KNOW ABOUT

BUSINESS

Entrepreneurship Education
in Schools and Technical Vocational Training Institutions

MODULE 5
How Do I Find A Good Business Idea?

Authors:

George Manu
Robert Nelson
John Thiongo

Editors:

Peter Tomlinson and Klaus Haftendorn

International Labour Office, Geneva

International Training Centre of the ILO, Turin
Copyright © International Training Centre of the ILO 2005

This publication enjoys copyright under Protocol 2 of the Universal Copyright Convention. Applications
for authorization to reproduce, translate or adapt part or all of its contents should be addressed to the
International Training Centre of the ILO. The Centre welcomes such applications. Nevertheless, short
excerpts may be reproduced without authorization, on condition that the source is indicated.

Know About Business

ISBN 92-9049-XXX-X

First published 1996

Second edition 2000
Third edition 2002
Fourth edition 2004
Revised edition 2005

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Know About Business Module 5: How Do I Find A Good Business Idea?

MODULE 5

How Do I Find A Good

Business Idea?
Module Objective:
è To provide techniques for generating business ideas as well
as for identifying and assessing business opportunities.

Module Coverage:
Page
1. Generating Ideas ......................................................2
2. Identifying and Assessing Business Opportunities ........21

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Know About Business Module 5: How Do I Find A Good Business Idea?

I TOPIC 1: Generating Ideas

II SUGGESTED TIME:
• 4 hours

III OBJECTIVE:
• To enable learners to:
(a) appreciate the importance of having a good business idea as a
prerequisite for successful business start-up and for an existing business.
(b) know how to generate business ideas.

IV RATIONALE:
• A good business idea is essential for starting a successful venture and for
staying competitive afterwards. Good business ideas, however, do not
usually just occur to an entrepreneur. Rather, they are the result of hard
work, effort and often creativity on the part of the entrepreneur.

V ACTIVITIES
1. Ask the learners to define a business idea. Jot down their answers on a
board or flipchart. Show TRANSPARENCY 1 and discuss any aspects not
covered to arrive at a common understanding of the term.
2. Ask the learners to indicate why it is important to generate ideas. List
responses on a board or flipchart. Using TRANSPARENCY 2, compare the
learners’ list with the points suggested on TRANSPARENCY 2, discussing
key issues including the fact that the generation of business ideas is
necessary both before and after a business has been set up.
3. At this point, have the learners give examples of people or firms in their
community or elsewhere which have come up with good business ideas,
and their reasons for considering these ideas good. Lead a discussion on
some of these.
4. Ask the learners to suggest ways in which business ideas can be
generated. List these on a board or flipchart. Show TRANSPARENCY 3
and compare it with the learners’ responses. Then, lead a discussion on
the main points, giving examples and illustrations. Issue the HANDOUT
and use it for the discussion.
5. Using TRANSPARENCY 4, introduce the concept of creativity and explain
its importance in generating a good business idea. Then do the nine dot
exercise. Show the top of TRANSPARENCY 5 and ask the learners to
connect the 9 dots by means of 4 straight, continuous lines. Ask each
individual to write down their solution. Ask those who managed to do it to
explain how before revealing the answer on the bottom half of
TRANSPARENCY 5. Explain that the solution lays outside the square of

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Know About Business Module 5: How Do I Find A Good Business Idea?

dots, and that we needed to stretch our imagination and mind beyond
the apparent problem.
6. Do the creative square exercise to provide another example of creativity
in action. Show TRANSPARENCY 6 and ask each individual to count the
total number of squares in the figure. Emphasize that a square is a
rectangle with sides of equal length. Discuss the answers and the process
used in solving the puzzle, highlighting the use and need for creativity.
After the exercise, in order to illustrate how to come up with all the
squares there are, you may:
(a) number each square or box in the main diagram;
(b) combine various boxes to form squares, i.e. four equal-sided boxes
or rectangles;
(c) add up the possible combinations to arrive at a total.
7. Remind the learners of the concept and principles of brainstorming using
TRANSPARENCY 7, supplemented by the HANDOUT. To give some
practical experience of using the technique, tell learners that they have
just 5 minutes to come up with at least a dozen uses for one of the
following (choose one item only):
• old newspapers
• bricks
• old clothes
• boxes (made of cardboard or wood)
• poles/sticks
• any other object of your choosing.
8. Now divide the learners into small groups of 4 or 5 and tell them that
they are going to do a number of exercises to give them practice in using
the concepts and techniques discussed so far. Use WORKSHEETS 1, 2, 3
and 4 in succession. You may hold a competition for the best ideas from
the exercises and award prizes accordingly.
9. Summarize the key learning points.

