UNIT- 2

Generating New business

idea
Generating Ideas for
Business
UNIT- 2
Examine the existing goods and
services
Business ideas may be generated by
examining what goods and services are
sold outside by the community. Very often,
these products are sold in a form that can
still be enhanced or improved.
 Examine the present and future
needs

Look and listen to what the customers,

institution, and communities are missing in
terms of goods and services
 Examine how the needs
are being satisfied

Needs for the products and services are

referred to as market demand. To
satisfy these needs is to supply the
products and services that meet the
demands of the market.
 Examine the available
resources around you

Observe what materials or skills are

available in abundance in your area. A
business can be started out of available
raw materials by selling them in raw form
and by processing and manufacturing
them into finished products.
 Read magazines, news articles,
and other publications on new
products and techniques or
advances in technology

It will also guide you on how to put the right

product in the right place, at the right
price, at the right time.
Selecting the Right
Idea
1. How much capital is needed to put up
the business?

2. How big is the demand for the product?

Do many people need this product and
will continue to need it for a long time?
3. How is the demand met? Who are
processing the products to meet the need
(competition or demand)? How much of the
need is now being met (supply)?

4. Do you have the background and

experience needed to run this particular
business?
5. Will the business be legal, not going
against any existing or foreseeable
government regulation?

6. Is the business in line with your interest

and expertise?
Environmental
Scanning
process of gathering, analyzing, and dispensing
information for tactical or strategic purposes.

entails obtaining both factual and subjective

information on the business environments in
which a company is operating.
serve as an evaluation of the type of the
entrepreneurial activity appropriate in the
community.
Method of Generating Ideas
• Focus groups have become one of the most popular ways to gather market
research data. 1. Focus Group
• As a research technique they are used by marketing managers, product
managers, and market researchers.
• Businesses find them useful for staying close to consumers and their ever-
changing attitudes and feelings.
• Focus groups provide qualitative information from well defined target audiences;
the information can be used for decision making and developing marketing
strategies and promotional comings.
• Focus groups are also used to discover more about consumer habits and product
usage. They can reveal how different products and services are used by
consumers. In addition they can be used to find out more about consumer
attitude toward product and service. Quality of service can be evaluated through
the use of focus groups. Public relations agencies often use focus groups to
gather information about consumer attitudes and perception.
• Brainstorming is a method for generating ideas to solve a design
problem. It usually involves a group, under the direction of a facilitator.
2. Brainstorming
The strength of brainstorming is the potential participants have in
drawing associations between their ideas in a free-thinking environment,
thereby broadening the solution space.

• Most of the ideas generated from the group have no basis for further
development. Yet there are times that a good idea emerges. For example
many modern commercial banks successfully used brainstorming
techniques to develop a series of product for their clients or customer.
Such development has a greater frequency of occurrence when the
brainstorming effort focuses on a specific product of market area.
• It is a method for obtaining new ideas and solutions by
focusing on problems.
3. ProblemThis analysis
inventory uses individuals in a
analysis
manner that is analogous to focus groups to generate new
product areas. However, instead of generating new ideas, the
consumers are provided with list of problems and then asked
to have discussion over it and it ultimately results in an
entirely new product idea.
• When known product of service are related to suggested
problems. A new product idea emerges. Result from product
inventory analysis must be carefully evaluate as they may
actually reflect a new business opportunity.
• For maximal result, it is advisable that problem inventory
analysis should be used primarily new product ideas from
existing product before future evolution.
• Observation is the most common method of identifying the new
4. Observation
business ideas. Observation can be used to describe a person or
group of people behaviour by probing.
• What do people buy?
• What do people want and cannot buy?
• When people buy?
• Why do they buy?
• What could be alternative?
All these question should be asked in order to identify the
business ideas for particular sector.
 • Research and development – R&D – is the process by
which a and
5. Research company works to obtain new knowledge that
Development
it might use to create new technology, products,
services, or systems that it will either use or sell. The
goal most often is to add to the company’s bottom
line.
• The activity is aimed to invent new product and hence
new business [Link] knowledge acquired
during study or work experience. Researching new
methods skills and techniques enable entrepreneurs to
enhance his performance and stability to deliver better
product and services.
• To identify emerging tread can generate new business idea for the
entrepreneur.
6. Emerging
• If it is picked in the early Trends
stage of emergence, it can be huge revenue
generating business.
• For example:- Digital payment is an emerging trend in India.
Creative ideas do not suddenly appear in people's minds for no apparent
reason. Rather, they are the result of trying to solve specific
problemCreative Problem
or to achieve Solving
a particular Techniques
goal. Creative problem solving
capacity can only be enhanced through various mental exercise
techniques. Through creativity affected by age, education, bureaucracy
and lack of use, following are some of such techniques which can help
in solving the problems.

