Opportunity screening

• The personal screen

1. Do I have the drive to pursue this business opportunity to the end?

2. Will I spend all my time, effort, and money to make the business opportunity work?

3. Will I sacrifice my existing lifestyle, endure emotional hardship, and forego my usual comforts to
succeed in this business opportunity?

 If “YES” is your answer to all of the above, then you can begin your earnest pursuit of that
opportunity.

The 12 R’s of Opportunity screening

1. RELEVANCE to vision, mission, and objectives of the entrepreneur. The opportunity must be
aligned with what you have as your personal vision, mission, and objectives for the enterprise
you want to set up

2. RESONANCE to values. Other than visions, mission and objectives, the opportunity must match
the values and desired virtues that you have or wish to impart

3. 3. REINFORCEMENT OF ENTREPRENEURIAL INTERESTS. How does the opportunity resonate

with the entrepreneur’s personal interests, talents, and skills?

4. 4. REVENUES. In any entrepreneurial endeavor, it is important to determine the sales potential

of the products or services you want to offer. Is there a big enough market out there to grab
and nurture for growth?

5. RESPONSIVENESS to customer needs and wants. If the opportunity that you want to pursue
addresses the unfulfilled or undeserved needs and wants of customers, then you have a better
chance of succeeding.

6. REACH. Opportunities that have good chances of expanding through branches, distributorship,
dealership, or franchise outlets to attain rapid growth are better opportunities.

7. RANGE. The opportunity can potentially lead to a wide range of possible product or service
offerings, thus, tapping many market segments of the industry.

8. REVOLUTIONARY IMPACT. If you think that the opportunity will most likely be the “next big
thing” or even a game-changer that will revolutionize the industry, then there is a big potential
for the chosen opportunity.

9. RETURNS. It is a fact that products with low costs of production and operations but are sold at
higher prices will yield the highest return on investments. Returns can also be intangible:
meaning, they come in the form of high profile recognition or image projection.

10. RELATIVE EASE OF IMPLEMENTATION. Will the opportunity be relatively easy to implement for
the entrepreneur or will there be a lot of obstacles and competency gaps to overcome?
 11. RESOURCES REQUIRED. Opportunities requiring fewer resources from the entrepreneur may be
more favored than those requiring more resources.

12. RISKS. In an entrepreneurial endeavor, there will always be risks. However, some opportunities
carry more risks than others, such as those with high technological, market, financial and people
risks.

• The pre-feasibility studies

• focus on a few key items that could make or break the business concept

• consider the following factors that are contained in a pre-feasibility study:

1. Market potential and prospects

2. Availability and appropriateness of technology

3. Project investment and detailed cost estimates

4. Financial forecasts and determination of financial feasibility

5. Market potential and prospects

6. It is based on the estimated number of possible customers who might avail of the product or
service.

7. For a more realistic number, it would help to narrow down your estimation to the relevant
population or target customers in the area where you want to operate your business (micro
market)

BUSINESS THAT CATERS TO THE BASIC CUSTOMER NEEDS, such as:

• Food

• Clothes

• Beverages

• Furniture

• Appliances

• Housing

• Schooling and the like

there would usually be demand and supply statistics available from government institutions, industry
associations, and research firms

The customers would, oftentimes, make the final choice on what to buy according to several factors
such as:

1. their purchasing power or disposable income

 2. Their proximity or accessibility to the goods or services

3. Their individual desires and preferences

4. Their age or generational grouping

5. Their social, cultural or ethnic background

6. Their peer group preferences

7. Their gender

8. The season of the year

9. Their personal identification with trend setters

10. their educational attainment

11. their technical proficiency and product expertise

12. Their motivational impetus

13. Their lifestyle preferences

14. Their susceptibility to certain advertising and promotional appeals and many others

MARKET ESTIMATION
• It is the most difficult task of the entrepreneur because of the many ways customers can be
divided and segmented

• demographics

• INCOME - Class A, B, C, D, E

• AGE - Infants, toddlers, 6to12 years teenagers, young adults, adults, middle agers, and senior
citizens

• GENDER - Male, Female

• LEVEL OF EDUCATION

• LOCATIONAL PROXIMITY

SEGMENTING THE MARKET

Using a set of demographics will be the most basic approach in determining the target segment.