VI SUMMARY
1. A business idea is a prerequisite for a successful business venture. Good
business ideas, however, do not usually just occur to an entrepreneur.
Rather, they are the result of effort and often creativity on the part of the
entrepreneur.
2. Finding a good idea is the first step in transforming the entrepreneur’s
desire and creativity into a business opportunity.
3. There are several sources of good ideas. To be successful in generating
or finding one, however, the entrepreneur needs to keep his/her mind
and eyes open and be alert to opportunities.
4. An idea, however good, is only a tool at the end of the day. It needs to
be developed and transformed into a viable business opportunity.

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Know About Business Module 5: How Do I Find A Good Business Idea?

MODULE 5: Topic 1
TRANSPARENCY 1

What is a Business Idea?

n A business idea is the response of a person

or persons, or an organization to solving an
identified problem or to meeting perceived needs
in the environment (markets, community, etc.).

n Finding a good idea is the first step in

transforming the entrepreneur’s desire and
creativity into a business opportunity.

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Know About Business Module 5: How Do I Find A Good Business Idea?

MODULE 5: Topic 1
TRANSPARENCY 2

Why Should You Generate

Business Ideas?

n You need an idea – and a good one at that – for

business (both new and existing)
n To respond to market needs
n To respond to changing fashions and requirements
n To stay ahead of the competition
n To exploit technology – do things better
n Because of product life cycle
n To spread risk and allow for failure

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Know About Business Module 5: How Do I Find A Good Business Idea?

MODULE 5: Topic 1
TRANSPARENCY 3

Sources of Business Ideas

n Hobbies/Interests
n Personal Skills and Experience
n Franchises
n Mass Media
(newspapers, magazines, TV, Internet)
n Exhibitions
n Surveys
n Complaints
n Brainstorming
n Creativity

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Know About Business Module 5: How Do I Find A Good Business Idea?

MODULE 5: Topic 1
TRANSPARENCY 4

Creativity

n Creativity is the ability to design, form, make or

do something in a new or different way.

n The ability to come up with creative solutions to

needs/problems and to market them often marks
the difference between success and failure in
business. It also distinguishes high-growth or
dynamic businesses from ordinary, average firms.

n To be creative, you need to keep your mind and

eyes open.

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Know About Business Module 5: How Do I Find A Good Business Idea?

MODULE 5: Topic 1
TRANSPARENCY 5

The Nine Dots

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Know About Business Module 5: How Do I Find A Good Business Idea?

MODULE 5: Topic 1
TRANSPARENCY 6

Creative Squares

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Know About Business Module 5: How Do I Find A Good Business Idea?

MODULE 5: Topic 1
TRANSPARENCY 7

Brainstorming

Brainstorming is a technique for creative

problem-solving as well as for generating ideas.
The objective is to come up with as many ideas as
possible.

It usually starts with a question or problem

statement. Each idea leads to one or more additional
ideas, resulting in a good number.

FOUR RULES:
n Don’t criticize or judge the ideas of others
n Freewheeling is encouraged – ideas that seem to
be wild or crazy are welcome
n Quantity is desirable – the greater the number of
ideas, the better
n Combine and improve upon the ideas of others

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Know About Business Module 5: How Do I Find A Good Business Idea?

MODULE 5: Topic 1
WORKSHEET 1

Hobbies/Interests

. Within 5 minutes, each member of the group must list below

at least 4 hobbies or interests.

1. ________________________________________________________

2. ________________________________________________________

3. ________________________________________________________

4. ________________________________________________________

5. ________________________________________________________

6. ________________________________________________________

7. ________________________________________________________

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Know About Business Module 5: How Do I Find A Good Business Idea?

MODULE 5: Topic 1
WORKSHEET 2

Hobbies/Interests

. From the list of hobbies/interests listed on WORKSHEET 1, each group

must now choose one idea they wish to develop into a business. Group
members are to negotiate this themselves. Now, using the space below
and/or separate sheets of paper, or with word processing software if
desired, describe your idea and the resulting product or service in
detail, including who the likely customers might be. You have 15
minutes for this task, after which you will be given 5 minutes to present
your idea to the whole group.