i. Brainstorming vii. Forced Relationship

ii. Reverse Brainstorming viii. Collective notebook method
iii. Brain writing ix. Attribute listing method
iv. Gorden method x. Big dream method
v. Checklist method xi. Parameter analysisa
vi. Free association
 1. Brainstorming
• Brainstorming is the most well known and widely used for idea generation as
well as for problem solving. Once the idea is generated in the idea generation
technique, in problem solving technique, brainstorming exercise is only carried
in the focused idea. Although the capacity of single person is somewhat limited,
the production of words increases enormously if there are more people working
together.
• For starting brainstorming session, topic of the brainstorming should be clearly
given so that each think on it and based on that problem can be solved. In
brainstorming no criticism is allowed and thoughts should be creative.
 2. Reverse Brainstorming
 It is the reverse process of brainstorming where thinking is started for
negativity. In this technique, following steps are followed as bellow:
• Clearly identify the problem or challenge, and write it down.
• Reverse the problem or challenge by asking, “ how could I possibly cause the
problem?”
• Brainstorming the reverse problem to generate reverse solution ideas. Allow the
brainstorming ideas to flow freely, do not reject anything at this stage.
• Once a person brainstormed all the ideas to solve the reverse problem, no
reverse these into solution ideas for the original problem or challenge.
• Evaluate these solution ideas. Is potential solution available along with its
attributes?
 3. Brain-writing
• Brain-writing is an idea generating group activity that involves everyone. While
brainstorming encourages a group to generate creative ideas verbally, brain
writing enables a group to generate ideas and solutions to several problem
simultaneously on paper. The group involvement is focused and individualistic,
yet it taps into collective input as participants build on each other’s ideas. This
method is suitable when a group has a limited time to discuss problems as well
as there are several shy people in a group.
 4. Gorden method
• The gorden method involves developing new ideas when the individuals are
unaware of the problem. In this group members do not know the exact nature of
the problem. The entrepreneur begins by mentioning a general concept
associated with the problem. The group thereafter responds by expressing a
number of ideas. This can then lead to a concept being developed, followed by
related concept through guidance by the entrepreneur. At least the actual
problem is revealed, enabling the group to make suggestion for the
implementation or refinement of the final solution.
 5. Checklist method
• In this method, a new idea is developed through a list of related issues or
suggestions. The entrepreneur uses a list of questions or statement to guide the
direction of developing entirely new ideas or focusing on specific idea areas.
The list of checkpoints vary from product to product and business to business.
 6. Free Association
• Free association is a method of developing new idea through a chain of word
association. This technique is helpful in developing an entirely new angle to a
problem. The process involve a word or phrase relating to the problem being
written down, then another and another, with each new word attempting to add
new idea to the ongoing thought processes, finally creating a chain of ideas
ending with the new product idea merging. This is the simplest yet most
effective method that an entrepreneur can employ.
 7. Forced Relationship
This is a process of forcing relationship among some product combinations and
their features. It is a technique that asks questions about objects or ideas in an effort
to develop a new idea.
The new combination and eventual concept emerged through a five step process
given below:
Isolation of elements of the problem.
Establish relationships between these elements.
Record the relationships in an orderly manner.
Analyze the emerging relationship to find ideas or pattern.
Develop new idea from these patterns.
 8. Attribute listing method
• Attribute listing an idea-generating technique that requires entrepreneurs to list
the attributes of an item or problem and then look at each Attribute listing is
from different perspectives. Through this method, originally unrelated objects
can be brought together to form a new combination and possible new uses that
better satisfy a need. In summary, attribute listing refers to a method of
developing a new idea by looking at the positives and negatives.
 9. Big dream Approach
• In this method, the entrepreneur dreams about the problem and its solution. He
or she thinks big. In this approach, every possibility is recorded and
investigated or the resources required documented. To the entrepreneur idea are
conceptualized without any constraint until an idea is developed into a
workable form
 10. Parameter Analysis
• This is a method of developing new idea by focusing on parameter
identification and creative synthesis. Parameter identification involves the
analysis of variables contained in the situation to determine their relative
importance. These variables thereafter become the focus of the investigation
with other variables being set aside .
 FEASIBILITY STUDY
Feasibility study-
•is an analysis of the viability of an idea.

•is an analysis of all possible solutions to a problem and a

recommendation on the best solution to use.