-Some general statistics for these demographics can be found online

-Look into other specific classifications that are relevant to the market you are targeting such as:

1. Psychological profiling

2. Lifestyle preferences of the different customer segments

 What must be done by the entrepreneur?
With regards to segmenting the market

 Actual field research

1. Surveys

2. Focus group discussions

3. In-depth interviews

4. Observation techniques

Assessing competition
 Market potential is also affected by the number of establishments supplying and serving the
customers.

 Determine how saturated the market is in the given area of coverage

 Keep out of a market where competition is fierce

 Make a comparison with the closest competitors

Estimating market share and sales

• The most important task is to quantify the market potential in a systematic way

1. Define the market coverage

-reach he or she wants to serve

-the area would define the total population being targeted

2. Determine the broad market segments within the area

-total targeted population

Technology assessment and operations viability

• Four target customer expectations affecting the scale and complexity of an enterprise’s
operations:

1. Quantities demanded

This would determine the needed capacity of operation

2. Quality specifications demanded

This would dictate the following:

a. Quality of input or raw materials

b. Quality assurance process in transforming input to output

 c. Quality output that meet the operations, standard set

d. Quality outcomes for the customers who will be looking for specific results

3. Delivery expectations

Knowing how much, how frequent, and when to deliver to

customers

4. Price expectations

The selling price of the product or service would be evaluated

by the customers according to the value they would receive (in terms of quality, delivery, and quantity)
and this value added should be matched against competitors.

Investment requirements and production/servicing costs

• The Entrepreneur needs to determine how much money is needed to start the business
opportunity with consideration to the technologies and operating levels required

• Three investments that need to be funded

1. Pre-Operating Costs

2. Production/Service Facilities Investment

3. Working Capital Investment

Pre-operating costs
• These are the costs related to the preparation for the launch of the business. These include the
pre-feasibility study, in-depth feasibility study, market research, product development,
organizational development, and initial promotional costs

• Production/service facilities investment

• This refers to the long-term investment for the actual business establishment, including
investment in:

1. land buildings

2. machinery equipment

3. computers software

4. furniture vehicles

• If the business would be renting or leasing space, the leasehold improvements (or renovation)
would also be part of the facilities investment.

• Working capital investment

• This includes the investment needed to operationalize the business composed of cash, accounts
receivable, and inventories (raw materials, work in process, and finished goods). The
 entrepreneur must see to it that he or she has enough cash to cover the inventories to be
purchased (or manufactured) the accounts receivable to accommodate customers, and the
operating expenses to be incurred. These operating expenses would include the following:

Operating expenses
a. Employees’ salaries, wages, and benefits

b. Rent and lease expenses

c. Utilities

d. Transportation

e. Fees and licenses

f. Commissions

g. Office supplies, etc.

Financial forecasts and determination of financial feasibility

• It refers to the monetary transactions that the business is expected to engage in. Ultimately, the
end result of the financial forecasts will indicate the feasibility of the enterprise.

Financial forecasting calls for the creation of the four critical financial
statements namely:
1. Income Statement

2. Balance Sheet

3. Cash Flow Statement

4. Funds Flow Statement

5. Income statement

6. Is a financial statement that measures an enterprise’s performance in terms of revenue and

expenses over a certain period? Simply put, the formula is

REVENUES – EXPENSES = INCOME OR PROFIT (LOSS)

• TABLE 2.4 Income statement of Mang Juan’s Manufacturing

GROSS SALES P750,600.00

LESS: COST OF GOOD SOLD 468,487.00

-----------------

GROSS PROFIT/MARGIN P282,113.00

LESS: OPERATING EXPENSES 166,145.00

OPERATING PROFIT/MARGIN P115,968.00

LESS: TAXES 21,392.00

----------------

NET PROFIT AFTER TAXES P94,576.00

==========

• Notes:

• COST OF GOODS SOLD refers to the materials, labor costs, and overhead of making a product.
For service establishments, the entrepreneur can compute the costs of servicing the customers
directly as cost of service rendered.

