Evaluating the Opportunity

[Business Model]

www.bradford.ac.uk/managem

Entrepreneurial Process

You
Ideas
Concepts
Value

e
nc
ha
En

Ev
al
ua
te

Explore

Experiment / Execute

The Big Lie

If you build a better mousetrap, the world will beat a path to
your door, even though your house be in the woods.

Maybe they dont want more mousetraps

Maybe they like the ones they buy now
Maybe theyll never even hear about your
mousetrap
The truth:

If you think getting the technology right is

tough, try marketing. Then try sales if you want
a real challenge!

Why New Ventures Fail

Product-market

Financial

Poor timing
Under-capitalisation
Product design
Assuming debt too
problems
early
Inappropriate
Venture capital
distribution strategy
relationship
problems
Unclear business
definition
Managerial
Over-reliance on one
problems
customer
Problems with the
managerial team
HRM problems
Source: Bruno, Leidecker and Harder
In Kurato and Hodgetts (2001)

Managerial Defects

Inability to identify target market or customers

Inability to delineate trading area
Inability to delegate
Belief that advertising is an expense, not an
investment
Only rudimentary knowledge of pricing strategy
Immature understanding of distribution channels
No planning
Inability to motivate
Somebody elses fault

Changing Role of Entrepreneur

HIGH

Owners ability to do

Criticality
to
Company
Growth
People, planning
and systems
LOW

Owners ability
to delegate
1
Conception/
Existence

2
Survival

3
Growth/
Success

4
Expansion/
Takeoff

5
Maturity

(Adapted from: Churchill and Lewis, 1983)

Business Success or Failure

Entrepreneuial
character

Business
culture
LUCK

Business
decisions

Company
strengths

What Is Feasibility Analysis?

Feasibility Analysis
Feasibility analysis is the process of determining
whether a business idea is viable.
It is the preliminary evaluation of a business idea,
conducted for the purpose of determining whether the
idea is worth pursuing.
Feasibility analysis takes the guesswork (to a certain
degree) out of a business launch, and provides an
entrepreneur with a more secure notion that a
business idea is feasible or viable.

Feasibility Analysis: What Does the Market Say?

The Business Idea

THE McKINSEY & COMPANY (2000) CHECK LIST

What is new and innovative in your business idea?

How unique is your business idea?
Who is the client?
Why should somebody buy your product or service?
Why is the product better than similar products already on the market?
What is your competitive advantage, and why could/would it not be
copied by competitors?
Can the business idea be produced, and how much would that cost?
How would the product reach the customers?
How would you earn money on the product, what are the costs and what
is the price that can be charged?
How big is the market?

Feasibility Analysis
Role of feasibility analysis in developing successful business
ideas

Feasibilty 4Ms

Market

Management

Motivation

Money

Assessing Opportunities
Investment: None
Risk:
Return:

Certain

Unpredictable

None

Impact of
change:
Time:

High

High

None

Now

Great

Future

Rae (2007)

Opportunity assessment Pentagon model

Investment Financial, Non Financial, Intangible
(Knowledge, Information, Expertise) IP,
Reputation, Branding, Social Capital.
Risk Knowledge, Economy, Technology,
Financials, Customers, Competition, Supply Chain,
Management.
Return Amount, Timescale, Form, Exit Strategy.
Change disruptive technologies
Timescale Duration, Leadtime, Return

Opportunity assessment Pentagon model

20

INVESTMENT

TIME

RISK
20

20

CHANGE
20

20

RETURN

Opportunity selection
Market

Strategy

Innovation

OPPORTUNITY
SELECTION

Investment

People

Learning

Selection criteria between high- and low-value opportunities

Used in strategic decision-making on opportunities
Rae (2007)

Opportunity evaluation: Summary of key factors

Why there is a perceived opportunity; what and where it is
The market opportunity for the business; its size, value and
duration
Key market segments and customer groups, their
preferences and how to reach them
The industry structure, driving forces and competition
The dynamic effects of change on the industry
Who is likely to support or invest in the business
The options, resources and key factors for the business
project

Rae (2007)