CHAPTER TWO

CREATIVITY AND BUSINESS

DEVELOPMENT

Asrat Mamuye (MSc) March, 2022

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Brain Storming questions

1. What do you understand by terms;

o Opportunity scouting/sensing
o Environmental scanning and
o SWOT analysis
o Business plan as entrepreneurship process of
setting new business (venture)?
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Discussion topics!

A. Business Idea Generation

How do we get an idea to start a business?

B. Business Idea Selection

- How do we select the best and viable business idea/s out
of the list of ideas?

C. Business Plan Development

- a written document describing all relevant internal and
external elements and strategies for starting a new
venture.
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What is a Business Idea?

 The response of a person or an organization to solving an
identified problem or to meeting perceived needs in the local
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) It is a precondition; a business idea is only a tool.

(b) An idea by itself, however good, is not sufficient for success.

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Business Idea Generation

Remark!

• A profitable business idea is sitting under your nose;

• Opportunities and possibilities are always out there;
• Creative thinking is important besides Concrete thinking
(basic and literal form of thinking)

Good business opportunities are often the results of the entrepreneur being
alert to his/her environment of extra effort in establishing opportunity
identification mechanisms.
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What is Creativity?

 It is the ability to bring something new into existence, whether a

new solution to a problem, a new method, or device or a new
artistic objects or form.

 In other words, it is thinking what no one else has thought

before.

 It is the prerequisite to innovation.

 Innovation is the transition of creative idea into a useful
application.
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Sources of Business Ideas

1. Hobbies/Interests

 A hobby is a favourite leisure-time activity or occupation.

 Many people, in pursuit of their hobbies or interests, have
founded businesses.

2. Personal Skills and Experience

 Over half of the ideas for successful businesses come from

experiences in the work place.
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Sources of Business Ideas

3. Franchises

 It 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 their willingness to conform
to standardized operating procedures.

4. Mass Media

5. Exhibitions
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Sources of Business Ideas

6. Surveys/Research and Development units

 The needs and wants of the customer, which provide the rationale
for a new product or service, can be ascertained through a survey.

7. Complaints from Customers

 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.
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Sources of Business Ideas

8. Change/technological

 Change can be a threat; however, most entrepreneurs consider

change as a challenge and opportunity to trigger new needs for
products and services.

9. Government regulation

10. Market shift

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Business idea selection

Macro
1 screening

Funnel model

2 Micro
screening

3 SWOT
Analysis
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Business idea selection

Macro screening
 First selection/filtering
 Use the following basic criteria:-
 Is there sufficient demand?
 Own capabilities?
 Own sufficient financial resource? (at least 20%)
 Are there many similar project in the area?
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Business idea selection

Micro screening
 Stricter viability test
 Solvent demand
 Availability of qualified personnel
 Availability of technology equipment
 Availability of raw material
 Competitors
 Critical success factor
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Business idea selection

SWOT Analysis
The last exercise of refining a business idea
 The finding of the analysis gives concrete ground for
undertaking market studies
Strengths weaknesses

Opportunities Threats
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Business Plan Development

 A business plan (feasibility plan) is an outline of

potential issues to address and a set of guidelines
to help an entrepreneur make better decisions.
 The depth and detail of the business plan depends on
the size and scope of the proposed type of new
venture.
 The size of the market, competition, and potential
growth may also affect the scope of a business plan.
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Business Plan Development

The Business Plan includes:

 functional plans such as research and development,
manufacturing, marketing, finance, and human
resources

 expected results

 critical risks
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The purpose of business plan

1. It can help the owner/manager to crystallize and

focus his ideas
2. It can help the owner/manager set objectives and
give him/her a measure against which to monitor
performance
3. It can also act as a vehicle to attract any external
finance needed by the business
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The purpose of business plan

4. It can convince investors that the owner/manager has identified

high growth opportunities, and that he has the entrepreneurial
capacity and managerial talent to exploit that opportunity effectively
5. It entails taking a long term view of the business and its
environment
6. It emphasizes the strengths and recognizes the weakness of the
proposed venture
7. It offers a sound basis for operation of a business plan that can
be used at different times
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Business Plan Development
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Business Plan Development

"The business that fails to

plan, plans to fail“
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Pitfalls to Avoid in Business
Planning
The following are the drawbacks in planning:
 Unrealistic Goals
Indicators: lack of attainable goals, time frame, priorities and
action steps
Remedy: setting up a time table with specific steps to be
accomplished during a specific period.
 Failure to Anticipate Roadblocks
Indicators: no recognition of future problems, no admission of
possible weaknesses of the plan, no contingency plans
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Pitfalls to Avoid in Business
Planning
Remedy: listing the expected obstacles and solutions
 No Commitment or Dedication
Indicators: excessive postponement, missed appointments, no
desire to invest personal money
Remedy: acting quickly and follow professional appointments,
show financial commitment
 Lack of Demonstrated Experience (Business or Technical)
Indicators: no experience in business, no experience in specific
area of the venture, not understanding the industry.
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Pitfalls to Avoid in Business
Planning
Remedy: giving evidence of personal experience and background,
build effective team.
 No Market Segment
Indicators: uncertainty regarding who will buy, no proof of
unsatisfied need
Remedy: having a specific target market, justify why and how your
product will satisfy the need.
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Components of Businesses plan