Description of the idea

__________________________________________________________

__________________________________________________________

__________________________________________________________

__________________________________________________________

__________________________________________________________

__________________________________________________________

__________________________________________________________

__________________________________________________________

__________________________________________________________

__________________________________________________________

__________________________________________________________

__________________________________________________________

__________________________________________________________

__________________________________________________________

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Know About Business Module 5: How Do I Find A Good Business Idea?

MODULE 5: Topic 1
WORKSHEET 3

Mass Media: Newspapers/Magazines

. Your group should identify 7 business ideas from the articles as well as
the commercial opportunities section of a newspaper or magazine. The
commercial section may contain advertisements for businesses or
machines on sale whilst articles may describe new types of businesses
or announce changes in fashion or consumer needs. Then, for each idea
chosen, give reasons as to why you are interested in it. You have 20
minutes for this task.

Business idea Reason(s) for interest

1. ______________________________ ________________________________

2. ______________________________ ________________________________

3. ______________________________ ________________________________

4. ______________________________ ________________________________

5. ______________________________ ________________________________

6. ______________________________ ________________________________

7. ______________________________ ________________________________

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Know About Business Module 5: How Do I Find A Good Business Idea?

MODULE 5: Topic 1
WORKSHEET 4

Personal Skills and Experience

. Working initially on your own, jot down the skills, experience, training
and background that you have to start a business. Examples could be
welding, catering, computer programming, car repair, secretarial
experience, plumbing, etc. Then, determine the types of business you
could start or run on the basis of what you have written down. Thirdly,
for each of these businesses, determine the people or organizations who
are likely to buy your products or services or who you would aim at. You
may use the space below and additional paper, if required. You have 15
minutes for this task. After that, you should illustrate your ideas to your
group members. Have you convinced them?

__________________________________________________________

__________________________________________________________

__________________________________________________________

__________________________________________________________

__________________________________________________________

__________________________________________________________

__________________________________________________________

__________________________________________________________

__________________________________________________________

__________________________________________________________

__________________________________________________________

__________________________________________________________

__________________________________________________________

__________________________________________________________

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Know About Business Module 5: How Do I Find A Good Business Idea?

MODULE 5: Topic 1
HANDOUT 1

Generating a Business Idea

A good business idea is essential, or even a prerequisite, for a successful business
venture. However, good business ideas do not usually just occur to an entrepreneur.
Rather, they are the result of hard work and effort on the part of the entrepreneur in
generating, identifying and evaluating opportunities.

What Is a Business Idea?

A business idea is the response of a person or persons, or an organization to solving
an identified problem or to meeting perceived needs in the environment (markets,
community, etc.). Finding a good idea is the first step in transforming the
entrepreneur’s desire and creativity into a business opportunity.
Two things should however be noted:
(a) although it is a prerequisite, a business idea is only a tool;
(b) an idea by itself, however good, is not sufficient for success.
In other words, notwithstanding its importance, an idea is only a tool that needs to be
developed and transformed into a viable business opportunity.

What Is Creativity?
Creativity is the ability to design, form, make or do something in a new or different
way.
The ability to come up with creative solutions to needs/problems and to market them
often marks the difference between success and failure in business. It also
distinguishes high-growth or dynamic businesses from ordinary, average firms. Real,
successful entrepreneurs are creative in identifying a new product, service or business
opportunities.
To be creative, you need to keep your mind and eyes open as you work through the
sources of business ideas explained below, and apply the techniques.

Sources of Business Ideas

There are millions of entrepreneurs throughout the world and their testimonies
suggest that there are many potential sources of business ideas. Some of the more
useful ones are outlined below.

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Know About Business Module 5: How Do I Find A Good Business Idea?

Hobbies/Interests
A hobby is a favourite leisure-time activity or occupation. Many people, in pursuit of
their hobbies or interests, have founded businesses. If, for example, you enjoy
playing with computers, cooking, music, travelling, sport or performing, to name but a
few, you may be able to develop it into a business. To illustrate this, if you enjoy
travelling, performing and/or hospitality, you may consider going into tourism – which
is one of the biggest industries in the world.

