Where do business ideas come from? The best source is what you know. Often, ideas come from work experience or from personal interests, such as hobbies; other ideas can come from friends and relatives, and our educational background.
The process of creating or seizing an opportunity is less the result of a deliberate search than it is a mindset of maintaining a form of vigilance that is sensitized to business opportunity. Successful entrepreneurs recognize an opportunity while it is still taking shape. This frequently relates to the prospective entrepreneur’s current profession or interests, where he or she perceives:
a process that can be more efficiently performed,
an attractive new service or improvement of an existing service, or
some business or geographic “niche” that is being underserved.
The Internet and rapid growth of e-commerce have certainly created changes in the process of buying books and CD’s, trading stock, delivering information, and bidding on collectibles. Where do you see the next process to be transformed in a major way by the Internet?
Other opportunities can be based on broad trends, which may be:
demographic, such as the “graying” of America (creating opportunities in health services, for example);
sociological developments, like the “green” movement, with its emphasis on recycling and environmental sensitivity, and;
cultural changes caused by changing economic conditions and technological developments.
Opportunities can also frequently be found in current and developing business trends such as:
the globalization of business,
the need for outsourcing created by downsizing, and
the burgeoning service economy.
There are often localized opportunities, based on geography, natural resources, human resources in local abundance, and the like. Can you think of any for your area?
Jeff Timmons, in his book New Venture Creation, suggests that “An opportunity is attractive, durable, and timely and is anchored in a product or service that creates or adds value for its buyer or end user. Opportunities are created because there are changing circumstances, inconsistencies, chaos, lags, or leads, information gaps, and a variety of other vacuums, and because there are entrepreneurs who can recognize and seize them.”
Ideas may be easy enough to generate, but an idea is not necessarily an opportunity! Building a “better mousetrap” does not insure success; other factors include fit, timing, and resources. Let us look at an analysis of the factors determining the opportunity potential of an idea in the context of our interest in opening a business in the area where we live.
Neighborhood Coffee Shop
I live in the eastern section of town, which is growing rapidly, and food and business services are not quite keeping up. The “East” is fairly isolated from the rest of the city by water, an interstate highway, and an industrial park, forming a separate and distinct market. “People” are saying that the East desperately needs a good coffee shop. (Who are these people? Are they just in our immediate circle? Are they representative enough of the area to extrapolate from?)
Let us analyze some factors which indicate the opportunity potential of an idea:
The “window of opportunity” is opening, and will remain open long enough. We cannot be the only entrepreneurs that perceive these opportunities. How long before the need becomes compelling enough for others to jump in?
Entry is feasible, and achievable with the committed principals. Two friends want to be partners with me in a venture; one is managing a coffee shop across town, and willing to manage a startup. Between us, we could muster the capital for a coffee shop.
The proposed venture has some competitive advantage. We were among the first to locate in the new area, and are very active in the local business community. We know of an ideal site, and the building manager is a friend. She is willing to sub-contract the beverage and light-meal/dessert services the building provides tenants.
The economics of the venture are “rewarding and forgiving.” Materials costs are a small percentage of revenues; site preparation and equipment costs are minimal.
We can break even at what seems to be an easily achievable volume.
We may even want to consider a more upscale atmosphere based on what some say is the difference between a “coffeehouse” and a “coffee shop:” About two bucks a cup… A coffee shop is a place to grab a quick bite and a cheap cup of coffee. Eric Gerber of the MSN Network’s Sidewalk suggests that “A coffeehouse is a place to wax philosophical — Mozart or Bach, Faulkner or Fitzgerald, Xena or Hercules? — while seeing just how complicated you can make a simple drink like coffee: double latte espresso-chino with half decaf Jamaican Blue Mountain dark roast, extra low-fat foam and a Frangelica drizzle, please.”
The conditions for starting a neighborhood coffee shop seem favorable, but there must be more that we can do to critically evaluate the venture while improving our chances of success. In the next lesson, we will discuss the benefits of market research.
Wishing you success,
John B. Vinturella, Ph.D.
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