•is a formal study to decide what type of system can be developed,

which best the needs of the organization.
•A feasibility study is essentially a process for determining the viability
of a proposed initiative or service and providing a framework and
direction for its development and delivery

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WHY DO FEASIBILITY STUDIES?

• To find a solution that is cost effective from a business

perspective.
• To Find a solution that is well recognized
• To find out the probable market for the products
• To find out the opportunities and threats as presented by
environment
• To determine the probable income of operating the
project
• To show the contributions the project can offer to the
society, among others

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 BENEFITS OF CONDUCTING A
FEASIBILITY STUDY

• Narrows the business alternatives.

• Gives project teams more focus and provides an

alternative outline.
• Identifies a valid reason to undertake the project.

• Enhances the success rate by evaluating multiple

parameters.
• Aids decision-making on the project

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 STAGES OF FEASIBILITY
STUDIES

 A PREFEASIBILITY STUDY

 A FEASIBILITY STUDY

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 DIMENSIONS OF FEASIBILITY
STUDY

 MARKET ANALYSIS

 TECHNICAL ANALYSIS

 FINANCIAL ANALYSIS

 ECONOMIC ANALYSIS

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 MARKET ANALYSIS
 Market research is the systematic gathering,
recording and analysing of data about problems
relating to the marketing of goods and services.

 Market research is the means by which those

who provide goods and services keep
themselves in touch with the needs and wants of
those who buy these goods and services.

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 Marketing Questions

 What is the market?

 Who are the competitors?
 Who is the target audience?
 What do customers want?
 What do competitors offer?
 What is your USP?
 What do customers think you offer them?

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 FINANCIAL ANALYSIS
Financial analysis seeks to ascertain whether the proposed project will
be financially viable in the sense of being able to meet the burden of
servicing debt and whether the proposed project will satisfy the return
expectations of those who provide the capital. The aspects which have
to be looked into while conducting financial appraisal are:

 Investment outlay & cost of project.

 Means of financing
 Project profitability
 Break-even-point
 Cash flows of the project
 Investment worthwhileness judged in terms of various criteria of merit
 Projected financial position

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 TECHNICAL ANALYSIS
The technical analysis of a project idea can be scrutinized in
detail to evaluate its technical feasibility. Technical analysis
distinct from commercial, financial, economic and
managerial feasibility .Technical feasibility is one of the first
studies that must be conducted after a project has been
identified. In large engineering projects consulting agencies
that have large staffs of engineers and technicians conduct
technical studies dealing with the projects.

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 PURPOSE

• To ensure that the project is technically feasible in the sense that

all the inputs required to set up the project are available.

• To facilitate the most optimal formulation of the project in terms

of technology, size, location and so on.

• Choose best alternative

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 TECHNICAL ANALYSIS
FACTORS
 Location and site
 Plant size
 Layout
 Machinery & Equipment
 Environment impact assessment
 Inputs
 Infrastructural facilities
 Manpower

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44
45
 OPERATIONAL FEASIBILITY
• Operational feasibility determines if the human resources are
available to operate the system once it has been installed
• Users that do not want a new system may prevent it from
becoming operationally feasible
• Is a measure of how well a proposed system solves the
problems, and takes advantages of the opportunities identified
during scope definition and how it satisfies the requirements
identified in the requirements analysis phase of system
development.

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Preparation of Business Plan/
Project Report

47
 Writing the B.P.
3. Industry analysis
a. Future outlook and trends
b. Analysis of competitors
c. Market segmentation
d. Industry and market forecasts
4. Description of venture
a. Product(s)
b. Service(s)
3. Size of business
a. Office equipment and personnel
b. Background of entrepreneur
 Writing the B.P.
5. Production plan
a. Manufacturing process (amount subcontracted)
b. Physical plant
c. Machinery and equipment
d. Names of suppliers of raw materials
6. Operational plan
a. Description of company’s operation
b. Flow of orders for goods and/or services
5. Technology utilisation
 Writing the B.P.
7. Marketing plan
a. Pricing
b. Distribution
c. Promotion
d. Product forecasts
e. Controls
8. Organisational plan
a. Form of ownership
7. Identification of partners or principal shareholders
a. Authority of principals
b. Management-team background
c. Roles and responsibilities of members of organisation
 Writing the B.P.
9. Assessment of risk
a. Evaluate weakness of business
b. New technologies
c. Contingency plans
10. Financial plan
a. Pro forma income statement
b. Cash flow projections
c. Pro forma balance sheet
9. Break-even analysis
a. Sources and applications of funds
 Writing the B.P.
11. Appendix (contains backup material)
a. Letters
b. Market research data
c. Leases or contracts
d. Price lists from suppliers
 1. INTRODUCTORY PAGE