Personal Skills and Experience

Over half of the ideas for successful businesses come from experiences in the work
place, e.g. a mechanic with experience in working for a large garage who eventually
sets up his/her own car repair or used car business. Thus, the background of potential
entrepreneurs plays a crucial role in the decision to go into business as well as the
type of venture to be created. Your skills and experience are probably your most
important resource, not only in generating ideas but also in capitalizing on them.

Franchises
A franchise is an arrangement whereby the manufacturer or sole distributor of a
trademark, product or service gives exclusive rights for local distribution to
independent retailers in return for their payment of royalties and conformity to
standardized operating procedures. Franchising may take several forms, but the one
of interest is the type that offers a name, image, method of doing business and
operating procedures.
In the 1980s and early 1990s franchising experienced tremendous growth, becoming
a much-used method of going into business for the millions of enterprises that were
starting up in the USA and Europe. In the USA alone, there are over 2,000 types of
franchise businesses, accounting for over US$300 billion in annual sales revenue and
about a third of all retail sales. Apart from buying a franchise, one can also develop
and sell a franchise concept. There are many directories and handbooks as well as
associations, including the International Franchise Association, which can provide
further information.

Mass Media
The mass media is a great source of information, ideas and often opportunity.
Newspapers, magazines, television, and nowadays the Internet are all examples of
mass media. Take a careful look, for example, at the commercial advertisements in a
newspaper or magazine and you may well find businesses for sale. Well, one way to
become an entrepreneur is to respond to such an offer.
Articles in the printed press or on the Internet, or documentaries on television may
report on changes in fashions or consumer needs. For example, you may read or hear
that people are now increasingly interested in healthy eating or physical fitness.
You may also find advertisements calling for the provision of certain services based on
skills, for example accounting, catering or security. Or you may discover a new
concept for which investors are required, such as a franchise.

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Know About Business Module 5: How Do I Find A Good Business Idea?

Exhibitions
Another way to find ideas for a business is to attend exhibitions and trade fairs. These
are usually advertised on the radio or in newspapers. By visiting such events
regularly, you will not only discover new products and services, but you will also meet
sales representatives, manufacturers, wholesalers, distributors and franchisers. These
are often excellent sources of business ideas, information and help in getting started.
Some of them may also be looking for someone just like you.

Surveys
The focal point for a new business idea should be the customer. The needs and wants
of the customer, which provide the rationale for a product or service, can be
ascertained through a survey. Such a survey might be conducted informally or
formally by talking to people – usually using a questionnaire or through interviews –
and/or through observation.
You may start by talking to your family and friends to find out what they think is
needed or wanted that is not available. Or, for example, whether they are dissatisfied
with an existing product or service and what improvements or changes they would like
to see. You can then move on and talk to people who are part of the distribution
chain, that is manufacturers, wholesalers, distributors, agents and retailers. It would
be useful to prepare beforehand a set of questions which might be put on a
questionnaire or used in an interview. Given their close contact with customers,
channel members have a good sense of what is required and what will not sell.
Finally, you should talk to as many customers as possible – both existing and
potential customers. The more information you can get from them, the better.
Besides talking to people, you could also get information through observation. For
example, in deciding whether to open a shop on a particular street, you can observe
and count the number of people going past on given days and compare these to other
sites. Or, if you are interested in an area frequented by tourists, you may be able to
set up or market products from a craft business. Or you may have noticed that there
is no decent restaurant or hotel on a tourist route or in a given town.
One way of ensuring that you are not negligent in this area is to be alert at all times
to needs and opportunities to do business. One entrepreneur apparently went round
at every cocktail party asking if anyone was using a product that did not adequately
fulfil its intended purpose. Another monitored the toys of a relative’s children looking
for ideas for a market niche.

Complaints
Complaints and frustrations on the part of customers have led to many a new product
or service. Whenever consumers or customers complain bitterly about a product or
service, or when you hear someone say “I wish there was .....” or “If only there were
a product/service that could ....”, you have the potential for a business idea. The idea
could be to set up a rival firm offering a better product or service, or it might be a
new product or service which could be sold to the firm in question and/or to others.

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Know About Business Module 5: How Do I Find A Good Business Idea?