• Balance sheet

• 3 different things to look at the Balance Sheet

1. Assets

2. Liabilities

3. Equities

ACCOUNTING EQUATION
ASSETS = LIABILITIES + EQUITY

ASSETS
What ARE assets?
Assets represent all the investments in the enterprise including the initial investments that you
considered in the pre-feasibility study (investment requirements). These include cash (on hand and in
bank), accounts receivable, inventory of goods, equipment and machinery, facilities, vehicles, etc.

Liabilities
What are liabilities?
• Liabilities represent the enterprise’s debts to suppliers, to banks, to government, to employees,
and other financiers

Equity
Stockholders’ equity
• Stockholders Equity represents the investors’ investments in the stock (or shares)
 The Balance Sheet equation is:

ASSETS=LIABILITIES + EQUITY

The above equation means: that the resources invested into the enterprise in the form of liabilities and
stockholder’s equity must be equal to the total value of the assets or the enterprise itself.

• Balance sheet of mang juan’s manufacturing

ASSETS

Current Assets

Cash P100,500.00

Accounts Receivable 370,200.00

Inventory 405,350.00 P876,050.00

Fixed Assets

Land P422,100.00

Building 200,000.00

Vehicles 150,000.00 772,100.00

TOTAL ASSETS P 1,648,150.00

==========

LIABILITIES

Current Liabilities

Accounts Payable P150,000.00

Income Taxes Payable 20,500.00

Wages Payable 75,000.00

Short Term Debt 125,000.00 P370,500.00

Long Term Liabilities

Long Term Debt 777,650.00

P1,148,150.00

STOCKHOLDERS’ EQUITY

Capital P 350,000.00

Retained Earnings 150,000.00 500,000.00

TOTAL LIABILITIES AND EQUITY P1,648,150.00

Financial ratio and measurements

PAYBACK PERIOD = TOTAL INVESTMENT/ ANNUAL NET INCOME AFTER TAXES

Payback Period - the entrepreneur will always be interested in knowing the payback period or how long
will it take for him or her to get back what she has invested in the enterprise

- It is just one of the many financial computations one can take a look at in considering a
particular business opportunity.

- This will only be possible if the entrepreneur can come up with FINANCIAL STATEMENTS

RETURN ON SALES = NET PROFIT AFTER TAXES/ SALES

 It is the ratio where the entrepreneur calculates how much profit the enterprise is earning for
each peso sold

• RETURN ON ASSETS OR RETURN ON INVESTMENT = NET PROFIT AFTER TAXES/ TOTAL

ASSETS/INVESTMENTS

• The above ratios are but a few of the frequently used financial measurements. Should the
resulting figures for all the three ratios be favorable, this means that the business opportunity is
quite promising

The feasibility study

• More comprehensive and detailed

• It requires a more rigorous approach

• Are prepared to convince bankers and investors to put money into the business opportunity

In writing the feasibility study THE ENTREPRENEUR SHOULD TAKE INTO CONSIDERATION OF THE
FF:

1. A more in-depth study of market potential to ensure that the business proposal will reach the
forecasted sales figures;

2. Proof that the product or services being offered has the right design, attributes, specifications,
and preferred features

3. Proof that the entrepreneur and his or her team have the necessary experience, skills, and
capabilities to maximize the venture’s chances of success;

4. Legal visibility

5. More detailed costing on the different assets and more justification for the production and
operating expenses
 6. More thorough analysis of the technology and its sustainability

OPPORTUNITY SEEKING
OPPORTUNITY SEEKING
• Entrepreneurs are innovative opportunity seekers

• They have endless curiosity to discover new or different ideas and see whether these ideas will
work in the marketplace

• Ordinary businessman’s main objective is simply to earn profits from producing, buying, and
selling goods unlike the entrepreneurs

• Entrepreneurs create value by

1. Introducing new products or services

2. Finding ways of making them

3. Innovation in terms of product design

4. Addition of new product features to existing ones

5. 5. Improving their operational capability by employing new technologies that will bring them
greater efficiency, better economies and even enable them to reach unparalleled superiority

6. 6. They may totally change the prevailing business paradigm by rendering it obsolete through
the introduction of disruptive technologies, processes, and systems.