Company/promoter details
Company description/nature of business
Amount of finance needed, may also mention the
offer (stock, debt, etc.)
Statement of confidentiality of the report
“TITLE PAGE sets out the basic concept of the
venture”
 2. Executive Summary

it is prepared after the total plan is written

2-3 pages in length
Should stimulate interest of potential investors
Investors read summary to determine if the
entire B.P. is worth reading
Should be concise + convincing + motivating
 2. Executive Summary

Executive summary should address most of the

basic questions/issues
What is the business concept/issue?
What’s the USP?
Who is(are) the Entrepreneur(s)? (previous
performance history)
How will they make money & how much?
 2. Executive Summary

If venture has strong growth it should include

EXIT STRATEGY
Supporting evidence, data points from M.R.,
P.O./contracts
Executive summary is similar to “opening
statement by a lawyer” or an “introductory
statement by a salesperson”
 3. Environmental & Industry Analysis

Environmental analysis
identify relevant trends and changes on
local/ national/international level
[Link] – GNP, unemployment,
disposable income, etc.
[Link] – shifts in attitudes, changing values
 3. Environmental & Industry Analysis

Environmental analysis
[Link]
gauge the potential technological
developments (resources employed by
major firms)
make careful short-term marketing
decisions
BUT …….. be prepared with PLAN B
 3. Environmental & Industry Analysis

Environmental analysis
[Link] concerns
Be prepared for any future legislation that
may affect the marketing mix.
E.g. deregulation of prices, restriction on
advertising, safety regulations
 3. Environmental & Industry Analysis
Industry analysis
*After environmental analysis we focus on specific
industry trends
[Link] demand
Demand data  often available from published sources
Market is growing OR declining, no. of new
competitors, changes in consumer need/preference
M.R.  gauge demand for Entrepreneur’s product
 3. Environmental & Industry Analysis
Industry analysis
[Link]
Who are the competitors?
Normally…..large corporations – biggest threat
What are their strengths & weaknesses?
[Link] can be identified from experience,
trade journal articles, advertisements, websites,
yellow pages
 3. Environmental & Industry Analysis

Finally, focus on specific market, say Patna

Q1. Who is the customer?

Q2. What is the business environment like in specific

markets/areas?
 3. Environmental & Industry Analysis – Q’s

1. What are the major economic, technological,

legal, and political trends on a national and I’nal
level?
2. What are total industry sales over the past 5
years?
3. What is the anticipated growth in this industry?
4. How many new firms have entered this industry in
the past 3 years?
 3. Environmental & Industry Analysis – Q’s

5. What new products have been recently

introduced in this industry?
6. Who are the nearest competitors?
7. How will your business operation be better
than theirs?
8. Are the sales of each of your major
competitors growing, declining, or steady?
 3. Environmental & Industry Analysis – Q’s

9. What are the strengths and weaknesses of

each of your competitors?
[Link] trends are occurring in your specific
market area?
[Link] is the profile of your customers?
[Link] does your customer profile differ from
that of your competitor?
 4. Description of Venture

This section should begin with mission statement/

company mission
This statement basically describes the nature of
business and what the firm hopes to achieve with
this business
It guides the firm in long-term decision making
Describe the product/service, location & size of
business, history of venture
 4. Description of Venture – Q’s

1. What is the mission of the new venture?

2. What are your reasons for going into business?
3. Why will you be successful in this venture?
4. What development work has been completed to
date?
5. What are your product(s) and/or service(s)?
6. Describe the product(s) and/or service(s),
including patent, copyright, or trademark status.
 4. Description of Venture – Q’s

7. Where will the business be located?

8. Is your building new? Old? In need of
renovation? (if renovation is needed, state costs)
9. Is the building leased or owned? (State the
terms)
10. Why is the building and location right for your
business?
 4. Description of Venture – Q’s

11. What office equipment will be needed?

12. Will equipment be purchased or leased?
13. What experience do you have and/or will you
need to successfully implement the business
plan?
 Location

vital in case of retail

E.g. area, space, parking, accessibility from road,
access to customer, suppliers, distributors, delivery
rates, town regulations, zoning laws
E.g. Doughnut shop
 Evaluation of Location

1. How much space is needed?

2. Buy Vs. Lease
3. Cost/[Link].
4. Is the site zoned for commercial use? Local
taxes?
5. What town restrictions exist for signs, parking,
etc.? billboards@Delhi
 Evaluation of Location