Brainstorming
Brainstorming is a technique for creative problem-solving as well as for generating
ideas. The object is to come up with as many ideas as possible.
It usually starts with a question or problem statement. For example, you may ask
“What are the products and services needed in the home today which are not
available?” Each idea leads to one or more additional ideas, resulting in a good
number.
When using this method, you need to follow these four rules:
• Don’t criticize or judge the ideas of others
• Freewheeling is encouraged – ideas that seem to be wild or crazy are welcome
• Quantity is desirable – the greater the number of ideas, the better
• Combine and improve upon the ideas of others
Furthermore, all ideas, no matter how seemingly illogical or crazy, must be recorded.

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Know About Business Module 5: How Do I Find A Good Business Idea?

SUPPLEMENTARY NOTES MODULE 5: Topic 1

FOR THE FACILITATOR

Why should you generate business ideas?

There are many reasons why entrepreneurs or would-be entrepreneurs need to
generate business ideas. Here are just a few:
• You need an idea – and a good one at that – for business. As indicated earlier, in
looking at the rationale for this topic, a good idea is essential for a successful
business venture – both when starting a business and to stay competitive
afterwards.
• To respond to market needs. Markets are made up essentially of customers who
have needs and wants waiting to be satisfied. Those people or firms that are able
to satisfy these requirements are rewarded.
• Changing fashions and requirements provide opportunities for entrepreneurs
to respond to demand with new ideas, products and services.
• To stay ahead of the competition. Remember, if you do not come up with new
ideas, products and services, a competitor will. The challenge is to be different or
better than others.
• To exploit technology – do things better. Technology has become a major
competitive tool in today’s markets, with the rate of change forcing many firms to
innovate. There are several companies in the world, operating in the electronics
and home appliances industries, which come up with dozens of new products every
month. For these and many others in today’s global markets, generation of
business ideas is crucial.
• Because of product life cycle. All products have a finite life. As the product life
cycle chart shows, even new products eventually become obsolete or outmoded.
Thus, there is a need to plan for new products and the growth of these. The firm’s
prosperity and growth depends on its ability to introduce new products and to
manage their growth.
• To spread risk and allow for failure. Linked to the product life cycle concept is
the fact that over 80 per cent of new products fail. It is therefore necessary for
firms to try to spread their risk and allow for failures that may occur from time to
time by constantly generating new ideas.

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Know About Business Module 5: How Do I Find A Good Business Idea?

SUPPLEMENTARY NOTES MODULE 5: Topic 1

FOR THE FACILITATOR

Product Life Cycle

SALES

INTRODUCTION

GROWTH MATURITY DECLINE

TIME

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Know About Business Module 5: How Do I Find A Good Business Idea?

I TOPIC 2: Identifying and Assessing Business

Opportunities

II SUGGESTED TIME:
• 3 hours

III OBJECTIVE:
• To enable learners to appreciate the importance of, and possess techniques
for identifying and assessing business opportunities.

IV RATIONALE:
• The recognition of a business opportunity coupled with the ability to
respond effectively is the basis for starting and maintaining successful
ventures. It is also a characteristic of successful entrepreneurs. It involves
not only generating ideas or identifying opportunities but also screening
and evaluating them to determine the most viable, attractive propositions
to be selected.

V ACTIVITIES:
1. Have the learners define the term `business opportunity’. Show
TRANSPARENCY 1 to clarify. In the process, draw a distinction between
an idea and an opportunity, with the help of notes from the HANDOUT.
2. Lead a discussion on the characteristics of a good business opportunity,
jotting down suggestions on a board or flipchart. Compare the class list
with TRANSPARENCY 2, discussing any aspects that were left out by the
class – with the help of notes from the HANDOUT, if required.
3. Ask the learners to list the factors involved in the identification and
assessment of a business opportunity. Compare the list with
TRANSPARENCY 3 and explain the key points, with the help of the
SUPPLEMENTARY NOTES FOR THE FACILITATOR.
4. Either
(a) invite an entrepreneur to talk to the learners about how he or she
found a business idea/opportunity and transformed it into a
successful venture, or
(b) ask someone from the local community or a regional/national
organization – such as an investment promotion centre, an
employers’ organization, the regional/local economic development
board, a business promotion agency, the university or polytechnic,

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Know About Business Module 5: How Do I Find A Good Business Idea?