Entrepreneurial mind frame, heart flame, and gut game

 These are very essential to an Entrepreneur’s Opportunity Seeking

A. Entrepreneurial Mind Frame – allows the entrepreneur to see things in a very positive and
optimistic light in the midst of crisis or difficult situations.

. Entrepreneurial Heart Flame – Driven by Passion, they are drawn to find fulfillment in the act of
process of discovery.

- It is also about emotional quotient or EQ which is often manifested in the

entrepreneur’s efforts to nurture relationships with customers, employees and
suppliers.

• Entrepreneurial Gut Game – this refers to the ability of the entrepreneur to sense without using
five senses. This is also known as intuition. The gut game also connotes courage, or we call it
“lakas ng loob” THE MANY SOURCES OF OPPORTUNITIES

1. Macro Environmental Sources of Opportunities

2. Industry Sources of Opportunities

 3. Market Source of Opportunities

4. Other Sources of Opportunities

• Macro environment sources of opportunities – refers to the “big or macro forces that affects the
area, the industry and the market which the enterprise belongs to

1. SOCIO-CULTURAL ENVIRONMENT

2. POLITICAL ENVIRONMENT

3. ECONOMIC ENVIRONMENT

4. ECOLOGICAL ENVIRONMENT

5. TECHNOLOGICAL ENVIRONMENT

Socio-cultural environment
6. Includes demographics

7. Helps assess the trends and dynamics of bigger consumer population, beliefs, tastes & traditions

Political environment
 Defines the government system of the country or the local area of business
 Includes all the laws, rules and regulations that governs business practices as well as permits,
approvals, and licenses necessary to operate the business
 It regulates the use of natural resources, wastes disposal, taxation, importation of goods and
services, accounting and reporting of businesses

Economic environment
 Supply and demand forces mainly drive macro-economic environment that drive the interest
and foreign exchange rates

 Entrepreneur must think critically through each and single economic event that impacts his
enterprise

Ecological environment
 Includes all-natural resources and the ecosystem, habitat of men, animals, plants, and minerals

 There is growing awareness in the world today that will make this factor more and more
important for countries, industries and businesses

 Opportunities abound for greener, cleaner, and healthier products whose objective are to save
the planet and prolong lives

Technological environment
  New scientific and technological discoveries, which often lead to launch and commercialization
of new products with superior attributes or to rendering the old ones obsolete, are the
entrepreneur’s nightmares

 Entrepreneur is left with no choice but to invest to new technologies in order to keep up with
the competition

Examples of relevant opportunities and threats to a fast food chain

FACTORS OPPORTUNITIES TO THE THREATS TO THE ENTERPRISE
ENTERPRISE

1. Social • Increased customer base for

the fast food chain
• Increasing double income
earners in the family (i.e. • More healthy product
mother and father are both offerings are demanded by
working) customers

• Trend toward healthier

food choices

2. Political • Increased purchasing power

of the consumers leading to
• Tax exemption for 13th
higher retail sales
month pay and other
bonuses up to P70,000.00
passed by Congress

3. Economic • Opportunity for the • Smaller suppliers’ difficulty

enterprise to expand to coping with greater
• ASEAN Integration in 2015
other ASEAN markets competition posed by
(countries that belong to
foreign rivals; might lose
ASEAN Trading at zero
small but reliable suppliers
tariff)

4. Ecological • Opportunity to start an • Additional costs incurred by

advocacy toward a ‘greener’
• Increased usage of eco bags
operation (not limited to
and environment-friendly
usage of eco-friendly
containers
containers/packaging)
5. Technological
• Greater usage of apps to
• Increased usage of place delivery orders via
smartphones to smartphones, which may
disseminate important help increase market reach
new packaging may
decrease profitability
• Potential for online
customer disappointments
and netizen bashing due to
poor product/service
delivery brought about by
intermittent technical
 information (e.g. news. glitches
Weather, traffic updates)