6. Is renovation required?
7. Does the site have room for
expansion?
6. What is the economic/
demographic profile of the area?
6. Adequate labour pool?
7. Sewage, electricity, plumbing
If site decision involves legal issues, hire a lawyer?
 Production plan

Describe the manufacturing process

In case of subcontracted processes, include sub-
contractor details + reasons for selection of sub-
contractor, details of completed contracts
Describe the physical plant layout
m/c + equipment
 Production plan

details of raw materials + supplier details +

payment terms
costs of manufacturing
any future capital equipment needs
*if manufacturing is not involved, REMOVE this
section
 Production plan

1. Will you be responsible for all or part of the

manufacturing operation?
2. If some manufacturing is subcontracted, who will be
the subcontractors? (Give names, addresses)
3. Why were these subcontractors selected?
4. What are the costs of subcontracted
manufacturing? (include copies of written contracts)
 Production plan

5. What will be the layout of the production

process? (Illustrates steps if possible)
6. What equipment will be needed immediately
for manufacturing?
7. What raw materials will be needed
immediately for manufacturing?
8. Who are the suppliers of new materials and
what are the appropriate costs?
 Production plan

9. What are the costs of manufacturing the

product?
[Link] are the future capital equipment needs
of the venture?
In case of retail operation or service:
1. From whom will merchandise be purchased?
2. How will the inventory control system
operate?
 Production plan

If a retail operation or service:

3. What are the storage needs of the venture
and how will the venture be promoted?
4. How will the goods flow to the customer?
5. Chronologically, what are the steps involved
in a business transaction?
6. What are the technology utilisation
requirements to service customers
 Operations plan

Describe the flow of goods from production to the

customer
May include inventory/storage, shipping, CSD
*Explain the chronological steps in completing a
business transaction
E.g. internet retail sports clothing operation
Discuss the role of technology in business
transaction process
 Operations plan

IN CASE OF SERVICES: the focus of operations

plan is the Process of delivering QUALITY service.
(reliability, responsiveness, assurance)
 Marketing plan

Describe how products will be distributed, priced

& promoted.
THOSE data facts should be described based on
which critical marketing decision strategy has been
formulated
Specific forecasts should be indicated to project
profitability of the venture
 Marketing plan

It should be clear to investor as to what are the

goals and what strategies will be implemented to
achieve the goals
Marketing planning is an annual requirement
which is monitored weekly/monthly
It acts as road map for short-term decision making
 Organisation plan

Describes the venture’s form of ownership

Proprietorship, partnership, corporation
If partnership  terms of partnership should be
included
Corporation  shares of stock authorised, share
options, resumes of all directors
Organisation chart (authority/responsibility)
 Organisation plan – Q’s

1. What is the form of ownership of the firm?

2. If a partnership, who are the partners and what
are the terms of agreement?
3. If incorporated, who are the principal
shareholders and how much stock do they own?
4. How many shares of voting or non-voting stock
have been issued and what type?
 Organisation plan – Q’s

5. Who are the members of the boards of

directors? (give names, addresses, and
resumes)
6. Who has the cheque-signing authority or
control?
7. Who are the members of the management
team and what are their backgrounds?
8. What are the roles and responsibilities of
 Organisation plan – Q’s

9. What are the salaries, bonuses, or other forms of

payment for each member of the management
team?
 Assessment of risk

Indicate the potential risks

What if risks become reality?
Describe the strategy that’ll be employed to
prevent, minimise or respond to the risks
 Assessment of risk

*Risks generally result from

i. competitor’s reaction
ii. gaps in marketing plan,
iii. flawed production/ management team,
iv. new technology rendering new products
obsolete
 Financial plan

It determines the potential investment

commitment needed
Indicates whether the B.P. is economically feasible
3 financial areas are discussed in this section
1. Forecasted sales & approximate expenses
2. Cash flow
3. Projected balance sheet
 Financial plan

1. Forecasted sales & approximate expenses

Summarise it for at least 3 years with first year’s
projection provided monthly
Includes forecasted sales, cost of goods sold,
general and administrative expenses
Estimate income tax, determine net profit after
tax
 Financial plan

2. Cash flow
Cash flow figures - First 3 years with first year’s
projection provided monthly

*Sales may be irregular, receipts from

customer, bills have to be paid at different
times of the year

short term borrowing to meet fixed

expenses
 Financial plan

[Link] balance sheet

Shows financial condition at a specific time
It’s a summary of assets/liabilities of a business +
investment of Entrepreneur/ partners + retained
earnings(losses)
*Any assumptions considered for the balance sheet
should be mentioned for the benefit of potential
investors