the business community or a consultancy firm – to come and talk

about business opportunities, or
(c) divide the learners into groups of, say, 4 or 5. Ask them to draw up a
simple questionnaire or formulate a few questions for an interview,
using the WORKSHEET as a guide. Then, have each group visit and
speak to a successful entrepreneur. The interview should focus on
how the entrepreneur generated the business idea, how he or she
identified or recognized the business opportunity, how he or she
assessed the opportunity and how he or she transformed it into a
successful business. During this interview, each group should also
collect some basic background information about the entrepreneur
and his/her firm, such as the type of business, number of employees,
how long ago the business was established etc. Group members must
negotiate and arrange the whole process by themselves, although
the facilitator may provide some assistance where required. When
they have completed the exercise, each group prepares a report and
presents it to the entire class.
5. Finally, draw some conclusions from the exercise and reinforce the key
learning points.

VI SUMMARY:
1. The recognition of a business opportunity coupled with the ability to
respond effectively is the basis for starting and maintaining successful
ventures. This involves not only generating ideas or identifying
opportunities, but also screening and evaluating them to determine the
most viable, attractive propositions to be pursued.
2. A business opportunity may be defined simply as an attractive
investment idea or proposition that provides the possibility of a return for
the person taking the risk. Such opportunities are represented by
customer requirements and lead to the provision of a product or service
that creates or adds value for its buyer or end-user.
3. A good idea is not necessarily a good business opportunity. Consider, for
example, that over 80% of all new products fail. It is therefore important
for all ideas and opportunities to be well screened and assessed.
4. Identifying and assessing business opportunities is not an easy task. Yet
it is necessary to minimize the risk of failure. It involves, in essence,
determining risks and rewards/returns.

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Know About Business Module 5: How Do I Find A Good Business Idea?

MODULE 5: Topic 2
TRANSPARENCY 1

What Is a Business Opportunity?

A business opportunity may be defined simply as an

attractive investment idea or proposition that
provides the possibility of a return for the person
taking the risk. Such opportunities are represented
by customer requirements and lead to the provision
of a product or service which creates or adds value
for its buyer or end-user.

Distinction between ideas and opportunities

n A good idea is not necessarily a good business
opportunity. Consider, for example, that over 80%
of all new products fail.
n So, what turns an idea into a business
opportunity?
n To put it simply, Income exceeds Costs = Profit.
n Examine the characteristics of a good business
opportunity.

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Know About Business Module 5: How Do I Find A Good Business Idea?

MODULE 5: Topic 2
TRANSPARENCY 2

Characteristics of a Good
Business Opportunity

To be a good opportunity, a business opportunity

must fulfil, or be capable of meeting the following
criteria:
n Real demand
n Return on investment
n Be competitive
n Meet objectives
n Availability of resources and competencies

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Know About Business Module 5: How Do I Find A Good Business Idea?

MODULE 5: Topic 2
TRANSPARENCY 3

Identifying and Assessing

Business Opportunities

n Not an easy task

n Involves, in essence, determining risks and
rewards/returns reflecting:
– Industry and market
– Length of the ‘window of opportunity’
– Personal goals and competencies of the
entrepreneur
– Management team
– Competition
– Capital, technology and other resource
requirements
– Environment (political, economic, legal,
government regulations etc.)

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Know About Business Module 5: How Do I Find A Good Business Idea?

MODULE 5: Topic 2
HANDOUT 1

Identifying and Assessing Business

Opportunities
Seeing, seeking and acting on opportunities is one of the characteristics of successful
entrepreneurs everywhere. It is also the basis for starting and maintaining successful
ventures. It involves not only generating ideas and recognizing opportunities, but also
screening and evaluating them to determine the most viable, attractive propositions
to be pursued.

What is a business opportunity?

A business opportunity may be defined simply as an attractive idea or proposition that
provides the possibility of a return for the investor or the person taking the risk. Such
opportunities are represented by customer requirements and lead to the provision of a
product or service which creates or adds value for its buyer or end-user.
However, a good idea is not necessarily a good business opportunity. For example,
you may have invented a brilliant product from a technical point of view and yet the
market may not be ready for it. Or the idea may be sound, but the level of
competition and the resources required may be such that it is not worth pursuing.
Sometimes there may even be a ready market for the idea, but the return on
investment may not be acceptable. To underscore the point further, consider the fact
that over 80% of all new products fail. Surely, to the inventors or backers the idea
seemed a good one, yet clearly it could not withstand the test of the market.
So, what turns an idea into a business opportunity? A simplified answer is when
income exceeds costs = profit. In practice, to be comprehensive you need to examine
the factors listed and illustrated below.