INDUSTRY SOURCES OF OPPORTUNITIES

Participants in an industry include:

1. Rivals or competitors in a particular type of business.

2. Suppliers of input (e.g. fuel, electricity, raw materials) to rivals as well as suppliers of
machinery and equipment, suppliers of manpower and expertise, and supplies of merchandise

3. Consumer Market Segments being served by rivals or competitors.

4. Substitute products or services, which customers shift or turn to

5. All other support and enabling industries

Several ways of defining an industry as a source of opportunities

• According to product types or according to the functions of the product or service

Examples: computer industry, beer industry, fast-food industry & cola industry

• Tracing the industry from its most basic raw materials down to its various consumer application
otherwise known as product or value-added chain

Product chain – focus on volume produced

Value-added chain – focus on economic

Examples: coconut industry, coffee industry

Market sources of opportunities

• MICROMARKET – refers to the specific target market segment of a particular enterprise. These
are target customers that represent the immediate customers of an enterprise

• CONSUMER PREFERENCES – refer to the tastes of particular group of people. Examples: clothes
people wear, the food they eat, the music they listen to and the movies they watch.

• PIQUES – Consumer dislikes. It refers to the things that irritate customers

• PERCEPTION – There are times when the product is not changed by the enterprise but what
changes is the way consumers perceive the product

Other sources of opportunities

1. Customer preferences change over time
2. People’s tastes in clothes, music, shoes, entertainment, dance, sports, hobbies and even careers
have evolved over the years

3. What piques customers is a great source of opportunities

4. Before the customer is won over, there is first a battle for the mind, Next there is a battle for the
heart. Finally, there is a battle for the wallet

5. The longer the customer wants to use the product, the greater the chances of creating lasting
loyalty.

6. Opportunities abound in shaping consumer perceptions or occupying spaces in their minds or

places in their hearts that have not yet been filled.

7. New Inventions, new systems and work processes, new insights about the human psyche, new
applications for old knowledge, new revelations about how the physical world works, new
interpretations, new combinations based on the convergence of previous technologies, new
outlooks about how life should be led, and a host of other new things are tremendous sources
of opportunities

8. Determining personal preferences and competencies lay the foundation for a new business
venture

9. 9. Unexpected occurrences in both the external and internal environment of the enterprise
indicate that significant changes are happening, and opportunities are sprouting.
OPPORTUNITY SEIZING
Opportunity Seizing
• The final stage

• By now, the entrepreneur has an idea as to where he or she will locate the business and how he
or she will market the product or service

• At this stage, the entrepreneur must be able to determine the critical success factors that
enable other players in the same industry to succeed while, at the same time, be vigilant about
those factors that cause other business to fail

What market segment would be best for the enterprise to enter into?
1. Crafting a Positioning Statement – look at other competitors in the marketplace. Customer
profiling will come into the picture.

2. Conceptualizing the product or service offering – entrepreneur must conceptualize his or her
own products. A concept is an idealized abstraction of the product or service to be offered to
the preferred market of the entrepreneur

3. Designing, Prototyping, and Testing the Product – the entrepreneur must render the concept
and translate it into its very physical and very real dimensions. Building prototype of the
product entails that will be ready for actual testing by the entrepreneur then later on by the
customers.

4. Implementing, Organizing and Financing – good planning and good programming are essential
to have good implementation.

A good planner and programmer must make several important choices to

achieve the desired end results
1. To choose the correct technology, the one that would produce the output that would meet the
quality specifications of the customers.

2. To choose the right people who can perform the technical and the managerial functions
necessary to realize the desired end results.

3. To design the operating workflow that would assure the effective, economical, and efficient
production of the output
4. To specify the systems and procedures that would govern the enterprise, motivate and
discipline the workforce, and satisfy the customers.

5. To design the organizational architecture that would allow the people to function at their best