1. Cover Page
This should include at least:
• Name of the Business
• Type of Ownership
• Date prepared
• Addresses
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Components of Businesses plan
2. Executive Summary

 This is a concise summary/synopsis of the business

opportunity; however it covers all important
components of the plan (a maximum of two page
document).
 In other words, it is Brief summery of what's
being proposed.
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Components of Businesses plan
2. Executive Summary
It addresses at least five subjects as noted in the figure below.
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Components of Businesses plan
3. Description of the business & products/services

The general description of the business refers:

• Form of business • Uniqueness of product or

• Owners service
• Name of the business • Addresses: kebele, telephone,
• Business startup date fax, E-mail
• Business type: supplier of
high quality child care products
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Components of Businesses plan
3. Description of the business & products/services

Essential information required to describe a product

includes;
• distinctive characteristics • methods of manufacturing
of the product itself • proprietary protection
• how it works (or is used) (patents, trademarks, or
• materials copyrights) and
• costs • potential competing
(substitute) products.
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Components of Businesses plan
4. Market Research and Analysis
 In this section different information about the market
concerning the following marketing components will be
incorporated.
• Target market (customers) identified (such as, age, sex, family
income, occupation and location of potential customers)
• Market size and trends (know that a market exists only when
there are qualified buyers)
• Competition (explain competitors strengths and weaknesses)
• Estimated market share (
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Components of Businesses plan
4. Market Research and Analysis

 The following questions might be asked and given reply to

be competitive in the market regarding your Product or
service.
• What are you selling?
• How your product or service will benefit the customer?
• Which product or services are in demand?
• What is different about the product or service your business
is offering?
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Components of Businesses plan
4. Market Research and Analysis

 Here the following questions should be addressed Product or

Service Distribution.
• What are your location’s needs?
• Is the area accessible?
• How and where you plan to sell your product?
 It should be noted here in that you must match your location
and distribution strategy to the buying pattern preferences
of your target market.
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4. Market Research and Analysis

 The entrepreneur is also expected to know different pricing

strategies and try to decide a strategy that suits its objectives.
 Hence, getting the pricing strategy of competitors is important to
see the relationship of your price with the competitors and the
industry average.
 Other important issues to be considered regarding Pricing systems:
Luxury prices for name-brand products, Low prices with frequent
sales and discounts, credit policies, location, methods of distribution,
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Components of Businesses plan

4. Market Research and Analysis

 Advertising and promotion is the other important thing in

business world that enables business entities to create
awareness about their products or services with an action plan
to obtain sales projections.
 Hence, a well-defined plan of action includes the timing, costs
and expected return of the chosen promotional methods
which have impact on cash flow, both cash receipt and cash
disbursements.
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Components of Businesses plan
4. Market Research and Analysis
 Elements of the Marketing Plan (Summary)
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Components of Businesses plan

5. Manufacturing or operations plan

 This section Outlines how your company will operate and

include the production process or service delivering process
exhaustively. It comprises of the following components.
o Location analysis
 Is the area desirable?
 The building desirable?
 Is it easily accessible?
 Is the public transportation available?
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Components of Businesses plan

5. Manufacturing or operations plan

 Is street lighting adequate?

 Are market shifts or demographic shifts occurring?
o Production needs: facilities and equipment
o Suppliers/transportation cost
o Labor supply (Human resource requirements)
o Manufacturing cost data
o Inventory management
o Legal issues
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Components of Businesses plan
5. Management

 The intent of the Management Plan is to explain in detail who

will run the business, what skills and credentials these people
have, and how everyone will fit into the organization's
structure. So, the plan encompasses:
o Management team – key personnel
o Legal structure – stock agreements, employment
agreements, ownership
o Board of directors, advisors, and consultants
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Components of Businesses plan
6. Financial plan

 Financial statements for a new venture are

projections based on previously defined operating
and marketing assumptions. So, the plan
encompasses:
o Financial forecast (Profit and loss statement,
Cash flow statement, Break-even analysis, Cost
controls, Balance sheet)
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Components of Businesses plan
6. Financial plan

o Sources of finance and application of funds (Debt

financing and equity financing)
o Budgeting plans
o Financing stages (Early Stage/Seed, Expansion
Stage, Liquidation Stage)
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Components of Businesses plan
7. Milestone Schedule

o Product design and development. o Product display at trade shows

o Establishing the management team o Signing up distributors and
o Production and operations scheduling dealers

o Market planning o Ordering production quantities

of materials
o Incorporation of the business
o Receipt of first orders
o Completion of design and
o First sales and first deliveries
development
o Hiring of sales representatives o Payment of first account
receivables (cash-in)
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Components of Businesses plan
8. Critical Risks
Critical risks of a business may include:
o Potential Problems: effect of unfavorable trend in the industry,
design or manufacturing cost overruns, and longer lead times in
material purchases, unplanned-for competition.
o What-ifs: those conditions which may happen in the future but not yet
to be known about their occurrence currently. Some of them might be
competitors’ price cut, inaccurate sales projections, breaking up of
management team.
o Obstacles and risks
o Alternative courses of action (i.e. contingency plans)
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Components of Businesses plan
9. Appendix
o This section contains documents and other materials which

have been used for preparing business plan.

o This can be financial, administrative, human resource or other

related data.
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Sample Business plan format

THANK YOU