Characteristics of a good business opportunity

To be good, a business opportunity must fulfil, or be capable of meeting, the following
criteria:
• Real demand, i.e. respond to unsatisfied needs or requirements of customers who
have the ability to purchase and who are willing to exercise that choice
• Return on investment, i.e. provide durable, timely and acceptable returns or
rewards for the risk and effort required
• Be competitive, i.e. be equal to or better – from the viewpoint of the customer –
than other available products or services
• Meet objectives, i.e. meet the goals and aspirations of the person or organization
taking the risk
• Availability of resources and skills, i.e. be within the reach of the entrepreneur
in terms of resources, competency, legal requirements, etc.

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Know About Business Module 5: How Do I Find A Good Business Idea?

Identifying and Assessing Business Opportunities

Ideas and opportunities need to be screened and assessed for viability once they have
been identified or generated. This is not an easy task, and yet at the same time it is
so important. It can make the difference between success and failure, between
making a fortune and losing everything you had. Whilst the exercise does not
guarantee success – but then nothing in this world does, except Divine intervention –
it certainly helps in minimizing the risk and thus the odds for failure.
Identifying and assessing business opportunities involves, in essence, determining
risks and rewards/returns reflecting the following factors:
• Industry and market. Is there a market for the idea? Are there any customers –
people with money who are able and willing to buy the product or service? Can you
provide what they need or want? How many are there?
• Length of the ‘window of opportunity’. Can you create or seize the opportunity
whilst it lasts?
• Personal goals and competencies of the entrepreneur. Do you really want to
venture into the business? Do you have what it takes? Are you motivated enough?
• Management team. Who else will be involved with you in the business? Do they
have the experience, know-how, contacts or other desirable attributes required?
• Competition. Who are your competitors? Do you have something customers want
that your competitors do not have? For example, can you produce or market at
lower costs?
• Capital, technology and other resource requirements. How much capital,
technology or other resources are required? Do you already have them or could
you get them?
• Environment. Are the political, economic, geographical, legal, and regulatory
contexts favourable? Will the business do any damage to the physical
environment?
The above questions are typical of the type of issues that need to be addressed.
Responses to these questions will determine the attractiveness of any business
opportunity.

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Know About Business Module 5: How Do I Find A Good Business Idea?

MODULE 5: Topic 2
WORKSHEET 1

. Together with other members of your group, design a

simple questionnaire (a set of questions) you would use to
interview an entrepreneur.

The questions must focus on:

• how the entrepreneur generated his or her business idea
• how he or she identified or recognized the opportunity
• how he or she screened, evaluated or assessed the opportunity
• how he or she transformed the idea into a business.
The questionnaire should be no more than 2 pages long, including space for recording
answers. Test the questionnaire (on members of another group in your class, for
instance) to make sure it is clear and show it to your facilitator before you use it. After
you have visited the entrepreneur, analyse the responses, produce a short report and
present it to the whole class.
You and the other members of your group must negotiate and arrange the whole
exercise by yourselves. Your facilitator can however provide guidance if required.
Enjoy it! Have fun!

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Know About Business Module 5: How Do I Find A Good Business Idea?

SUPPLEMENTARY NOTES MODULE 5: Topic 2

FOR THE FACILITATOR

Identifying and Assessing

Business Opportunities
Ideas and opportunities need to be screened and assessed for viability once they have
been identified or generated. This is not an easy task, and yet at the same time it is
so important. It can make the difference between success and failure, between
making a fortune and losing everything. Whilst the exercise does not guarantee
success – but then nothing in this world does, except by Divine intervention – it
certainly helps in minimizing the risk and thus the odds for failure.
Identifying and assessing business opportunities involves, in essence, determining
risks and rewards/returns reflecting the following factors discussed below.

