Sources of business ideas: Business Experience
Experience from working in a particular market or industry.
- Better of understanding of what customers want
- Knowledge of competitors, pricing and suppliers
- Less need for market research
- Able to make more realistic assumptions in the business plan
- Industry contacts
- Doesnt have a fresh perspective
- Entrepreneurs that are new to the market might exploit approaches successful in other industries
Sources of business ideas; Personal Experience & O
Comes from day-to-day dealings, hobbies and interests
Simplu observing what goes on around you
Identification of a product/service
An entrepreneur will often decide what product/service to offer based on their own experience i.e. a product/service they are familiar with through a previous hobby/interest/job.
- Good knowledge of the features of the product/service
- Passionate and interested in the product/service so motivated to do well
- Good contacts in an established market
- May already have a good reputation within the market
- Is there room for another competitor?
- The entrepreneurs passion might not be shared
- Knowledge of the product/service isnt the only skill needed?
Identification of a market niche
The entrepreneur might spot a gap in the market for unmet consumer needs.
- Basing product/service on customer needs
- Benefit of being first in the market
- No/little competition in the early stages of setting up their business when it is most vulnerable
- Entrepreneur will have little or no expertise in the market
- Is the gap real? Has somebody else tried to exploit and discovered why it doesnt work?
- Competition may enter quickly and capture the market share
A replication of a successful business formula. The franchisor licenses the use of trademarks and proven businesss ideas to the franchisee.
Each franchise is owned and operated by a franchisee.
However, the franchisor retains control over the way in which products and services are sold and marketed. They also control the quality and standards of the business.
Benefits and pitfalls of being a franchisor
- Franchisors can expand the business quickly
- Risk is shared - much of the cost is met by the franchisee
- Franchisee may have very good entrepreneurial skills which will earn the franchisor revenue
- Some franchisees become powerful as they acquire more franchises
- Potential loss of control as to how the product/service is presented to the customer
- May be difficult to control quality as franchise network expands
- Litigation - a failed franchisee is a court case waiting to happen
Benefits and pitfalls of being a franchisee
- Able to sell an already recognised and successful product/service
- Take advantage of central services such as marketing, purchasing, training, stock control, accounting systems and administration provided by the franchisor
- Franchisor may have experience in the market that the fracnhisee can benefit from
- Proportion of revenue is paid to the franchisor
- Lack of control - franchisee has to follow the franchisors rules
- Right to operate might be withdrawn
Protecting business ideas
Copyright - Protection given to books, plays, films and music. Does not protect ideas until they are fixed.
Patent - An exclusive right to use a process or produce a product, usually for a fixed period of time (up to 20 years). A patent protects new inventions, they way they are made, what they are made from and how they work.
Trademark - A word, image, sound or smell that enables a business to differentiate itself from competitors. A trademark can create loyalty amongst customers.