ENT10001, Winter Term 2015
Lecture 2
Prepared by Susan Jones
Agenda
• Evaluating Entrepreneurial Opportunities
– sorting the ideas from the opportunities
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Spot the flaw in this “story”
Priceline Webhouse club
•Extension of Priceline.com (name your own price for airline tickets)
•Applied model to groceries
•Customer specifies price for (say) peanut butter
•Webhouse negotiates with suppliers, best price for bulk purchase What could go wrong here?
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And the miscalculation in this one
Webvan
•Online grocery, during dot.com boom
•Backed by $millions in venture capital
•Order online and have groceries delivered to you
Or Dogfood.com
•Same model but for dog food
Seems plausible – why might it not work?
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What is the difference between an idea and an opportunity?
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Idea
• A thought or collection of thoughts that generate in the mind.
• An idea is usually generated with intent, but can also be created unintentionally.
• Ideas often form during brainstorming sessions or through discussions.
• Business Dictionary.com
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Opportunity
• Exploitable set of circumstances with uncertain outcome requiring commitment of resources and involving exposure to risk.
• Business Dictionary.com
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Two main sources of opportunity
• Change
• Problems
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What is an Opportunity?
= Business Concept/Model + Window of Opportunity
Timmons, New Venture Creation
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4 elements of an Opportunity
1. It solves a significant problem or need
2. It creates significant value for the customer
3. It can be commercialised because the market has the right characteristics
4. It is a good fit for the business owner
Timmons
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Characteristics of an Opportunity
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Why evaluate?
• Reasons for business failures:
– Lack of capital
– Lack of professional advice
– Lack of planning
• Risk
– Time
– $
• Each screen (test) you do leads to a higher probability of success
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Detailed evaluation: Purpose
• To gain a clear idea of the opportunity through research • To validate your assumptions about the opportunity
• To shape the opportunity to be more profitable
• To uncover potential pitfalls
• To decide whether the opportunity is worth the risk?
Will you implement?
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Assumptions
• What assumptions have you made in building your business case
• Assess the consequences of incorrect assumptions
• How severe would the impact be
• How will you overcome these
• Make sure you declare the assumptions
• How can you test your assumptions – VALIDATION!
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Marketing & Opportunity Evaluation
A good entrepreneur starts with the market •Market research is the cornerstone of opp eval & biz development •Lean startup relies on feedback from customers
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Types of research
• Secondary
– Published (secondhand) sources
• Primary
– First hand information
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Talking to people- primary research
• Industry associations, local chambers of commerce, government departments
• people working in the industry, business owners who have similar businesses
• Potential customers – chat, survey
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Secondary research
• Online
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Australian Bureau of Statistics: www.abs.gov.au
Factiva
IBISworld
Online forums related to your industry
• Industry associations
• online databases with