the founders and investors if the
company succeeds?

P The Team. Is the team right for the business. Do you have knowledge in this area.

Timing. Is the market ready for your product. You may have a great idea for flying cars, but
P if consumers are not ready for your product you may not be able to turn your idea into a
successful business.

Goal Fit. Does the business concept fit the goals of the team to create a high potential or
P
lifestyle business?

By using the RAMP model and the fourteen questions above you should be able to do a thorough
job analyzing your business ideas and opportunities presented to you.

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