Industry and market

The key question to be answered here is whether there is a market for the idea. A
market in this context consists of customers – potential or actual – with needs and
wants, who have the ability to purchase your intended product or service and who are
willing or predisposed to exercising that choice. Thus, there is also a need to consider
whether what the customer wants can be provided at the right price, in the right
place, and in a timely manner.
Another important consideration here is the size of the market and the growth rate of
the industry. The ideal situation is a market that is large and growing – where getting
even a small market share can represent a significant and increasing volume of sales.
For this exercise, the would-be entrepreneur needs to gather information. If some
potential entrepreneurs are tempted to think that is too much hard work, they might
take some comfort from the saying that the data available about markets (size,
characteristics, competitors etc.) is often inversely related to the real potential of an
opportunity. In other words, if market data is readily available and if the data clearly
shows significant potential, then it is likely that a large number of competitors will
enter the market and the opportunities will diminish. There are several sources of
published information (also called secondary information), including good libraries,
chambers of commerce, investment promotion centres, government ministries,
universities, foreign embassies, the Internet, newspapers, and so on.
In addition to the above, there is often the need to collect information at the source
(also called primary research) by interviewing people, for example customers and
suppliers. In that case, you will need to design the research methodology.

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Know About Business Module 5: How Do I Find A Good Business Idea?

Length of the ‘window of opportunity'

Opportunities are said to have a ‘window.’ That is, they do exist, but they do not
remain open forever. Markets grow at different rates over time, and as a market gets
bigger and more well-established, conditions are not as favourable. Timing is
therefore important. The issue then is to determine the length of time the window will
be open, and whether the opportunity can be created or seized before the window
closes.

Personal goals and competencies of the entrepreneur

An important question for anyone venturing into business is whether they want to
undertake that particular venture. Personal motivation is an essential attribute of
successful entrepreneurship. Thus, unless a person really wants to do that kind of
business, he or she should not venture into it.
A related question is whether the potential entrepreneur has the necessary
competencies (including the knowledge, skills and abilities) for the requirements of
the business and, if not, whether they could be brought in. Many small business
owners/managers have entered into business based on the strengths of their skills.
When the above aspects are combined, the issue then becomes one of whether there
is a good fit or match between the requirements of the business and what the owner
wants or desires. This is important not only for success, but also for the
entrepreneur’s happiness. As the saying goes, “Success is getting what you want;
happiness is wanting what you get.”

Management team
In many ventures, particularly those involving a large amount of capital, high risk,
sophisticated markets and/or high competition, the management team is usually the
most important dimension in determining attractiveness. The experience and skills of
the team in the same or a similar industry, technology and market often determine
success or failure. This explains why venture capitalists (or people who provide
finance for businesses) put so much emphasis on the management factor, and they
often say that they would rather have good management with an average
idea/product/service than a brilliant idea/product/service with bad management.

Competition
To be attractive, an opportunity must have certain competitive advantages. These
could be lower costs in terms of production and marketing, for example. Or better
quality. In addition, the availability of entry barriers – which could take the form of
high amounts of capital required, protection such as patents or regulatory action,
contractual advantage such as exclusive rights to a market or with a supplier – can
make the crucial difference between a ‘go’ and ‘no go’ investment decision. In other
words, if a firm cannot keep most would-be competitors out of its market, or if it faces
existing entry barriers, then the opportunity will hardly be attractive.

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Know About Business Module 5: How Do I Find A Good Business Idea?

Capital, technology and other resource requirements

The availability and access to capital, technology and other resources such as skills
determine whether certain opportunities can be pursued and to what extent. As a
general rule, the more difficult the requirements are in this area, the more attractive
the proposition, provided of course that there is a market for the idea/product/
service. To give an example, whilst marketing a breakthrough product based on a
patented technology is no guarantee of success, it certainly creates a formidable
competitive advantage.

Environment
Finally, the environment within which the business will operate has a profound
influence on the attractiveness of any opportunity. By environment we are referring
not only to green issues (i.e. the physical environment, which is important and
increasingly so), but also the political, economic, geographical, legal and regulatory
contexts. Political instability, for example, renders business opportunities unattractive
in many countries – especially for those ventures requiring high investment with a
long payback period. Similarly, inflation and exchange rate fluctuations or a weak
judiciary system do not augur well for investments, even if the returns are high. The
lack or availability of infrastructure and services (such as roads, electricity, water
supply, telecommunications, transportation, and even schools and hospitals) also
affect the attractiveness of an opportunity in a given area.

Feasibility Study and Business Plan

Finally, the process of examining the factors discussed above is often referred to as a
feasibility study. In recent times, investors and lenders require these issues to be
considered and set out in the form of a business plan. Preparing a business plan is
presented in Module 8.

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