THE SEARCH FOR A SOUND BUSINESS IDEA

Topics: Entrepreneurship, Entrepreneur, Financial statements Pages: 18 (669 words) Published: April 14, 2015
THE SEARCH FOR A SOUND
BUSINESS

CHAPTER 5

What is a sound business idea?

• It

is defined as the economic opportunity
which is within the reach of the
entrepreneur and which will provide him a
desirable value.

NOTE: An entrepreneur who is well grounded in
the concept of sound business idea will be
able to save time, effort, and money in
pursuing his goals.

The Importance of Sound Business
Ideas
Sound
Business
Idea

New
Venture

Established
Business

Successful
Market Entry

Success in
Competition
NOTE: Business ideas
differ in form.

Procedure in Determining the
Best Business Idea

Preparation of
the List of
Business Ideas

Screening of
the Listed
Ideas

Final
Selection

Methods of Searching for
Ideas
1.Unanticipated

Means – The entrepreneur
finds business ideas w/o serious effort
a. The Person’s Work
b. The Person’s Hobbies
c. The Person’s Acquaintances
d. A chance event encountered by the
person

Methods of Searching for
Ideas
2.Deliberate

Search
a. Using Search Questions
b. Idea Prompting
b.1. someone else’s idea
b.2. customer request
b.3. some other event

Screening Generated Ideas
1.Market Feasibility
2.Technical Feasibility
3.Financing Feasibility
4.Financial Feasibility

1.Market Feasibility
a.Stable

and Sufficient Demand
A business idea will not last if there is
insufficient demand for whatever product or
service that is contemplated. Demand that
remains constant or shows signs of growth
throughout long periods indicates the
probability of market feasibility. Demand
must also be large enough to justify the
investments that will be needed by the
venture.

1.Market Feasibility
b.Competitive

Strength
The business idea must be such that the
venture can effectively compete with current or
potential competitors.
The competitive strength of the competitors
must be determined in terms of product offerings,
price, distribution methods, promotion methods, and
others.
NOTE: The proposed business idea must be strong
enough to withstand competition.

The Way to Sound Business
Ideas
Search for Business
Ideas

Screening

Adoption of the
Selected Business Idea

Preparation of Formal
Plans

Sources of Market Information
It is the information required to determine the market fit of the business idea may be derived from the following:

1. Prior

studies of the market/related markets by other companies,
government agencies, and entrepreneurs.

2. Actual

polls of population samples representing typical customers.
The means used include the following:
2.a.

Mail Questionnaires

2.b.

Advertisements incorporating feedback mechanisms such as
mail responses

2.c.

Phone interview

2.d.

Personal Interview

3. Negotiations

with prospective customers to solicit orders and
determine whether or not they will actually buy.

Technical Feasibility
• Business

ideas of ten times appear easy
to execute, but it is not really so
when converting them into real products
or services with the required quality
or quantity.

Financing Feasibility
• One

of he factors necessary in determining
whether a business idea should be considered
or not is financing.
Sources of Financing
1. The Proposed Owner’s Savings
2. Relatives and Friends
3. Financing Institutions like banks

Financial Feasibility


The purpose of entrepreneurship is to provide a source
of income to the entrepreneur.
Profit – is a result of the financial feasibility of
the business idea.
2 Steps in determining Financial Feasibility through
analysis
1. The preparation of projected financial statements
1.a. income statement
1.b. balance sheet statement
1.c.
Cash flow statement
2. The determination and analysis of financial ratios
derived from the projected statements.

Projected Financial
Statements
• The

forecast of something w/c will
happen in the future.

Determining the...
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